Endava plc

Ladies and gentlemen, thank you for standing by. And welcome to the NDAAVA earnings release first quarter fiscal year 2021 conference call. 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'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to one of your speakers for today, Lawrence Mattson, investor relations manager. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Endava's first quarter of fiscal year 2021 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 Q2 fiscal year 2021 and for the full fiscal year 2021. Our expected near and medium-term revenue growth, the potential impacts of the COVID-19 pandemic and associated global economic uncertainty, our expectations regarding digital transformation of existing businesses and industries, the necessity of digital transformation for many, and NDABA's ability to benefit therefrom, an anticipated client demand for NDABA services, as well as other forward-looking statements. These statements are subject to risks 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 the Risk Factors section of our annual report on Form 20-F filed with the Securities and Exchange Commission on September 15, 2020, which contains and identifies important factors that could cause actual results to differ materially from those contained in any forward-looking statements. 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 relation 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. I would like to thank you all for joining us today, and I hope you're all staying safe and healthy. 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, 2020. Now, we're coming to the close of an extraordinary calendar year, and unfortunately, the pandemic continues to wreak damage on lives and economies with some regions back in lockdown. Within all these challenges, the good news for Endava has been that digital transformation has become even more of a priority in the new world order. And we continue to see growing numbers of engagements with existing and new clients on how to shape their digital future and transform their operating model. COVID-19 has accelerated recognition of the amount of digital transformation work still to be done. and has brought forward the urgency to do it now. As I mentioned previously, the Endava Enterprise Distributed Agile Delivery Model was designed to be extremely flexible, and it has served us well, enabling a fast reaction and protecting our business performance and our people in this rapidly changing business environment. With a second wave of COVID-19 hitting our main markets in the Northern Hemisphere, there is a question about whether we will see similar uncertainty and volatility in customer decision-making as was experienced in March and April when the first wave hit. This time around feels very different. In communication with our customers, they are much clearer on their priorities in the current pandemic environment. and we're seeing more business-as-usual type stability in decision making. So far, we have not seen sudden decisions to stop or reduce project activity, while we are seeing plenty of new projects and expansion of existing projects in much more normal fashion. All of this is driven by digital acceleration in their marketplaces. As a result, we have decided to provide full fiscal year guidance consistent with how we are currently seeing behavior and decision-making at our customers. Moving on to our results, Endava had a solid quarter to start our new financial year with revenue of 95.1 million pounds, a growth of 15.5% year-on-year, from 82.4 million pounds in the same period in the prior year. If we pro forma adjust for the revenue from the WorldPay captive divested in August 2019, our revenue growth on a constant currency basis was 20.1% year on year. Our strong revenue growth was driven by the expansion of work for our existing customers and the acquisition of new ones during the quarter. During the quarter, we continued to broaden our client base and ended the quarter with 501 active clients, up from 278 at the end of the same period in the prior year, an 80.2% year-on-year increase. Continuing on the trend I highlighted last quarter, Revenue growth coming from our largest clients increased sequentially, as large corporations continued to invest in digital transformation during the pandemic. Revenue from clients who paid us above £5 million over the past 12 months increased 11.2% sequentially over Q4. And this quarter, we have started to see a recovery in projects from our smaller clients. We continue to grow our client base despite the sales and marketing challenges arising from reduced travel and attendance and industry events. This quarter we grew in all of our regions and verticals and our European acquisitions of CDS, Exocet and Intuitus are all integrating nicely into the Indava family and complementing our existing offerings. Today, I'd like to take you through one of our fast growth segments, mobility. The industry is focused on the movement of people and goods, including automotive, travel, logistics, hairlines, smart cities, and so on. We see these industries as going through a long wave, technology-driven transformation, ultimately in 30 or 40 years' time, facilitated by autonomous vehicles, mobility as a service, and new monetization models. But it will take time to realize the full scope of our new mobility-enhanced future. Endava is all about helping clients to utilize next-gen technologies to take the steps on this transformation path, which will deliver business benefit now while laying the foundations for the long-term trends. We believe the future of mobility lies in the connection of various presently disparate systems to create a new fabric of interactivity with which we will reduce friction in many parts of our personal and professional lives. We are actively engaged in helping our clients in their mobility journey, and in particular, helping them create excellent customer experiences that drive business activity. Endava has been a strategic partner to the Royal Mail Group for just over three years. We have recently completed a major transformation program for their final mile optimization, focusing on the postal workers' route management for the whole of the UK to enable greater efficiency and improved customer service. We're also working with one of the largest global logistics systems integrators to deliver advanced intra-logistics projects worldwide. We help the client with their digital transformation journey, spanning from receiving to shipping goods. We automated warehouse processes, such as product registration stations, storage retrieval systems, and intralogistic transport. We improved their ability to deliver projects to end customers and shortened time to market. We started with the creation of system architecture all the way through to implementation. We delivered secure, robust, and scalable software services, and the client praised our quality assurance testing capabilities. And we're a key strategic technology partner for Aer Lingus, helping them accelerate their digital transformation and innovate their approach to payments, loyalty, and customer experience. We recently delivered an innovative payments hub platform, making it easier to effectively integrate new alternative forms of payment, such as Apple Pay and loyalty program points. In turn, this allows the airline to choose the payment service providers who help to improve the guest experience and purchasing activity. And this platform also alternates back office payment processing. The automotive industry is undergoing a fundamental transformation And we believe it's being disrupted by some key trends, including services centered around customer needs and desires, vehicles seamlessly connected to a broad digital ecosystem like payments, insurance, finance, e-commerce, and smart city services. and shared mobility services, or mobility as a service, providing seamless end-to-end mobility across multiple vehicles and service offerings, reducing the number of private vehicles and the overall CO2 emission. We're working with our clients in all of these areas. We created a virtual motor show for Volkswagen earlier this year following the cancellation of the Geneva International Motor Show, which brought in over 240,000 visitors globally. This virtual motor show was very well received by Volkswagen and the entire industry. We created a similar offering for Audi with the global Audi e-tron launch through a virtual reality solution, allowing Audi to present new models globally at various locations within a narrow timeframe and with a limited number of car prototypes. Finally, Endava deployed a digital media supply chain solution, delivering smart digital signage services to over 2,000 Audi dealers globally. This solution provides state-of-the-art digital customer engagement and product and service presentation within the dealer showrooms. Our client growth continues to translate into strong employee growth. We ended the quarter with 7,199 employees, a 21.9% increase from 5,904 in the same period last year. We have increased our headcount organically every quarter since the start of the pandemic, and our attrition rate remains low. As we continue to redefine the future of work and explore the impact of much more time spent by our people working from home, we've been pleased to note continued improvement in productivity, with a percentage improvement in high single digits compared to productivity pre-pandemic. However, working from home also brings new physical and mental health challenges. And this quarter we launched the Endava Wellbeing Program, which includes a wide array of tools and training to help our people adjust and thrive in the new working environment. And over 60% of Endavans have already engaged with this program. Our expectation is that post-pandemic, we will move to a hybrid model where our teams spend some time in the office together mixed with other time working from home. And we continue to recruit people on the basis that they must be able to regularly attend an Endava office. As shown by these results, client demand for our services continues to be strong as digital transformation continues to rise up their agenda. Mark and I and the entire team are extremely pleased with our performance for the quarter just ended, despite the challenging environment, and we are excited about the opportunities ahead of us and remain confident in our ability to deliver value for all of our stakeholders. 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 fiscal year.