LONDON - Endava plc (NYSE:DAVA) shares climbed 3.8% as the company reported third-quarter earnings that surpassed analyst expectations, despite a year-on-year (YoY) revenue decline.
For Q3 FY2024, the technology services firm posted an adjusted earnings per share (EPS) of £0.22, beating the consensus estimate of £0.18. However, revenue saw a 14.3% decrease to £174.4 million from the previous year, slightly missing the £174.9 million analyst forecast.
The company's revenue performance was within its own guidance range, even as it faced an 11.8% revenue decrease at constant currency.
Endava's CEO, John Cotterell, commented on the results, "Our revenue of £174.4 million for Q3 FY2024 was within our guidance, representing a decrease of 11.8% in constant currency year over year. The overall demand environment remains challenging but stable, and we are seeing signs of increasing discretionary spending. Client behavior is stabilizing but sales cycles remain elongated."
Looking ahead, Endava provided guidance for the fourth quarter, expecting revenue between £195.0 million to £197.0 million, which would represent a constant currency revenue growth of between 3.5% and 4.5% YoY.
The company also anticipates adjusted diluted EPS to be in the range of £0.22 to £0.23 per share. For the full fiscal year 2024, Endava forecasts revenue to be in the range of £741.0 million to £743.0 million, indicating a constant currency revenue decrease of between 4.5% and 4.0% YoY, with adjusted diluted EPS expected to be between £1.13 and £1.14 per share.
Despite the YoY revenue decline, the company's stock responded positively to the earnings report, likely buoyed by the earnings beat and stable outlook. Investors may also be encouraged by Endava's recent acquisition of GalaxE in April 2024, which utilized £129.0 million of cash and could potentially contribute to future revenue growth.
Endava's financial highlights for the quarter also included a loss before tax of £(0.5) million, compared to a profit before tax of £30.4 million in the prior year. The adjusted profit before tax was £15.5 million, or 8.9% of revenue, compared to £43.4 million, or 21.3% of revenue, in the same period last year. The loss for the period was £(1.7) million, resulting in a diluted EPS of £(0.03), compared to a profit of £24.4 million and diluted EPS of £0.42 in the prior year.
Endava's cash flow from operating activities was £3.0 million in Q3 FY2024, down from £25.1 million in the same period last year. The company's cash and cash equivalents stood at £190.0 million as of March 31, 2024.
The company, which provides services across various industries including Payments, Banking and Capital Markets, and Insurance, has a total headcount of 11,025 as of the end of the quarter, with an average of 10,127 operational employees during Q3 FY2024.
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