Endava's Q4 Earnings Fall Short, Shares Dip 6% on News

Endava's Q4 Earnings Report Sparks Stock Drop

LONDON - Endava plc (NYSE:DAVA) experienced a 6.5% drop in shares following the release of its fourth quarter earnings, which fell short of analyst expectations. The technology services company's performance highlighted some of the challenges faced over the past year.

Analysis of Financial Performance

The adjusted earnings per share for the quarter that ended June 30 were reported at £0.22. This figure is notably beneath the forecasted estimate of £0.23, indicating a gap that raised concerns among investors. Revenue for the quarter was recorded at £194.4 million, reflecting a modest year-over-year increase of 2.4%. However, this was still below the anticipated figure of £195.7 million set by analysts.

Insights from the CEO

CEO John Cotterell provided insight into the company’s performance, stating, "The past fiscal year has been challenging for Endava, with our revenue declining by 4.5% in constant currency. This was significantly influenced by headwinds affecting our business, particularly due to our exposure in key markets like the UK and the Payments industry vertical." His remarks underscore the difficulties the company has faced in a competitive market.

Yearly Financial Overview

For the complete fiscal year 2024, Endava reported total revenue of £740.8 million, marking a decrease of 6.8% from the prior fiscal year's revenue of £794.7 million. Additionally, the adjusted profit for the year fell dramatically to £66.0 million, a sharp decrease from the previous year’s £132.4 million. This decline raises questions about the company's operational efficiencies and market strategies.

Future Outlook

As Endava looks to the future, it has forecasted first quarter revenue for fiscal 2025 to be between £194 and £195 million. This projection represents an expected constant currency growth of 4.5% to 5.0% year-over-year. For the entirety of fiscal year 2025, the company anticipates achieving revenues between £800 and £810 million. This indicates an expected constant currency growth of approximately 10.0% to 11.5%, suggestive of a potential recovery and positive adjustment to ongoing market dynamics.

Understanding Market Reactions

The stock market often reacts swiftly to earnings reports, particularly when results diverge from expectations. Endava's recent downturn may reflect broader investor skepticism about its recovery strategies and inherent market challenges. Close observation of upcoming financial reports will be crucial for stakeholders hoping to gauge the company’s direction.

Frequently Asked Questions

What caused the drop in Endava's share price?

The drop was primarily due to Q4 earnings and revenue that missed analyst expectations, leading to investor concerns.

How did Endava perform financially in the last fiscal year?

Endava reported a 6.8% decline in revenue for fiscal year 2024, amounting to £740.8 million and a significant drop in adjusted profit.

What is Endava's forecast for fiscal year 2025?

Endava forecasts revenue between £800 million and £810 million for fiscal year 2025, representing a potential growth of 10.0% to 11.5% in constant currency.

Who is Endava's CEO, and what did he say about the company's challenges?

Endava's CEO is John Cotterell. He noted the company faced significant challenges including a decline in revenue driven by headwinds in key markets.

What are the projected earnings for the first quarter of fiscal 2025?

Endava anticipates first quarter revenue between £194 million and £195 million, indicating a growth in constant currency.

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