Endava plc

Good day and welcome to the NDAAVA first quarter fiscal year 2025 results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Laurence Madsen, Head of Investor Relations at ESG. Please go ahead.

Thank you. Good morning, everyone, and welcome to NDAVA's first quarter of fiscal year 2025 conference call. As a reminder, this conference call is being recorded. Joining me today are John Cottrell, Endowed Chief Executive Officer, and Mark Thurston, Endowed Chief Financial Officer. Before we begin, a quick reminder to our listeners. Our presentation and our accompanying remarks today include forward-looking statements, including but not limited to statements regarding our guidance for Q2 fiscal year 2025 and for the full fiscal year 2025. the impact of headwinds facing our industry and business, our ability to capitalize on market opportunities and trends in our industry, including with respect to development with artificial intelligence, our addressable market, our expectations regarding the impact of our recent acquisition of Galaxy on our business, enhancements to our technology and offerings, demand from clients for our technology services, our ability to create long-term value for our clients, our people, and our shareholders, and our business strategy, plans, operation, and growth opportunities. 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 we undertake no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law. For more information, please refer to the risk factors section Our annual report filed with the Securities and Exchange Commission on September 19, 2024. Also, during the call, we'll present both IFRS and non-IFRS financial measures. While we believe the non-IFRS financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial presented in accordance with IFRS. Reconciliations of such non-IFRS measures to the most directly comparable IFRS measures are included in today's earnings press release as well as the investor presentation, both of which you can find on our investor relations site or on the SEC website. A link to the replay of this call will also be available on our website. With that, I'll turn the call over to John.

Thank you, Lawrence, and good morning, everyone. Thank you for joining us for our first quarter fiscal year 2025 earnings call. We're pleased with our first quarter results, which beat our guide and showed top-line growth quarter on quarter as well as year on year. As we discussed on our last earnings call, we believe our market is exhibiting the characteristics of a significant digital shift. This is visible in the slowdown of more traditional digital business, alongside the acceleration of new, mainly AI and core modernization-driven growth. Whilst this growth has emerged from a smaller base, we believe that the acceleration is beginning to outpace the areas of decline. I will add that this shift seems to differ from others the markets have experienced over the years. The AI imperative to transform the core comes with a plethora of exciting opportunities, revolutionizing the digital experience as we know it. We believe that our experience and expertise in digital transformation, AI, and core modernization make us the ideal partner for customers in this new disruptive wave. Additionally, we believe the size of the market we address is expanded by the shift where, quite excitingly, we are no longer focused on solutions built predominantly around the core, but in fact need to engage directly with the core itself. From ideation through to production, what we are calling the digital shift. We believe our business is well set up for these new growth areas whilst reducing concentrations. Our focus on AI is continuing to establish leading edge propositions. to solve real business challenges, and our acquisition of Galaxy has enhanced our core modernization capability, adding pasted IP, which provides clients with a more secure and cost-effective path to their digital future. These capabilities give us access to larger, more complex transformation programs with a powerful proprietary set of accelerators, providing us with a compelling sales offering. Alongside this, we've diversified our customer footprint across industries and geographies and globalized our delivery capability. We believe these changes strategically position us to meet the growing demand for the digital shift. And this morning, I'll outline our progress across each of these priorities and look forward to showcasing some of our latest technology offerings at our investor day tomorrow and hope you can join our webcast. First, our business winning activities. We continue to focus on building larger strategic partnerships with customers as a key lever for future growth. We have increased the size of the largest opportunities we are seeing over the last few years, regularly bidding on and winning deals valued at 100 million sterling and higher. As a result of the shifts in the market, we are also having more conversations with our customers, about addressing their largest enterprise challenges. I'm pleased to share that in recent months, we secured strategic deals with clients in various verticals and regions, highlighting our continued business diversification. A few examples of these include a multi-year agreement with Aer Lingus to support them with their digital transformation ambitions, from specialist strategic advisory work to business-wide migration and implementation programs. Then there is our work with a leading mining company and also several large and longer-term commitments with big insurers in order to de-risk their modernization programs. I'm also happy to announce our progressing partnerships across the market to open up new channels and leverage relationships. Today, we announced a partnership with YouSoft, the provider of a low-code platform with which to develop business-critical applications. As USOS continues to focus on product innovation, Endava will provide implementation support and drive stronger customer relationships to help scale their platform's impact. We also recently formed a strategic partnership with Mamboo to drive innovation in the financial services sector through cloud banking technology. In a nutshell, the partnership aims to help financial institutions modernize their core systems. accelerate time to market, and enhance customer experiences. This collaboration will empower banks and fintechs to adopt flexible, scalable, and API-driven solutions, enabling them to stay competitive in an evolving digital landscape while meeting regulatory requirements efficiently. And finally, we recently signed a strategic partnership with GoCardless, aimed at enhancing digital payment solutions for businesses globally. Simply put, through this partnership, businesses can expect to streamline payment processes, reduce costs, and improve cash flow management. The partnership will focus on delivering innovative, scalable solutions that meet the growing demand for seamless real-time payment experiences. Moving on to technology and AI in particular, Based on the results of our recent sponsored IDC Info Brief, titled The Next Wave of Digital Transformation in the Era of the AI-Powered Digital Shift, 60% of CEOs consider deploying AI, machine learning, and generative AI to be their top modernization and transformation initiative, making it the leading priority for this group. But to truly harness AI's transformative potential, organizations must ensure that this technology is embedded deep within their core systems, which is why modernizing our clients' core infrastructure is a key pillar of our long-term strategy. So let's turn to core modernization. We do not view it as just a behind-the-scenes upgrade. It's the critical foundation enabling the adoption of cutting-edge technologies to drive future growth, from AI and automation to advanced analytics. Without modern, flexible, and scalable systems, businesses simply can't take full advantage of these innovations. But core modernization is a holistic approach to transforming platforms that have historically resisted change or been overlooked in transformation efforts. The same IDC research found that 49% of firms attribute overspending on digital infrastructure to the cost of maintaining legacy systems, which just underscores the urgent need to modernize for greater operational efficiency. When we work with clients to modernize their core systems, we aim to develop those relationships into long-term partnerships where we can continue to help them thrive in a rapidly changing landscape. In short, core modernization empowers us to deliver innovation at scale, setting the stage for future growth and transformation. Through our DARPA X capabilities, we design and accelerate our clients' change agendas, seamlessly integrating these innovations with our foundational capabilities to drive lasting impact. It's about equipping organizations with the ability to implement and optimize next-gen technologies without being held back by outdated systems. So what does this innovation look like in action? The cornerstone of our modernization approach is an in-depth analysis of legacy technology assets. This analysis is supported by our own IP in the form of AI-enabled accelerators. which are designed to reduce disruption and vastly increase the speed and accuracy of delivery. They offer a tailored, unique approach that analyzes each customer's situation, thereby facilitating our ability to develop, deploy, and integrate impactful solutions. The seven modernization accelerators range from Kronos and Ray, which focus on software assessments, to Morpheus, our agentic AI accelerator. The suite also includes tools for dependency mapping, predictive analysis capabilities, and optimizing data center environments, which clients have told us are unique features and which enables more efficient, lower-risk, accelerated transformation programs. And by leveraging next-generation technologies, we believe we can deliver even greater value to our clients, pushing the boundaries of what's possible with the goal of delivering sustainable growth. These accelerators and the others that we offer in specific verticals, totaling more than 20 overall, really come into their own when underpinned by our core competencies in data, AI, and digital product strategy and management. A big focus for us right now is supporting clients as they transition their AI use cases from proof of concept to operating in production. So we have front row seats, when seeing the value that our AI systems provide to our clients. An example, for a preeminent London market insurer, we deployed an AI system that monitors their huge volume of incoming submissions and politely declines the ones that don't suit our client's business model. The system makes the decision based on whether it is the wrong type of product or if it may sway the whole portfolio. Another interesting use case is one where we developed an AI system for a personal lines insurer offering car and home insurance products in the UK. We worked on their claims transformation program to increase the number of online self-reported customer claims after an accident. From the first notification of loss, AI was used to ensure that the claimant would never need to repeat information, even if the case was escalated. Length handling is a major cost area for insurers, so this program had an important value proposition. Before our system went live, around 14% of their customers' claims were self-reported online. A year after our go-live, this had doubled to about 28% and keeps increasing. Then there is the U.S. Asset Tracking Company, facing a demanding environment where precise real-time tracking of physical assets was essential. Challenges emerged around accurately pinpointing and recording asset locations. So leveraging a customized AI model integrated with an IoT solution, we automated the geomarking process. This eliminated the need for manual data entry, enhanced accuracy, and provided the client with a seamless tracking experience. And finally, a manufacturer of intelligence glasses required greater levels of accuracy when users issue voice commands. To help resolve the problem, a large language model or LLN-based solution was deployed to enhance the user experience. When a user speaks to the device, the model maps natural language to the commands supported by the device. If the user words do not match predefined commands, the AI model generates an appropriate response. The device is capable of processing both user speech and images, providing a comprehensive and intuitive interaction experience. As you can see, it's an exciting time for us. These deployed AI use cases represent just a small subset of the solutions we've been creating and deploying for clients. Switching gears now and moving on to Galaxy, integration is progressing with a focus on both commercial alignments and a goal of achieving operational excellence. We are concentrating on our cross-selling efforts and recently leveraged our nearshore teams to support a major US pharmaceutical retailer with their international assets, demonstrating our global reach and industry insights. Additionally, we broadened the scope of services offered to our longstanding Galaxy healthcare clients, now working to elevate their data strategy and reinforcing our commitment to delivering transformative outcomes in healthcare. I mentioned earlier that we have globalized our delivery capability. To expand on that, we are excited to have been able to open up new areas of client spend with our delivery footprint in India. Our presence in this region gives us the ability to offer global coverage across time zones and access to a diverse and skilled team. essential elements in large-scale engagements. As India is often a strategic location in our clients' technology delivery plan, we're already seeing a new level of engagement with potential customers, including strategic bids that would previously have been out of our reach. Our first net new success in the region was our selection as the preferred technology partner for a global capital markets organization. This perfectly illustrates the benefit from our new India footprint. Our India delivery qualified us to engage with the customer, but the services will require delivery not just from India, but also Central Europe and Latin, as well as both AI and core modernization capabilities. Building on this momentum, we're progressing with further opportunities across payments and retail, and are actively collaborating with existing customers to design optimal best-suring solutions. Now, moving on to our people. We ended the quarter with 11,821 endowments on board, which represents a 0.5% increase from the same period last year. Looking forward, and based on the current environment, we are prioritizing recruitment in high-demand areas, such as around the domains of data, AI, and cloud. With our people in mind, I would like to focus on an area that is very important at Indala, which is mental health. We are committed to creating an environment where everyone feels empowered to take care of their well-being, and our Indalans can find support and guidance through the Employee Assistance Program and our dedicated well-being champions. On the World Mental Health Day this October, we offered a masterclass and workshops offering practical tools and strategies to navigate life's ups and downs with confidence. We also joined the global celebration of Customer Experience Day, recognizing the positive impact it creates for our organization, our people, and our clients. In October, our engineering days took center stage. featuring three days of live talks streamed from Bucharest, Montevideo, and Melbourne. These global sessions were led by our top engineers, exploring key topics that resonate across our business and the wider industry today. Local and regional events followed, fostering collaboration among our teams as we continue to transform how we envision and engage with technology. In closing, I'd like to take this opportunity to thank all endowments for their commitment and determination as we are navigating the challenges of the digital shift, but also discovering the new opportunities it brings. We will continue to manage the business for the long term, maintaining our culture and organizational health, and creating exciting technological solutions that empower our clients to thrive in this next wave of AI-driven digital transformation. Now, I'll hand over to Mark, who will walk you through our quarterly financial results and offer guidance for the upcoming quarter and remainder of the fiscal year.