Executive Summary
Endava reported Q4 FY2024 revenue of GBP194.4 million, up 2.4% year over year (3.5% in constant currency) and aided by an incremental contribution from the GalaxE acquisition. The quarter benefited from North America and healthcare growth, but was offset by weaker UK revenue and ongoing payments softness. For the full year ended June 30, 2024, revenue declined 6.8% to GBP740.8 million as macro headwinds and a backlog of client decision-making weighed on demand, with inorganic contributions from GalaxE delivering an 8.2% positive effect in constant currency. Adjusted PBT for FY2024 fell to GBP83.0 million with an adjusted PBT margin of 11.2%, reflecting ongoing investments in people, platforms (notably Dava.X), and the GalaxE integration. Management anticipates margin normalization in the coming periods as GalaxE is integrated and delivery efficiencies mature, albeit at a near-term cost to margins in 1H FY2025. The company guides to a more constructive growth trajectory in FY2025, driven by core modernization, India delivery, and cross-sell opportunities with GalaxE; however, the impact of FX and macro uncertainty remains a key risk to achieving the higher end of guidance. The leadership emphasized AI as a transformational vector, highlighted Morpheus as a proof point of AI-enabled productivity (e.g., cutting a healthcare workflow from five days to under 10 minutes with anticipated annualized savings >USD10 million), and outlined a multi-horizon plan that includes OpenAI collaboration, Dava.X specialization, and expanded partnerships. Overall, Endava positions itself as undergoing a strategic shift toward a less cyclical, AI-enabled services mix, with meaningful cross-sell upside and an investment-led path to margin expansion.
Key Performance Indicators
QoQ: 16.08% | YoY:-27.47%
QoQ: 168.07% | YoY:-94.51%
QoQ: -6.74% | YoY:-108.04%
QoQ: -6.73% | YoY:-107.93%
Key Insights
Revenue (Q4 2024): GBP194.4m, +2.4% YoY; CC +3.5%; inorganic contribution +15.6% in the quarter; QoQ CC: +11.4% (GalaxE contribution driven). 10 largest client concentration: 34% of revenue; avg spend per top-10 client: GBP6.7m. Geographic mix (Q4 2024): NA 38%, Europe 25%, UK 30%, Rest of World 7%. Gross profit: GBP43.172m; gross margin: 22.21% (vs. 31.36% in FY4Q23, indicating mix/scale effects). Operating income: GBP1.247m; operating margin: 0.64%. EBITDA: GBP14.354m; EBITDA margin: 7.38%. Ad...
Financial Highlights
Revenue (Q4 2024): GBP194.4m, +2.4% YoY; CC +3.5%; inorganic contribution +15.6% in the quarter; QoQ CC: +11.4% (GalaxE contribution driven). 10 largest client concentration: 34% of revenue; avg spend per top-10 client: GBP6.7m. Geographic mix (Q4 2024): NA 38%, Europe 25%, UK 30%, Rest of World 7%. Gross profit: GBP43.172m; gross margin: 22.21% (vs. 31.36% in FY4Q23, indicating mix/scale effects). Operating income: GBP1.247m; operating margin: 0.64%. EBITDA: GBP14.354m; EBITDA margin: 7.38%. Adjusted PBT: GBP14.9m; adjusted PBT margin: 7.7%. Net income: GBP-1.854m; net margin: -0.95%. EPS (diluted): GBP-0.0315; adjusted diluted EPS: GBP0.22. Cash flow: net cash used by operating activities GBP-0.239m; capex GBP-1.79m (0.8% of revenue). Free cash flow (FCF): GBP-2.029m. Balance sheet: total assets GBP1,013.891m; cash & equivalents GBP62.358m; total debt GBP202.761m; net debt GBP140.403m; total liabilities GBP374.436m; total stockholders’ equity GBP639.455m. FY2024 highlights: revenue GBP740.8m; adjusted PBT GBP83.0m; adjusted diluted EPS GBP1.12. Guidance (as of Aug 2024 for FY2025): Q1 FY2025 revenue GBP194m–GBP195m; adjusted diluted EPS GBP0.21–GBP0.22; FY2025 revenue GBP800m–GBP810m (+10% to +11.5% constant currency); adjusted diluted EPS GBP1.12–GBP1.17. FX note: USD weakness against GBP (~GBP1 = USD1.31; EUR1.19) dampens reported GBP revenue; M&A contribution ~11%–13% of growth in the guide. Important dynamics cited by management include a shift toward core modernization, the India delivery footprint, stronger cross-sell with GalaxE, and the OpenAI ChatGPT enterprise rollout.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
194.42M |
2.44% |
11.50% |
| Gross Profit |
43.17M |
-27.47% |
16.08% |
| Operating Income |
1.25M |
-94.51% |
168.07% |
| Net Income |
-1.85M |
-108.04% |
-6.74% |
| EPS |
-0.03 |
-107.93% |
-6.73% |
Key Financial Ratios
operatingProfitMargin
0.64%
operatingCashFlowPerShare
$-0
freeCashFlowPerShare
$-0.03
priceEarningsRatio
-181.28
Management Commentary
- Strategy & AI: Management underscored the AI-driven digital shift as a meaningful longer-term growth driver and stressed the need to treat AI as a holistic transformation tool rather than a mere add-on. Quote: “Maximize the potential of AI. Organizations should move away from seeing AI merely as an add-on to existing systems and start considering it as a versatile tool capable of driving holistic transformation across the enterprise.” Significance: Sets the strategic tone for Endava’s product roadmap and client engagements, including Morpheus and GPT-based tooling.
- GalaxE integration and cross-sell momentum: The company highlighted strong early signs of cross-selling across the GalaxE platform and integration into core modernization offerings. Quote: “We are seeing a significant number of cross sell projects” and “cross selling opportunities well into double-digits.” Significance: Signals potential margin- and growth-acceleration as GalaxE assets integrate with Endava’s existing delivery and GTM.
- Morpheus and production-grade AI use cases: Morpheus demonstrated tangible productivity gains (e.g., reducing a five-day workflow to under 10 minutes with >USD10m annualized savings in a regulated pharma engagement). Significance: Provides a tangible proof point for AI-enabled efficiency and client ROI, supporting higher-value engagements.
- OpenAI partnership and governance: Endava announced a strategic deal to deploy ChatGPT Enterprise licenses across all employees, with AI champions driving GPT development, which supports responsible AI deployment and productivity gains. Significance: Establishes an enterprise-wide AI operating model and potential for scalable efficiency gains.
- GalaxE core modernization and cross-market expansion: With GalaxE, Endava is accelerating a move toward a digital core (finance, healthcare focus noted). Significance: Aligns with clients’ needs to modernize core systems to leverage data and AI, expanding addressable market and cross-border delivery.
- Geographic and portfolio diversification: APAC share rose to 17% of Endavans, up from 9%, confirming geopolitical diversification as a strategic hedge against UK/payments sensitivities. Significance: Reduces concentration risk and broadens the service reach across industries.
- Sustainability and partnerships: Endava published its Sustainability Report and emphasized partnerships (Snowflake, Guidewire, Stripe) to drive client-centric solutions. Significance: Enhances ESG profile and creates ecosystem leverage for client solutions.
Maximize the potential of AI. Organizations should move away from seeing AI merely as an add-on to existing systems and start considering it as a versatile tool capable of driving holistic transformation across the enterprise.
— John Cotterell
We are seeing a significant number of cross sell projects, and cross selling opportunities with GalaxE well into double-digits.
— John Cotterell
Forward Guidance
Endava’s FY2025 guidance reflects a cautious yet constructive path. Key takeaways include: (i) Revenue guidance of GBP800m–GBP810m for FY2025, representing ~10%–11.5% constant-currency growth, supported by a roughly 11% inorganic contribution and deployment of GalaxE capabilities into Endava’s GTM; (ii) Q1 FY2025 revenue guide of GBP194m–GBP195m, implying modest sequential progression and a currency-adjusted lift of up to ~1% if FX is neutral; (iii) Adjusted diluted EPS guidance of GBP1.12–GBP1.17 for FY2025 and GBP0.21–GBP0.22 for Q1 FY2025; (iv) Margin trajectory: adjusted PBT margin is expected to be depressed in 1H FY2025 due to investments in Dava.X, integration costs associated with GalaxE, and OpenAI-related licensing, with normalization anticipated in later quarters as cross-sell and delivery efficiencies scale. Management also noted that USD weakness versus GBP had a negative effect on the GBP revenue guide. Overall, the path to growth hinges on (a) successful integration of GalaxE and migration of its work onto Endava systems, (b) acceleration of core modernization programs (particularly AI-enabled transformations), and (c) continued pipeline progression in North America and other non-UK geographies. Key indicators investors should monitor include: pipeline progression in AI-core modernization, cross-sell conversion rates from GalaxE, the cadence of margin recovery across H2 FY2025, and the pace of OpenAI-enabled productivity gains across the global workforce.