Endava plc

Good afternoon, good day, and welcome to NGAVA's first quarter of fiscal year 2023 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Lawrence Madsen, Head of Investor Relations at Endava PLC. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Endava's first quarter of fiscal year 2023 conference call. As a reminder, this conference call is being recorded. Joining me today are John Cottrell, NDAVA's Chief Executive Officer, and Mark Thurston, NDAVA'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 2023 and for the full fiscal year 2023. and other forward-looking statements regarding our business and operations. 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 filed with the Securities and Exchange Commission on October 31, 2022. 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. I'd like to thank you all for joining us today and I hope you're all well. We're pleased to be here to provide an update on our business and financial performance for the three months ended September the 30th, 2022. We reported another solid quarter with revenue totaling 196.2 million pounds for Q1 of our fiscal year 2023, representing a 33% year-on-year increase from 147.5 million pounds in the same period in the prior year. We ended the quarter with an adjusted profit before tax for the period of 39.5 million pounds, representing a 20.1% adjusted profit before tax margin. Despite continued global macroeconomic uncertainty, we remain in a strong demand environment. The recent political challenges in the UK have caused apprehension in the market. And I'd like to emphasize that we have little exposure to UK centric businesses and around 80% of our revenue at the UK is derived from multinational companies with a global transformation agenda. As we book revenue in the country where the service is delivered, I'm pleased that we recently launched our second We Care sustainability report, which gives more insights into our ESG approach and priorities and can be found on our investor website. We are building on our commitment to prioritise the wellbeing of our people. We want to ensure that all our endowments have options available to support their mental health and wellbeing, should they need it at any point in their careers while working with us. We now have a number of trained Endava wellbeing champions across the organisation who act as a point of contact and are advocates of our wellbeing offer, helping direct Endavans to available resources. We're also making progress towards our environmental ambition of achieving net zero emissions from our organisation and value chain. We've been working towards alignment with the SBTI criteria in setting and subsequently validating targets. This involved defining a baseline for our emissions data against which to measure our progress. We engaged PricewaterhouseCoopers to provide limited assurance over selected metrics related to the greenhouse gas emissions disclosures included in our published sustainability report. On the revenue front, we grew in all geographies and verticals during the quarter. As usual, our revenue growth continues to be driven by both the expansion of work for our existing clients and the acquisition of new ones during the quarter. We ended the quarter with 715 active clients, up from 658 at the end of the same period in the prior year, a 9% year on year increase. Importantly, we continued growing the number of larger clients with a total of 140 clients paying us in excess of 1 million pounds per year, compared to 93 in the same period last year, representing an impressive 51% year on year increase. As the ideation phase is brought to life, we believe that the opportunity to scale the engagement into production systems is realized, significantly expanding activity and client footprint. For over 20 years, Indava's payment vertical has been providing payments expertise to the financial services sector. This includes helping banks, payment service providers, credit and debit card companies, acquirers, fintechs and paytechs with their payments estates. We see continued strong demand in the vertical with a constant runway of work to cater to the ongoing digitization of payments globally. In parallel to this payments vertical, we have created the payments horizontal to help customers across industries integrate the online payments experience. This is essentially deploying our 20 plus years of payments knowledge and capability and financial services into other industry verticals. We're seeing a significant demand for our services across various sectors, including retail, automotive, airlines, insurance, healthcare providers, and particularly in marketplaces. The underlying theme is that companies are increasingly taking direct ownership of their payments value chain. We're seeing a big increase in work helping clients analyze the payment experience they provide to their customers and how they collect revenue for themselves and on behalf of third parties. These projects include building onboarding and KYC solutions, real-time payments, for claims and micropayments in insurance, in-car payments in automotive, and payment facilitators in healthcare to reduce payment costs and create new revenue streams. Across all verticals, one of the key areas we are active in is payments orchestration. Many large global businesses have extremely complex payments estates as a result of global expansion transition from brick and mortar stores to e-commerce, adoption of new payment options, as well as acquisitions and product diversification. As a result, these clients now have very siloed payment infrastructures by region, often with multiple regional partnerships and commercial agreements. This makes integrations, maintenance, and partner management a very expensive process. Endava has been helping businesses across many industries to simplify their payment platforms and as a result has enabled them to reduce the cost of ownership and centralised supplier buying power. This allows clients to go to market with new services quicker, to be more competitive and to offer an improved customer experience. As a result, new revenue streams are created by increasing throughput of successful transactions and reducing costs. Endover is helping marketplaces with their payments complexity and is also helping businesses across all industry adopt marketplace models. Marketplaces add value by streamlining supply chains, reducing costs, enabling access to a wider network of vendors, and more rapid product and service diversification. Marketplaces introduce new revenue streams for our clients, with payments becoming the key driver of revenue growth. We work with payments and financial services companies needing to transform their platforms to support their clients that adopt this business model. We also work directly with businesses that adopt this business model and need to transform their platforms. For example, we are working with Patrix, a payments company, to help them bring to market a product that would let marketplace platforms more easily pay suppliers in harder to reach regions, such as Asia Pacific, while supporting traditional close to home payment approaches. In the mobility area, we're having more conversations and engaging in more projects around the future digital enablement of personal transport and the evolution of mobility as a service. Car manufacturers are rapidly having to adjust to the digital user experience demanded by younger buyers. This includes the need to enable cars to become payment devices and a personal mobility device through digitally enabled subscription, sharing, and rental models. Our expertise with user experience, consumer-facing mobile and web platforms, API enablement, and critical scalable systems coupled with our relationships in the automotive sector, have positioned us well for this emerging market for our services. We're working with Link & Co, a disruptor in the automotive space. We initially helped them to bring one of the first car subscription models to market, rapidly followed by helping them enable car owners to share cars via a marketplace. This offers car owners their own revenue stream, and extends the reach of the Link&Co brand to both direct subscribers and a wide network of occasional users. Additionally, there is a growing number of new financial services companies looking to offer business solutions. Indaba is using its payments experience to help those new companies scale and build out connections to hundreds of global payments platforms. We're also working with companies such as Stripe and Planet as they look to diversify their existing global portfolios further. We're working with a global payments orchestrator, helping them to solve complex payments challenges, improve efficiencies, and reduce costs. Endava is helping them scale their latest technology to increase the number of solutions they offer to clients. Planet specializes in solving complex payments challenges in the retail and hospitality sectors, and working with a network of global partners. Endava helped modernize their product offering, making it cloud native and able to support both online, mobile, and in-person payments. We continue to support their revolution as they build out their connected commerce platform that helps retailers and hotels connect software and payments to put the customer experience first. We're excited about our payment horizontal model as payments is increasingly becoming a key focus for companies outside of the traditional payment industry. We continue our geographical expansion and diversification. We recently announced the acquisition of Lexicon in Australia. Lexicon partners with clients to build new digital solutions or accelerate digital transformation programs across enterprise systems, products, and IoT using an agile delivery methodology. Lexicon's 127 operational employees are in Australia and Vietnam. I'm excited about our growth prospects in the Asia Pacific region. Our client growth continues to translate into strong employee growth. We ended the quarter with 12,065 employees, a 25.5% increase from 9,616 in the same period last year. While competition for the best talent remains strong, we remain very successful in recruiting the people we need and our attrition rate remains low. In summary, as demonstrated by our financial results, demand for our services remains strong. We are successfully navigating a challenging global macroeconomic environment and remain excited about the opportunities in front of us and confident in our ability to execute on our objectives. 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 the fiscal year.