Endava F3Q Recap: Credibility and Conversion Timing Headwinds Remain; Downgrading to UW

Research evidence excerpt

Endava F3Q Recap: Credibility and Conversion Timing Headwinds Remain; Downgrading to UW

6E (p) 82.57 46.67 -43.5%

visibility into what is likely to drive that inflection given ongoing pipeline Adj. EPS - 27E (p) 121.27 66.77 -44.9%

conversion timing challenges and another late-year guide reset. Near-term

Quarterly Forecasts (FYE Jun)

catalysts also appear limited, as we do not expect next-year guidance alone to

Adj. EPS (p)

change sentiment given recent execution volatility, and we believe 2025A 2026E 2027E

management will need time and consistent delivery across multiple quarters to Q1 25.40 14.89A 15.03

rebuild investor confidence. Finally, with the broader IT services demand Q2 29.97 16.25A 15.00

Q3 33.88 5.01A 16.20

backdrop still challenging, we see limited scope for meaningful multiple Q4 24.03 10.52 20.54

expansion until revenue momentum improves. FY 113.28 46.67 66.77

• F3Q summary. Revenue of £179M came in well below JPMe/Street at £184M Style Exposure

and guidance of £182-185M. We estimate revenue was down -2.6% on a

sequential FX-neutral organic basis (and down 7% on y/y basis). Adj pre-tax

margin of 1.8% was down 5% seq from F2Q and came in below JPMe/Street

at 5.9/6.3%, while adj EPS of £0.05 came in well below JPMe/Street

£0.16/0.20 and company guidance of £0.18-0.21, hurt by weak revenue and

margins. Management attributed the quarter’s revenue miss to opportunities

slipping beyond March and pointed to three drivers that also pressured the

revised 4Q26 outlook: clients located in the Middle East delaying work due to

the ongoing conflict, a slowdown in overall client demand tied to the macro

environment arising from the conflict, and large, complex outcome-based

contracts taking longer to execute than planned.

• FY26 Guidance Update Still Implies 4Q Ramp.