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- **Revenue Miss and Strategic Deal**: Q1 FY2026 revenue missed due to a £10M client credit, but a $100M multi-year payments deal highlights AI-native transformation success.
- **AI Productivity Gains**: 70% of services now involve AI, with DARVA Flow driving 25-35% productivity gains in code reviews and testing.
- **Margin Pressure and Recovery**: Adjusted PBT margin dropped to 5.5%, but FY2026 guidance reflects cautious pipeline conversion (£735-752M) and large deal ramp-up in H2.
- **Operational Shift**: Transition to outcome-based deals (24% of revenue) is prioritized, with 470 new AI hires and mandatory DARVA Flow training by year-end.

**【CEO Summary Section】**
- **Revenue Miss and Challenges**: Q1 FY2026 revenue of £178.2M (-8.6% YoY) fell short of guidance due to an unexpected £10M client credit and pipeline conversion delays. The company secured a multi-year $100M deal with a payments firm, showcasing AI-native transformation capabilities.
- **AI-Driven Growth**: 70% of services now involve AI, with examples like automating medical bill processing (95%+ accuracy) and AI-assisted code migration (30x faster). DARVA Flow, an AI-native delivery model, is being rolled out across 11,636 employees, with 470 new hires from the DARVA X Academy.
- **Strategic Shift**: Transitioning from TNM (76% of revenue) to outcome-based deals (24%) is driving productivity gains (5-10x) but causing short-term margin pressure. The company aims to lock in long-term partnerships, e.g., with Toyota Racing and Convex.

**【CFO Financial Commentary】**
- **Financial Results**: Adjusted PBT margin dropped to 5.5% (-440bps YoY), with EPS of £0.15 (-40% YoY). Adjusted free cash flow improved to £9.2M, but cash reserves declined to £47.2M. Capital expenditures rose to 1.7% of revenue.
- **Guidance Update**: Q2 FY2026 revenue expected £179-182M (-8% to -7% YoY), with FY2026 at £735-752M (-4.5% to -2.5% YoY). The lower guide reflects cautious pipeline conversion assumptions, offset by large signed deals.
- **Leverage and Margin**: Operational leverage will drive margin recovery as large deals ramp up. Share buybacks continue ($34.1M remaining), but investments in AI talent and DARVA Flow are prioritized.

**【Q&A Key Highlights】**
- **Client Credit Clarification**: The £10M credit was procedural, not execution-related, and isolated. If absent, revenue would have met the low end of guidance.
- **Pipeline Conversion**: Non-strategic deal conversion was 50-80% of high/low pipeline, below expectations. FY2026 guide lowered to £752M (from £765M) to account for pipeline risk.
- **DARVA Flow Productivity**: Early wins show 25-35% productivity gains via AI in code reviews and testing. Full-phase completion could double this impact.
- **Headcount Strategy**: 2% YoY headcount decline reflects AI talent expansion (470 hires) and attrition in non-AI roles. DARVA Flow training will be mandatory by year-end.
- **Macro Considerations**: No unusual client churn; the payments deal is net new business. Pricing stability in TNM suggests demand resilience despite macro headwinds.

Endava plc (DAVA) Q1 2026 Earnings Call Transcript

- **AI-Native Transformation**: Over 50% of workforce using AI, with pilot projects showing 10x productivity gains via Endava Flow.
- **Record Order Book**: Q4 FY25 signings highest on record, but Q1 FY26 revenue down 6% YoY due to delayed project ramps.
- **Margin Challenges**: 3% PBT margin headwind from AI investments and bonuses, offsetting 10.1% YoY PBT growth.
- **Strategic Wins**: 5-year RX deal, North American financial institution partnership, and hyperscaler AI tool deployment.
- **Geographic Shifts**: North America revenue down 5.3% YoY (FX), U.K. up 5.9%, healthcare +104% YoY.

**【CEO Summary Section】**
- Endava is transitioning to become AI-native, with over half of its workforce now using AI in projects. Key AI initiatives include scaling a medical records processing platform, developing an in-cabin driver identification system, and creating AI tools for creative workflows.
- The company signed its highest-ever order book value in Q4 FY25, driven by transformative offerings and client relationships. Notable deals include a 5-year agreement with Reed Exhibitions and a partnership with a North American financial institution.
- Endava Flow, a new delivery model integrating AI agents with human engineers, achieved up to 10x productivity improvements in pilot projects. This model is expected to drive long-term operational efficiency.
- Strategic partnerships with OpenAI, AWS, Microsoft, and Google are accelerating AI adoption, leading to client wins such as a hyperscaler's AI tool deployment and a reinsurer's AI-native architecture project.

**【CFO Financial Commentary】**
- Q4 FY25 revenue: GBP 186.8 million (-3.9% YoY, -0.7% in constant currency). Adjusted PBT: GBP 16.4 million (+10.1% YoY). Adjusted EPS: 24p (+13.6% YoY).
- FY25 revenue: GBP 772.3 million (+4.3% YoY, +6.3% in constant currency). Adjusted PBT: GBP 82.1 million (-1.1% YoY). Adjusted EPS: 113p (+1.8% YoY).
- Q1 FY26 guidance: Revenue GBP 181-183 million (-6% to -5% YoY in constant currency). Adjusted EPS: 17p-19p.
- FY26 guidance: Revenue GBP 750-765 million (-1.5% to +0.5% YoY in constant currency). Adjusted EPS: 82p-94p.
- Margins impacted by 3% headwind from AI investments, bonus reinstatement, and Endava Flow program costs.

**【Q&A Highlights】**
- **Order Book vs. Growth**: Strong pipeline (highest ever signed in Q4) but delayed revenue ramp due to project timing and multiyear deal phasing. Example: a large Q4 deal will contribute in H2 FY26.
- **Margin Pressure**: 3% adjusted PBT margin reduction from AI investments and bonuses, offsetting underlying margin expansion. Sequential growth expected post-Q1 as new deals ramp.
- **Client Dynamics**: Payments vertical decline (19% YoY) offset by growth in banking (+37%), insurance (+12%), and healthcare (+104%). North America revenue down 5.3% YoY due to FX, but U.K. up 5.9%.
- **Flexible Pricing**: Transaction-based models (e.g., Mastercard partnership) balance risk/reward, with upside from volume growth. Outcome-based deals reduce client uncertainty but require rigorous risk assessment.
- **Headcount**: 11,479 employees (-5% YoY), prioritizing AI, data, and cloud skills. FY26 hiring focused on supporting AI initiatives and client demand.

Endava Plc (DAVA) Q4 2025 Earnings Call Transcript

- **Revenue Resilience**: Q3 revenue up 11.7% YoY to £194.8M, driven by North America (37.1% growth) despite FX headwinds.
- **AI-Driven Innovation**: Pioneering partnerships with Open AI, Google, and AlixPartners; AI projects deliver 19% accuracy improvement in healthcare and workflow acceleration in insurance.
- **Share Buyback Boost**: $39.7M repurchased; $110.3M remaining under expanded program, signaling confidence in long-term value.
- **FX Risk**: Q4 guidance reflects -3% growth impact from dollar weakness, highlighting macroeconomic volatility.
- **Pipeline Momentum**: 24 large deals in pipeline, with 5 closed in Q3, positioning for future revenue growth.

**【CEO Summary Section】**
- **Challenging Environment**: Slowed growth due to U.S. dollar weakness and unsigned deals in North America and Asia Pacific. Pipeline of large deals (24) is growing but conversion to revenue is slower than expected.
- **AI and Partnerships**: Pioneered Open AI’s beta services, partnered with Google Agent Space, AlixPartners, SideFX, and Backbase. Highlighted AI projects in healthcare (19% accuracy improvement), insurance (workflow acceleration), and golf performance (AI-powered swing analysis).
- **Strategic Moves**: Increased share buyback by $50M, focused on cost control, and expanded AI-driven solutions.

**【CFO Financial Commentary】**
- **Q3 Results**: Revenue £194.8M (+11.7% YoY), adjusted PBT £24.6M, adjusted EPS 34 pence (vs. guide 31-32 pence). North America revenue up 37.1% due to Galaxy acquisition.
- **FX Impact**: Q4 guidance includes -3% growth impact from dollar weakness. Full-year revenue guidance £771.5-773.5M (+6.0-6.5% YoY in constant currency).
- **Share Buyback**: $39.7M repurchased; $60.3M remaining, with additional $50M authorization.

**【Q&A Key Highlights】**
- **Pricing Dynamics**: Competitive but maintaining day rates; AI-driven efficiency offsets cost pressures.
- **Headcount Trends**: 11,365 employees (+3.1% YoY), shift to AI, data, cloud skills; attrition due to re-skilling.
- **Regional Challenges**: North America growth hampered by FX and deal delays; U.K. and Europe stable, APAC underperforming.
- **AI Traction**: Agentic AI solutions (teams of AI agents) gaining traction in enterprise applications, with partnerships driving deal flow.

Endava (DAVA) Q3 2025 Earnings Call Transcript

- **AI-Driven Growth**: Core modernization projects in banking (+43.6% YoY) and North America (32.7% revenue growth) lead the charge.
- **Client Confidence**: 92% of clients likely to recommend Endava, up from 91% prior quarter.
- **Financial Resilience**: Beat Q2 EPS guidance (£0.30 vs. £0.24-£0.25) despite macro headwinds in UK and EMEA.
- **Share Buyback**: $100M program signals confidence in long-term value creation.
- **Risk Watch**: TMT and mobility verticals lag as clients prioritize AI transformation over legacy projects.

**【CEO Summary Section】**
- Emphasized AI-driven core modernization as a growth driver, citing 43.6% YoY growth in banking and capital markets vertical.
- Highlighted large-scale projects with clients like fintech providers and North American financial institutions, showcasing use of accelerators (Ray, Maps, Dash) for application modernization.
- Announced $100M share buyback program to optimize capital allocation.
- Client satisfaction metrics improved: 92% likelihood to recommend (vs. 91% prior) and 90% likelihood to repurchase (vs. 88% prior).

**【CFO Financial Commentary】**
- Q2 FY2025 revenue: £195.6M (+6.6% YoY), with North America up 32.7% driven by GalaxE integration.
- Adjusted EPS: £0.30 (vs. guidance of £0.24-£0.25), supported by 5% YoY decline in operating expenses.
- Adjusted PBT margin: 11.2% (down from 12.4% YoY), with margin recovery expected in H2.
- Q3 FY2025 guidance: £198-£200M revenue (+13-14% CAGR), £0.31-£0.32 EPS.
- FY2025 full-year guidance: £795-£800M revenue (+8.5-9% CAGR), £1.20-£1.23 EPS.

**【Q&A Key Themes】**
- **Macro Risks**: UK and Rest of World revenue down 43.5% YoY due to client caution; TMT and mobility verticals under pressure.
- **Large Deal Pipeline**: Core modernization projects with 2+ year sales cycles expected to accelerate Q4 revenue.
- **Pricing Dynamics**: Modest improvement in utilization (6-7%) and pricing through outcome-based contracts.
- **GalaxE Integration**: Systems cutover complete; cost synergies to materialize in FY2026.
- **Talent Strategy**: Focus on reskilling existing workforce for AI adoption (80% of Endavans using Gen AI daily).

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