All right, thank you. We're gonna kick off here. This is the Endava session. I'm Bryan Bergen. I cover IT services, fintech, and payments here at TD Cowen. Thank you all for joining us. With us today, we have Endava's CFO, Mark Thurston. We also have Laurence Madsen in the audience, head of IR and ESG. Thank you both for being here today. Mark, I think, you know, it's your results are relatively recent, third quarter- Yep a week ago. Generally, a message of stability was conveyed. But let's start there. Let's parse how the demand environment has changed over the last three, six, nine months, and really the nature of the client conversations today versus the second half of last year and even the first calendar quarter of this year. Yep. So, I think, going back six months earlier, probably a bit longer, we anticipated quite a recovery in calendar year 2025, which would have been our Q3, Q4. And what gave us a basis for that was mainly around new deal pipeline. So we'd had a very sort of quiet period in terms of new sizable deals, and sizable deals for us is anything over $5 million, which is what I tend to look at. And that pipeline was building. It looked like it was going to be delivering revenue in the new calendar year, so a January timeframe through. And, it became sort of apparent as we were going through December and budgets were being settled. Budgets weren't being pulled, they were still in place. But what we found as we went through into January, February, is that in terms of the deals that were in the pipeline, they weren't landing as anticipated, so the cadence was off. And then deals that we had won, where we anticipated a period of ramp... And in terms of what I mean by that, when Endava starts with a new client, we go through a discovery phase, where we actually work out with a client which direction of travel they want to go in and scale with it. We found that projects and work with client were staying in that discovery phase for much, much longer than anticipated. So one work didn't ramp, work that we anticipated to win didn't land on a timely basis. And I think all that added up to us pulling our guide back quite severely for Q3, Q4. And what we've sort of deployed since has been a more conservative way of looking at the pipeline and the conversion rates. And so when we guided, we landed within a quarter for Q3. Right ... on the revenue, we beat on the EPS. We have gone towards the bottom end of the guide that we were guiding in February. So the dynamic hasn't really changed. We in terms of new deals, the pipeline continues to build. It's just the velocity at which deals go through to start work is still not progressing at the pace that we anticipated. In terms of positives is we feel as though we are stable- Okay ... at the moment, which is sort of flattish, you know, consecutive sort of progress. Which means basically that work which is finishing projects are being replaced by work coming in at the top, so we're not on a declining, pattern. So it is stabilizing. I think the visibility isn't much improved, to be frank. It's still good, you know, a quarter out, you know, 3 months. 6 months, still there, but it's, it's hazy. It's, it's not where it was, say, 18 months ago, where we had reasonably good visibility, you know, out sort of 9 months or so. So feels stable at the moment. Okay, so it's settling, really the balance now of filling the bucket, so to speak. Yeah, exactly ... relative to the water flowing out the bottom- Yeah, yeah ... which, that's the start. Yeah. All right. Yeah. Maybe we key in now on verticals. Verticals and geos, relative outperformers, underperformers. What have you seen over the last three-plus months? So North America has been slightly disappointing for us, actually, in terms of the growth trajectory, mainly, TMT. But we've seen most of our sort of pull back in the UK and Europe. Europe has stabilized, Continental Europe, as opposed to the UK, stabilized more recently. And I think in the UK and Europe, and to certain extent, the States, we've seen this really severe pull back in the payments vertical. So it's, you know, it represents, I think about 24% of revenue. It was 30% if you go back, and it had always been 30% all through the sort of growth period. So it's been a rapid sort of decel in payments. Banking, capital markets is a bit mixed, it's a bit stable. Mobility, which is one of our largest sort of segments, again, is a bit sort of patchy. We've seen some sequential decline there, but largely due to a large logistics client in North America. So that's on balance it, but payments is our real sort of headwind at the moment. That's always been the key. Yeah ... area of differentiation for the company. Yeah. What's happening in that vertical? Is there something structurally different? Is it just the digestion of an outsized level of spend in those post-COVID years? What's happening there? It's probably a bit of both. I mean, we've got two large clients, which, you know, we've talked about publicly. Mastercard is our top client, it's about 10% of revenue, and Worldpay is about 5%. Different dynamics going on there, and a little bit of complexity. So Mastercard is really split in two. We have the real-time payment side of Mastercard called Vocalink, which is currently about sort of 70% of the spend that we have with them. And then there's the non-Vocalink element, which is the 30%. Now, the Vocalink real-time payments component, that came off peak activity probably about June last year, where we were rolling out a number of products with them, globally.... We signed a new 5-year contract with them, $145 million, on a declining profile. So we knew it was gonna come off peak. But what has been going on in the Vocalink space is they are basically moving on to different sort of technologies that they want us to help them implement. So they are coming in slightly lower than the run rate on the contract. They will still have that commitment over 5 years, but it is on a lower sort of ramp down. The non-Vocalink element of spend is reasonably robust, but it's only 30% of the spend. So it's growing, you know, over double digits, but it can't make up for that decline in the rest of Mastercard, and that is in different areas, such as, you know, open banking, and gateway expenditure, and, you know, card loyalty schemes. So we are still an important part of Mastercard. I'd characterize it as they're sort of shifting their product sets and technologies. And I think it will remain like that way for the, you know, the coming sort of quarters. The other big client in payments is Worldpay. Used to be a 10% client under various ownerships. It has gone down to 5%. Lastly, it was with Fiserv. It's now been spun out with GTCR, PE-backed owner, who have a statement of investing in their product suite, which, I think observers take on it is that there's been underinvestment and the product has become- Mm-hmm ... less competitive. Now, Endava is a key supplier partner with Worldpay, and now they are going through investment cases at the moment. It's too early to say when the spend will start, and I think we will be a big beneficiary of that, but that has also been a sort of drag on the payment sort of segment. And our third-largest client is a listed business. It's focused on SMEs. There's been pressure in that part of the market, so they have, you know, prepared for the worst and reduced sort of spend. So the payments piece, as you can tell, it's a little bit of a technology pivot. Mm-hmm. It's a little bit sort of cyclical. I'm confident it will return. It's just a question of when. Okay. Is the Vocalink aspect, is that a function of them just coming off a very high level of spend because of whatever products they were putting before, and this is a natural decline, or is this- is there anything competitive there? There isn't in terms of are they using another provider? Okay. They're not doing that. They are not bringing it in-house. We're basically the same split of work, what is done in-house, what they use us for. So it isn't that. It's an activity dynamic. Okay. And then on the Worldpay account, is that it... Has it stabilized from a sequential standpoint? Yeah. Now, you're just waiting for those investment- It's basically flat. Okay. I mean, if history tells us anything, where they were spending, it was a 10% of our revenue client- Mm-hmm ... then there is a big potential, but it's too early to call. Okay. Now, understanding those two make up a big piece of- Yeah ... more than half of the 24, but the balance of the payments book, is that performing well? Is it stable like the rest of the company, or are there anything else underlying that? We, we tend to work with, on the one side, incumbents, as I'll call Worldpay- Yeah ... and Mastercard helping them, you know, face off to, you know, the disruptors. Yeah. The disruptor volume has gone down slightly, which tends to be PE-backed- Right ... which is another headwind we've been facing with, you know, high interest rate environment and the readiness to invest. So that has also become muted as well as part of that sort of decline from about 30% to 24% of revenue. Okay. I think it's cyclical. Personally, I think it will come back. There aren't any issues in terms of competition, in terms of our position in those accounts. And we're a key sort of partner for them in terms of realizing their ambitions. Okay. As you've had this pressure among some top clients, can you talk about maybe the top 10 client cohort? Has the complexion of the verticals that make up those large, has it changed much, or is it still- Not really. Okay. Not really. Still- I mean, still payments, as you'd expect. I think our top three are payments, businesses, but we have TMT, we have banking and capital markets, one of the sectors we named other in there. So it moves around a little bit, but not. It's you know, it's very sort of stable and as a percentage of revenue, although our revenues have come down, it's remained constant as well. Okay. It's very much reflective of, you know, the rest of the business. Okay. Now, we just step back and think about the group. Historically, the digital engineering group was 20% organic level. Yeah. That was the expectation. Yeah. That was the performance. Yeah. Endava was performing there as well. Yeah. A common question we get now is, as we look forward, is there something structurally different? Now, what enabled that before, and as we look forward, have things changed where that is not a reasonable level of growth that the street should expect? How do you, how do you think about that as far as what drove that 20%+ organic growth in the past, pre-COVID, and are things different when you—whenever things do become normal- Yeah ... are things different? So I think in COVID, we had a pull forward of investment. So we were putting in some very high growth rates, which were pretty exceptional. Right. At the time, it was, has the market picked up from 20%-25%? And based on the view at the time, it's like, "Oh, it's 25%." Now, it's obviously come off. So I think COVID brought forward investment, so there was going to be a bit of a lull before it went below trend line. And I think the trend line has lowered at the moment because I think what we grow basically is on disruptive technology waves. Mm-hmm. You could, you could argue fintech payments as being part of that. But if you look at the, one of the big sort of disruptors is, is AI, basically. And Endava is very good at spotting those long-term disruptive waves, thinking about how it's going to impact our clients and their business models, and helping them navigate that, whether they're an incumbent or a, a disruptor. So I think it is a, a fundamental sort of fillip to our growth prospects. So I'm confident that 20% will, will come back. I think it's when- Yeah. As you know, the conversation's about the pipeline building, and that might be partially or a contributing factor to why there is some delayed decision-making, you know, at the moment in terms of technology and to what extent if you can future-proof making a decision about whether the degree you put AI into that solution or not. That may be part of it, but I think the market is pivoting, and we have experience of pivoting with it, and we'll follow that disruptive trend. Okay. So understanding that, you know, there are deals are being signed, they're either in the backlog, not necessarily converting right at the right pace- Mm. that we've seen in the past, but as far as pipeline growth and activity levels, is that generally getting healthier? Is that improving? Yeah, yeah ... toward what normal was? I mean, you know, even going back, we know we started the conversation back in, you know, what were we seeing in sort of November, October last year. So we previously, about sort of six months or so, we weren't really... Apart from the Mastercard deal- Right ... 145, we weren't really seeing any big deals come through, and then they started to pick up, you know, back then. They were growing through when we reported in February, and they are bigger still, significantly up from what we were talking about in February. What is very unpredictable is when they're going to land. Yeah. You know, you may say, "Well, are you losing stuff?" And stuff is dropping out, but it's pretty small, and it's usually at the clients' for various reasons. But we're not losing it to competitors. It's not of price. It's around either concerns about technology choices or the, I'll call it the macro sort of outlook, but what I mean is, you know, general sort of business activity, whether people actually want to double down and progress with it. But it will come, and what makes me think that is we operate in making our clients competitive, and you can sit on work for a period of time, but you will not become competitive. You will lose traction with the marketplace, which is exactly where we are with sort of Worldpay. Yeah. So it can just sit there and be kicked down the road for so long, but it does have to take place. Okay, that's clear. We'll certainly be talking about AI soon here, but I want to talk about GalaxE first. Yeah. So you closed on GalaxE.Solutions. This is your initial foray into India. Yeah. Delivery location was obviously key for this target, but maybe talk about what attracted you to it. What was also important as far as the characteristics of this business? So firstly, it was mainly driven by diversification, which, for us is geography. So critiques of the company since IPO is you're still very European-centric, you're still exposed to payments and financial services, and look, look what's happened. Mm. So what GalaxE gives us is diversification into healthcare, 70% of their revenue is healthcare. It's all U.S. revenue, so it's part of that diversification story. They do their delivery from India, but what was more compelling about that was the use of accelerators that they have called the GxFource, which we will rebrand. And these are accelerators or tools, for want of a better word, that help them look into their client's enterprise core and make changes to it, that give certainty of outcome and return on investment to the changes in the core. Now, Endava doesn't typically operate in the core. We build, you know, digital transformation that sits above the core, typically. Mm-hmm. We plug in through APIs. So this essentially sort of opens up that enterprise core to us to exploit. Now, they do it using mainly a nearshore model, so it's about 1,600 people. I think 1,200 are in India and 400 nearshore, onshore in North America. So our model will change as we integrate them in terms of how we deliver it, but it's essentially delivered from India in an offshore, you know, sort of fashion. So for us, it's about sort of adjacency, so it's not cannibalizing our nearshore delivery model. That will remain the sort of case. So it's adjacency. It's about how do you get share of wallet, how do you get into the core, and get basically clients ready to take advantage of the next sort of wave of disruption, which will be AI. How do you make it work in terms of its opportunity realization from the core? And it is a way of doing it. Okay. Okay, what about... As we think about the run rate revenue, the margin profile of this business relative to Endava's, what do we need to know about that? And if it's different, how do you get it to the company profile? So we're gonna take our time integrating it, so it's a big acquisition for us. We sort of indicated on the Q4 guide that its run rate is around $21 million worth of revenue. There's an element of caution in there, where we're looking at the contracts. They have come off slightly from how they were performing last year. I'm not gonna be taking it any sort of further, but I would use that as a run rate going forward. That's the partial fourth quarter? Yes, so it's in a fourth quarter. Yeah ... 'cause we, we integrated, purchased them tenth of April. Right. So you have to gross up for a full sort of quarter. But the signs for revenue synergies are all going well. We have had conversations with their client base who are willing to allow more work from both organizations given the increased scale. And we have also talked to our client base about the deployment of these GxFource accelerators. And that's been very sort of receptive. So there's gonna be some work thinking how we jointly go to market around this new proposition, and I think that could lead to some pretty exciting developments. It sounded like it did have some early success already with it, too. You mentioned a cross-sell win- Yes on the call. Yes. Maybe give a little more detail on that. Yes. So that was an AI engagement with a telco. Basically because they could see that we had this tool, it's an Endava client. Okay. We are going to work together with the GalaxE team to make sure that we sort of take that forward. We wouldn't have got that opportunity without the two organizations coming together. Delivery from where? It will be... They have a location in India- Okay ... which is why GalaxE was interesting to them. Yeah. We will probably be actually delivering the solution from Central Europe. Okay. How do you anticipate your existing—you know, so India, obviously a lower cost location. Is there any trend that might from your existing client base looking for that different location for delivery because of cost? At the edges, I would say. I think what it does is it gives us some optionality to sharpen the pencil if things are being competitive. So I'd say particularly around sort of new opportunities. I think also it will be more prominent with clients who have their own engine sort of capability. There's more of an obvious sort of overlap now that we have some engine capability, but it allows us, I think, to sharpen the pencil, but we won't be about cannibalization. Okay. As you think about the integration risks of this deal, when we look back, some of your peers have done acquisitions in India, took them a couple of years to get it right. Have you put added guardrails in your process on this particular deal? Talk about the risks and what you've observed from- Yeah ... peers out there. I mean, it's always one of the risks, which is basically, you know, the cultural mix. Yeah. You know, you're mixing oil and water. And so we try and get a feel for that from, you know, visiting them, talking to clients, and seeing whether we have the similar ways of working. And it does come down to values. Now, there will, there will be differences. You know, the engine model is very sort of different to our nearshore model. So there will be differences. But what we, what we tended to find is that, you know, the values that we expose about openness and being trusted, et cetera, they resonate very well with most sort of cultures. And we think we will get good engagement from them. The early signs are that they are very energized by joining Endava and about, you know, taking both organizations forward. So I think, we can, we can make big progress there. I think, putting them onto our model because they, you know, they have been a private business. Mm. We do have public company sort of standards. I think they have to be receptive to it, there's no choice. But I think they will see it as a positive as well. It will just tighten them up as an organization and take them on as well. Okay. Let's pivot to profitability. So as far as margins go, the coming quarters, talk about the tailwinds and the headwinds as you move forward. You have obviously a stable top-line message- Yeah ... but what's the message on margin as we go forward? So gross margin, there'll be some slight headwinds. There are two big factors, which is, we're not paying a bonus this year because of performance, so we need to rebuild that to make ourselves an attractive employer, to prospective candidates and retain the talent that we have. The other item is we have a tax credit that goes through our cost of sales from the U.K. government around research and development that has been ceased by the U.K. government. So we will sort of lose that as a credit in our cost of sales. So the gross margin profile won't kick back as quickly as maybe others are anticipating, 'cause we're building those two things. But profitability will come basically as the top line comes. We will raise the billability, the utilization of our people, and manage the bench appropriately. And again, we will keep our controls around, you know, SG&A and invest where is sort of appropriate. So SG&A, I think this coming year, FY, I'm talking about half fiscal 25- Yep ... there will be investment as we integrate GalaxE as well. So it will weigh on margins, I think, probably for, you know, two or three quarters, but then we should see the profitability start to return more strongly in that fourth quarter as we exit FY 2025. Okay. Historically, we would think about a kind of a 40/20 adjusted gross margin, 40-ish%, adjusted PBT margin around 20. Is there anything looking ahead, aside from this UK tax piece, anything structurally different that would preclude a return to that? I don't think so. I mean, the—we still have a time and material model, so it's people, it's bill rates. It's managing, you know, the cost, which is essentially sort of wages, and making sure people are busy. So what messes that up, but basically is, you know, can you get the rates in the marketplace? So our pricing is stable, but you may recall, you know, 18 months ago, we were getting, you know, 1%, 2% sequential increases quarter-over-quarter. So we need that to return and the market to return. The other thing is around sort of the management of cost. So you know, we have managed costs very tightly. We do it through our pyramid-... Our grade distribution, and we will sort of continue to do that. So I think the gross margins will return. It will come through sort of the growth will really be the inflection point, sequential growth in terms of sort of revenue. But as long as we keep our eyes on those levers and get the visibility, which is the real thing that puts a challenge on managing the gross margin, where you think revenue's gonna grow- Yeah. and you recruit accordingly. What we want is it to grow, and we recruit accordingly, and actually get the gross margin outcome we're looking for. Okay, that's clear. I'm gonna pause and see if the audience has any questions before I continue. Gen AI, what's... maybe talk about how you're helping your clients. Talk about the engagements, the demand level- Yeah. and what are you doing? Obviously, it's still very early- Yeah. What are you doing across the client base today? We're starting in a handful of cases, I think, quoted three last week on the earnings call, where we're actually starting to get into the production side of deploying AI solutions with clients. A variety of industries, we're using one in pharmaceuticals, where it's being used for clinical trials. We're using one in the sports space, where they are getting to know their clients or user base more accurately, so they can move more to a dynamic pricing environment. So we're starting to get sort of traction where people are using it in real life. It hasn't ramped yet, but they're starting to think about building systems and take it from there. So it's different to three, six months ago, where you're having very high-level conversations about: What does AI mean, you know, to me? What should I be thinking about? So people are actually starting, you know, to deploy it. Okay, how is it impacting your delivery? So- As you think about productivity of the developer, how is that playing out? So we have a relationship with OpenAI. We are going to deploy more widely Copilot amongst the workforce. From what we've seen, it improves productivity, so efficiency, mainly at the more junior levels of the grade- Mm. Not so much at the higher level, so we will deploy it more widely. In terms of what that does for margin, I don't think it alters it that much, because I think it just increases the velocity at work, which we deliver work and product to the clients. And I don't think it will impact basically the sort of rates at which we charge. The client just gets more from us for the same sort of price. And where it may alter things is some of the more sophisticated clients who measure us on velocity of throughput, so we get paid on the velocity of throughput. At the moment, so if we become more efficient, we, in theory, get more. Now, they will know that, because we work very closely with them, and they will adjust, you know, accordingly. We're looking at using it in SG&A, so we're looking in, you know, our contracting space. We're using it in finance. So we're embracing it. Are clients asking for product or different terms as a result of this yet? Good question. No, there is different approach. There are some clients who say, "Don't use it at all on us, because we are worried about the IP. Okay. Quite right. They want some guardrails put around the use of it. People are very paranoid about the management of data and where it comes from. Mm-hmm. So they are baby sort of steps. So, they will usually frame it in terms of what they will allow and what they won't allow in terms of the engagement. Okay. Is that dependent on any particular industry or anything like that, or? I think quick, quick answer to that is pass. I'm not exactly sure. We know that AI will be very beneficial for certain regulatory- Right ... industries. It's just, in terms of the controls around sort of data and- The early risk- where it comes from. Yeah. Right, they don't want to be the guinea pig. Yeah. So it's sort of stepping through it, and I think this is part of why the adoption isn't so high as people think in enterprises, 'cause people are being cautious about letting it loose- Okay ... in inverted commas. All right, understood. Well, we're out of time. So, Mark, I want to thank you- Okay. Thank you all for joining us. Thank you.