Endava (DAVA) Q1 2025 earnings summary

Executive summary

• Achieved 3.5% year-over-year revenue growth to £195.1 million in Q1 FY25, exceeding guidance and driven by strong North America and banking sector performance, with 5.2% growth at constant currency.

• Market is shifting from traditional digital business to AI and core modernization-driven growth, with larger, more complex transformation programs and several high-value, multi-year deals secured.

• Strategic partnerships and the GalaxE acquisition have expanded capabilities, added proprietary IP, and diversified the client base across industries and geographies.

• The company leverages a global workforce of 11,821 employees as of September 30, 2024, with a strong presence in Europe, North America, Latin America, APAC, and the Middle East.

• Business model emphasizes recurring revenue, with 89.7% of annual revenue on average coming from existing clients.

Financial highlights

• Q1 FY25 revenue was £195.1 million, up 3.5% year-over-year and 2% sequentially in constant currency.

• Profit before tax was £4.2 million, down from £17.3 million year-over-year; adjusted profit before tax was £19.2 million, down from £29.8 million.

• Adjusted profit before tax margin declined to 9.9% from 15.8% year-over-year, impacted by lower operating margins.

• Adjusted diluted EPS was £0.25, down from £0.39 year-over-year; diluted EPS declined to £0.04 from £0.21.

• Adjusted free cash flow was £3.5 million, down from £16.0 million year-over-year, representing 1.8% of revenue.

Outlook and guidance

• Q2 FY25 revenue expected between £195.0 million and £197.0 million, representing 8.5%-9.5% constant currency growth year-over-year.

• Full-year FY25 revenue guidance is £800.0–£810.0 million, with 10%-11.5% constant currency growth.

• Adjusted diluted EPS guidance for Q2 is £0.24–£0.25; full-year guidance is £1.12–£1.17 per share.

• Margin improvements expected in the second half of the fiscal year as GalaxE integration completes and optimization initiatives take effect.

• The company highlights a large addressable market for digital transformation, with a projected five-year CAGR of 16.1% and $3.9T in spending by 2027.