Q1 2021 Endava PLC Earnings Call
Ladies and gentlemen, this is the operator.
Hey, Scott Collins is scheduled to begin in approximately two minutes.
Time your lines will again be placed on musicals. Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the end of the earnings release first quarter fiscal year 2021 conference call.
At this time all participants are in a listen on my knowledge.
After the speakers.
Chris presentation, there will be a question and answer session.
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I would now like to hand the conference over.
One of your speakers for today.
Parents Matson Investor Relations manager please.
Please go ahead.
Thank you good afternoon, everyone and welcome to end of US first quarter of fiscal year 2021 Conference call. As a reminder, this conference call is being recorded joining me today are John Cottrell and divest chief.
For two executive officer, and Mark Thurston and others Chief Financial Officer before we begin a quick reminder, to our listeners. Our remarks today include forward looking statements, including our guidance for Q2 fiscal year 2021 and for the school fiscal near 2021 are expected near and meat.
From term revenue growth the potential impact of the could you had 19 pandemic and associated global economic uncertainty our expectations regarding digital transformation of existing businesses and industries. The necessity of digital transformation from many and our visibility to benefit there.
And anticipated client demand for and other services as well as other forward looking statements.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements actual results and the timing of.
Sales and events may differ materially from the results or timing predicted or implied by such forward looking statements and reported results should not be considered as an indication of future performance.
Please note that these forward looking statements made during this conference call speak only as of.
30 date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law.
Please refer to the risk factors section of <unk> annual report on form 20-F filed with the Securities and exchange.
Commission on September 16, 2020, which contains and identifies important factors that could cause actual results to differ materially from those contained in any forward looking statements.
Also during the call well present, both I as far as a non I FRS financial measures.
Reconciliation of non IRS to IRS measures is included in today's earnings press release, which you can find our Investor Relations website, a link to the replay of this call will also be available there with that I'll turn the call over to John.
Thank you Laurence I would like to thank you all for joining us today, and I hope, you're all staying safe and healthy.
Mark and I are pleased to be here to provide an update on our business and financial performance for the three months ended September Thirtyth 2020.
Now we're coming to the close.
We have an extraordinary calendar year and unfortunately, the pandemic continues to Rick damage on wives and economies with some regions back in lockdown.
Within all these challenges the good news for Indaba has been that digital transformation has become even more of a priority.
In the new World Order and we continue to see growing numbers of engagements with existing and new clients on how to shape additional future and transform their operating model.
COVID-19 has accelerated recognition of the amount of digital transformation work still to be done.
Done.
And has brought forward the urgency to do it now.
As I mentioned previously.
In dollar enterprise distributed agile delivery model was designed to be extremely flexible and it has served us well, enabling a fast reaction and protecting our business for.
The amounts and our people in this rapidly changing business environment.
Well the second wave of COVID-19, hitting our main markets and the northern Hemisphere. There is a question about whether we will see similar uncertainty and volatility in customer decision, making as was experienced.
In March and April when the first wave hit.
This time around feels very different.
In communication with our customers they are much clearer on their priorities in the current pandemic environment and we're seeing more business as usual type stability in decision making.
So far we have not seen southern decisions to stop or reduced project activity.
Well, we are seeing plenty of new projects and expansion of existing projects in much more normal fashion.
All of this is driven by digital acceleration in that market.
Plexus.
As a result, we have decided to provide full fiscal year guidance consistent with how we are currently seeing behavior and decision, making as our customers.
Moving onto our results and DAVA had a solid quarter to start on new financial year.
With revenue of 95.1 million pounds, a growth of 15.5% year on year.
From 82.4 million pounds in the same period in the prior year.
If we pro forma adjust for the revenue from the world pay captive divested.
August 29 team our revenue growth on a constant currency basis was 20.1% year on year.
Our strong revenue growth was driven by the expansion of work for our existing customers and the acquisition of new ones during the quarter.
During the quarter.
And we continue to broaden our client base and ended the quarter with 501 active clients up from 278 at the end of the same period in the prior year.
And the 80.2% year on year increase.
Continuing on the trend by high.
Highlighted last quarter revenue growth coming from our largest clients increased sequentially as large corporations continue to invest in digital transformation during the pandemic.
Revenue from clients, who paid us above 5 million pounds over the past 12 months increased 11.2%.
And sequentially over Q4.
And this quarter, we have started to see a recovery and projects from our smaller clients.
We continue to grow our client base, despite the sales and marketing challenges arising from reduced travel and attendance and industry events.
This.
This quarter, we grew in all of our regions and verticals and our European acquisitions of Cts axis that an intuitive us all integrating nicely and in the other family and complementing our existing offerings.
Today I'd like to take you through one of.
Our fast growth segments mobility.
The industry is focused on the movement of people and goods, including automotive travel logistics Airlines smart cities and so on.
We see these industries is going through a long wave technology driven transformation.
Alternately in 30, or 40 years time facilitated by autonomous vehicles mobility, as a service and new monetization models.
But it will take time to realize the full scope of our new mobility enhanced future.
In dollar is all about Hell.
Helping clients to utilize next Gen technologies to take the steps on this transformation path, which will deliver business benefit now while laying the foundations for the long term trends.
We believe the future mobility lies in the connection of various presently disparate systems to create.
A new fabric of interactivity with which we will reduce friction in many parts of our personal and professional lives.
We are actively engaged in helping our clients in them ability journey and in particular, helping them create excellent customer experiences that drive business activity.
And the other has been a strategic partner to the Royal Mail group for just over three years. We have recently completed a major transformation program for that final mile optimization, focusing on the postal workers route management for the whole of the UK to enable greater efficiency.
I see and improved customer service.
We are also working with one of the largest global logistics systems integrators to deliver advanced intra logistics projects worldwide.
We help the client with their digital transformation journey spanning from receiving to shipping.
Goods, we automated warehouse processes, such as product registration stations storage retrieval systems and intra logistic transformed.
We improved our ability to deliver projects to end customers and shorten time to market.
We started with the creation of assist.
System architecture, all the way through to implementation we.
We delivered secure robust and scalable software services and the client praised our quality assurance testing capabilities.
And were a key strategic technology partner for Aer lingus, helping them accelerate adoption.
Total transformation and innovate their approach to payments loyalty and customer experience. We recently delivered an innovative payment hub platform, making it easier to effectively integrate new alternative forms of payment such as Apple pay and loyalty program points in terms.
Turn this allows the airlines choose the payment service providers, who helped to improve the guest experience and purchasing activity and this platform also alternates backoffice payment processing.
The automotive industry is on the going a fundamental transformation and we believe.
It's being disrupted by some key trends, including services centered around customer needs and desires vehicles seamlessly connected to a broad digital ecosystem like payments insurance Finance E Commerce and Smart City services.
And shared mobility services or mobility.
The other service, providing seamless end to end mobility across multiple vehicles and service offerings, reducing the number of private vehicles and the overall CA to emission.
We're working with our clients in all of these areas.
We created a virtual motor show for Volkswagen earlier this.
They're following the cancellation of the Geneva International Motor show, which brought in over 240000 visitors globally.
This virtual motor show was very well received by Volkswagen and the entire industry.
We created a similar offering for Audi with the global LD.
See from launch through a virtual reality solution, allowing out adding to present, a new models globally at various locations within a narrow timeframe and with a limited number of car prototypes.
Finally, and dollar deployed additional media supply chain solution delivering.
Smart digital signage services to over 2000 LD deals globally. This solution provides state of the art digital customer engagement and product and service presentation within the dealer showrooms.
Our client growth continues to translate into strong employee.
Correct.
We ended the quarter with 7199 employees, a 21.9% increase from 5904 in the same period last year.
We have increased our head count organically every quarter since the start of the pandemic.
Rick and our attrition rate remains low.
As we continue to redefine the future of work and explore the impact of much more time spent by our people working from home. We've been pleased to note continued improvement in productivity.
With the percentage improvement in high single digits.
This compared to productivity pre pandemic.
However, working from home also brings new physical and mental health challenges and this quarter, we launched the indaba wellbeing program, which includes a wide array of tools and training to help.
Our people adjust and thrive in the new work environments.
And over 60% of in Dolphins have already engaged with this program.
Our expectation is that post pandemic, we will move to a hybrid model, where our teams spend some time in the office together mixed with other time.
Hi, I'm working from home.
And we continue to recruit people on the basis that they must be able to regularly attend on in the office.
As shown by these results client demand for our services continues to be strong as digital transformation continues to rise up their agenda.
Mark and I and the entire team are extremely pleased with our performance for the quarter. Just ended despite the challenging environment and we are excited about the opportunities ahead of us and remain confident in our ability to deliver value for all of our stakeholders.
I'll now pass the call on to.
Who will walk you through our financial results for the quarter and provide guidance for the coming quarter and fiscal year.
Thanks, John.
Some highlights the most recent quarter.
And Tavis revenue totaled 95.1 million pounds for the three month.
Months ended September 32020, compared to 82.4 million pounds in the same period last year.
15.5% increase over the same period in the prior year.
In constant currency, our revenue growth rate was 16.9%.
Joe mentioned, if we pro form.
But just to the revenue from the World Cup captured last year, our revenue growth on a constant currency basis with 20.1% year on year.
Profit before tax for Q1 fiscal year, Twentytwenty was 8.7 million pounds compared to profit before tax of 17.5 million pounds.
All in the same period in the prior year.
Our adjusted profit before tax for the three months ended September 30th Twentytwenty was 18.2 million pounds compared to 16.9 million pounds for the same period last year.
7.8% year over year increase.
Adjusted profit before tax margin was 19.2% for the three months ended September 30 at 2020 compared to 20.5% for the same period last year.
Adjusted profit before tax adjusted PBT is defined as the company's profit before tax.
Adjusted to exclude the impact of share based compensation expense amortization of acquired intangible assets realized and unrealized foreign currency exchange gains and losses net gain on disposal of subsidiary.
Share based compensation expense amortization of acquired intangible assets and.
Unrealized foreign currency gains or non cash expenses.
Adjusted PBT margin is adjusted PBT as a percentage of total revenue.
Our adjusted diluted EPS was 26 pence for the three months ended September 32020 calculated on 56 point.
6 million diluted shares as compared to 24 cents for the same period last year calculated on 55.4 million diluted shares up 8.3% year over year.
Revenue from our 10 largest clients accounted for 39% of revenue for the three months ended September 32000.
Sequentially compared to 41% in the same period last year.
Additionally, the average spend per client from our 10 largest clients increased from 3.3 million pounds to 3.7 million pounds for the three months ended September Thirtyth 2020.
In the three months ended September.
Timber 30, Twentytwenty North America accounted for 29% of revenue compared to 27% in the same period last year.
Accounted for 25% of revenue compared to 26% in the same period last year and the UK accounted for 43% of revenue compared to 45%.
In the same period last year, while the rest of world accounted for 3% of revenue compared to 2% in the same period last year.
Revenue from North America grew 23.8% for the three months ended September 32020 over the same quarter 29 team.
Comparing the same.
Its revenue from Europe grew 15.3% and UK grew 8.4%, but excluding the impacts that will pay cat six from the prior year period capacity growth for the UK would have been 6.7% higher or 15.1%.
We grew in all three of our industry.
Pitco during the quarter.
Revenue from payments and financial services grew 10.3% for the three months ended September 32020, excluding the impacts that will pay catch up from prior year period, comparative growth would have been 5.8% higher or 16.1%.
Revenue from payments to.
Financial services accounted for 50% of revenue compared to 53% in the same period last year.
Revenue from TMT grew 28.7% for the three months ended September 32020, as the same quarter of 2019 and accounted for 28 sales.
Sense of revenue compared to 25% in the same period last year.
Revenue from other grew 12.7% three months ended September 32020 over the same quarter of 29 team and now accounts for 22% of revenue unchanged from the same period.
Last year.
This growth was mainly driven by clients in the mobility and retail sectors.
We now turn to our adjusted free cash flow, which is our net cash provided by operating activities plus club grabs perceived less net purchases of non current tangible and intangible assets.
Adjusted free cash flow was 21.2 million pounds for the three months ended September 32020, compared to 13.5 million pounds. During the same period last year.
Our cash and cash equivalents at the end of the period remained strong 70 million pounds at September 32020.
Compared to 101.3 million pounds at June 30 Twentytwenty.
We spent 50.8 million pounds net of cash acquired in the quarter on our acquisition of concentrate digital services in August.
Capex for the three months ended September 32020 is sensus revenue.
Revenue was 0.6% compared to 3% in the same period last year.
Our guidance for Q2 fiscal year 21 is as follows.
And DAVA expects revenue will be in the range of 102 million to 104 million pounds.
Representing constant currency revenue growth of between 17.5% and 18% and DARPA expects adjusted diluted EPS to be in the range of 25 to 26 pence per share.
The constant currency growth figure above exclude the well pay captive witch.
Current dollar sold in August 2019, and starting in the second quarter fiscal 2000 coupon will not be included in quarterly comparative financial metrics.
And DAVA does not intend to refer to will pay captive in future quarterly guidance.
And the other has decided to reinstate for.
Full year guidance with our guidance for the full year fiscal year Twentytwenty one as follows.
And the other expects revenue will be in the range of $419 million to 421 million pounds, representing constant currency growth of between 20% and 20.5%.
And DAVA expects adjusted diluted EPS to be in the range.
Of one pound four pence to one pound eight pence per share.
Constant currency growth figure now quoted for the full fiscal year 21 guidance still includes the pro forma adjustment for the bill pay captive.
It remains in the full year comparative.
This does guidance for Q2 fiscal year 21, and the full fiscal year 21 assumes the exchange rates at the end of October and exchange rate was one British pound to 1.29 US dollar and won 11 euros.
Typically.
That concludes our prepared comments operator, we are now ready to open the line for Q and a.
Thank you.
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Try your question please press the pound or hash key.
Your first question.
Morning comes from Bryan Bergin from Cowen. Please go ahead.
Hi, Thank you.
I wanted to ask here on the calendar 21 budget outlook for clients. So it seems you obviously had improved visibility to reinstate the the full fiscal year outlook can you provide some color on on the conversations you're having with clients what they're telling you.
[music] about their calendar 21 spending intentions and any broad trends are picking up and those that are different.
Hi, Brian.
Thanks for that yet so.
The visibility is actually pretty good in line with my opening remarks.
We're seeing clients have got clear.
Priorities of all they want to.
Invest in and we're seeing those plans come through I think the probably the best way of illustrating that is contracted and committed spend.
As a proportion of our guidance is at normal levels for this time of year. So.
They all ratios into Kelly.
Yes.
We're in a normal place.
I think interestingly.
Looking at budgets for next year.
In conversations with that with clients. This week following the announcement of the vaccine.
A number of clients have indicated that the additional.
We'll budget might become available if the vaccine enables activity.
To normalize things like travel et cetera.
So that it's clear that clients are still where their business is being.
Restrained by the impact of the pandemic on economic activity that they are.
Still holding.
Back a little bit.
But if.
If the world Normalizes, we might see some of that come through.
Okay, that's good to hear.
And then on contract can you just give us a comment on the integration process, there and the progress you're making does that bring any large relationships as well.
I see the big jump in client count that would seem to suggest otherwise, but I'm. Just curious if there are any large potential enterprise relationships that they may have.
You can push on as well.
Sure I.
Yes, the integration is going very well there were very positive and aligned.
Team.
And of course.
We have teams in region in Belgrade, and Servier and so on that.
That mean it isn't it isn't say.
A pandemic constrained relationships that we're building because people in the local market are able to see each other.
The reaction in the low.
Local market from a recruitment perspective has been very very positive essentially saying that the two brand leaders combined.
Thats had a very very positive impact.
We're we're seeing a number of joint bids.
Nearly nearly 10 opportunities that we're working on.
Together already.
And there's been a number of new names that we've already closed.
The last three months also.
The alignment across the business is very good and they bought some real strengths were in for instance, a couple of the examples I gave in the opening remarks around mobility.
Stories of cash from Cts.
And which we're using to leverage.
And so the Air Lingus example, for instance, where spend is continuing.
And the entire logistics company that we were talking about that is a very.
Very large multinational.
So they are all large clients that with quite substantial spend with Cts, where we're looking.
And seeing opportunities to scale, what we're doing with them.
All right. Thank you.
Okay.
Next question comes from Shiny Brennan from Credit Suisse. Please go ahead.
Oh, great. Thanks for taking my questions I've got two if that's possible.
Firstly just to pick you up on those mobility comments does much more focus around that industry then.
Than we normally get from you is that something that you need to bulk up through M&A return you will mix up to so expect more deals in that space.
And then on an unrelated topic can you just talk about the organic trends it may well be mined.
Our numbers that are wrong, but on an organic basis, if you strip out the acquisitions.
Feels like Q1 gross wells are a little bit slower than than Q4, and then when I think about your guidance for the second quarter.
You've got a full quarter of concentrate in there it feels like that might.
You're not a slowdown in organic growth.
I've I've got my numbers right I'm, what's the reasons you think for the relative caution in your organic gardens.
So let me do the mobility on first Hi, Charlie.
So, yes, I'm ability, we put our end.
My name is opening remarks, basically as part of the launch pulling together all the stuff that we're doing in the mobility space.
And then there's a lot of overlap of activity of how technology is impacting those different industries that we've put on to the mobility banner.
No actually we.
We've already been doing M&A to beef up what we've got in that space I mentioned, a couple of those examples have come from the C.D.S. steel.
The automotive examples that I went through in your opening remarks came from the access that they feel that the business in Berlin.
That came on board last December.
[music].
And then a lot of the logistics work is is.
You know from Indaba for many years back so it's an area that we've already been focused on it in terms of looking to see whether we could be set up with some M&A.
It is strengthening as a proportion of our business one of the fastest growing.
Areas, albeit from low.
Lower levels.
Of turnover.
But you know, we do see a big opportunity to adjust just because of those macro trends.
That are that are gathering speed.
And so we will as part of any other M&A.
I look cannot be looking to see whether there is an ability component to it.
But we're not just going to focus on that.
In terms of our M&A strategy.
It's mark yes, so just on the there isn't any slowing in the organic growth. So I mean.
We were guiding for Q1 sequentially, we should what people.
We're focusing on it was about 4%, we've done 5% and actually the differential between the four to five is FX and the FX headwinds were less strong than anticipated mainly because of the dollar and then you look at the guidance for Q2 again folks you on sequential we're going if at 9.5%.
The top of the range. So there was a pickup and the only sort of contribution additional contribution from CBS is you may recall at this quarter.
Where in Q2, we will have a full quarter contribution from Cts, whereas in Q1, we actually had about six weeks.
So we're getting half as much again contribution so I mean, the CD EPS contribution for this quarter is is relatively modest and.
In terms of also a pro forma excluding worldpay.
Constant currency growth, where we're roughly around that sort of 20%. So.
I would say in.
Slowdown in organic growth.
We're saying, maybe we can pick it up offline.
Our next question comes from Ashwin Shirvaikar from Citi. Please go ahead.
Hello.
Good morning.
Or maybe I should take good afternoon to you guys.
Right Yeah.
Good.
Good quarter here I wanted to ask you know as you think of your ideation to production into and.
Indeed indeed.
Mold of how you work you know, it's easy to see perhaps that the production parts of it.
It may be easier to do in a remote fashion you always done it that way what about the ideation piece how has that adapted.
Yeah.
So.
Hi, Ashwin. Thanks for the question, yes. So.
I mean, you all have picked up from my opening remarks that we strongly believe that we will we'll end up with a delivery model post pandemic that has a mixture of people.
Face to face in the office.
Kurt and teams are doing.
Sprint Kickoffs in retrospect is doing some of the ideation, particularly in the early stages of.
Programs, where they were the.
Scrum teams are working on how our new technology can be introduced.
Needs to be more of.
Face to face.
Activity going forward.
He said that.
What was price.
We're actually seeing.
Good ideation happening and clients are very happy with things that were coming out with.
During this pandemic period.
However, it is.
It's our belief that really get the best out of it.
Teams need to form and do some face to face activity.
Unable that happened to drive the best ideation, and so it is going to be part of our model going forward.
And that's why we're making sure when we recruit people even during this period that you know.
Alright.
First of all to attend the Dover officers and why not just picking people up all over the world I know some of our competitors are looking at doing.
That then you know that the productivity metrics, though I touched on.
Have been improving is very much of the production and as you're touching on so once once you get into production.
Develop.
All of US can can work at home and how.
Have the space to concentrate.
A little bit more you got good productivity.
When you're building out systems, I wish, which is why you're touching on it.
Right right no I just wanted to based on your comments I want it to.
I wanted to confirm that.
Yes, I'd ideation piece, which was actually happening it cannot be actually be down better more efficiently face to face, but it doesn't mean that it has grown to a hospital is happening can efficiently based on what you just said the the other question I had was.
Dan obviously.
Actually all over.
The cost of your history, a number of acquisitions are you finding perhaps it is because or becoming a bit more of core competency where you can you.
Use the current current situation to accelerate M&A I mean many.
Companies seem to be doing that.
You know it is difficult for one company to get to to do everything and so you know.
Just a question on M&A and can you speed up M&A, you certainly have the balance sheet for it.
Yes, Sir I mean M&A for us.
Yes, it's always a balancing act between saying because businesses are going to really add value to the dollar.
And there's a there's a lot of business is being touted around out there at the moment.
But but it needs to be balanced with with our ability to integrate.
No were very strong believers that the worst thing you can do with M&A.
M&A is to do too many and get into gesture.
You don't integrate properly the people, therefore don't settle down and all that well.
You don't fully.
Extract and exploit.
The sales messages and strengths of the organization that you bring in through if you'd like to growing properly. So you know we we've as you've noted done many M&A deals.
Over the last 10 years or so we've always focused on making sure that there is a clear.
Integration.
Before.
In on more.
And we are continuing to do that.
Having said that there are there are some very good opportunities out there.
And and we keep an eye on that to make sure we're not missing out on something that's going to be really additive to.
In the office capability.
We have got in place.
An integration team who are permanently available to do these integrations now.
And that does enable us to run a little bit faster than we did four or five years ago.
Understood.
Thank you.
Our next question comes from Bryan Keane from Deutsche Bank. Please go ahead.
Hi, guys I wanted to ask about the new client growth or at least the increase in total number of clients was was most of that increase looks like about an 85.
Crease was that just from the acquisition of CBS and the total or was or was there.
Bigger growth in organic growth and new clients this quarter.
So what was the contribution from Cts.
So you know.
Well well spotted.
But we also managed to grow the roster on an organic basis as well.
So we're continuing to add clients.
Yeah organically.
Got it and in Mark any comments on the pricing environment currently but also.
So when you've given the outlook you know what.
Whatever you incorporate into price going forward for the guide for the fiscal year.
Yeah. So I think the pricing were saying at the same levels as we saw in Q Q4 sales remaining relatively.
Robust Q4 was down on Q3, so we're certainly seeing some stability so reflects our sort of outlook.
Got it and then.
For for the fiscal year with what will be now the contribution from acquisition.
It's just so we can get.
Get our models correct.
So we went in terms of the dog, we haven't obviously factored anything we haven't done so in terms of revenue guide includes Cts from.
The acquisition date wishes made orca cell tower and a half.
Months.
Our useful sort of run rate to think about is our Q2, which is clean if I can call. It that so he has all the most recent acquisitions in the last sort of 12 months and that gives you the pace to extrapolate for the rest of year.
And then how much was CBS then how much.
You bet that be at least on an annual contribution and I guess, we can figure out the quarterly.
Well I won't give you the exact sort of second I mean, when we say Weve Cts, we acquired 460 delivery heads and they are at about a 10% discount while revenue per head. So you couldn't.
You should use.
An annual revenue of around sort of a 25 million, but you then you have to take into account, it's 10 or half months.
I would say that gives you are.
Some helping and compete United figures.
Got it thanks for taking the questions.
Thanks, Brian.
Our next question comes from Miami Tandon from Needham and company. Please go ahead.
Thank you congrats John and Mark on a good quarter I wanted to pivot over to margins. What are you looking at in terms of margin trajectory for the remainder of the year, maybe the puts and takes around that as well.
Any utilization, there's still more room to expand utilization or do you feel like you've kept that out the growth will be more driven by head count and pricing.
So.
In terms of the sort of outlook way, we've had a good good quarter as you can see for Q1. So the PBT margin was 19 point.
2%.
Adjusted basis, and that was driven by strong performance on our on our gross margin adjusted again, so around 43% I expect that to come off from that.
That level.
As we look into sort of Q2 men.
Mainly because there's a number of small.
For one off factors in the Q1 results.
Particularly rasnick color R&D tax credit.
And I expect utilization to come down sort of slightly as we recruit into that demand that we see in the second half so the second quarter utilization.
We'll come down slightly.
I, then think for the balance of the year. We will then start to pick up as we grow into that.
That's.
That people bench that we are recruiting too so I think overall we will.
In terms of full year.
Our gross margin will be slightly below what.
What we report in F Y 20, probably a percentage or so and probably are.
That does imply basically in the in the guide our adjusted PBT margin will be somewhere between 18 and 19.5%.
Great. That's very helpful. Mark and then maybe.
A broader question on that.
The talent, but just given that reacceleration in revenue I was wondering if you're having.
More competition for talent I would imagine so given that digital transformation wrought p. in these days. So maybe just some thoughts on talent acquisition can you hire the skillsets to meet the demand.
Improvement and any implications that you see for employee attrition going forward and wages Asian levels. Thank you.
Sure.
So you asked an interesting market at the moment obviously.
You know the pandemic impacted through Q4.
And.
A lot of other companies lay people off during that time.
And that has made.
Employees, a little bit more nervous in the market.
And all of it didn't lay anyone off and actually we continue to grow organically all the way through the period.
[music].
We've had a very very positive impacts on the markets that we're operating in.
So our attrition levels are at historic lows.
And our ability to recruit in the.
The employee proposition if you like that we have in March.
Marketplaces being significantly strengthened in all the locations that we operate in.
So as a result, you know we are we're recruiting very very strongly at the moment.
And we've had very strong levels of acceptance. So October we've we've had the highest month ever by some distance in terms.
The numbers of people.
Accepting a job offer at Andover.
So we remain in a very strong and confident position about our ability to attract retailers that we need in the markets that we operate in.
John sorry, just to be clear any implications for wage inflation and.
Subscription levels going forward given your comments, what you see over the remainder of fiscal 21 and maybe longer term.
So at the moment attrition levels are still trending down we expect that would turn at some point.
Just as the market starts to normalize Andrew.
It turn trends, perhaps slowly upwards to more normal attrition levels.
But we are we are very substantially below normal, let's say at the moment, even on a rolling 12 month basis, which includes a lot of period before the pandemic hit.
The.
In terms of wages that we're paying and inflation is below normal at the moment.
Having said that you know we we are we have or pay rounds to come in January.
And so there's always a step up in our cost that happened in January simply because.
Awesome.
The moment when the vast majority of our staff receive their annual increases.
We want to sales that none of that typically has an impact obviously on on gross margin.
It's anywhere between one and 2% and then we start to recover that through.
Renewals discussions with.
Mines, So I said, it's a normal pattern that we've seen historically.
Great. Thank you for taking my questions.
Uh huh.
Our next question comes from Maggie Nolan from William Blair. Please go ahead.
Hi, Thank you.
And on that point about your your hiring plans. Some of your peers are using hiring outside of their normal office had no way to structurally change their cost structure versus historical spend.
I'm wondering if you're able to achieve something similar even when you're expecting that employee at some level of.
A frequency as in person obviously, that's in the future.
<unk>.
Hi, Maggie.
Yeah, we so weve observed.
Some of our peers I'm doing that actually we've seen them appear in some of the places that we are not not actually taking any andover.
Employees, but hiring.
Hiring outside of the places where they have offices.
We decided we're not going to go down that route our belief is the wallst.
Whilst working from home has been demonstrated to work and the real added value.
Yes.
In terms of delivery model, we think moving to a 100% working from home.
By putting people in cities and countries that were not even in.
Is not a sustainable long term model for the way in which in dollar those business.
And part of that's the idea.
Action dimension that Ashwin was asking about earlier, we the ideation element of how in the offer operates I either the multi disciplinary teams who are able to.
Look at technology from a business perspective.
And come up with new ways of using it to try.
EPS form business models, and do that in proof of concepts and prototypes before we get into production.
We believe requires and teams to gel.
In a way that you can't achieve if work in all over the map and never meeting each other in person. So we are continuing.
Trying to hire people within range of our offices, so that they can spend.
Day, or two or sometimes five.
A week working together in the office.
And you know this is an area there is going to have huge debate I'm sure over the next six to 12 months.
But it's very much the Andover view that in order to sustain our business model and the quality of what we do for clients.
We will need teams to have a good amount of face to face time going forward.
Got it and then.
Our friend mobility trend pretty interesting.
I know that you mentioned that the.
Long tail, but I'm wondering if that demand for surface within mobility has been increasing and just in this current environment given.
Some of the applications on things like supply chain and and globalization and.
In general.
Wondering if you have any comments there. Thank you.
Yes, I mean, the last we see mobility as being not that very long.
Transformative trend, though I touched on in the opening remarks.
Yes, definitely been a push in some of those areas.
Hi.
Very strongly over the last six months logistics last mile deliveries et cetera, being a couple of areas.
By contrast, some of the other dimensions of abilities, such as airlines and travel.
Massive break put on it.
So it's a mixed story.
On the automotive area has been interesting because a lot of the push in that space has been around marketing and how do you continue to get your sales in front of people.
When they're not going to visit a dealer in the way that they have done historically.
So thats, but thats pushed a lot of the products that we've been.
Hi engagement in the automotive space around.
So it's a very mixed stories about whats happening under the covers during covert in the mobility space.
All right well, thank you nice quarter.
Thanks, Mike Thank you.
Our next question comes from Steve.
<unk> from Keybanc. Please go ahead.
All right great. Thanks for taking my question.
Just wondering I think last quarter, you talked quite a bit around digital necessity of projects, but wondering if you're having any change in those kind of projects dynamics and if we're kind of back to a.
A new normal in terms of project I mentioned and the demand for them.
Hi, Steve. So there is there is some of the additional necessity stuff I mean the.
Just picking on my last comments about mobility some of that last mile stuff has been conditioned on.
Necessity, where.
Much higher volumes of hit the logistics and distribution industry.
And investment in.
The systems to enable customer service to keep up with the high volumes going through his has been a.
A big step up in activity over the last.
Six months.
Having said that.
I think.
If you look at what clients.
Spending in talking to us about now there's much more of a shift back to.
Their longer term trends.
And investments rather than the the fixing the problems that emerge.
During March and April.
Okay, great. Thank you.
Our next question comes from Jan.
Morgan Stanley. Please go ahead.
Thank you very much I wanted to.
Can you give us.
A little bit of incremental color on the different verticals and activity in and outlooks. There you mentioned a little bit what was going on from a mobility project perspective, but can you speak to the wider trends them and engagement levels and kind of what you're expecting and in each of those areas.
Sure.
Yes, thanks, Thanks James.
Yes, so there's let me pick out in the areas, where we're seeing a pick up.
So we've seen a pickup in banking and payments and insurance.
Oh.
Three areas of TMT Tech media and telco.
Media being the strongest of those three.
And then in other in the mobility space that we've talked a bit about and in retail.
[noise] travel and entertainment is still very channel.
Alleged.
But actually we have little exposure to them as a business.
It has impacted some of the other spaces, so payments world well being up very strongly on.
On the E commerce and things like.
Self.
Service on boarding.
Leave and pin on gloss.
Add.
And the open banking arena.
In the area of.
Payments attached to.
Travel so.
Cross border payments.
And FX related activities, we've seen a drop down in activity.
Likewise in insurance loss most of the insurance space is looking strong travel insurance as has tightened quite a strong pull back so there is a bit across sector.
Impact happening from nice sort of Mac.
Economic effects that the visible around travel.
Yes.
Got it got it that's really helpful and then.
Just a quick question is weve heard increasingly this narrative behind.
Vendor consolidation and and how.
The current environment is creating a situation where at least some.
Some customers will reevaluate do they really need as many.
It service vendors that they are using et cetera, or are you seeing that at all and then you're obviously doing quite well. So what do you think maybe if that is happening country.
Turning to your ability to take share and maintain position is it just your focus or are there more specific.
You'll starts and abilities are delivering to the customers.
Yeah. So.
I mean that vendor consolidation is definitely happening we are we're not.
Just as a business on getting into.
Conversations with procurement departments.
Around vendor consolidation activity, we're focused on.
In each of the business areas to our clients.
Irene on how can technology.
Make a big impact.
On that business and change their business models.
The improved efficiency and so on.
And so do we we tend to see ourselves growing market share in clients as we drive those conversations through proof of concepts and prototypes turning into projects and so on.
And clients to make larger and larger multi year commitments to us.
And probably behind the scenes they are consolidating what they're doing with other vendors.
Often probably in the legacy space.
Where we don't where we don't play.
Right.
So that that compression of spend with vendors.
Vendors to.
Provide legacy support.
Is benefiting us, but it's it's not directly competitive activity.
If you understand what I mean, because we're offering as.
All the different service.
Having said that I have observed some of the other.
The players talk about seeing weakening of demand in some of the areas that we're in like like payments.
Where we can see continue to see a strengthening of demand so it could well be that they're getting console.
I've laid it out in some of the markets where.
We're seeing strong growth.
That's really helpful. Thanks, a lot.
Thanks James.
Our next question comes from Brian Farley from MKM. Please go ahead.
Hi, Thanks for taking my question and congratulations on a great quarter I wanted to touch on something that was said earlier about the number of clients added over the past quarter, because there's quite a lot about 85 clients a lot of that's come from that acquisition as you mentioned, but maybe you can give us some color on the types of clients that are on board are they big companies small companies and in particular sector and then as it.
Late what's been the most successful new logo acquisition channel.
Yes, other than nine movement was sales.
At our acquisition Contrite Cts, so that brought roughly.
Around six.
60 odd clients with it.
We have been Onboarding, new logos basically cross.
Pace.
I wouldn't say, there's anything any particular sort of sector obviously.
You have to take costs at the relation at that.
Situation.
Sure.
In the mobility sub segments.
Travel, but it has been in our across the geography and.
And also you know sector. So it's been a.
At the quarter sequentially for us.
And just on your second question around new.
Logo acquisition.
You know, we so our pipeline.
Comes through so.
Going to set up meetings with clients put our propositions in their industry space in front of the move that forward three proof of concepts that then turn into.
Larger.
Product.
Option systems.
Now you know, we do that very much on an industry focused basis.
And interestingly.
The channels.
That open up meetings in different industries can be quite different sales.
Where.
Whereas in payments.
We would see strength through linked in the channel and through.
Shows and events.
In.
Other areas like insurance.
You see other activities such as coal pulling.
Yeah.
Being much stronger.
It also actually varies geographically by market.
Say.
The response, you get into the U.S. to the different channels can be different to Europe with the UK somewhere in the middle.
The key though is that it.
Is is our propositions that.
We develop around how technology can.
The impact of these different industry segments.
And that's what gets engagement with clients.
When we're able to talk about.
Business very much a business level, and how technology can impact and transform it.
And then get them interested in it.
Concept.
That gets the ball rolling so that those are that's our successful logo acquisition.
Great. Thank you so much.
Okay. Thank you.
This concludes the Kenny portion of our call I'll turn it back for any closing remarks.
Great well, thank you all for joining us today.
As you will have noted and even although the pandemic continues to recur a terrible impact we are actually more comfort and our clients have incorporates the challenges.
Into their investment plans and we're seeing a much more stable decision making.
And then we saw back in March and April So, we therefore guided for the full fiscal year, and we're feeling pretty positive about our business position.
Look forward to seeing you all on our next earnings call in February.
Ladies and gentlemen, this concludes today's conference call. Thank you.
Participating and you may now disconnect.
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