Executive Summary
Endava delivered a solid top-line performance in QQ1 2025 with revenue of GBP195.1 million, up 3.5% year over year (CC up 5.2%), and sequential growth under a backdrop of margin normalization pressures. The quarter featured meaningful progression from the company’s AI-driven core modernization strategy and the GalaxE acquisition, which together expanded North American exposure, healthcare revenue, and nearshore delivery capabilities. While revenue grew, profitability remained modest—net income of GBP2.25 million and a net margin of ~1.15% against a gross margin of ~25%, with an adjusted PBT margin of 9.9% in the prior year period signaling the need for GalaxE-related synergies to drive margin expansion in the back half of FY2025.
Management framed QQ1 2025 within a broader “digital shift” toward AI-enabled core modernization, arguing that clients now require deep core transformations rather than peripheral digital upgrades. Endava highlighted its Dava.X framework and seven modernization accelerators (Chronos, Ray, Morpheus, and others) as accelerants to faster, lower-risk transformations, supported by a diversified, global delivery footprint including India. Management projects margin improvement in the second half as GalaxE-integrated systems and processes ramp, underscored by explicit guidance for FY2025: Q2 revenue GBP195–GBP197 million with 8.5–9.5% CC growth and EPS of GBP0.24–GBP0.25, and FY2025 revenue of GBP800–GBP810 million with 10.0–11.5% CC growth and EPS of GBP1.12–GBP1.17. These targets assume FX of GBP1 = USD1.30 and EUR1.19.
Strategically, Endava’s combination of AI leadership, core modernization capabilities, an expanded U.S. footprint via GalaxE, and a stronger nearshore/offshore mix position the company to capture larger, multi-year transformation programs. However, investors should monitor longer decision cycles, integration costs, and competitive dynamics in a still-uncertain macro environment as headwinds to near-term margin expansion persist.Overall, the QQ1 2025 readout reinforces Endava’s thesis that AI-embedded core modernization is a structural growth driver, with the potential for meaningful upside if the pipeline converts in the second half of FY2025.
Key Performance Indicators
QoQ: 12.71% | YoY:-10.67%
QoQ: 276.10% | YoY:-70.88%
QoQ: 221.20% | YoY:-81.83%
QoQ: 221.45% | YoY:-81.67%
Key Insights
Revenue: GBP195.1m for the three months ended 30 Sep 2024, up 3.5% YoY (GBP188.4m in the prior-year period); constant currency growth 5.2% YoY; sequential CC growth +2% vs the prior quarter.
Gross Profit: GBP48.66m; gross margin 24.9% (0.249) vs prior-year period margin around 0.249 but with YoY gross profit down ~-10.7% and QoQ up ~12.7% according to management metrics, reflecting product mix and integration effects.
Operating Income: GBP4.69m; operating margin 2.40% (0.024); YoY operating inco...
Financial Highlights
Revenue: GBP195.1m for the three months ended 30 Sep 2024, up 3.5% YoY (GBP188.4m in the prior-year period); constant currency growth 5.2% YoY; sequential CC growth +2% vs the prior quarter.
Gross Profit: GBP48.66m; gross margin 24.9% (0.249) vs prior-year period margin around 0.249 but with YoY gross profit down ~-10.7% and QoQ up ~12.7% according to management metrics, reflecting product mix and integration effects.
Operating Income: GBP4.69m; operating margin 2.40% (0.024); YoY operating income declined ~-70.9% but QoQ rose ~+276.1% as the quarter benefited from cost discipline and mix changes.
Net Income: GBP2.25m; net margin ~1.15%; YoY decline ~-81.8%; QoQ improvement ~+221.2% as the business mix evolved and costs moderated.
EPS (basic/diluted): GBP0.0385 / GBP0.0382; YoY loss of ~-81.7%; QoQ gain ~+221.5%.
Cash Flow: Net cash provided by operating activities GBP4.37m; free cash flow GBP3.24m; capex GBP1.14m; cash balance at period end GBP52.81m; cash at beginning GBP62.36m; net debt GBP134.80m; total debt GBP187.61m.
Balance Sheet Health: Total assets GBP967.72m; total liabilities GBP341.28m; cash and cash equivalents GBP52.81m; current ratio 1.90; debt to capitalization 0.23; equity GBP626.44m; goodwill and intangible assets total GBP610.01m; net tangible equity substantial but with meaningful intangibles.
Key Segments/Contributors: Healthcare revenue grew 201.6% y/y with GalaxE integration and accounted for ~12% of revenue; North America revenue contributed ~39% of QQ1 2025 revenue, aided by GalaxE; Payments declined 25.5% YoY but still ~20% of revenue; Banking & Markets grew 23.4% and accounted for ~70% of total revenue; UK revenue declined (payments-related) and ROW volumes softened due to vertical exposure.
Outlook (Guidance): Q2 FY2025 revenue GBP195–GBP197m; CC growth 8.5–9.5% YoY; adjusted diluted EPS GBP0.24–GBP0.25; Full-year FY2025 revenue GBP800–GBP810m; CC growth 10.0–11.5%; adjusted diluted EPS GBP1.12–GBP1.17; FX assumptions: GBP1 = USD1.30; EUR1.19. Management expects margin improvement in the back half as GalaxE integration completes and optimization programs take effect.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
195.05M |
3.52% |
0.33% |
| Gross Profit |
48.66M |
-10.67% |
12.71% |
| Operating Income |
4.69M |
-70.88% |
276.10% |
| Net Income |
2.25M |
-81.83% |
221.20% |
| EPS |
0.04 |
-81.67% |
221.45% |
Key Financial Ratios
operatingProfitMargin
2.4%
operatingCashFlowPerShare
$0.07
freeCashFlowPerShare
$0.06
priceEarningsRatio
124.14
Management Commentary
Theme: Digital shift and AI-enabled core modernization
- John Cotterell: “We believe the market is exhibiting the characteristics of a significant digital shift that’s visible in the slowdown of more traditional digital business alongside the acceleration of new, AI and core modernization-driven growth.” This frames Endava’s strategic context and aspirational market positioning.
Theme: Core modernization and AI capabilities
- John Cotterell: “The AI imperative to transform the core comes with a plethora of exciting opportunities… the size of the market we address is expanded by the shift, where we are no longer focused on solutions built predominantly around the core, but in fact need to engage directly with the core itself.”
- John Cotterell: “The seven modernization accelerators range from Chronos and Ray… to Morpheus, our agentic AI accelerator.” This highlights the asset base underpinning the transformation play.
Theme: GalaxE integration and India footprint
- John Cotterell: “Our acquisition of GalaxE has enhanced our core modernization capability, adding patented IP… access to larger, more complex transformation programs.”
- John Cotterell: “We are excited to have been able to open up new areas of client spend with our delivery footprint in India.”
Theme: Strategic partnerships and go-to-market
- Laurence/Madsen listed partnerships with Usoft, Mambu, GoCardless to extend channel and platform reach in payments, cloud banking, and real-time payments. These partnerships support cross-sell opportunities and geographic expansion.
Theme: People and culture
- John Cotterell highlighted Endava’s focus on mental health, well-being programs, and global engineering events, underscoring cultural resilience as a driver of long-term performance.
"We believe the market is exhibiting the characteristics of a significant digital shift that's visible in the slowdown of more traditional digital business alongside the acceleration of new, AI and core modernization-driven growth."
— John Cotterell
"The first net new success in the region was our selection as the preferred technology partner for a global capital markets organization."
— John Cotterell
Forward Guidance
Management provided explicit near-term and full-year targets in GBP terms:
- Q2 FY2025 guidance: Revenue GBP195–GBP197 million; constant currency growth 8.5–9.5% YoY; adjusted diluted EPS GBP0.24–GBP0.25.
- FY2025 guidance: Revenue GBP800–GBP810 million; constant currency growth 10.0–11.5% YoY; adjusted diluted EPS GBP1.12–GBP1.17.
- Currency assumptions used in guidance: GBP1 = USD1.30; EUR1.19.
- Margin trajectory: Management reiterated expectations that adjusted PBT margins will improve in future periods as GalaxE integration progresses and the cost optimization program from FY2024 yields benefits; they anticipate stronger second-half performance as large programs ramp up and the integration completes (end-February 2025 for GalaxE integration).
- What to watch for investors: pipeline conversion timing for larger core-modernization programs (IBMs of the AI-era); progression of production-grade GenAI engagements; stabilisation or acceleration of top client spend; progress on cross-sell opportunities via India and nearshore delivery; and the rate of margin improvement in H2 FY2025.