Endava (DAVA -0.13%), a U.K.-based leader in IT services and digital advisory, released its fiscal 2025 first-quarter earnings on Nov. 12, 2024. For the period, which ended Sept. 30, revenue rose 3.5% year over year to 195.1 million British pounds, just above the upper end of management's guidance range. However, diluted earnings per share (EPS) fell sharply to 0.04 pounds from 0.21 pounds in the prior year period. On adjusted EPS, though, its result of 0.25 pounds exceeded guidance.
| Financial Metric | Fiscal Q1 2025 Result | Fiscal Q1 2025 Management's Guidance | Fiscal Q1 2024 Result | % Change YOY |
|---|---|---|---|---|
| Revenue | 195.1 million pounds | 194 million pounds to 195 million pounds | 188.4 million pounds | 3.5% |
| Diluted EPS | 0.04 pounds | — | 0.21 pounds | (81.0%) |
| Adjusted diluted EPS | 0.25 pounds | 0.21 pounds to 0.22 pounds | 0.39 pounds | (35.9%) |
| Profit before taxes | 4.2 million pounds | — | 17.3 million pounds | (75.7%) |
| Net cash from operating activities | 4.4 million pounds | — | 16.6 million pounds | (73.6%) |
Source: Expectations based on management's guidance, as provided in 2024-09-19 earnings report.
Understanding Endava
Endava, a global IT services provider, specializes in digital transformation and technology advisory services. It caters to a wide range of industries including technology, media, telecom, and healthcare. The company is known for its commitment to customer-centric solutions that integrate advanced technologies like artificial intelligence and machine learning.
Recently, Endava has been prioritizing geographic expansion and sectoral diversification. Its robust service suite, enhanced by strategic acquisitions like GalaxE, will be pivotal to achieving its growth targets.
Quarterly Highlights
The latest quarter saw Endava reporting revenue of 195.1 million pounds, a slight improvement from the same quarter last year. The North America region increased its share of total revenue from 30% to 39%, helping offset declines elsewhere.
The profitability picture was less rosy. Diluted EPS fell to 0.04 pounds and adjusted EPS came in at 0.25 pounds, both indicating pressure on margins. Profit before tax notably decreased to 4.2 million pounds, pointing to rising cost challenges. These cost pressures were attributed partly to the company's expanded investments in services and technology efforts.
Endava's operational activities reflected a tighter cash-flow scenario. With net cash from operations falling by 73.6% to 4.4 million pounds, maintaining a balanced cash reserve might require strategic interventions. The amount of cash and cash equivalents on its books was down by 68.6% year over year, raising concerns over its cash management strategies.
Industry realignments showed a marked shift. The share of Endava's revenue coming from the payments industry dropped from 27% to 20%, reflecting known sector-specific hurdles. Geographically, the U.K.'s contribution to the top line fell from 35% to 31%. Such trends reflect shifting market dynamics and competitive pressures in established markets.
On the strategic front, Endava integrated new technologies following its acquisition of GalaxE, which closed in April, enhancing its modernization and AI capabilities. These developments underscore Endava's resolve to capitalize on digital transformation demands and align its offerings with emerging technological landscapes.
Look Ahead
Management maintained a cautiously optimistic stance, projecting fiscal Q2 revenues of between 195 million pounds and 197 million pounds. Fiscal 2025 revenue guidance remained at 800 million pounds to 810 million pounds. Despite current obstacles, management views continuous investment in core technologies as keys to unlocking future growth.
