Endava ((DAVA)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Endava’s recent earnings call painted a mixed picture for the company, highlighting both significant achievements and notable challenges. The sentiment expressed during the call was one of cautious optimism, as the company celebrated strategic partnerships and advancements in AI capabilities, yet faced revenue declines and profitability issues. The strategic focus on AI-native transformation holds promise for long-term growth, but short-term financial metrics reflect ongoing challenges.
Strategic Partnership with Payments Company
Endava secured a multiyear strategic relationship with a leading payments company, valued at up to $100 million. This partnership underscores the strength of Endava’s client relationships and showcases its capabilities in AI and advanced engineering, marking a significant milestone for the company.
AI Integration and Advancements
AI has become a cornerstone of many clients’ technology roadmaps, with Endava forming partnerships across a wide range of projects. Notable advancements include the development of an AI-enabled content studio for e-learning and AI-assisted modernizations for retail pharmacy applications, highlighting Endava’s commitment to AI integration.
Large Strategic Deals Signed
Beyond the payments deal, Endava has deepened its engagement with Convex and extended its partnership with Toyota Racing Development. These deals reflect the success of Endava’s strategic approach to securing large-scale partnerships and expanding its influence in key sectors.
Expansion of AI Talent Pool
Endava’s DARVAX Academy attracted 2,900 applicants, resulting in 470 hires focused on AI skills across nine delivery locations. This expansion demonstrates Endava’s commitment to developing a robust AI talent pool, essential for supporting its strategic initiatives.
Partnership with OpenAI
Endava has expanded its investment in a partnership with OpenAI, with engineers enrolled in OpenAI’s partner-exclusive certification program. This initiative aims to deepen Endava’s AI knowledge and capabilities, further solidifying its position as a leader in AI-driven solutions.
Revenue Decline
The company reported a revenue of £178.2 million for the quarter, marking an 8.6% year-over-year decrease. In constant currency terms, the revenue decline was 7.3%, indicating challenges in maintaining growth momentum.
Unexpected Client Credit
An unexpected credit to a client in the United States negatively impacted Endava’s quarterly results, leading to lower-than-expected financial performance and highlighting the volatility in client engagements.
Profitability Challenges
Endava reported a loss before tax of £8.5 million, a stark contrast to the £4.2 million profit recorded in the previous year. The adjusted PBT margin decreased to 5.5% from 9.9%, reflecting the company’s ongoing profitability challenges.
Decreased Revenue from Major Clients
The average spend per client from Endava’s 10 largest clients decreased by 9.9% year-over-year. Additionally, revenue from major regions also declined, indicating a broader trend of reduced client spending.
Forward-Looking Guidance
For the second quarter of fiscal year 2026, Endava expects revenue to range from £179 million to £182 million, representing a constant currency revenue decline of 7-8% compared to the prior year. The adjusted diluted EPS is projected to be between £0.15 and £0.17. For the full fiscal year 2026, revenue is anticipated to be between £735 million and £752 million, with an adjusted diluted EPS expected to range from £0.80 to £0.88. This guidance considers recent strategic deals and pipeline conversion assumptions.
In summary, Endava’s earnings call highlighted a dual narrative of strategic successes and financial challenges. While the company has made significant strides in securing partnerships and advancing AI capabilities, it faces hurdles in revenue growth and profitability. The forward-looking guidance suggests cautious optimism, with expectations of continued strategic focus and gradual financial improvement.