Endava plc

Ladies and gentlemen, thank you for standing by and welcome to the NDAAVA first quarter fiscal year 2020 results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be provided at that time. If you require any further assistance, please press star zero. Thank you. I would now like to hand the conference over to your speaker for today. Lawrence Madsen, Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to NDAAVA's first quarter of fiscal year 2020 earnings conference call. As a reminder, this conference call is being recorded. Joining me today are John Cottrell, NDAAVA's Chief Executive Officer, and Mark Thurston, NDAAVA's Chief Financial Officer. Before we begin, a quick reminder to our listeners. Our remarks today include forward-looking statements, including our guidance for Q2 fiscal year 2020, and the full fiscal year 2020, and other forward-looking statements. These statements are subject to risk and uncertainty that could cause actual results to differ materially from those contained in the forward-looking statements. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. Please note that these forward-looking statements made during this conference call speak only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law. Please refer to our SEC filings as well as our financial results press release for a more detailed description of the risk factors that may affect our results. Also during the call, we'll present both IFRS and non-IFRS financial measures. A reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which you can find on our investor relations website. A link to the replay of this call will also be available there. With that, I'll turn the call over to John.

Thank you, Laurence, and thank you all very much for joining us today. Mark and I are pleased to be here to provide an update on our business and financial performance for the three months ended September the 30th, 2019. Endava had another record quarter. For quarter one, fiscal year 20, with revenue of 82.4 million pounds, a strong growth of 24% year on year, from 66.4 million pounds in the same period in the prior year. Our strong revenue growth is driven by the expansion of our existing customers and the acquisition of new ones during the quarter. We continue to broaden our client base and ended the quarter with 278 active clients up from 262 at the end of the same period in the prior year. The total number of clients who generated revenue over one million pounds on a rolling 12 months basis was 62, an increase of 19% over the same period of the prior year. And we continue to grow the number of clients generating over two million pounds on a rolling 12 months basis. This group increased by 50% from the same period last year to 45. In the last quarter, we grew in all of our regions and verticals. We had strong revenue growth, along with continued improvement in our operating margins. As of this quarter, we will report our revenue from the rest of the world. In quarter one, fiscal year 20, the rest of the world accounted for 2% of revenue. It is small, but fast growing. The rest of the world includes companies located in Hong Kong, Japan, and the Middle East. On the technology front, we see several trends continuing to develop in parallel streams, often within the same organizations. Our clients are demonstrating an increasing desire to bring their IT and business organizations closer together in a deliberate move to drive towards more rapid value delivery. The need to create a unified business view and operational structure around transformation is growing strongly. Given our unique combination of next-gen technology ideation focused on solving business problems, alongside our ability to take these concepts to production at an enterprise scale, we are successfully helping our clients make that organizational pivot by merging these groups while delivering new products and platforms to market. Additionally, the C-suite is now realizing their transformation initiatives will be seriously hindered without a strong cloud foundation. As a result, the deepening of cloud initiatives has become a priority. We've been active in helping clients capitalize on the promised benefits to streamline business services, rationalize IT estate, and lower costs. Finally, we see the need for businesses of all sizes and maturity level to better understand the strengths and weaknesses of their software platforms. Most organizations, have an application estate that has grown organically and largely tactically over the years without much cohesion. We are increasingly asked for architectural evaluation exercises at all levels of scale, from detailed code analysis of individual applications to entire application estate reviews. We use a range of industry-recognized and proprietary techniques for these evaluations, along with our own proprietary code analysis technology. I would now like to spend a moment on our private equity focus and strategy. Work for PE portfolio clients has been a significant proportion of Indava's business over the years, as we successfully deliver transformational change to their portfolio companies through the adoption of next generation technology. Strategically, we believe that extending our footprint and relationships with PE clients will position Endava well, not just for the due diligence and digital strategy work, but also for the downstream transformation programs once the clients have completed their acquisitions. We also see more PE firms evaluating the potential for technology change to drive significant value increase as part of their investment thesis. in a number of sectors. As a result of this strategy and belief, we have invested further in the PE segment in a couple of areas over the past month. Firstly, two weeks ago we announced the acquisition of Intuitus Limited, headquartered in Edinburgh, Scotland. Intuitus is a leading independent provider of technology and digital due diligence and other technology advisory services to PE clients. significantly expanding the number of PE firms with whom we have a relationship. Culturally, we believe Intuitus will fit well with the Endava family and open up significant opportunity for downstream transformation programs following deal completion. This acquisition adds 24 employees and a network of senior freelance IT professionals. The transaction closed on November the 1st, 2019, and we expect it to be accretive in year one. Secondly, last week, we announced the launch of an integrated IT due diligence product with Bain and Company, targeted at PE clients. As I highlighted in previous calls, we have been actively working with Bain in the PE space, and this announcement is a natural evolution in our relationship. In the last year, our integrated offering has grown into a defined product set, which has been well received by PE clients who recognize the value of a combined team which integrates the deep technology insights developed by Endava into the broader investment thesis of commercial due diligence. In the light of these announcements, I would like to just highlight some of the private equity projects we have been working on with Bain. We've worked closely with a leading PE fund on several projects in Italy. We did the pre-acquisition work on a large education company in which the PE fund took a stake. Our work included analyzing the user experience of the digital platform along with a deep dive into the architecture and IT systems. Another assignment involved looking at a credit company in order to help it scale the existing platform. understand the defensibility and potential to develop value-add products based on the existing architecture and operations. We've also been actively advising another global PE firm for some of their portfolio companies in the retail and transportation sectors located in France and the Nordic region. We performed in-depth digital maturity assessments, including technology assessments, and made recommendations around architectural application landscape, and IT operations. Our assessments led to immediate strategic decisions for those companies. Our client growth continues to translate into strong employee growth. We ended the quarter with 5,904 employees, a 13.9% increase from 5,182 in the same period last year. As a reminder, during this quarter, we transferred 146 employees with the sale of Endava Technology SRL, also referred to as the captive, to WorldPay. The transaction closed on August the 31st, 2019. The competition for talent remains challenging, but our strategy of being an employer of choice in the cities where we operate is a strength in recruiting and retaining talent. The Endava online community remains very active, with over 33 postings on technology thought leadership in the quarter ended September 30, 2019. On a macro level, we continue to review the potential impact of Brexit on Endava. We are not aware of any clients who are adjusting their spending plans with us, as a result of the uncertainties caused by Brexit. We've started the 2020 fiscal year with solid results, and client demand for our service offerings remains strong. We remain optimistic about our ability to deliver sustainable growth into the future. I'll now pass the call on to Mark Thurston, our CFO, who will walk you through our financial results for the quarter and provide guidance for the coming quarter and update it for the fiscal year.