Thanks for joining us here as we are about to wrap up. We still have a keynote after this presentation here at the Morgan Stanley TMT conference for 2026 on Tuesday. The second of four days. Very thankful to the Endava management team for joining us. Before we get started with them, I'm James Faucette, Senior IT Services Analyst here at Morgan Stanley. We're very pleased today to have our co-CEOs of Endava, John Cotterell and Alastair Lukies. We also have Mark Thurston, Chief Financial Officer. Before we get started with the team, though, I do have important disclosure to read. Please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. I guess with that, I'll just kinda open it up. I'm sure you've gotten the same question multiple times, as have we. It starts with, you know, hey, the recent commentary that you gave coming into the calendar year was actually really encouraging. I'm wondering if you can walk us through the key factors behind that change. In particular, what are the things you're looking at that inspires confidence in a stronger fourth quarter pipeline conversion rate? Sure. I mean, we've been, as I've articulated, fairly frequently over the last year or so, on a strategic focus around, number one, getting into the C-suite and having conversations with our clients. Mm-hmm A bout what it is they're trying to achieve with their business and how AI can help drive that. Secondly, around, moving more towards outcome-based contracts aligned with those client objectives. Right We're talking about. Thirdly, establishing an AI native approach to delivery, which we call Endava Flow. When you put all of those things together, it's a very powerful proposition to clients. Mm-hmm. That's what's been generating the pipeline that is giving us the confidence in the guide that we have put forward. Al, do you wanna just expand a little bit on the sort of client-facing side and how the reactions that they're having to that? I mean, I think, we, a lot of our peer group and a lot of people in the technology world, certainly in this. Yeah, that's right. That we're in at the moment are selling a fascination or a religion around the technology. We're being very disciplined about talking to the customers, actually listening to the customers, two ears and one mouth, about what it is that they're trying to achieve with their business, and then seeing where we can apply AI. If I look at the shape of the business and the way we're engaging in the C-suite now, recent wins like Paysafe with the Chief Executive Officer, Nexus, the biggest shift in the payments industry probably for 50 years. The rest of the pipeline where, what I'm seeing is CEOs saying to CIOs, "If you can go and get me efficiency using AI, knock yourself out," right? You cut my costs. In terms of ideation and where we can go in terms of competitive advantage. Mm-hmm I wanna talk to an expert in the field that's doing that. It's a very, it's a very different approach to I think most companies in the space, and it's starting to resonate. Got it. If that's the message, you know, Mark, how do you bring that together and think about what the implied assumptions are of that current pipeline and what portion of it needs to close to get to kind of the targets you've set for the June quarter? I mean, the June quarter, in terms of Q4, there is a step up, which we articulated certainly quarter-on-quarter, 8% on Q3. Part of that is because of the number of days in the quarter, so we get about 2%. You're looking at. Okay. 6%. 6%. Uplift. Now, this is all the sort of midpoint. It's underpinned, contracted, and committed. I think we're about 70%-75%, which is typically normal. It's also underpinned by the recent sort of deals that we have won as well. We have great confidence in it, but it does also have a wide range on it, something like GBP 10 million, which at this sort of stage in the year, we would usually sort of narrow. Right. Because, you know, experience has told us over the last, you know, couple of years that things cannot play out as you know, might think they do. It's underpinned by the deals we've won earlier in the year and, you know, it's the strength of that pipeline, that conversion assumption. Got it. I wanna pressure test a few things, starting with kind of your largest clients, and then we'll talk about geographies outside of your top three customers. How have spending intentions been across your top three customers? Is this message of the pieces that you can bring together, John, resonating, including with them? you know, and how are they thinking about, how much they can engage with Endava and what the opportunity set is there? Yeah. That's exactly what we're finding with our largest customers, is that that level of conversation around what is it you're trying to achieve with the business. Mm-hmm And us working through, how we can bring the appropriate programs, technologies, outcome-based contracts, the Endava Flow approach to bear, is getting huge interest and huge traction. You know, it's not only our existing customers that we're having those conversations with, but that's where we've had the earliest traction, and are seeing the fastest returns out of those conversations. Are we on track to be able to stabilize, the businesses with those largest three clients, or is there still kind of, work to be done to flesh that out and to get them kind of on track with some of the newer capabilities of Endava, you think? I would say yes, there's a lot of stabilization that's been done. There's been contracts and extensions. Okay. Doors opened. We covered that on the earnings call. You know, actually lots of opportunity 'cause. Mm. The clients are also going through significant change themselves, you know, in their businesses and in their marketplaces and in the investments that they're making. You know, we're seeing opportunities come off the back of that which we haven't really got in the forecast. Got it. Oh, interesting. Interesting. Then what about by geography? Outside of these top three customers, can you look at across where you're operating globally and say, "Oh, this particular geography is strong. This one's weak. This one's so-so." Like, love to hear about what you're seeing geographically. I'll let you take that one. Well, it's sort of dominated by the end industry vertical. We're seeing strength or clear somewhat resurgence in financial services. Yeah. For us, it's, you know, payments we've just been talking about, but also banking, capital markets, and insurance. It's, it's dependent very much on the relative strength of those sectors in each of the sort of geographies. You know, we're a U.K. heritage, you know, headquartered company. Yep. We see sort of strength in the U.K., basically. We're seeing also come through in rest of world. I mean, we were just referencing, you know, the Nexus sort of deal that we announced on the earnings call. Right. Right. That is causing, you know, some uplift in that geography. Also North America. You know, it's our biggest geography. It's a percentage of revenue. There's also a lot of momentum there as well. Got it. I wanna spend some time just talking about the AI initiatives within Endava. Obviously, key and central part of your investment focus and where you're putting resources, becoming more AI native. What are the objective KPIs you guys will use to prove those investments are translating into higher win rates, faster sales cycles, better unit economics, et cetera? Like, what are the things that you're tracking and that maybe you can share with us at least from time to time? Sure. I think you just covered a few of them. Okay. Yeah. I mean, obviously, seeing that come through in revenue growth actually. Mm-hmm. By those capabilities. You know, we're tracking which projects we're using Endava Flow on, et cetera, so that we can actually, you know, track the impact that it's having. I think margin improvements, so top line growth, margin improvement. Right. Right. Right. Right. you know, we'll be able to see that on those projects, many of which will be outcome-based, that we're actually able to track a margin improvement coming through. Oh, interesting. On average, actually lifting the overall margin of the business as we shift to more outcome-based, Endava Flow enabled, solutions that we're putting in place for the client. Those are good financial metrics. What about operational metrics? Is there some sort of productivity metrics or output related metrics, et c., that you're seeing and can talk about? Alastair? Yeah. operationally, we've sort of drunk the Kool-Aid ourselves and- Right. Brought a lot of efficiency to our legal department. Okay. To our finance department, to our platforms, to our sales process. We've reduced the number of salespeople we have substantially and replaced them with higher quality C-suite engagement salespeople. I think that one of the key KPIs that I would be looking out for is longevity of partnership. Okay. Right. I think if you look at Pace, Apple, Nexus, these are five to seven-year partnerships, and none of us know where the world's gonna be three years time. Right. Right. Right. If we're still in that dialogue contractually, and we're finding efficiencies through Endava Flow, our ability to create that operational leverage and the unit economics that we're searching for is far greater than getting back into a bidding war every year. Right. Right. Right. Right. Right. Against competitors who are also desperate to win those accounts. My job here is to make sure that, you know, people that wanna come on the journey with us are prepared to put some skin in the game. Back in the day when I was building companies, that was really a sort of joint venture model. It's like, are we really gonna partner here? Right. Right. Right. Right. We're not setting up loads of joint ventures, but the culture and the cadence of the relationships is much similar to a joint venture. It seems to me from the outside that that would be conducive to some of this outcome-based pricing and projects, et cetera. Is that right? Like, on the flip side of it, if you're trying to put together outcome-based agreements and as you're saying, that's resulting in some JV, et cetera. How does that survive or how's that reevaluated, particularly if it is a longer duration contract and beyond the horizon of what you could really see? Look, I think you have to be particularly in a Hype Cycle. Mm. You've got to have some good self-awareness. The history shows us the projected change is never as quick as people expect, but it's more profound in the long term. Right. Right. Right. I don't think this is gonna be any different. Mm-hmm. We've designed the new business structure in a way to say those that are doing more traditional Endava services, which there's tons of appetite for, right? Right. Right. Right. Right. Right. Right. Right. You have got to make sure there's no decline because it's the cash flow from that that's helping us fund the new. Right. If a relationship with a strategic partner starts in year one with 90% traditional Endava, 10% Endava Flow, can we get that to 50/50? Right. By year three? Right. Right. They're the levers that we have to pull to get the blended margin back up to the 20% pluses into the 30s where we've been before. Yeah. It's a blend. People keep talking about flicking a switch. Mm. It just. It never happens like that. Right. borrowing from some of that consulting developed, adoption curves. Mm-hmm And emotion that goes with that, What do you need to do then to, if we're in the Hype Cycle, to limit the depths of the valley of despair and as people kinda come to grips with what the realities are versus impressions, and then ultimately make that profound change? I joined. Just quickly. Sorry. Then I know we'll pass to you. I joined because I believe that John pivoted earlier than anyone else. Mm. I think we've been through our trough. Mm-hmm. I think our trough's done. I actually think the Trough of Disillusionment, we're now coming back into the plateau and starting to scale. Interesting. I think a lot of other people are about to enter it. Right. Go on. John. That's exactly what I was gonna say. If you look at, the sweet spot for us is that combination of we're talking to the Chief Executive Officer. Mm-hmm Very senior in the C-suite. We're understanding what they're trying to do to their business, what their aspiration is, what the game-changing thing is. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. They're trying to do. We're bringing an output-based, outcome-based contract to bear on that. Right So that the client sees we've got skin in the game. Totally We're all pulling in the same direction. Right. Also is giving us opportunity to make wider margins. Then when you're putting the Ava Flow capability, which is a method by the way, it's not some platform we've built. Right. Using AI. I'll come back to that in a moment. Please If you want. When you get that sweet spot of putting those three things together, you actually are giving yourself the opportunity to drive much more significant growth with the client. Right. Right. Right. Much, higher margins and strong execution. You know, we have very, very high NPS score as a company. Right. Yeah. That is because of our execution. That's why clients trust us and actually go, "Do you know what? I'm gonna believe in you guys to actually drive this change for me. John, talk about Endava Flow from your perspective. Like, what is it, and how does it differentiate what you can deliver to the customer? Let me wind back a mo. If you look at the digital wave that we rode for 20 years. Yep That was largely an agile-based method. Yeah. Right? agile is all about coordinating human beings in the creation of software. Okay And doing it in an iterative way. That is completely inappropriate- Mm To an agentic AI delivery model. Right? Interesting. Dava.Flow is the creation of that delivery model that you need for an agentic solution. Upfront, you use agents to help. Mm-hmm W hat new products or capabilities, or strategies a client should be searching around, coming up with options, helping them choose. The next phase is around creating the backlogs, you know, doing the specs, getting the regulations, the governance, the coding standards, everything together that then becomes the ability to do the prompt engineering and the context engineering and all the rest of it that goes into the next phase, where the agents actually build the code. Right Governed by people. The final phase is the support mode of systems that have already been taken live and the improvement of them and so on. That is a very different approach to an agile approach. It's completely different. Culturally, it's different. agile teams, when they start, they get together, within two weeks, they're kicking code out. Mm-hmm. The, in an agentic model, you're not doing that. Mm. You're creating an understanding of what you're trying to build. Mm. You put weeks into that, and then you have a very fast build. Mm And refinement process. It's culturally different. It's a different conversation with clients, different expectations to manage and so on. Needs codifying it in a lot of detail so that an engineer who is picking something up actually understands the role they're playing in a large program, and the phase that they're in and what they need to do. We have captured all of that, and we've found our people on very fast learning curves using the capabilities that we've put in place to actually make it work. We're not seeing other people do that yet. Right. Can I ask you, like, it's a potentially incredibly important point that you're making there. You know, it seems like most of the metrics I hear thrown around. About effective use of agentic AI or, you know, that kind of thing, basically just comes down to speed of code production. Mm-hmm. Right? It sounds like what you're saying is, like, if that's your focus and your metric, that may be a key risk of pushing you into this Trough of Disillusionment because you think it's just about speed of production. It's really the outcome and getting that right from the get-go instead of trying to iterate your way there. Is that fair or is that? It's, it's- A lacking assumption? It's absolutely fair. It's particularly true in an enterprise environment. Okay. I think people can look at what is happening at a consumer level or an individual who can use these tools to create a lot of code very quickly. Right. You know, the vibe coding type thing. That does not translate into an enterprise environment easily. Mm-hmm W here you've got regulators, you've got governance, you've got security issues, you've got legacy systems, you've got data problems. All of those things have to be integrated into an architecture and a design that can be fed into the agents so that they code something that works. Right. Right. Right. Right. Right. Right. Right. It's capturing all of that Dava.Flow is all about. One of my favorite books is The Pillars of the Earth by Ken Follett, which goes back to the original cathedral builders. Okay. They used to start laying slabs really quickly, and they kept on collapsing. Mm-hmm B ecause they didn't design them properly. Right. The job of a modern day and Endava engineer is to do the architectural thinking, think inception. Right. This establish in their mind with the client what is the building gonna look like when it's done, not then hand that over to a load of coders. You hand it to the agents to each do their little bit of the Lego building. Right. it's a very different approach to... It's an interesting construct that you're building. At least to me, it's somewhat resonant because if I think about, you know, the way that things were built, for a long time, as you just kind of started. If I start with a log cabin. Mm-hmm. I see which, you know, what my trees are, what fits, what fits together, and kind of architect as I go. To your point is that once you start building big things and you've got a lot of labor that can move quickly, you gotta figure it out beforehand. Which AI can help you do, by the way. Well, yeah. Yeah. Which is kind of interesting, right? If I go back to, you know, kind of what Like, if I go back to some of the big failures in software initiatives back in, at the dawn of the internet age, is people felt like, oh, like we fell short of capability and had a lot of cost overruns because we tried to over-engineer upfront without really knowing what the potential was. That's kind of, in my mind, maybe overly simplistically gave rise to this, you know, this agile coding approach, et cetera, where once again, you're kinda back to building. Yeah as you can, especially in a cloud-based environment. Your costs were low if you made a mistake, et cetera. You know, maybe, as you're suggesting, is that with agentic development, seems like the architects start to become a lot more important again. It seems like what you're saying. It's not just the architects, but I. No. Yeah. the. I totally accept that. Yeah. like the. Correct. Yeah. Exactly. ... that comes together. Yeah. You have to put the work into what exactly are we building, then you tell the agents to do it. Right. by the time with equipped with all of that information, you know, the prompts, the ask, but also all the contextual information around. Right ... this is the environment you're going into, this is the. Interesting requirements, et cetera. Our experience is you get higher quality code than with very good engineers if you do it right. If you don't do it right, if you're substandard in the way you do it, you have a rubbish in, rubbish out problem. Got it. Just to add to that, if you think of our strategy to engage with the C-suite and ideate on what their modern building might look like, what their you know, what their skyscraper is going to look like, their Salesforce Tower, is if they've already done that work internally and they've got it wrong, and it's got to IT procurement and they're just doing an RFP. Mm-hmm You're in a race to the bottom against the Indian outsourcers or against one of our peer group, the chances are it's not gonna be a great project. Right. You're gonna build a reputation for that. Right. By being in the ideation stage, you can really work through the flow, so you get success. Got it. Any questions from the audience here? Just a question here. How much efficiency will this method bring clients in terms of the job? If you think about there's a lot of software companies talking about engineers doing 20 times the amount of work as they used to do per head. If you had a job that was six months or nine months, you know, and obviously you guys wanna participate in the benefits here, but how much quicker can you, do you think you can, you can do it? We're in multiples rather than%, right? We're definitely in that space. Yeah. I.e., are we taking three, four, 10? It's that sort of... It depends on the specific job. Yeah. I think that's actually essential because in order to deliver successful solutions, you've got to do things like address the legacy system problem. That means you've got to lower the cost of fixing those issues to a level where it becomes viable, which it hasn't been historically. AI actually enables that, and it's the productivity that enables it. It unlocks a huge amount of work that's been locked away because no one could afford to do it. Yeah. It's the obvious follow-up. If your multiple is more efficient, is there multiples more work there? Absolutely. There is There is To replace what you were doing before? Just to, not that in terms of the market size, obviously, you could grow, share or whatever, but just in your client base. I think for an organization like us, there is, right? 'Cause we're shaped right for an AI world with enough senior people and not too many junior people. I don't think you can apply it to the whole market and go, everyone, including all these armies of junior people, are gonna be kept busy by this new method, right? I think that's where you get the winners and losers. I think for an organization like Endava, with the structure and shape that we've got, there is plenty of opportunity to eat up the productivity and do more with our clients. I.e., they'll still spend the money. Yeah, go ahead. Yeah. Can you talk to any pilot or test projects where this has been successful already, maybe on the metrics of, you know, what it would have looked like versus what it looks like now? Yeah, we're not actually disclosing any of that at the moment, right? Some of these are 12, 18-month programs, and we're seeing the benefit, but we're not actually able to reach the point where we have completed and actually able to, you know, demonstrate that the outcomes that we got were what we expected or better. We're seeing it, but we haven't reached the point where we can really produce definitive things on it. Let me just add, 'cause obviously under NDA with particular customers, we can demonstrate how the methodology has been viewed 'cause we had to show examples. The Nexus bid that we won against pretty much every big IT services company in the world. It was us and AWS that won the rebuilding of SWIFT, if you wanna think of it like that, starting with 6 countries in Asia. It's an enormous project. I mean, it's a huge project. It's under some time pressure, which has now been compounded by the geopolitical environment. Yeah cause it's all about sovereignty of data and do we want 2 big American companies, you know. Correct Managing these systems around the world. We're on a, you know, we're on an aggressive timeline to get that delivered. They would never. If you look at who Nexus is, set up by the Bank for International Settlements as a joint venture between some pretty big players. Mm-hmm They would never have picked us if they didn't have the confidence that our methodology would get it there in time for a modern platform. A lot of the deals we'll be announcing and the deals that we've announced are based on us exposing the methodology to people. We do get asked the obvious question, which is, does that mean we get it for less money? No, but it's a much more guaranteed outcome, and it'll be more efficient when we do it. There is an element of alchemy. We're not a company that builds IP per se. We don't build our own platforms. We're not committing to platforms. Mm-hmm. We do think the methodology, just like the Agile Manifesto did, will become something that people gather around. That's our ambition. just you've reminded me there, the thing about Dava.Flow is it's tool-agnostic. Clients are no longer worrying about, I have to decide whether I'm gonna choose Anthropic or ChatGPT. Yeah, yeah. And someone else. It's really important. Will come up with something better, and my, you know, my whole choice has been thrown out, and I don't wanna start a project 'cause something keeps coming over the horizon. Dava.Flow takes that away 'cause you can plug whatever tool you want into it, and then execute against that. Last question here in the last minute and a half. I wanna take this back a little bit to the P&L. How much of recent margin pressure is intentional? That is investment in this and other, transformative initiatives versus structural pricing utilization, going back to kinda this question here. You know, help us understand the relative impact of margins and then when we should expect a turn. I'll let Mark give some definitive numbers, but essentially, we're investing significantly in the pivot- Yep I.e., investing in the AI capability. We've invested in, staff with AI capability that are not fully billable yet. That's had a, depression impact. Our billability has come down because we're not driving the growth rates that gives the healthiest level of billability right now. I don't know whether you wanna put numbers on it. You took the words out of my mouth, basically. Okay. I mean, quantification is about 3% that we've been investing. It will abate as we go through into our next fiscal 2027, but we will continue investing, but not at that level because the groundwork has been done, basically. Great. Well, we're out of time here. John, Al, Mark, thank you very much for joining us here at the Morgan Stanley TMT conference. Fascinating conversation, best of luck. Thank you. Thanks. It's been a great conference, Chad.