Good? All right. Hi, everybody. Thank you for joining us this afternoon. I'm Margaret Nolan. I'm the IT Services Analyst here at William Blair that covers Endava. I'm required to inform you that for a complete list of research disclosures or potential conflicts of interest, please visit our website at williamblair.com. Endava is a digital IT services company, and we're excited to have with us here today, John Cotterell, the CEO, and Mark Thurston, the CFO. So thank you both for joining us. We're gonna do an overview of the company. We'll do a little bit of Q&A, and then, immediately after the presentation, we'll end the webcast portion, but there will be a Q&A session right here in this room, so you don't have to move to the second room. And with that, I will turn it over to you all. Great. Well, the last session of the day, hey, that's got to be good, hasn't it? So we have a disclaimer. I won't ask you to read it. So Endava is a business. I'm John Cotterell, by the way, the CEO, but I founded the business just over 24 years ago in February 2000. It's a business focused in the digital space, and we're all about world-class engineering, industry expertise, and a people-centric mindset. So at our core, we believe that if you focus on the impact you're gonna make on people, you create better products, better solutions, and you need multidisciplinary teams to do that. You need the creatives, who understand how a product's gonna work and the impact it's gonna have, but you also need the engineers who are gonna bring that bit of magic. So technologies are how, and people are our why. One of the key aspects for us has been what we call Ideation to Production. So working with clients in the ideation phase to think through what is the art of the possible, what can be done with technology to impact clients' business, whether that's from a revenue increase point of view with customers, or whether it's an automation dimension, and so on. And we do that through an ideation phase. But then, as the client gets attracted to the possibilities, we'll build proof of concepts, we'll take them into prototypes, and then the client will sign up, and we'll move into a production-ready phase. And that's where the real money comes into the business as we build those production systems for clients. That route often means that we enter clients without going through an RFP process. And then, as we scale in the client, the procurement people and so on will come, and they'll want to RFP us. But running through an RFP process when you've demonstrated your capabilities is very different than using it as a method to get into a client for the first time. We deliver from nearshore locations, so that whole ideation to production, driven by agile, driven by close interaction and communication with the client, really benefits from being in a similar time zone. So our development teams are in Central Europe, for the European clients, in Latin America, mainly for the U.S. clients, and then over in Vietnam and Malaysia for Asia- Pac clients. That's been a core of our delivery model, and we believe that all of these things put together actually give a unique business model that creates a real moat in the way in which we deliver to clients. And that has been the shape of the business over the last 24 years as we've built through the digital transformation phase that we've been going through as a world. Now, at the end of March, we had just over 11,000 employees. We did a deal with a to acquire a business called GalaxE on the tenth of April, and that has taken us over the 12,000 mark. The majority of them are located in Central Europe, and you can see a mixture of European Union countries and non-European Union countries, and then in Latin America, and we're just starting to build out in Asia Pacific. So that nearshore weighting of where our people sit. But then between 5% and 10% of our delivery people are also sitting in country alongside clients, so in North America, in Western Europe, in Australia, and so on. So through that mix, getting the right capabilities at a good price point to deliver to clients. This gives a summary visual of where we were at the end of March, and just shows that over the last two or three years, in particular, we've built out that global delivery capability so that we're now in the Asia Pacific, we've got an office in the Middle East, and so on, as well as the Europe and US capability that we had until a couple of years ago. Actually, that step into global delivery is pretty important from the point of view of our global clients. It enables us to do the 24/7. It enables us to support clients who have a global footprint, and that's opening up opportunities. Now, as I mentioned at the start of this presentation, I started Endava over 24 years ago in the UK.... This slide just highlights some of the M&A that we've done along the way. Now, I hasten to emphasize that most of our growth, like over 80% of our growth over this period of time, has come through organic growth. The M&A has been about adding capability to enable us to extend our geographic boundaries, to move into new industries and capabilities, or sometimes to add a technology capability to the business. It has not dominated our overall growth at all. This is probably the key slide where I just want to spend a moment. If you wind back to the dot-com boom in the late 1990s, early 2000s, you saw all of the spend going into the market, driven by the excitement over what the internet was going to enable. As you got to 2002, there was a massive pullback in that spend. The returns that were coming, the quality of the products that were out there just didn't live up to the money going into it. And there was a real step back, a real drop in demand post all that dotcom exuberance. And we and others in the industry took a real step back and went, "What is it, from an engineering and delivery point of view, that is needed to create quality solutions?" And we came up with the model that then drove digital transformation for the next 20 years, which was essentially to build systems outside of the enterprise core, around the outside, if you like, that interacted with the internet, with mobile, and so on, other capabilities that came along. So digital transformation was built outside the enterprise core. As we move up to the present day, you see actually a similar scenario happening, where there are some headwinds around the... all the spend that went in post-COVID, and finance directors wanting more control over that spend. A bit of macro uncertainty getting put in the mix. But I think most importantly, you see AI uncertainty coming into the mix. And as we look forward, I think the next phase of growth in our industry is what I'll call AI transformation, rather than just digital transformation. And that has an interesting characteristic associated with it, which is that you need to do more than just that digital transformation around the outside of the core. You need to be able to transform the enterprise core as part of the delivery of AI transformation. Why? Because unless AI can get to the data and the processors in the core of your enterprise, you cannot maximize the value that you are going to get from it. If someone phones up with a problem with a bill, the AI has to be able to get to the roots of how that bill was created and what the problem associated with it might be, and can't sit at a more superficial level, which is what digital transformation has tended to be over the last 20 years. So in order to address that AI transformation market that is coming through, you need digital transformation, and our 20 years of leadership in that space gives us excellent credentials there. But you also need enterprise transformation. Now, we've been building systems to address the core modernization challenge that underpins enterprise transformation. For the last 10 years, we had a capability which we called Chronos. We haven't hugely marketed it, 'cause it wasn't particularly essential to our digital transformation core, but we've actually helped clients plot their path through enterprise transformation using that. And then the deal that we did on the tenth of April to bring GalaxE into the business actually adds a whole new suite of automation capabilities around enterprise transformation. Essentially, an MRI on your code base. It can read the code and tell you what it's doing. And that provides a much better foundation for actually driving modernization of the core than any other that is out there in the industry. We have nine patents on it, and six more in process. And that, alongside our digital transformation capability, positions us very, very well for the AI wave that is coming through. Now, as you look at how the pundits on our market see things, they see good growth rates coming through. So these are the IDC numbers, as they look forward five years, essentially driven by that AI transformation wave that I was talking about. And they see that being driven by the things that I've talked about, that need to press into the core, and the extra work on top of the digital transformation wave that we've had for the last 20 years. Now, both IDC and Gartner believe that the growth rates in the next five years are gonna be higher than the digital transformation growth rates that we had for the last 20 years. Gartner averaged 5% over the last 20 years. They're looking at 9% going forward. During that 5% growth period, we grew organically 20%-25%, with some M&A on top. Going forward, that gives us a huge opportunity to get our growth rates back into that 20%+ space that we've always talked about. Now, a little bit on the numbers. You can see that the growth rate CAGR there of 28.9%, that includes the M&A on top of that 20%-25% organic growth that we've delivered. But you can also see that as we've come into FY 2024, and our calendar year runs July to June, that we've hit those headwinds with actually our revenues dropping. So what's going on? How come there is this huge market growth opportunity forming in AI transformation, and actually, we and others in our industry are experiencing headwinds and shrinking? I would argue that the reason is the same as it was back in 2002, which is that the engineering capabilities and the how to deliver production systems are being constructed and built and understood right now. And whilst we are doing that, clients are uncertain about making decisions to press the button and do these production scale systems. As a result of which, we are seeing normal cycles of 4-6 months from initial ideation to kicking off a production system being significantly extended as clients work with us and rework with us and spend money with us, I hate to add, in that discovery phase. And that has created the headwinds, because as projects naturally come to an end and drop off, we're not replacing with the new projects at the rate that we previously did that drove the growth. And so you've seen the shrinkage. The big question is, when does that overtake the shrinkage, and we start seeing the spend coming through from clients, on those new projects? We can see those projects. It's in our backlog. It's a question of getting them to a place of confidence where they will begin to spend the money. The profitability has obviously suffered through that period. Our utilization has dropped, and we've had to take measures to manage our margins, particularly around bench reduction. So we've had some restructuring charges coming through, that are unpacked on the right-hand side. Over time, we've reduced our dependency on our top ten clients. So, FY 2019, which is our first year as a public company, we were 38% from our top ten. That has dropped to 34%. Not a huge drop, shows that we're growing the scale of our largest clients, in line with the growth of our business, but also diversifying a little bit. And then we've also grown the clients with greater than GBP 1 million of revenue. Until the recent slowdown, we grew the average spend of our top ten clients nicely each year. But that has taken a dip along with the rest of the business as we've hit these headwinds in the velocity of client decision-making. If you look at our business mix, one of the reasons why we believe we've been hit slightly more than our peers is our exposure to the financial services arena. Firstly, and secondly, our exposure to the U.K. in particular, but also wider Europe. Those have been hit more strongly than businesses with a higher exposure to other sectors and to North America. So that's been a big part in some of that differential in our performance and some of the other players in our industry. One of the reasons for doing the GalaxE deal that I touched on earlier was because they pushed that diversification for us. So GalaxE was 100% U.S. revenue. It's helped us push forward the North American business as a proportion of our overall revenue, and they're also 70% in the healthcare space, and we see that as an attractive vertical to begin to build out. So across those two things, we're diversifying away from a U.K., Europe-centric and the financial services focus that we've had. We're a cash-generative company with little CapEx spending coming through. I think just in conclusion, the thought that I would like to leave you with is that Endava is well-positioned for the AI transformation wave that's coming through. With that digital transformation and enterprise transformation capability put alongside each other, enabling clients to craft exciting new products that actually get at the data and processes in the core of their enterprise. That is what we are working on with clients, and that is what will lead to the uptick for us, as we emerge from this current period of headwinds. So that's the summary of where we are. Wonderful. Thank you. That was extremely helpful. Thank you, John. Excellent. I think a lot of people have been looking for an explanation just like that because it, it seems to have coincided with you know, a lot of enterprises having concerns around their budgets in general as well. So you almost have this kind of twofold impact where there's some budget conscientiousness, and then some decision paralysis, as you kind of explained it. My question to you is, as you think about those different factors, do you feel like some of the budget conscientiousness that's driven part of the malaise in demand across the industry has led up, and is what, what is left over is more decision paralysis? Essentially, what I'm asking is: do you think there's some level of stability that we're approaching here, even as we wait for some of that spend to really kick off? Yeah. So the short answer is, I do believe we're hitting a more stable period than we've had, particularly over the last 12 months. You know, if you look at what's happening in our business, we essentially have a natural ending of projects and programs that we're working on each quarter. And that is replaced by new work coming through, and as a business, we get the growth by the new work coming through, covering off what's ending, plus adding additional growth. Over the last 12 months, what's been finishing has been higher than what's been starting for the reasons of that hesitancy in making decisions that clients have had. Now, there's 2 factors that have fed into the decision-making conundrum. One is that AI technology solutions need a digital and enterprise transformation capability, and not a lot of suppliers out there have it. The second is that on each side of that equation, there is a lot of complexity that we're still working through. So how you engineer a cost-effective AI solution for a particular scenario requires a lot of engineering and thinking, so that you don't, for instance, end up spending more than the cost of the people you're replacing on buying the GPU power to power the large language models that are stepping into that role. That requires engineering to create an optimum solution. And those are the things that we're working through with our clients in the backlog that we're working on. Put alongside that, the greater stringency that CFOs have brought to their IT decision-making since the end of the post-COVID exuberance of spend, if you like. So CFOs have raised the bar. They've raised it because the exuberance meant they didn't see they were getting the returns they got through that period. They've raised it 'cause interest rates have gone up, and returns on investment, therefore, are asking for more. You put that raised bar alongside greater uncertainty from the technical team as to how you deliver these AI solutions, and you're actually getting this impasse, where the CFO is asking: "Can you... You know, prove it to me. Show me. Give me more." And they're the CIOs and CTOs are in a position where actually it's never been done before, and the certainty of the business cases that they're putting to the CFOs are needing to be worked on with more rigor and more proof of concepts and more prototypes to reach the level of confidence where they'll sign it off. All of that extending the sales cycle considerably and causing the headwinds that I just took you through. And when the floodgates finally open, when people are finally willing to spend on some of this, do you think the type of work that you'll be doing in enterprise transformation, core transformation, lends itself to a different, you know, duration of contracts, structure of contracts, you know, pricing? Is there something that's gonna change for you when you do finally start to see some of that spend come through? Yes. I mean, we believe that we'll have the opportunity to move towards more outcome-based solutions. So having used the technologies that I described earlier to understand what the current estate looks like, we will have much greater certainty about what we're gonna change and what it's gonna take to drive that change, and can widen our margins by putting an outcome-based solution around that, rather than doing it through a T&M type structure. It's different to the digital transformation space, where you're exploring the art of the possible, in terms of what a product can do. The enterprise transformation stuff is much more: can we move this, for instance, into a cloud environment, so we can access the GPU capacity that sits there, and use the tools and capabilities that you get with a cloud? That is much more defined. It actually lends itself to work in places like India, and that's where the India footprint that we have, we will be much more focused on the enterprise transformation side of what we need as part of the AI transformation wave. And so you said a lot of this is happening right now in the discovery phase that you're engaged with, with your clients, and you've talked about for a number of years that you're great partners from the moment of ideation all the way through, you know, the life cycle of the project. Is there a greater weighting of projects in the discovery phase right now toward these types of topics, towards enterprise modernization, or are you still seeing some demand for kind of more, typical digital transformation work that you've done for the past several years? So the digital transformation work is getting an AI twist to it. It's moving towards AI rather than clients being comfortable just going ahead with doing it in the same fashion as we did before AI came along. So you're actually seeing that move towards the AI issues with all of the engineering and so on, issues attached to that. The full enterprise transformation capability, about half of it comes from work that we'd done in establishing Chronos and so on. But the other half comes from the GalaxE deal, which we've only had on board for two months. So we're starting, we're at the early stages of that element of the capability hitting our pipeline. It's having a powerful impact on those early stages, but right now, it's not a huge proportion of the pipeline, whereas the rest of it sits in that digital transformation with an AI shift, coming through on it. And John, you dangled out, you know, this is margin accretive at some point, so Mark, I can't let the comment pass us by. How are you thinking about what this means for the margins? You've also talked on recent past calls about needing to invest in the business right now- And a lot of moving parts on the margins. So how are you thinking about near term on the margin structure, where you can drive efficiencies, where you need to invest, versus some of these long-term concepts? Yeah, so near term, meaning next fiscal for us. So we, as you saw from the slide presentation, margins have been suffering as we've been dealing with the headwinds through bench reduction, for instance, and driving higher utilization in the future. We will have two particular things that we'll need to address in our next fiscal, which is building back bonus to attract talent and retain talent, with stretching targets obviously behind, you know, achieving those bonus payments, but that is something like a 1%-2% headwind. And then the other thing that we will be facing as a headwind as we go into fiscal 25 is a UK R&D tax credit that we receive at the moment as a credit against our cost of sales, which is about 1% or so. The UK government is removing that benefit in fiscal year 25. So we will have something like a 3% headwind as we enter into fiscal 25. So whilst the benefits from the restructuring at the gross margin level will improve the underlying gross margin, those headwinds are gonna nullify it. So on the surface, it will look as though nothing is improving in the sort of near term at the gross margin level, certainly for 2-3 quarters. Mm-hmm. The other headwind investment is actually the integration with GalaxE. So that is the full integration that we have done to the business model, which will take probably three quarters, mainly through SG&A, but it is also addressing how we go to market with the joint transformation accelerators. We've talked about GxFource and Chronos. We'll rebrand those, we will take them through our industry verticals. Putting that in place and sharpening up to market will also be an investment for at least the next two quarters or so as well. So there'll be some investment from a P&L perspective, that we're dealing with some near-term headwinds. But I think over the longer term, medium term, touching on the points about using these accelerators and automation to address, you know, the enterprise core systems out there, I think will lead to us recovering the position that we, you know, enjoyed in our early stages of our journey as a public company, where we will get back up to those high thirties%, and SG&A leverage will improve as the investment comes off, and the historic, you know, profitability levels at the adjusted PBT level will return. Very helpful. Thank you. And you've both talked a lot about GalaxE and, you know, that acquisition checks a lot of boxes for you, but what you seem to be talking most excitedly about is the capability that it brings on. You said it like an MRI of the code base. So do you think that that capability helps you, you know, put some of your clients at ease as you talk about some of these projects? Is that going to be a big differentiating factor for you as you move through this next phase of technology? It is. We will go down a learning curve with our clients around this capability and how it works. It is literally a capability where you sit down with the clients, and you go through what it does, and their reaction is, "If that is anywhere near true, it is transformative for us." Because they know us and trust us, they then go, "Okay, let's try it on something." But with an element of disbelief that there is something out there that actually does this. And then as we actually show them what it does, that's when the confidence and the acceleration comes, that this can be applied to these problems on a much broader basis across the client. So that is it for time for the formal piece of the presentation. Thank you guys over there. We are gonna break out right here. I already saw one hand go up in the air. This is a little bit more casual. You all can jump in with some questions, and I have some as well, but maybe we'll kick off with Ted right there. Let's talk a little bit about your global delivery footprint and how that's changed. I know you've been in Malaysia, you're getting more into India. What markets or types of clients is that tuned into? Maybe just thinking about that from, like, almost like a rate part perspective, but also the kind of diversification, why you're choosing which markets you're going to versus others, kind of see. Yeah. So, Malaysia and Vietnam, we set up as a nearshore delivery capability for, Southeast Asia and, Australia and New Zealand. Because for our digital transformation, offering, we need, we need nearshore, delivery. So we end up with Central Europe servicing, Western Europe, essentially, Western/Northern Europe, depending on how you define it. We have LATAM, that is essentially focused on North America and being the, the nearshore, similar time zone, delivery capability for digital transformation there. So that's the reason for-