Q1 2022 Endava PLC Earnings Call
Hello, and welcome to the end of our Q1 fiscal year 2022 financial results Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question press the pound key.
Thank you I would now like to turn the call over to MS. Laurence Madsen. Please go ahead.
Thank you operator, good afternoon, everyone and welcome to <unk> first quarter fiscal 2022 conference calls.
During this conference call is being recorded joining me today are John Contrail, and dump as Chief Executive Officer, and Mark Thurston and now that's 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.
2022 and for the full fiscal year 2022 and statements regarding our perceived opportunities and anticipated future growth our expectations regarding digital transformation of existing businesses and industry.
The necessity of digital transformation for many companies and then that's the ability to benefit from potential technological advances across the industry.
Alright expectations for future partnerships and other credentials anticipated client demand for endo that services, our ability to attract and retain employees our integration a fight in level and our ability to execute on our sustainability objectives 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 certain 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 todays date and the company undertakes no obligation to update them two weeks like subsequent events or circumstances other than to the extent required by law.
Please refer to the risk factors section of our annual report on form 20-F filed with the Securities and Exchange Commission and September 'twenty eight 2021 which contains a discussion of important factors that could cause actual results to differ materially from those contained in it.
Any forward looking statements.
Also during the call well present, both I FRS and none I S. Farmers' financial measures a reconciliation of non I S. Rs. Two I am sorry. Its measures is included in todays earnings press release, which you can find on our Investor Relations website, a link to the replay of this call will also be.
With that little bolt, there with that I'll turn the call over to John.
Thank you Lawrence.
I'd like to start by thanking you all for joining us today.
Hope, you're all staying safe and well.
We're pleased to be here to provide an update on our business and financial performance for the three months ended September 30th 2021.
Headline level, we continue to experience very strong demand for our digital services and all of our regions and verticals.
Well, we're very focused on recruiting talented people.
We remain in an environment, where demand outweighs supply and therefore, we're having to be selective in the work that we take on.
And Delta reported revenue of 147 5 million pounds for Q1 of our fiscal year 2022, representing an almost 61% year on year increase in constant currency.
For 95.1 million pounds in the same period in the prior year.
We ended the quarter with an adjusted profit before tax for the period, a $34 8 million pounds, representing a 91% year on year increase from $18 2 million pounds in the same period in the prior year.
Strong revenue growth continues to be driven by both the expansion of work for our existing clients and the acquisition of new ones during the quarter.
I mentioned on previous calls that we were seeing an increasing flow of new client opportunities, which start small with ideation or proof of concept engagements and then scale as we move into production system development.
The scaling of these projects has engagements expand is now driving the growth of larger clients and the increased spend by these clients.
As a result, we ended the quarter with 658 active clients up from 501 at the end of the same period in the prior year.
31% year on year increase.
Importantly, we grew the number of larger clients with a total of 93 clients, who are paying us in excess of 1 million pounds per year compared to 66 in the same period last year, representing a 41% year on year increase the average spend of our top 10 clients is also accelerating growing by four.
T 2% year on year, and the revenue from clients, who paid us about 5 million pounds increased 31% year on year.
The integration of our most recent U S acquisitions volume and level, both of which we acquired this past fiscal year is going very well and we're actually in Charlotte in person. This week meeting with clients and our people.
I'm very excited about the growth prospects for our business in the U S. Following these acquisitions.
Our business in the U S continues to grow strongly up 93% for the three months ended September 30th 2021 over the same quarter of fiscal year 2021.
From a technology perspective, we continue to see high demand for all types of cloud computing services from helping clients with cloud choices and strategy.
Migration of existing software to cloud platforms to development of cloud native applications, and finally operating cloud based platforms through our managed by and all of our services.
As part of accelerating disruption and change for our clients. We work on all three major cloud platforms, maintaining strong partnerships with AWS Azure and Google cloud.
These partnerships gives us access to the knowledge and skills building needed to ensure that we can use the agility and sophistication of these cloud platforms to build industry, leading solutions for our clients.
This allows us to avoid the delays associated with on premise infrastructure.
It allows us to harness industry, leading cloud services, such as those for cognitive computing and data analytics.
Additionally, cloud platforms avoid many of the traditional bureaucratic and governance obstacles that are found in larger organizations, allowing us to deliver value to foster.
Often we find that a relatively specialists project in one area of cloud computing for instance, creating a data lake or are advising on the migration of an application.
Often drives other cloud based work to us and importantly, our people love working on cloud platforms and so it helps us to grow and retain the best software engineers.
Another technical trends that we're observing with interest is the rising profile of a possible future met of us fueled in part by the Facebooks recent rebranding and investment announcements relating to it.
Whilst we'd agree with many observers that such an ambitious virtual environment as many years and a number of technology advances ahead of us.
We can see its future importance to our clients and we'll continue to track its development and experiment with it as it evolves.
Back in today's world, though we're seeing greater awareness of the possibilities offered by augmented reality virtual reality mixed reality across a range of our clients in.
And in response, we continue to grow our strong capabilities in these areas through our group level technical community for Exor on three day computing.
Demand for our services in the payments the school continues to accelerate at the core of payments all the acquiring systems, which are the most complex aspect of the entire payment journey.
Relatively few organizations have tackled the challenges of the reengineering or building from scratch and acquiring platform due to the great complexity and risks associated with such undertakings.
However, these projects are at the core of our expertise on demand for this service continues to increase.
With the significant shift to online payments.
He is also helping payments companies ensure their platforms and systems can scale with increases in volume.
Aligned with the increasing requirement by consumers and businesses to send and receive money in real time and the offers are also helping clients rollout real time payments globally.
Additionally, a key challenge for payments companies today is to differentiate themselves while holding on to merchants.
We think the best way to do this is through delivering value add services, thus, creating additional stickiness.
Here also we support our clients by innovating and building additional services, such as portals with business analytics or loyalty offerings.
Such as our merchant financing.
We also go further building downloadable smart terminals that don't just take payments, but also control stock and host bookkeeping.
Louis.
Here's some examples of what we're doing today for all clients in the payments that's cool.
We are working with clear course partnership of innovative technology companies created in 2018 they.
They provide membership software to organizations and small businesses that helped our clients manage their members and clients.
Administer their business workflow and automate their payment processes seamlessly.
This allows them to deliver a cleanup customer journey and to cross sell.
It also helps increase revenue while lowering expenses.
And all of that has been their exclusive tech partner in this journey from the very beginning as we are enabling them to become a fully fledged payments facilitator.
Indaba and most of the card are working to deliver additional choice and how consumers and businesses pay.
Seen in account to account and real time payments infrastructure.
Builds on our relationship with vocal link in the early two thousands.
And we're working with one box.
An innovative solution, which enables financial institutions to broaden and maintain cost effective sustainable physical presence to support our full customer base.
Bank branches continue to close and people are being financially excluded one bank's leverages open banking to support communities by providing it of individuals and Smes access to their underlying bank accounts in a single location and by providing face to face pooled help people engage.
With the digital future.
One bank's ambition is to play a leading role in the delivery of everyday banking services in the U K initially before looking to take the solution International.
So open banking continues to gain traction globally.
Indaba has played a pivotal role since inception in the development of the platform continues to work on expanding new and innovative capabilities.
And David came to ACI as part of the acquisition of the speed pay bill payment business from Western Union.
And the office teams designed the cloud architecture and built the platform for Western Union.
We started working with ACI in 2019, and they've been a key pas speed pays ongoing functional development client on boarding and integrations with ACI systems.
Prior to the acquisition, we provided sole application support of the speed pay platform.
We currently work closely with ICR teams on joint support of application.
And the Alba has moved beyond speed pay to support other areas in the ACI business.
We are working with a leading payment company to build a gateway for non card payments known as alternative payment methods or IBM.
Including connections to Aggregators.
Such as P. P R O.
We support a P EMS as well as the shopping cart integrations building the reference implementations for two key market places.
We're also helping build a new e-commerce fraud solution and enhancing the flexibility and scalability of the overall cloud architecture.
Final areas of support involved the integration of Salesforce and the associated merchant building pricing on on boarding enhancements.
I also want to highlight that we recently celebrated our 10 year anniversary working together with will pay from Fas and we continued to expand our work with F. I S and will pay globally.
Our client growth continues to translate into strong employee growth.
We ended the quarter with 9616 employees.
The 33, 6% increase from 7199 in the same period last year.
We added 733 net new employees in the last quarter.
While competition for talent remains intense I'll focus on recruiting the best talent in the countries, where we are located is unchanged.
And we continue to recruit and retain the employees we need.
Our attrition level remains low by industry standards.
Focusing on being an employer of choice in our core locations remains a key objective of our growth strategy.
Additionally, we believe the moat around our business model created by our unique culture remains intact. Despite a strong head count growth.
We recently opened a new state of the art offices in Bucharest, Romania.
Born of salaries in Argentina, designed specifically for hybrid work across home and office.
The new working environment maximizes collaboration and innovation when teams are in the office and offers a lot of people flexibility.
These two officers will serve as a pilot so that we can refer to refine and optimize this new model to work.
More employees choosing to return to the office. However, it has to be said that the majority of our workforce continues to work from home most of the time given the ongoing impact of the COVID-19 pandemic and all geographies.
Following up on the launch of our sustainability report were delighted to receive such great feedback and we will continue to build and iterate our roadmap around the five key pillars of our <unk> approach.
If you've not had a chance to read our report we invite you to have all of them.
More recently, we started the rollout of our inclusive leadership program focused on equipping our leaders with practical solutions actions and a toolkit to build solutions to inclusion challenges and improve our people's experience.
As demonstrated by our financial results demand for our services remains strong.
We are excited about the opportunities in front of us and remain confident in our ability to deliver value for all of our stakeholders.
I'll now pass the call onto Mark who will walk you through our financial results for the quarter and provide guidance for the coming quarter and the fiscal year.
Thanks, John.
And <unk> revenue totaled $147 5 million pounds for three months ended September 32021, compared to $95 1 million pounds in the same period last year, a 55.0% increase over the same period in the prior year.
Constant currency, our revenue growth rate was 68%.
Profit before tax for Q1 fiscal year 2022, it was $24 9 million pounds compared to 8.7 million pounds in the same period in the prior year.
Our adjusted profit before tax for the three months ended September 32021, with $34 8 million pounds compared to $18 2 million pounds for the same period last year.
Our adjusted profit before tax margin was 23, 6% for the three months ended September 30 of 2021 compared to 19, 2% 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 and realized and unrealized foreign currency exchange gains and losses.
Which are noncash items.
Adjusted PBT margin is adjusted PBT as a percentage of total revenue.
Our adjusted diluted EPS was <unk> 49 pence for the three months ended September 30 of 2021 calculated on $57 8 million diluted shares as compared to 26 patents for the same period last year calculated on $56 6 million diluted shares.
Revenue from our 10 largest clients accounted for 36% of revenue for the three months ended September 32021, compared to 39% for the same period last year.
Additionally, the average spend per client from our 10 largest clients increased from $3 7 million pounds to $5 3 million pounds for the three months ended September 32021, representing a 42.0% year over year increase.
In the three months ended September 32021, North America accounted for 36% of revenue compared to 29% in the same period last year Europe accounted for 20% of revenue compared to 25% in the same period last year and a U K accounted for 41% of revenue compared to 40.
3% in the same period last year, while the rest of world accounted for 3% unchanged from the same period last year.
Revenue from North America grew 93.0% for three months ended September 32021 over the same quarter of fiscal year 2021.
During the same periods revenue from Europe grew 24, 1% the U K grew 47, 6% and the rest of World grew 53, 6%.
We grew in all three of our industry verticals during the quarter.
Revenue from payments and financial services grew 54, 8%. The three months ended September 30 of 2021.
Revenue from payments and financial services accounted for 50% of revenue unchanged from the same period last year.
Revenue from TMT grew 35, 6% for the three months ended September 30 of 2021 over the same quarter of 2020 and accounted for 25% of revenue compared to 28% in the same period last year.
Revenue from other grew 81, 2% for three months ended September 30 of 2021 at the same quarter of 2020, and now accounts for 25% of revenue compared to 22% in the same period last year.
We now turn to our adjusted free cash flow, which is our net cash provided by operating activities plus grants received less net purchases of non current tangible and intangible assets.
I want just to free cash flow was $16 5 million pounds for the three months ended September 30 of 2021 compared to $21 2 million pounds. During the same period last year.
Our cash and cash equivalents at the end of the period remains strong at 82.0 million pounds September 30 of 2021 compared to $69 9 million pounds at June 30 of 2021.
Capex for the three months ended September 30 of 2021 as a percentage of revenue was two 3% compared to 0.6% in the same period last year.
Our guidance for Q2 fiscal year 2022 and.
David I expect revenues will be in the range of 150 million pounds to 152 million pounds, representing constant currency revenue growth of between 47% and 49%.
Adolfo expects adjusted diluted EPS to be in the range of 42 to 44 pence per share.
Our guidance for full year fiscal year 2022 is as follows.
<unk> expects revenues will be in the range of 615 million pounds to 620 million pounds, representing constant currency growth of between 40% and 41%.
And David expects adjusted diluted EPS to be in the range of $1 seven one to $1 76 pounds per share.
This is above guidance for Q2 fiscal year 2022, and the full fiscal year 2022 and assumes the exchange rates at the end of October when the exchange rate was one British pound to $1 37 U S dollar and 1.18 Youre right.
This concludes our prepared comments operator, we are now ready to open the line for Q&A.
At this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad.
First question comes from a line of James Fawcett with Morgan Stanley.
Thank you very much I wanted to ask first if youre seeing any changes around client behavior in decision, making in the current environment.
Especially when so many people are facing head count constraints, especially in their IPO Department.
Hi, James Thanks for that.
I mean client behavior is very much driven by the.
Business opportunities and challenges are saying in the digital space it environment.
So.
There's a lot of demand flowing.
From those business needs and the projects that are emerging from that.
Now.
The.
Demand in this space is far exceeding supply right across the whole business.
And so that is of course.
Driving them to to have conversations with organizations like ourselves, who have the skills and capabilities too.
Execute on that business challenges.
Now that's not particularly a change in behavior from before but there is definitely higher volumes of that.
Coming through and hitting us.
Got it and then on that point of of you know.
Hiring et cetera can you provide.
Update on on your own.
Are you still comfortable with the previous Maximums of.
How quickly you can grow your own head count in a quarter or a year.
And can you just kind of give an update of of what that looks like and how are you thinking about your client recruitment algorithm et cetera.
Sure I mean.
The recruiting stuff has always been a challenge getting the right talented people.
It requires successful businesses to build a really good market presence with a career proposition that's going to attract and retain the best.
That is.
Very very crucial in the current market environment now.
I think as you were touching on we've always guided that we can do that sort of 25% to 30% organic head count growth.
As a sensible scaling.
Where.
The ability to onboard people deploy them into projects.
And make sure they're operating with the quality and the.
And all of our approach is going to enable us to deliver effectively to our clients.
Is the constraining factor wish, which sort of cap rate on that 30% now currently our attrition is actually running very low or actually around the 12% Mark over the last 12 months, which is still below the 15% that we talk it.
It's giving us a little bit of headroom on that 30% Max that we can only go for.
And it's actually trending down if we look at a rolling three months attrition.
Has been moving down over the last four months.
One of the things that happen through the.
Through the pandemic period, a year ago was actually we didn't lay off staff, we held onto them we continue to promote them.
During that slightly slower growth period.
As a result of which and David just became a little bit more senior than we normally are in terms of upgrades.
And that's also I provided a little bit of headroom in terms of being able to expand.
So we've run a little bit above the 30% I think we were about 34% year on year with Mark.
Yeah.
But actually because I'm not sure that's part of was enabled that to happen.
That's great. Thank you very much.
Thanks Jay.
Your next question comes from the line of Brian bargain with Cowen.
Hi, all good morning, Thank you.
Just given the magnitude of growth right now and demand outstripping supply can you talk about your considered near considerations for maintaining these high levels of adjusted PBT margin versus reinvesting even more at a higher level to try and support elevated growth for an extended period.
Hi, Brian.
I mean, we've had a very strong quarter of all our adjusted gross margin.
It was just shy of 43% and that reflects a re.
Reasonable level of utilization amongst all four hasn't really picked up significantly quarter on quarter surge in this stable environment, we've always talked about high <unk> to low 70, so high.
The higher end of that sort of range.
And then on the pricing environment for us.
<unk> remains good which sort of supports gross margin outlook I think the only.
Comment is around the battle for talent, we are seeing.
We are going to have to.
Face sort of cost pressures, we onboard new people.
We grew our head count to meet the strong demand that we see so we have to be competitive in the marketplace with all our packages and also to keep our.
People within in Dolphin and developing their careers. So we've got an eye on attrition and keeping that in a sensible pace. So I think there's definitely cost pressures that we're seeing it's not going to become.
Italy apparent how strongly up because we have our major pay round in January.
But there are definite sort of cost pressures that are in the sort of near term, but we're confident in the medium term and I'd say over the next 12 months that we will be able to recover through pricing discussions with clients.
Clients.
And then I guess the other component for adjusted PBT margin is SG&A.
This quarter, it was a pretty low percentage about 15%, which.
It'll better delight spend compared with last quarter I expect it to pick up in the coming quarter will definitely be spending more on sales sales and marketing and also there's some integration activities. We have with our most recent M&A, but we'll be just going up to around.
16 and half 17%.
In the medium term, we will always have that algorithm for us which is maintaining the gross margin and that sort of 40 plus percent area and it is leveraging the SG&A and we will get occasional sort of.
Variations in that from quarter to quarter, but it doesn't change the long term outlook.
And it's worth just adding to that that.
The last nine months or so we have been investing in our industry vertical space.
Specifically.
Accelerators.
Propositions to IND.
Industry segments within the market.
To strengthen our position in the market.
It is part of what's helping accelerate.
The Honda was saying.
But we've been doing that within the framework of the results that we've been delivering.
Okay, that's good to hear.
Just as you lean into that U S opportunity further should we expect an even more substantial latam build out on the operational front can you kind of give us a sense on how youre thinking about the footprint expansion in the Latam region over 2022.
Yeah, so the whole Americas.
Spanning really well for us if you actually looked at what we did in the U S.
This last quarter it was actually 107% in constant currency terms that we expanded in the U S.
It's very very strongly linked to what we're doing in Latam.
I haven't got the percentages, but the Latam acceleration is significantly faster than we're seeing in <unk>.
Central Europe at the moment.
As we're scaling for.
So that growth that we're seeing in the U S. Do you have.
Got it.
I will take that Africa environment.
Paul.
Yeah. So I mean, there's a lot of time growth was very very strong.
If you look at it year on year we've.
It really sort of in fact at the.
They approached with a nearshore delivery with our North American revenues, which is proving that sort of accelerator.
So, but we're really encouraged by the growth that we're seeing that.
We'll pull that out and drop it in light of the Nicole.
Okay No worries thanks, guys.
Thanks, Brian.
Your next question comes from the line of Jamie Friedman with Susquehanna.
Hi.
Good morning, Great results good afternoon.
Thanks, Jeremy we're actually in the U S. So it's good morning for us.
Got you, Okay, well afternoon similar.
So.
John in your prepared remarks, you talked a bit about the meta versus and I couldn't help but ask for some use cases I know you talked about three D. But.
Could you share some other use cases that you're seeing potential demand for from clients.
Yeah. So at the moment is much more in the.
In the space of augmented.
Reality virtual reality and mixed reality type solutions.
We're putting together with clients.
So for instance.
We're helping our clients.
The industrial space at large German client.
Who's using augmented.
Reality to actually review Lodge.
Machinery things like turbines and so on so that an engineer can remotely.
A drone.
And with your equipment.
Side of the World.
Using a headset to view, what's happening through the dry.
As an example, so.
Sorts of apt.
Applications are starting to appear.
Quite a lot sort of Iot related and different segments.
And.
A lot of it is at the more experimental and testing the boundaries of what is going to be possible.
With clients that ideation type stuff that we do with clients.
And then.
A few of them are scaling.
Training is another area of where actually with the working from home environments and so on we've been able to setup.
Training.
Situations once again with real equipment that actually enables.
Someone who is unable to travel to be trained on how to do maintenance and so on and how to guide local maintenance.
In remote factories and so on.
Great and then.
Mark.
Just as we're building out the quarters for the year.
He gave the.
Q2, and the fiscal year, but.
How much M&A contribution is there and then is the is there a particular time at this point where.
It feeds like assuming you don't do more which you may but absent that is to do the comps get different in the second half.
Yeah. So there's an M&A contribution in a constant currency Q1, 61%.
About 15% of that is the contribution from M&A.
And then implied in the guide for Q.
Q2.
Guiding at.
A 44% is real but actually it's a 49%.
<unk>.
Constant currency does.
As a contribution of 39% say call it.
Organic so you've got about 10% so the full year.
The guide at the top end, which is 41% let's call it an M&A contribution of 7%.
Leaving the organic elements at 34%. So there's a fading of M&A contribution basically because of the acquisitions that we did towards the tail end of Q3, FY 'twenty with five level.
I run the full 12 month cycle. So when you get to Q4 and the guide will be totally sort of organic and that will be certainly above 20%.
Got it thanks for the detail.
Your next question comes from.
So just just wanted to sort of answer that question, we had earlier with Brian about the <unk>.
Kris and Latam head count so year on year, it's been 61%. So we have roughly about 1400 people in Latam.
Thanks.
Your next question comes from the line of Maggie Nolan with William Blair.
Thank you and just to follow up on that so is that delivery makes up a big factor in driving your Rev per delivery had up over time or could you get a little bit more granularity.
And what's been driving that up, particularly the strength this quarter and then how sustainable you feel that that is.
Yeah, I mean, we've been making very good progress on the revenue.
Had.
Certainly.
It's around the sort of 69000 pounds Senate and you can see that sort of in the head count growth year on year is 37% and yet we're delivering.
Constant currency revenue growth of 61% so part of that is coming from.
Priest utilization, probably about 8% or.
There isn't a there's a slight shift in our onshore near shore mix.
So I would say the acquisition of.
Level in five that proportion has increased.
Instead of being around 6%, 8% that contributes and elements of growth that is around 6% and then the actual right in terms of.
The services that we can deliver on a Monday rate basis contributes about 9% takes us to the 61%. So I think that the revenue per head metric is.
I think remain at this higher level, because the mix of onshore Nashville is it going to change significantly.
Basically we are at I think that the.
And if all utilization, which is the sort of.
Seventies.
The only thing that is going to then potentially drive it higher will be the Monday, right, which is again, how we recover that.
Pressure.
For the.
The cost base.
Isn't it.
Balance at the end, but I think the the revenue per head is going to remain pretty stable, but probably this is probably a little bit of upside given the pricing environment.
It's probably worth just noting that.
Although we've increased utilization.
Against the second quarter last year. It was actually very low last year at 67%. So we moved it up to 71% that's what drove the 8% element of.
The utilization.
Component going into that.
Revenue per head.
So we are keeping a level that's sustainable.
The high growth that we experience as you know we run the utilization of it a lot with them.
Many of the larger payers in the business and that is to enable our growth rates to continue.
That's all great detail. Thank you.
The other thing I wanted to ask about the other segment is growing at quite well and it's becoming a more sizable piece of the business. So any granularity on.
Our particular sub verticals that are really driving that particular clients or projects or anything of that nature, we should be keeping our eye on its future growth driver.
Well geographies.
Geographies contributing.
Element.
To that particularly sort of North America. So there's a there's a good contribution.
From a loved one five as part of that good.
But actually.
We're seeing strong growth in mobility, which we've talked about on previous calls.
And also in <unk>.
<unk> Tec.
Space as well as retail CPG, but I think the mobility thing is the thing that is really driving the growth. This quarter, followed by health Tech social the three verticals that we've we've talked about previously and I think.
Certainly sort of level of thought has given us an acceleration in that space.
Yes.
Your next question comes from the line of my Yang Kinder with Needham.
Thank you Ah Congrats John and Mark.
Mark on a strong quarter I wanted to go back to John's comment around the 25% to 40% head count growth. So if we think about that as the benchmark in terms of head count and given the pricing leverage that maybe some more room for utilization can we then assume that the embedded organic growth is probably going to run.
Some are closer to what Mark you said you'll finish up.
22, more like a medium term outlook just curious if that is a sustainable level as you look at the demand climate today.
Yes, so they they exit right.
On the previous question talking about which is clean.
Organic figure it will certainly be in the in the Twenty's and that's certainly been the sort of low to mid twenties.
I really see that.
Changing we think the demand is strong.
At this stage in the sort of cycle.
Because we've got a major sort of pay round to go through.
And then that influences the conversations we have with clients so to a certain extent.
We're being a little bit cautious in that growth outlook.
For next year.
But I've been cautious in the sort of niche my confidence in our ability to pass on those.
The competition for talent in the packages that requires to secure people and keep attrition where it should be a sensible levels I am confident in our ability to recover that through.
Price increases.
But certainly it's it's true that the 25% to 30% as our head count growth range.
Historically, we've also achieved price increases and so on.
So the revenue growth is.
Trended above our head count growth in the past, we don't see any reason why we wouldn't be able to achieve that going forward.
That's very helpful. And then I wanted to ask just about the verticals.
Verticals and service lines.
You're doing really well across your portfolio today any areas that you want to be in that you would call out as maybe target areas, whether it's organic buildout or through M&A that you would look to maybe <unk>.
Spanning two both from a vertical standpoint and from a service line perspective.
So at the moment, we're focusing on.
Areas.
We've highlighted to you guys in the past.
E.
The insurance payments.
The banking and capital markets. The Fintech areas, if you like a nice financial services.
Arenas.
TMT space Swishes coming through strongly.
And then within the other we've stopped with health CPG and retail.
In the mobility space.
A little bit of activity.
Coming through.
Yeah.
In.
What we call private equity.
It's a cross industry area, but it's driven by the relationships, we have with private equity firms.
Now that is turning out one or two other areas.
Looking at interest.
Maybe in a year or two.
Through M&A or otherwise through some of these client relationships that are coming through our private equity.
Tess, we might see ourselves moving into that so.
Energy is one of those.
We've got operating at a small level of environment.
Does it also interestingly.
Mining activity.
Digital is even hitting a business like that now.
That's a very helpful color. Thanks again.
Okay.
Your next question comes from the line of Moshe Camp Street with Wedbush Securities.
Hey, Thanks, let me add my.
Congrats on a very strong results I have two here two questions first.
It's kind of exciting to see the growth.
The U S.
Obviously this is a relatively new market for endeavour.
Any specific differences based on what you've seen so far in terms of.
Your ongoing interactions with the <unk>.
U S baselines or enterprise customers that you're seeing are you planning to run this a bit differently versus what you've done in the past.
And then are.
Are there specific verticals that you think will be a.
Probably the leading in terms of growth down the road for established here. That's my first question.
So yes. The U S has been very strong I mean, we've always run the business with.
Mindset that says you need local people in each market.
So we're going to make things happen.
And that is as true in and all client markets.
U S Europe and so on.
It's also true in the way in which we run our delivery operations with.
<unk> in Romania, Argentineans, and Argentina, and so on running things.
So that's that's pretty fundamental.
To having a team who understand what's happening in the local market and respond.
In the U S. We are seeing a lot more strength in the non financial services space.
And you know that that is that's very good news for us it helps with our diversification.
Our strategy not just geographically, but pushing into other sectors. So we're seeing strength in.
Ability space, we're seeing.
Mom coming very strongly in.
In retail.
<unk> is one of the big strengths that we see in the U S Big West Coast clients, who are using our services to build out.
Critical products.
Yes.
Such as the web conferencing or work from home type platforms that we're all familiar with we work on some of the big names that.
And that is different to what we see in say Europe around technology.
Health is also a space where the U S market is much more innovative.
And thoughts moving then than we see in Europe.
So we've been able to tap into that so it's early days for us.
Environment, because we haven't had that history of a lot of activity in house coming out of Europe.
But we're getting real traction here in the U S and saying not move forward.
Alright, Great and then just a follow up given the extensive knowledge and work that you've done in fintech and payments in dealing with.
With some of the players, including the neo banks any thoughts on kind of.
Building your own platform and try to kind of leverage that in terms of infrastructure.
Kind of being able to market that to some of your fintech kind of customers.
Yeah. Thanks for that question.
It's one of the areas, where you've been clear that we're not going to go down the road with building a product.
There are a number of reasons for that.
One of the key ones being you end up to some extent competing.
With your own clients, because you can harvest knowhow that you built in an industry by working with them.
And so we've adopted the view that we weren't built product.
And we want to therefore cause any sensitivities with the client base that we work with.
The one thing that we do do is we build what we call accelerators, which are components that are fairly standard.
Frequently used across the different spaces in which we operate.
And that can help accelerate the projects that we're working on with clients.
And Clos are very very positive about those accelerators, where we deliver them.
Understood. Thanks for the color.
Thanks, so much.
Once again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Your next question comes from the line of Bryan Keane with Deutsche Bank.
Hi, guys. Thanks for taking my questions.
I wanted to ask about open banking the demand there is there material ramping of payment volume there yet or is it still in the development phase.
Well, that's pretty big question.
Open banking is well beyond the development phase.
And is a huge facilitator for alternative payment types.
It's stronger in Europe at the moment, but we're starting to see.
It opened up in the U S as well.
And it's driving a lot of a lot of activity. That's there's a lot of hugely value added services that can be.
Bill on the open banking platforms.
And.
We're definitely seeing that moving very strongly and in systems. The all in you sit in the market with with millions of customers on them.
Got it and in the payment volume inside there, especially in account to account has been ramping pretty significantly.
Yes, it's very much site.
Got it and then the only other question I wanted to ask on was it was M&A just further appetite.
What youre looking at potentially in valuations willing to pay.
Yes, so our M&A is one of the areas.
We keep a close eye on it we're seeing many opportunities.
High single digits per week of opportunities get run across our desks.
But few of them have the right DNA.
<unk> being similar enough term dull, but for us to integrate the ideation to production hedge all approach to doing.
Business utilizing next Gen technology, we're always looking for that.
So we remain very choosy on where we engage.
And the strategy remains the same wishes.
To use M&A to help this whole diversification strategy.
As in bringing geographic balancing and pushes into geographic areas that we're looking to expand faster.
Sector acceleration so some of those those long wave change opportunities that we see in different industries.
Where.
An M&A opportunity is going to bring an acceleration in the right spaces for that will look very closely at it.
Occasionally there is an organization that brings in technology that we've not been able to development sure ourselves, it's actually very rare.
Often some deals will bring elements of all three.
So we are continuing to look very hard and have conversations nothing that I can report on at the moment, but if anything material happens of course, we will report to market.
How 'bout valuations jaw I've been changed much given the market. So I would say valuations have moved up a little bit over the last 12 months in particular.
Is that a little bit of extra competition.
I think the market is beginning to understand.
Adult business model.
And organizations operate that way are becoming more attractive.
The general ones in the market.
So that's pushed.
<unk> maybe around 20%.
Over the last 12 months.
And that makes it even more important for us to choose wisely, which businesses, we're going to buy and integrate.
Okay. Thank you and congrats on all the success.
Thanks, Brian.
At this time there are no further questions I would like to turn the call back over to Mr. John <unk> for closing remarks.
Well. Thank you all for joining US today as you will have noted from the coal demand for our services remains very strong.
We're seeing good demand across all verticals and geographies and so we remain very positive about our business position.
And I look forward to speaking to you early next year on our next earnings call. Thank you all.
This concludes today's conference you may now disconnect.
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