Endava plc

Ladies and gentlemen, thank you for standing by, and welcome to the INDEVA Q2 FY 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. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would like to hand the conference over to your speaker for today. Lawrence Mattson, Investor Relations, please go ahead.

Thank you. Good afternoon, everyone, and welcome to Endava's second quarter of fiscal year 2020 earnings conference call. As a reminder, this conference call is being recorded. Joining me today are John Cottrell, Endava's Chief Executive Officer, and Mark Thurston, Endava's Chief Financial Officer. Before we begin, a quick reminder to our listeners. Our remarks today include forward-looking statements, including our guidance for Q3 fiscal year 2020 and the full fiscal year 2020, and other forward-looking statements. These statements are subject to risk and uncertainties 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 result 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 the non-IFRS to IFRS measures is included in today's earnings press release. which you can find on our investor relations website. The 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 December the 31st, 2019. Endava had another record quarter for Q2 fiscal year 20 with the revenue of £85.9 million, a growth of 19.6% year-on-year from £71.8 million in the same period in the prior year. Our revenue growth in constant currency was 20.5% year-on-year. If we perform for the revenue from the WorldPay captive last year, our revenue growth on a constant currency basis was 24.5% year on 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 367 active clients, up from 271 at the end of the same period in the prior year. a 35% year-on-year increase. The total number of clients who generated revenue over £1 million on a rolling 12-months basis was 65, an increase of 8.3% over the same period of the prior year. While WorldPay remains a very large and fast-growing client for us, in Q2, following the sale of the captive, it was no longer our largest client. Last week we celebrated 20 years since I founded Endava. 20 years of reimagining the relationship between people and technology. 20 years of transforming business models, reimagining user experiences, and opening up new markets through the creation of technology products. We started the business in the financial services space in the City of London, but are increasingly expanding into other sectors. Today, I'd like to spend a little time on retail and CPG, which is a fast-growing segment for Endava. Customers are becoming sophisticated consumers of content, with retail and CPG organizations being forced to provide increasingly content-rich experiences in support of new purchasing and ownership models. This experience can be taken to the next level by considering the immersive experiences that can be provided through the application of virtual and augmented reality technologies. By providing truly immersive experiences, ranging from mobile-enabled augmented wayfinding or extended product interactions, a retail and CPG business can counter app fatigue and drive a more direct interaction with end consumers. Expectations are also quickly transcending the table stakes experiences of the last 10 years, digital tools into the physical world, combining environmental elements with interactive touchpoints designed to enhance and delight, offering a differentiator against competitors and a potential advantage as they tap into more personalized engagements. On this note, data-driven insight is a core enabler of all these enhancements. Insights gleaned from data collection around behaviors, preferences, operations, and conversion form the foundation of a new iterative product strategy of which technology is an integral component. The rapidity with which companies can capture, synthesize, and take action on customer data is increasing. And the time required to recognize results and inform the next phases of product development is shrinking inversely. In addition to these gains, data is creating a deeper, more personal connection to both products and the experiences associated with them. Audience segmentation has become such a granular pursuit that the days of grouping individuals against defined criteria are behind us, and each consumer is truly an audience of one, with a laser focus on gleaning as much insight on a per-person basis as possible to aggregate into still more development choices and customizations. We are well positioned to deliver into this space, rethinking the consumer technology connection and pairing innovative thinking around data applications with strategic planning against emerging technology needs. I'd like to highlight how our service solutions and product innovation offerings are helping clients in the ever-competitive and changing world of retail and CPG. Our creativity, along with our technical expertise, have been instrumental in helping clients in these fast-changing sectors. We partnered with a US-based worldwide retailer in leisure equipment. We provide applications used within their retail locations to help customers in stores, as well as store staff and management. We are helping in the streamlining of several key business areas, including infantry management, SEO optimization, and customer experience, as well as technology migration to the cloud using both AWS and Salesforce platforms. We're also working with a leader in the online and mobile prepared food ordering and delivery industry. We're involved in several of their mission-critical projects, providing expertise and engineering capacity in a modern environment. For example, we recently delivered improvements to their ratings and reviews module, Our team owned the entire delivery of the solution, design, implementation, and subsequent feature improvements. The work requires a well-designed architecture, allowing for vertical and horizontal scaling. Endafa was chosen by one of the world's largest beverage companies to be their IT services partner for a variety of mobile and web-led internal and external projects. These projects include helping the beverage company Giant consolidate and standardize its web experience on desktop and mobile. We've also built for them a next generation promotion platform designed to increase efficiency and lower cost by modularizing the company's promotions globally. It is designed to be available across all consumer channels, locally adaptable, easily configured, and for a small fraction of the cost traditionally associated with their running such campaigns for their beverage business. In the CPG space, we are also working with Unilever. They had bold ambitions to revolutionize the world of HR rewards by building a platform offering a unified benefits experience that needed an innovative technology partner with the capabilities to support their vision and deliver an end-to-end solution in an agile way. After a thorough competitive tender process, Unilever partnered with us to deliver the new platform. Unilever has now gone a step further by making this exciting solution available to other businesses to purchase with the launch of Uflex Reward as a new company. The cloud-based platform built on Microsoft Azure is multi-tenanted, secure, and fully customizable to each business user's brand. And Uflex Reward will continue to work with Endav to support and further develop the product. On December the 17th, we announced the purchase of Exocet, headquartered in Berlin, Germany. Exocet is a leading German digital agency delivering digital transformation from ideation to production using agile development. This acquisition should help to accelerate our European expansion. Exocet brings to Indaba a list of well-known German multinationals, including Audi, Deutsche Telekom, Siemens, and Europa Park. as well as experience in the broadcasting sector, working with ZDF, Media Broadcast, the BBC and others. With this acquisition, we now have 156 employees based in Germany and Austria with end-to-end expertise from consulting to design, implementation and technical innovation. Exocet's key clients were very receptive to the announcement and the acquisition is already leading to additional business which we believe Exocet would not have won without our support. On the acquisition of Intuitus, which I highlighted last quarter, we started the integration process with several commercial wins. Currently, we are working through our combined go-to-market and the positioning of our services to PE funds. Intuitus' deep knowledge of the PE space and their flexible operating model is accelerating our PE footprint. An increasing number of PE funds for whom we've done due diligence work are coming to us to support their post acquisition technology challenges. Our client growth continues to translate into strong employee growth. We ended the quarter with 6,267 employees, a 16.3% increase from 5,389 in the same period last year. In a continued effort to build out and invest in our U.S. growth, we recently opened two new close to client locations in the United States, in Dallas, Texas, and Santa Monica, California. Both offices have a mix of close to client staff from our sales and delivery organizations. We expect those locations, along with those we have in New York City, New Jersey, Atlanta, and Seattle, will continue to provide the basis for our US expansion. The Endava online community remains very active, with approximately 30 postings on technology thought leadership in the quarter ended December 31st, 2019. We delivered a solid first half of fiscal year 2020. Client demand for our service offering remains strong. Mark and I and the entire team are extremely pleased with our excellent performance for Q2. and continue to have confidence in the opportunities ahead of us and therefore our ability to deliver value for all our stakeholders, our clients, our investors, our exceptional leadership team and of course our people who are what makes Endava so special. I'll now pass the call on to Mark 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.