Endava plc

Good day and thank you for standing by and welcome to the NDAAVA PLC Earnings Release Third Quarter Fiscal Year 2021 Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. If you would like to ask a question at this time, 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 zero. I would now like to hand the conference over to your speaker for today, Ms. Laurence Manston. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to NDAAVA's third quarter of fiscal year 2021 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, 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 Q4 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, including with respect to our expectations regarding future work arrangements for our people, our expectations regarding digital transformation of existing businesses and industry, the necessity of digital transformation for many companies and Endata's ability to benefit therefrom, anticipated client demand for Endata services, our expected ability to leverage our intellectual property to provide more cost-effective deliverables to our clients with greater speed, our expectations regarding expansion opportunities, and our ability to execute on our sustainability objectives, 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 a discussion of 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 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.

Thanks, Lawrence. And I'd like to thank you all for joining us today. I do hope that you're all staying safe and healthy in these unusual times. We're pleased to be here to provide an update on our business and financial performance for the three months ended March the 31st, 2021. Now, while the COVID-19 vaccination campaign is underway around the globe, life is not yet back to normal. even as lockdown restrictions have been gradually lifted in many countries. We continue to prioritize the safety and well-being of our people as this pandemic affects the countries and the communities in which they live and work. But even in this context, we've seen a strong demand for our services. We've seen that digital transformation is at the heart of significant changes in how the world does business. and we continue to grow in all regions and all verticals. Indava had a solid Q3 for our fiscal year 2021, with revenue of £112.3 million, representing growth of 23.8% year-on-year in constant currency, from £92.2 million in the same period in the prior year. we ended the quarter with an adjusted profit for the period of 19.3 million pounds, representing a 51% year-on-year increase from 12.8 million pounds in the same period in the prior year. Our strong revenue growth was once again driven by both the expansion of work for our existing clients and the acquisition of new ones during the quarter. We continued to broaden our client base and ended the quarter with 567 active clients, up from 395 at the end of the same period in the prior year, a 43.5% year-on-year increase. Average revenue from our top 10 clients grew by 21% year-on-year as we continue to deepen our relationships with these large accounts. And revenue from clients who paid us above £5 million increased 41% year-on-year. Additionally, we continue to increase the number of clients who are paying us in excess of £1 million per year, with 81 clients in this category, up from 67 in the same period last year, representing a 21% year-on-year increase. We continue to see an accelerating trend of new clients starting work with us on a small ideation or proof of concept engagement and then scaling as they realize the business benefits. This effect is driving the growth in these large client cohorts. On the technology side, we see a lot of demand across the full range of our services. But a couple of technical trends stand out this quarter. First, there is the continued need for digital platforms. Digital platforms are cloud native software applications that can be accessed and extended by well-defined APIs, allowing them to be quickly and reliably extended to perform a range of business functions in a particular domain, both by the owning organization and external partners. These platforms are in demand in both emerging industries like FinTech and in established domains like mobility. And we believe that we're well positioned to meet this demand across industries. The second trend is demand for application rationalization and modernization, particularly in large financial services firms, in payments, and in other transaction-based areas of these organizations. We provide both the strategic view of what and how to modernize, as well as the engineering skills to perform the modernization. Now, last quarter, I explained some of the work we've been doing over the last few years to create accelerators that make us more efficient in client delivery projects. One of these that I'd like to highlight this quarter is our software analytics tool called Kronos. It is the technical accelerator that underpins our software analytics service and provides an extremely sophisticated analysis of existing software systems using a range of inputs, including metadata from source code control systems, such as Git, change trackers from issue management systems, like JIRA, and other simpler metrics generation tools. It uses a library of patterns and anti-patterns to spot characteristics and problems in the software, often producing insights that surprise people who've worked on that software for years, such as patterns of developer behavior, hidden dependencies, and knowledge gaps in the current team. We have analyzed dozens of complex systems over the last few years, and Kronos has been a key enabler for us to do this quickly and reliably. The understanding of our clients' existing systems that we're able to generate with Kronos helps us to deliver application rationalization and modernization programs faster and more cost effectively than we were able to do without this tool. Now, we recently launched our We Care program to bring to life our sustainability mission. Making a positive impact on the world around us has always been at the heart of our business, and it means a lot to me personally. Endava's core purpose and values aim to capture this mission. we identified five key areas that we care deeply about. First, our people, as we enable them to be the best that they can be. Second, social impact and our contributions to the communities in which we operate. Third, operating responsibly and demonstrating our ethical approach to business. Fourth, innovation and data integrity, as we continue to provide secure and smart solutions And finally, the environmental impact as we play our part in protecting our planet. Now, we've captured and documented what we do across all these areas to make it much easier for clients and other stakeholders to understand our passion in this area and what we're doing about it. As part of our commitment to our people, we continue to champion and empower women in technology. At the end of March, women accounted for 35% of our workforce. We recently held our Endava Women's Week with a program of exciting and impactful events, including masterclasses with inspirational industry leaders, a live Q&A panel that brought together leaders from across our global business, and access to two major International Women's Day events. Across our locations, in Darwin's participated events, encouraging women to imagine their future in IT. While internally, we also launched mentoring initiatives to further support our women to rise in their careers. Many of our client engagements are also very aligned with our We Care mission. I'm going to run through some specific examples on how we help our clients to make a positive impact. Ox Global, the creator of the Ox Truck, has the mission to deliver affordable low carbon transport in emerging markets with the goal of creating economic growth, positive social impact and reduced emissions. To achieve the required lower price, the physical operating costs of an Ox Truck are shared across multiple users on a mobility as a service basis. We partnered with Ox. to build a simple app that will allow the customer to request an OX service, such as transport or distribution of goods to and from a location. We believe the user-centric technology strategy and operating model we helped design is best suited to serve OX's unique target market. We also helped Macmillan Cancer Support, one of the UK's leading cancer charities, with their digital transformation. The new cloud-based platform will build on microservices, allowing Macmillan to provide a more engaging digital presence that is intuitive and helps and supports users. Using this platform, people living with cancer and their families can get the help they need when they need it, and Macmillan staff can work together more effectively and create new, exciting, and engaging digital experiences and content to keep supporting the audiences that they are committed to serving. Electrolink, the company responsible for operating the data hub underpinning the UK energy market, needed to deliver a new digital product to support the UK's target of achieving a net zero carbon footprint by 2050. The goal is to enable electricity distribution organisations and their customers to best plan for power provision using green and renewable sources. Endava teamed up with Electrolink, acting as the delivery partner to build a minimum viable product, providing a graphical presentation of generation and electricity network data. The client called the final product a game changer in how the electricity industry will view and use data. STEM is a global leader in artificial intelligence-driven energy storage systems. Its storage solutions accelerate renewable energy growth, help alleviate power grid intermittency issues, and support corporate ESG goals. Our data scientists and data engineers worked with STEM's software team to build solutions that reduce energy costs by automatically switching between using battery power during more expensive periods and grid power during cheaper periods. In another area, we've been working with Home Cycle Technologies, an innovative startup reinventing how plastic and aluminum items are recycled. The company pays customers to recycle based on the unique codes on the containers and specialized trash bins. We helped build the recycling system app for their pilot currently running in the state of New York, as well as their website. We've also been working with Lineage Logistics, the world's largest and most innovative temperature-controlled industrial REIT and logistics solutions provider. They are transforming the supply chain by preserving, protecting, and optimizing the distribution of food. We're assisting them with the development of their industry-leading warehouse operations technology, including the implementation of automation technology and applied data science. Lineage has been named as a visionary partner of Feeding America, the United States' largest domestic hunger relief organization. I'm very proud of our success in helping these clients with their goals of making the world a better place. Now, we're also continuing our strategy of tuck-in acquisitions and recently completed two transactions. We acquired five based in Croatia and Brooklyn, New York, on March the 4th. Five increases our capacity in the ideation, design, and delivery of intelligent digital experiences and enhances our capabilities in digital product strategy and performance optimization services. Five has a team of 157 operational employees, mainly based in delivery centers in Croatia and Brooklyn. And on April the 1st, we acquired Level, based in Charlotte, North Carolina. Level has a strong focus in the payments and financial services, logistics and mobility and TMT segments. And we believe will enable us to continue to expand in the United States while serving clients in these core market sectors. Level delivers from the US and Mexico with 172 operational employees. We believe these two transactions will enable us to further accelerate the expansion of our US business, which has shown strong organic growth over the last few years. They also offer Mexico and Croatia as new countries in which we can expand our delivery capability. I'm pleased with the strategic and cultural fit of both Five and Level within DARPA, and we're already seeing a significant number of joint opportunities. Our client growth continues to translate into strong employee growth. We ended the quarter with 8,127 employees, a 25.6% increase from 6,468 in the same period last year. We continue to actively recruit in all regions. We remain the employer of choice in our core locations and continue to attract top talent At the same time, our attrition rate remains extremely low. The majority of our workforce continues to work from home and productivity remains high. We expect a gradual return to the office starting in the second half of this calendar year with a hybrid model of in-person and remote working. Assured by our results and by the guidance Mark will provide, our services are at the core of our client's digital transformation journey. We're excited about the opportunities emerging and remain confident in our ability to deliver value for all of our stakeholders. Let me end by thanking our people who continue to deliver excellence, quality, and value to our clients in diverse homeworking contexts and who enable the performance that I've just discussed. We appreciate your dedication and loyalty. I will 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 the fiscal year.