Endava ((DAVA)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Endava’s recent earnings call presented a mixed sentiment, reflecting both achievements and challenges. The company celebrated a record order book value and significant strides in AI integration and strategic partnerships. However, it also faced hurdles such as a revenue decline in Q4 FY 2025, deteriorating adjusted free cash flow, and increased borrowings. Additionally, pressures in the European markets and a cautious outlook for FY 2026 were noted.
Record Order Book Value
Endava reported its highest ever order book value signed in Q4 FY 2025, highlighting the strength of its customer relationships and the appeal of its transformative offerings. This achievement underscores the company’s ability to attract and retain clients, positioning it well for future growth.
AI Integration Progress
The company has made significant progress in AI integration, with over half of its workforce now utilizing AI in projects. This development marks a critical step towards Endava becoming AI native, enhancing its capabilities and supporting multiple AI-related engagements.
Strategic Partnerships and Client Acquisitions
Endava’s strategic partnership with OpenAI has led to new client acquisitions and multiple engagements. The company has also strengthened its collaborations with major tech players like AWS, Microsoft, and Google Cloud, which are expected to drive future growth and innovation.
Revenue Growth in Fiscal Year 2025
For the fiscal year ended June 30, 2025, Endava reported a revenue of £772.3 million, marking a 4.3% increase over the previous year. In constant currency terms, the revenue grew by 6.3%, reflecting the company’s robust performance despite challenging market conditions.
Adjusted PBT Margin Improvement
Endava achieved an adjusted PBT margin of 8.8% for the three months ended June 30, 2025, compared to 7.7% in the same period the previous year. This improvement indicates effective cost management and operational efficiency.
Revenue Decline in Q4 FY 2025
The company faced a revenue decline in Q4 FY 2025, with revenues of £186.8 million, a 3.9% decrease compared to the same period last year. In constant currency terms, the decline was 0.7%, highlighting challenges in maintaining growth momentum.
Adjusted Free Cash Flow Deterioration
Endava reported a negative adjusted free cash flow of £4 million for the three months ended June 30, 2025, compared to a positive £6.6 million in the same period last year. This deterioration raises concerns about cash management and financial health.
Increased Borrowings
The company’s borrowings increased to £180.9 million as of June 30, 2025, up from £136.5 million at the end of March 2025. This rise in debt levels could impact the company’s financial flexibility and future investment capacity.
Weakness in Europe and TMT Verticals
Endava experienced a 13.1% revenue decline in Europe, primarily due to weaknesses in the TMT and mobility verticals. This regional challenge underscores the need for strategic adjustments to address market-specific issues.
Fiscal Year 2026 Cautious Outlook
Endava has provided guidance for Q1 and the full fiscal year 2026, projecting Q1 revenue to be between £181 million and £183 million, reflecting a year-over-year decrease of 5% to 6%. For the full fiscal year, revenue is expected to range from £750 million to £765 million, indicating a potential change of -1.5% to +0.5%. The company remains cautious due to a volatile operating environment but is optimistic about its strong order book and AI-driven strategic shift.
In summary, Endava’s earnings call reflected a mixed sentiment, balancing achievements in AI integration and strategic partnerships against challenges like revenue decline and increased borrowings. The cautious outlook for FY 2026 highlights the company’s awareness of a volatile market environment, yet its strong order book and strategic initiatives provide a foundation for potential growth.