ENDAVA 2025 Q2
Earnings Overview & AI Insights

Earnings Performance

Summary of Financial Performance:
Endava reported revenue of £195.6 million for Q2 FY2025, a 6.6% increase year-over-year (9.1% in constant currency). Adjusted profit before tax (PBT) was £21.8 million, representing an 11.2% margin (compared to 12.4% in the prior year). Adjusted diluted EPS for the quarter was £0.30, exceeding prior guidance due to improved cost management. Key drivers included growth in North America (32.7% YoY) and banking/capital markets (up 43.6% YoY). However, Europe and the rest of the world saw revenue declines due to FX headwinds and slower client spending. Adjusted free cash flow was £31.6 million, slightly lower than last year's £34 million. The company announced a £100 million share repurchase program subject to shareholder approval.

Company Outlook & Strategy:
Endava expects Q3 FY2025 revenue between £198 million and £200 million and adjusted diluted EPS of £0.31 to £0.32. FY2025 revenue guidance is £795 million to £800 million, representing constant currency growth of 8.5%-9%, with EPS expected to be £1.20-£1.23. The company is focusing on large-scale deals, AI-driven transformations, and demand for modernization in core industries like banking and insurance. Macro challenges are pressuring growth, particularly in the UK, Europe, and rest of the world.

Key Industry Trends:

• The "digital shift" is transitioning toward AI-driven transformations, highlighting demand for Gen AI solutions that require re-architecting core systems and cloud integration.
• Banking, capital markets, and insurance are growth areas, while payments and TMT face headwinds.
• AI adoption continues to accelerate, with a focus on enterprise-level customization to deliver real business value.

Operational Highlights:

• Endava secured significant new engagements, including core modernization projects for financial institutions, long-term partnerships in commodities trading, and AI-driven solutions for healthcare and insurance.
• Growth initiatives include modernizing legacy systems for energy providers and expanding B2C offerings for clients like a golf equipment company.
• The integration of GalaxE is progressing, contributing to North American growth.

Challenges & Risks:

• Macro headwinds are creating client caution, particularly in the UK and rest of the world, leading to project ramp-downs and pipeline delays.
• Payments vertical remains pressured due to reduced spend by larger clients.
• Industry-specific challenges, such as the impact of acquisitions and FX volatility, are affecting revenue growth in TMT and mobility.

Key Analyst Questions & Responses:

• Q3 Guide Assumptions: Management cited macro softness in the UK and rest of the world, offset by strong growth in North America and banking/capital markets. Timing of large deal conversions is key to sequential acceleration in Q4.
• Large Deal Pipeline: Executives highlighted success in scaling projects for large banking clients, with some deals increasing spend significantly over time. Continued growth in these areas supports the company's longer-term outlook.

Endava remains focused on navigating macroeconomic challenges while leveraging AI-led transformations and expansion into high-growth verticals.