Endava plc

Good day and welcome to the NDAAVA second quarter and fiscal year 2025 results conference call. All participants will be in 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 like now to turn the conference over to Lawrence Madsen, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Endava's second quarter of fiscal year 2025 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 presentation and our accompanying remarks today include forward-looking statements, including but not limited to statements regarding our guidance for Q3 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 of artificial intelligence, our addressable market, our expectations regarding the impact of our acquisition of Galaxy on our business, our expectations regarding the share repurchase program, including our anticipated receipt of shareholder approval for the share repurchase program, expectation of the effect of Endava's financial condition of claims, litigation, contingent liabilities, and governmental and regulatory investigations and proceedings, 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 strategies, plans, operations, and growth opportunities. 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 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 factor section of our annual report filed with the Security and Exchange Commission on September 19, 2024, also during the call. will 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 information presented in accordance with IFRS. Reconciliations of such non-RFRS measures to the most directly comparable IFRS measures are included in today's earnings press release as well as in 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 welcome everyone. Thank you for joining us for our second quarter fiscal year 2025 earnings call. We continue to see a fast changing demand environment with a strong shift from traditional digital transformation services to an AI-led model, what we call the digital shift. In a recent company sponsored survey of 350 tech and business leaders, 98% of senior leaders believe the digital shift has impacted their core business model in the last two years. Almost a quarter go so far as to say that their organization's mission or purpose has also changed as a direct result of the same. At our investor day back in November, we highlighted how Endava is leveraging AI-enabled capabilities like Morpheus and Compass, to accelerate client transformations. Interest in these solutions continues to grow and are contributing to our solid pipeline of signed and potential opportunities. That said, these are large-scale projects that require greater business case validation and more detailed prototyping, leading to less predictable decision-making timing and an elongated ideation to production cycle. On the technology front, GenAI adoption is becoming a key priority for clients. With our hands-on experience, coupled with deep industry expertise, we believe that we're in a strong position to cut through the hype that our clients are exposed to regarding AI and to work with them to deliver real business value. We believe the customization of GenAI for enterprise-level delivery should create increased demand for Endava and the broader IT services industry as adoption gathers pace. Implementation of GenAI solutions requires a fundamental re-architecture, deeper cloud integration, core modernization for full data access, regulatory compliance, security, resilience, and cost-effective scaling of AI processing demand. Becoming truly AI native does not happen overnight for our clients. It requires thoughtful planning, a clear understanding of ROI, and a willingness to challenge longstanding ways of working. We're proud to guide clients as they transform into AI-driven enterprises. Additionally, today, we announced our first share buyback program, totaling $100 million, as we reinforce our commitment to optimizing our capital allocation. And now, I'd like to provide you with an update on our recent successes in securing larger and longer-term deals. On our last earnings call, we explained our focus on these opportunities as a foundation for future growth. This approach has allowed us to refine our strategy, concentrating on the relationships that drive meaningful revenue growth as well as deal size call proposition, and deal structure. The three months since our last earnings call have been marked with exciting wins with new customers, as well as extended partnerships with some of our longstanding clients. I'll now share some examples. We're helping a leading global FinTech and payments provider refresh their technology stack by tackling technical debt and assisting with their data center migration and consolidation. Using our RAY and INFRA accelerators, we are also providing an independent third-party view of risks, opportunities, and strengths of the applications and products they offer to their clients. We also secured a core modernization project with a leading financial institution in North America. In the first phase, we used our RAY accelerator to create a comprehensive inventory of applications. focusing on key outputs, such as modernization paths, a risk model, a prioritization model, and a costing model. The second phase will build on these outcomes, delivering deeper application level insights and finalizing the frameworks established in phase one. Using our maps and dash accelerators, we expect to develop a detailed modernization mode map for the organization's core applications, helping them drive transformation with clarity and confidence. These two clients are in our banking and capital markets industry vertical. We're seeing strong growth in this sector, which is up 43.6% over the past 12 months. And these two engagements are illustrative of the scale of spend we can unlock as we apply our accelerators to this space. Moving on to other industries. One of our longest-standing customers and a global player in the talent acquisition industry, Alexander Mann Solutions, signed their longest commitment with us, a five-year extension as their key technology partner. This is particularly exciting for us, as whilst we continue to maintain and optimize their critical platforms and services, we are also exploring new ways to expand our partnerships. driven by our strengths in technology innovation and core modernization. We also extended a multi-year partnership with a major European commodities trader, becoming their prime technology partner. Together, we are focusing on providing advanced technology and data engineering solutions to meet the demands of the fast-changing global commodities trading markets, including areas like market data, collateral management, trade finance, and pricing. We're also working on several projects for a global health care company covering various facets of their operations. This includes providing professional services to build out an innovation hub in India. And we're also working on modernizing their mobile application for clients and providers to improve the customer experience. We continued to win new clients and were selected as the technology partner for a London-based market insurer in a three-year deal to help with the transformation of their technology operating model and their technology estate. And in the U.S., we launched a campaign targeting an emerging energy industry need. We've just signed Austin Energy. one of several US energy providers we are working with to address a common need to modernize similar legacy technology platforms. We're aiming to secure additional US energy providers as clients for this service. As I mentioned earlier, GenAI continues to be a major driver of technological advancement. We're seeing ongoing evolution in the space from more powerful models and breakthroughs in model training from both a cost and a technology perspective, to deeper integration into the software delivery lifecycle, advancement in agentic AI, and the increase of available open source models. All of this leads to more choice and options to build exciting solutions for our clients. But in Java, we believe AI is the single most defining technological advance of our lifetimes. It has the potential to change every aspect of our professional and personal lives, and we are already seeing this impact unfold daily. Through cutting-edge innovation, we are guiding our clients on their AI transformation journeys, helping them implement, scale, and optimize AI to achieve real business value. Let me take you through some examples. In our ongoing partnership with a major global pharmaceutical business, we are working to transform one of their critical clinical code processes, where consistent and reliable results are absolutely essential. In an industry where decisions are heavily scrutinized and the AI landscape presents challenges around consistency, the client needed a solution they could fully trust. To address this, we developed an innovative consensus mechanism within our agent framework, a software protocol designed to validate data by cross-verifying outputs. This approach significantly enhances reliability. Through multi-shot training, a method that reuses stored data instead of starting from scratch each time, the system is designed to reinforce correct behaviors by capturing the best answers and using them as references for future interactions. Working closely with the client, we are fine tuning the system incrementally, aiming to uncover previously hidden complexities. This process not only improves the solution itself, but also provides the client with a deeper understanding of their workflows, enhancing transparency and control. What is particularly exciting is that this solution has the potential to go beyond the immediate challenge we're solving It offers a versatile approach that can be applied across a wide range of industries, and we're eager to explore how it can create value for others. In another example, we partnered with a multinational insurance provider owned by a private equity fund to help modernize and streamline their operations using AI-driven solutions. Their new leadership team wanted to understand how AI could transform their business And so together, we identified two high-impact AI projects and a payment processing flow transformation as key focus areas. Working with the client, we first introduced ChatGPT Enterprise and began training their teams to rethink daily workflows using AI. By focusing first on foundational understanding and personal productivity gains, we aimed to build a strong base for broader organizational transformation. Starting at the individual level allows us to lay the groundwork for reimagining larger processes further down the road. Another recent project was with a leading golf equipment company. They wanted to expand their B2B golfer training business into the B2C space with a direct-to-consumer mobile application. However, existing solutions for golfer swing analysis did not meet the quality and precision standards that they are known for. That's where we came in. Together, we developed a tailored AI solution that brings their renowned training programs straight to consumers. By doing so, the company opened up a new revenue stream whilst allowing customers to benefit from professional-grade training programs. that were previously too expensive to be accessible. We've also been working with an automotive technology provider, which, facing resourcing and time constraints, struggled to meet deadlines for developing in-cabin facial identification technology and scaling its internal synthetic data capabilities. To help the team overcome these challenges, they partnered with Endava as their technology augmentation partner. We stepped in with cutting-edge solutions, conducting R&D and developing a prototype facial recognition solution that pushed technological boundaries. To support their synthetic data needs, we used advanced 3D graphics tools to create tailored assets and provided technical consultation to optimize and streamline their pipelines. This scaled development of pipeline optimization achieved up to a 50% increase in speed, enabling the client to meet project timelines whilst also unlocking greater innovation potential. Following positive feedback, we're now exploring additional opportunities to enhance their workflows and drive long-term success. Also within Endava, the integration of Galaxy is continuing. and we are focused on both commercial alignment and a goal of achieving operational excellence. Client satisfaction is core to our service delivery. We completed our latest client satisfaction survey in November 2024, and I'm happy to report that 92% of our participating clients stated that they would be likely to recommend Indala as compared to 91% in April 2024. and 90% stated that they would likely repurchase from us, compared to 88% in April 2024. And now, moving on to our people, we ended the quarter with 11,668 endowments on board, which represents a 1.1% increase from the same period last year. Looking forward, and based on the current environment, we continue to prioritize recruitment in high-demand areas, such as around the domains of data, AI, and cloud. In closing, I would like to take this opportunity to thank all endowments for their commitment and determination as we are navigating the digital shift and discovering the new opportunities that 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. 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. Thanks, John.