Endava plc Price & Performance (DAVA)

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 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 today's date, and we undertake no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law. For more information, please refer to the Risk Factors section of our annual report filed with the Securities and Exchange Commission on 09/19/2024. Also during the call, we'll present both IFRS and non IFRS financial measures. While we believe the non IFRS financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial presented in accordance with IFRS. Reconciliations of such non IFRS measures to the most directly comparable IFRS measures are included in today's earnings press release as well as in the investor presentation, both of which you can find our Investor Relations site or on the SEC website.

A link to the replay of this call will also be available on our website With that, I'll turn the call over to John.

Thank you, Laurence.

And welcome, everyone. Thank you for joining us our second quarter fiscal year twenty twenty five earnings call. We continue to see a fast changing demand environment with a strong shift from traditional digital transformation services to an AI led model. What we call the digital shift. In a recent company sponsored survey of three fifty tech and business leaders, 98% of senior leaders believe the digital shift has impacted their core business model in the last two years. Almost a quarter goes so far as to say that their organization's mission or purpose has also changed as a direct result [indiscernible] At our Investor Day back in November, we highlighted how Indaba is leveraging AI enabled capabilities like Morpheus and Compass, to accelerate client transformations. Interest in these solutions continues to grow and are contributing to our solid pipeline of signed and potential opportunities. That said, these are large scale projects that require greater business case validation and more detailed prototyping. Leading to less predictable decision making timing and an elongated ideation to production cycle. On the technology front, Endava adoption is becoming a key priority for clients. Coupled with deep industry expertise, we believe that we are in a strong position to cut through the hype that our clients are exposed to.

Regarding AI. To work with them to deliver real business value. We believe the customization of Gen AI for enterprise level delivery should create increased demand for Indaba Endava. And the broader IT services industry. As adoption gathers pace. Implementation of Endava solutions requires a fundamental rearchitecture deeper cloud integration, core modernization for full data access, regulatory compliance, security, resilience, and cost effective scaling of AI processing demand. Becoming truly AI native does not happen overnight for our clients. It requires thoughtful planning, a clear understanding of ROI, Endava willingness to challenge longstanding ways of working. We're proud to guide clients as they transform into AI driven enterprises. Additionally, today, we announced our first share buyback program totaling $100,000,000 as we reinforce our commitment to optimizing our capital allocation And now, I'd like to provide you with an update on our recent successes in securing larger and longer term deals. On our last earnings call, we explained our focus on these opportunities as a foundation for future growth. This approach has allowed us to refine our strategy. Concentrating on the relationships that drive meaningful revenue growth as well as deal size, core proposition and deal structure. [indiscernible] The three months since our last earnings call have been marked with exciting wins with new customers.

As well as extended partnerships with some of our longstanding clients. I'll now share some examples. We're helping a leading global fintech and payments provider refresh their technology stack, [indiscernible] by tackling technical debt and assisting with their data center migration and consolidation using our Ray and Infra accelerators we are also providing an independent third party view of offer to their clients. We also secured a core modernization project with a leading financial institution in North America. To create a comprehensive inventory of applications. Focusing on key outputs such as modernization parts, a risk model a prioritization model and a costing model. The second phase will build on these outcomes, delivering deeper app application level insights and finalizing the frameworks established in Phase one. Using our MAPS and DASH accelerators, we expect to develop a detailed modernization mode map for the organization's core app. Helping them drive transformation with clarity and confidence. These two clients are in our banking and We're seeing strong growth in this sector which is up 43.6% over the past twelve months. And these two engagements are illustrative of the scale of spend we can unlock as we apply our accelerators this space. Moving on to other industries.

One of our longest standing customers and a global player in the talent acquisition industry, Alexander Mann Solutions signed their longest commitment with us a five year extension as their key technology partner. This is particularly exciting for us. As whilst we continue to maintain and optimize their critical platforms and services, we are also exploring new ways to expand our partnership. Driven by our strength in technology innovation and core modernization. We also extended a multiyear partnership with a major European commodities trader becoming their prime technology partner. Together, we are focusing on providing advanced technology and data engineering solutions solutions to meet the demands of the fast changing global commodities trading markets. Including areas like market Endava, collateral management, trade finance and pricing. We're also working on several projects for a global healthcare company. Covering various facets of their operations. This includes providing professional services to build out an innovation hub in India And we're also working on modernizing their mobile app We continue to win new clients and were selected as the technology partner for a London based market insurer. In a three year deal to help with the transformation of their technology operating model and their technology estate.

Have just signed Austin Energy, one of several U. S. Energy providers we are working with to address a common need to modernize similar legacy technology platforms. We're aiming to secure additional U. S. Energy providers as clients for this service. As I mentioned earlier, Gen AI continues to be a major driver of Technolog are seeing ongoing evolution in the space. From more powerful models and breakthroughs in model training, from both a cost and a technology perspective, to deeper integration into the software delivery lifecycle advancement in Agentic AI, Endava the increase of available open source models. All of this leads to more choice and op At Indava, we believe AI is the single most defining technological advance of our lifetimes. [indiscernible] has the potential to change every aspect of our professional and personal lives unfold Through cutting edge innovation, we are guiding our clients on their transformation journeys, helping them implement scale and optimize AI to achieve real business value. Let me take you through some examples. In our ongoing partnership with a major global pharmaceutical critical clinical code processes. [indiscernible] where consistent and reliable results are absolutely essential. In an industry where decisions are heavily scrutinized, and the AI landscape presents challenges around consistency.

The client needed a solution they could fully trust. Address this, we developed an innovative consensus mechanism within our agent framework. A software protocol designed to validate data by cross verifying outputs. This approach significantly enhances reliability. We Through multi shot training, a method that reuses stored data instead of starting from scratch each time, The system is designed to reinforce correct behaviors. By capturing the best answers and using them as references for future interactions. Working closely with the client, we are fine tuning this system incrementally aiming to uncover previously hidden complexities. This process not only improves the solution itself, but also provides the client with a deeper understanding of their workflows. Enhancing transparency and control. What is particularly exciting is that this solution has potential to go beyond the immediate challenge we're solving It offers a versatile approach that can be applied across a wide range of industries. And we're eager to explore how it will create value for others. In another example, we partnered with a multinational insurance provider owned by a private equity fund to help modernize and streamline their operations using AI driven solutions. Their new leadership team wanted to understand how AI could trans AI could transform their business So together, we identified two high impact AI projects.

And a payment processing flow transformation as key focus areas. Working with the client, we first introduced Chat GPT Enterprise, a began training their teams to rethink daily workflows using AI. By focusing first on foundational understanding and personal productivity gains, we aim to build a strong base for broader organizational transformation. Starting at the individual level allows us to lay the groundwork for reimagining larger processes further down the road. Another recent project was with a leading golf equipment company. They wanted to expand their B2B golfer training business into the B2C space. With a direct to consumer mobile application. [indiscernible] However, existing solutions for golf or swing analysis did not meet quality and precision standards that they are known for. That's where we came in. Together, we developed a tailored AI solution that that brings their renowned training programs straight to consumers. By doing so, the company opened up a new revenue stream whilst allowing customers to benefit from professional grade training programs that were previously too expensive to be accessible. We've also been working with an automotive technology provider which facing resourcing and time constraints struggled to meet deadlines for developing in cabin facial identification [indiscernible] And scaling its internal synthetic data capabilities.

Help the team overcome these challenges, they partnered with Endava as their technology augmentation partner. We stepped in with cutting edge solutions conducting R and D and developing a prototype facial recognition solution that pushed technological boundaries. To support their synthetic data needs we used advanced three d graphics tools to create tailored assets and provided technical consultation to opt This scaled development of pipeline optimization at achieved up to a 50% increase in speed. Enabling the client to meet project timelines whilst also unlocking greater innovation potential. Following positive feedback, we're now exploring additional opportunities to enhance their workflows and drive long term success. Also within Indava, the integration of GALEX is continuing. And we are focused on both commercial alignment and a goal of achieving operational excellence. Client satisfaction is core to our service delivery. We completed our latest client satisfaction survey in November 2024. And I'm happy to report that 92% of our participating clients stated that they would be likely to recommend Endava as compared to 91% in April 2024. 90% stated that they would likely repurchase from us compared to 88% in April 2024. And now moving on to our people. We ended the quarter with 11,668 in Davens on board.

Which represents a 1.1% increase from the same period last year. Looking forward and based on the current environment, we continue to prioritize recruitment in high demand areas. Such as around the domains of data, AI and cloud. In closing, I would like to take this opportunity to thank all Indog for their commitment and determination as we are navigating the or shift. And discovering the new opportunities that it brings. We will continue to manage the business for the long term. Maintaining our culture and organizational health and creating exciting technological solutions that empower our clients to thrive. Now, I'll hand over to Mark, who will walk you through our quarterly financial results and offer guidance for the upcoming quarter and remainder of fiscal year. Thanks, John. Endava's revenue totaled £195,600,000 for the three months ended 12/31/2024, compared to £183,600,000 in the same period in the prior year. Representing a 6.6% increase. Constant currency, our revenue increased 9.1% from the same period in the prior year. Profit before tax for the three months ended 12/31/2024, was £2,500,000 compared to £10,600,000 in the same period in the prior year. Adjusted PBT for the three months ended 12/31/2024 was £21,800,000 compared to £22,700,000 for the same period in the prior year.

Our adjusted PBT margin was 11.2% for the three months ended 12/31/2024, compared to 12.4% for the same period in the prior year. Our adjusted PBT continues to improve when compared to the 9.9% we reported in Q1 fiscal twenty twenty five due mainly to cost control and we expect a continued margin recovery as we continue to integrate Galaxy. And benefit from the optimization effort we took in Q2. Fiscal twenty twenty five, which I'll comment on shortly. Our adjusted diluted earnings per share was $0.3 for the three months ended 12/31/2024, calculated on $59,600,000 to share as compared to 30p for the same period in the prior year. Calculated on $58,600,000 delivered to shares. Our adjusted diluted earnings per share in Q2 was stronger than our previous guide of '24 to 25p. Due to improved cost management, largely in indirect costs. We continue our business optimization efforts which have resulted in an exceptional charge in the quarter of £5,500,000 due to headcount reduction. Most of the exits occurred at the end of the quarter and thus this latest round of business optimization has limited impact on profitability in Q2 but should largely benefit in future quarters. Additionally, the adjusted tax rate in the quarter was 18.2%, down from 21.5% in Q1 FY 'twenty five.

UK and Romania agreed on a new tax treaty in November which will exempt NDA from Romania dividend withholding tax. Once it is fully ratified by both countries. This charge added $0.01 to adjusted EPS in the quarter. The impact against the statutory EPS figure is approximately 6p. A result of this tax change, we now expect our adjusted tax rate to be around 18.5%, for the remainder of fiscal year twenty twenty five. Revenue from our 10 largest clients accounted for 36% of revenue for the three months ended December 3120 compared to 34% for the same period last fiscal year. The average spend per client from our 10 largest clients increased from £6,300,000 to £7,100,000 for the three months ended 12/31/2024. As compared to the three months ended 12/31/2023. Representing a 13% year over year increase. In the three months ended 12/31/2024, North America accounted for 39% of revenue, Europe for 24%, The UK for 32%, while the rest of the world accounted for 5%. Revenue from North America grew thirty two point seven percent three months ended 12/31/2024, over the same period last fiscal year. Comparing the same periods, revenue from Europe declined 0.6% The UK grew 1.3%, and the rest of the world declined 43.5%.

North America was again while the decrease in Europe is mainly due to a slowdown of client in TMT. And an FX headwind. The decline in the rest of world is due to several clients. And various verticals pulling back on projects. Revenue in the payments vertical remains challenged as some of our larger clients continue to reduce spend. Saw a strong pickup banking and capital markets driven by some larger projects and expect this vertical to continue growing the remainder of the fiscal year. Insurance remains another source of strength for us and we would expect this vertical to continue to grow the remainder of the fiscal year.

In TMT, one of our larger clients Emmedia was acquired in Q1 fiscal twenty twenty five.

And the buyer shut down our project which explains in part the continued weakness in that vertical. The decline in mobility revenue is primarily explained by the planned ramp down for one large U. S. Client project in the last twelve months. Healthcare revenue growth is primarily explained by the Galaxy acquisition.

Our adjusted free cash flow was £31,600,000 for the three months ended 12/31/2024 compared to £34,000,000 during the same period last fiscal year. Our cash and cash equivalents at the end of the period totaled £60,100,000 12/31/2024 compared to £62,400,000 at 06/30/2024. Our borrowings totaled £123,700,000 at 12/31/2024, compared to £144,800,000 at 06/30/2024. [indiscernible] Capital expenditure for the three months ended 12/31/2024 as a percentage of revenue, was 0.2% compared to 0.8% in the same period last fiscal year. Additionally, as John mentioned earlier, the Board of Directors of Endava approved $100,000,000 share repurchase As part of Endava's evolving approach to capital allocation, The execution of the share repurchase program is subject to shareholder approval. Which we intend to seek at a general meeting to be held on or around 03/14/2025.

Before providing the guide, I would like to provide some additional details.

Since the end of the quarter, we have seen increased softness in The UK and rest of world regions. Due to a worsening macroeconomic environment. Leading to increased client caution regarding spend. Which in turn resulted in unplanned ramp downs on existing projects and delays in our pipeline. Consequently, we are pulling back the revenue and growth outlook. And moving on to the outlook. Our guidance for Q3 fiscal year twenty twenty five is as follows. Endava expects revenue to be in the range of £198,000,000 to £200,000,000 We representing constant currency revenue growth of between 1314% on a year over year basis. Endava expects adjusted diluted EPS to be in the range of 31 to 32p per share. Our guidance for the full year fiscal year 2025 is as follows: Adara expects revenue to be in the range of $795,000,000 to £800,000,000 representing constant currency revenue increase between 8.59% on a year over year basis. Endava expects adjusted diluted EPS be in the range of 120 to 123p per share. This above guidance for Q3 fiscal twenty twenty five and for full year fiscal twenty twenty five assumes the exchange rates on 01/31/2025. And the exchange rate was 1 British pound to US1.24 dollars and US1.20 euros This concludes our prepared comments.

Operator, are now ready to open the line for Q and A. We will now begin the question and answer session.

If you're using a speakerphone, Our first question today comes from Brian Bergin of TD Cohen.

Please go ahead.

Hi, thanks. This is Zach Aizemann on for Brian. First question we had is on the outlook. We were hoping that you can maybe go deeper into the underlying assumption [indiscernible] the 3Q guide.

And the implied acceleration in 4Q sequentially Just hoping for any more color that you can share on the large deal conversion and kind of what's contemplated there It sounds like there was a macro downtick in some geos. Earlier this calendar year, but just kind of curious what the assumptions are underpinning the March and June guide? Thanks, Zach.

Quite a lot to cover there. I think Mark is going to kick off with the underlying assumptions around Q3. I'll pick up some of the things driving the acceleration through into Q4. Which is around large deals that overlooks. [indiscernible] So Zach, on the Q3 outlook, as we sort of said in the reduction, there's some macro effects here. I mean, basically, North America remains strong for us. Europe stable with some puts and takes in there, but The UK definitely signs towards the negative side and that's what's really forced a reduction mainly around sort of financials. And similarly sort of rest of world again a negative sort of sense If you look at it by industry verticals, banking and capital markets, is strong. So good growth there. On the quarter, but actually it's one of our stronger areas as is insurance. Payments, stable again, but there is pressure there and put some text by geography. On the negative side though, you do have TMT weakening and mobility. And in terms of the pipeline outlook, that has also had an effect in terms of the judge I think John can comment on some of the bigger deal pipeline, which is encouraging.

It is going to be timing in that instance. So John, over to you. Yes, sure. So one of the things that's happening under the surface is what we've been talking about for a few quarters. Which is these larger deals often core modernization related where there's a longer sales cycle the sales cycle being the clients need to actually understand what is now possible with the new technologies that we bring to bear AI enabled a lot of it.

Enable a cost effective assure delivery and speedy core modernization program that they've struggled with in the past. Once they get their heads around the art of the possible, then need to and want to prove out the approach often via trial or a proof they want to raise budgets and get their business cases together. Sign deals, and then there's a slower scaling as we put to the program together because these are large programs. And then as you get through that, you start to see the revenues ramping through. So We get Earlier visibility on all of that happening than is is visible in terms of booking revenue coming through. An example of that is we've been working on core modernization with a large and that started around two years ago. This time last year, they were spending $1,500,000 a quarter with us. It's now four times that and continues to grow. And so so looking forward, we see the opportunity for that to grow. And we're seeing many other clients progressing down that road, and as at various stages, And as they progress down that road, that informs the forecast. That we have going forward. Now some of that's coming in, in Q3, but mitigated by those macro effects that Mark was just taking you through.

That's very helpful. And the follow-up is on the large account activity. Can you provide more insight into top client behavior and expectations moving forward? Just kind of looking for any incremental color on the top healthcare client, which actually looked Pretty strong sequentially. And then some of the volatility called out on the larger payment customer side, We're just hoping to dig in a little bit further as to what some of those conversations and interactions have been more recently.

Yes. So where we're seeing strength is in the AI driven core modernization driven space. So you see that with the healthcare client, that was a a Galaxy client where they've been doing call for years now. And that work continues to flow through with that client and is giving growth there, which you've picked up in the numbers. As you look at payments and the the BCM space, they're contrasting stories. The payment side, which to be clear is focused on the payments processes as clients. Continues to decline a little. It's much more stable than it was. If you look back a year ago when it was declining quite fast. But there's still a slow decline in that space. That is contrasted by very strong growth in the banking and capital market space. Now the reason I highlight the two next to each other is some of that is payments work. That we are doing in the banking and capital markets space where where banks are investing in their payments infrastructure.

But that isn't visible as payments work because it's it's part of a banking organization on being a payments processor. So we continue to see demand for our payments capabilities. But it's more appearing alongside many other things in the Banking and Capital Markets segment. Endava lot of that is core modernization related. I just gave the example a moment ago of one large bank in North America. [indiscernible] they're ramping up with us in terms of the spend. And we're seeing huge interest in the in the banking space around that capability. And expect that to be a leading sector for us in adopting our capabilities in core modernization.

Appreciate that color.

The next question comes from Tyler DuPont of Bank of America. Please go ahead.

Hi, good morning. Thanks for taking our questions.

I just want to also start with a demand related question. It sounds like of your clients are continuing to either delay or ramp down projects. Can you maybe just discuss the visibility you have into calendar 2025 budgets given we're I guess sort of near the February and budgets since we set around this time guess both on an absolute basis and versus this time last year?

Yes. So I mean, we're still seeing budgets get settled down. I think part of the reason for that is what I was picking up on earlier around our core modernization approach.

Which is where we're seeing a lot of demand that AI driven approach to core monetization. Is pretty new in the market. It's a pretty unusual and unique proposition that we have And so clients not knowing that that is available and having confidence in it until they've done the proof and concepts and so on, are not sitting on budget going, we're expecting to do this piece of work. Opportunity to do the work opens up as they understand the art of the possible. And so so with some clients, we're seeing them shake that into their budgets. With other clients, we're still seeing them shuffle budgets around. And look for budget in order to get these programs underway. So that may be specific to where we are with our capabilities and the conversations we're having with clients. Which as we all know is more around the discretionary spend space. Of what's really going to drive change in client organizations.

Okay. That's helpful. And then just as a follow-up, I want to ask about any potential pricing conversations you're having as we're still given the continued malaise in spending, particularly on the discretionary side, Are you having to engage in more meaningful pricing conversations to sort of compensate for that pullback, if you will? And if so, sort of where are those more pronounced versus others? Just any clarity there?

I mean, we're actually seeing a slow improvement in pricing. I mean, this is measured on a sort of average revenue per workday. Indeed on a revenue per head basis. I think most of it is us actually recovering inflationary driven sort of rises. But we're also, I think, seeing some benefits from the productivity where achieving on some of our outcome based deals.

I think the core modernization, I think as we land those bigger deals, they'll be multiyear. And will be around us expecting sort of So they will play very much to productivity sort of play. And our use of our accelerators that we've called out Ray and Dash as well as the AI, Morpheus and Compass.

Understood. Thank you very much. Thanks, Tyler. Our next question comes from Jonathan Lee of Guggenheim Partners.

Please go ahead. Great. Thanks for taking our questions. You think about some of the recent ramp downs and softness driving the revised outlook, were those more broad based across your client base? Or are you expecting any incremental challenges some of your large customers?

They have been relatively broad based. I mean, they've been more noticeable for the geographies that we sort of called out in The UK and rest of world. I guess given Rx exposure to financial services is where we've seen most of it, But it's not we can't point to one sort of client or a very specific instance what has caused it. Is and it's general sort of softness which we think is certainly let's call it macro trip and certainly The UK I can certainly vouch for that at the moment. And we are hearing also about softness Asia Pacific, more particularly sort of Australia. So we have seen some of these unknown ramped as obviously getting the notice, but they we haven't seen them coming. And the reasons are typically sort of budget pressures or uncertainty, which I think is macro driven.

Understood. And again, in the context of ramp downs, I mean, how should we think about the pace of hiring going forward for the remainder of the year, given the sequential ramp that you're seeing in fiscal 4Q?

So I think with Q3 coming up, we'll see sort of headcount step down on an average basis when we report the number in May.

But actually, given the sequential increase that we're seeing, it's implied by the back end Q4, I think it's growth between organically about 46% year on year.

Will start to recruit to make that [indiscernible] So you will see headcount start to build mainly towards I don't think towards the March. But certainly we will build headcount as we go through the fourth quarter to June. I'll just add to that. There's a bit of rotation. I skills that are going on as we go through this digital shift. And that's a little bit of a rotation towards higher value. So I'd expect headcount to be growing slower than the revenues we look for? Yes, absolutely.

Got it. Thanks for the detailed commentary there. Thanks, Jonathan. The next question comes from James Faucette of Morgan Stanley. Please go ahead. Hey guys, thanks for the question. It's Antonio on for James Faucette.

I wanted to ask more on the Galaxy acquisition.

How far along are you in that like in that process as far as like integration what is baked into that increase in moment like profitability that you're I'm expecting in the back half of the year. So we're well progressed. Starting from a systems perspective, we aim to cut over the end of this month. And derive our financials, all our operating systems financials systems will be locked. We are currently working in a [indiscernible] manner on propositions with the core modernization proposal that we have out in the marketplace.

We are as we're getting closer to integration, I think there will be further opportunities for COP cost optimization. We are focused more on G and A in the initial sort of stages. But as the two organizations come more closely together, I expect more to come from it. So slowly, we are improving the profitability at Galaxy as we bring the two organizations together.

And I think there will be more further actual opportunity for that actually into FY 'twenty six for us. As we get closer and closer aligned and build on the core modernization prop together.

Got it. That's helpful. And then as a follow-up, I just wanted to ask on your bench dynamic and the rate of like utilization and that's trending both onshore and offshore?

Thank you. Bench is stable. It's It's low by historic standards for us. I think we're operating at around a I think, 6%, 7%. I think we will operate at that level. So subject to this sort of integration further with Galaxy. We expect utilization to move up modestly. From where we are at the moment. It's reasonably high us by historic standards. But actually, I think we're getting more effective and efficient. And I think it's through adopting some of the tools that we've outlined We're not making any significant step change because of the use of AI, which we are rolling out across the company. We see sort of modest improvements from utilization towards the end of this fiscal.

Got it. Thank you for the color guys. The next question comes from Maggie Nolan from William Blair.

Please go ahead.

Hi, everyone. It's Kate Kromstein on from RISE. Thanks for My first question is, guys mentioned the continued focus on hiring for AI and data skills in you also talked about the digital skill shift going on in the market. Can you talk a little bit more about what you're seeing in the high rate market right now and and how you feel your access to this talent has evolved over the past [indiscernible] Thanks, Kate.

Yes, so we've got a big program going on around what we call being AI native. And we would define that as being everyone using generative AI in their daily work, and I emphasize the word [indiscernible] So that you're seeing people use it just as part of how they operate. Now a lot of what we're doing in that space is transitioning in Dartford, into the AI space as opposed to just recruiting new talent in the market. The everyone has gone back to the start line. From an AI point of view. Just over two years ago. So actually the best way of us moving forward is actually to equip our people retrying that. If you look at the GP GPT licenses that we have out there, because we have an enterprise license, across the organization. We're seeing 80% of those being utilized on a daily basis now. And across all in Darvins, we're at about 60% mark where people are using it in their daily work. The reason for the difference being is some of our people are on client environment and the clients haven't made Endava available to them yet. Although we are seeing progression in that direction.

So the big push is on developing our own people through Training through the Endava University and so on, And we're seeing rapid progress there. We are bringing people in. Particularly around the data science [indiscernible] but also where we find a few people who've gone further down the road in the use of AI, for instance, in the AgenTek AI space. So on We snap those people up as well where possible. We're just moving as fast as we possibly can. Into making AI completely ubiquitous across the organization.

Great.

That's super helpful. Thank you. And then can you guys hit a little bit on the $5,000,000 restructuring charge that you took during the quarter and actions that you're taking to [indiscernible] overall efficiencies in the business. [indiscernible] we took out around below 200 people Just before Christmas, split between direct and indirect. Quite a bit of this is actually anticipating the integration with Galaxy, as I said earlier, [indiscernible] at the end of February.

So it was very much focused on removing any sort of duplication and trying to simplify ahead of further integration that will happen from that that point forward. Think I think there will be further opportunities take out costs, whether it will be at this level. It's hard to say until we are fully on the systems and fully understand the delivery models on both sides. But I think we will continue to be vigilant on cost basically given we still have this uncertainty from a macro perspective.

Thank you.

Our next question comes from Jamie Friedman of Susquehanna. Please go ahead.

Hi, good morning, good afternoon. I was just wondering if you could talk about what your thinking or contemplating in terms of revenue realization, meaning like the revenue per head count because some of the companies are now seeing revenue grow faster than head count. Utilized headcount So revenue is growing faster than utilized headcount, right? So it's apples to apples. So any comment on the revenue per headcount at this stage? Thanks, Jamie. I think it will improve basically as we were saying because we're seeing pricing moderately improve. So if you think about that in terms of the workdays that we're delivering, I mean, we're still predominantly time and material.

Although we will increasingly sort of ship with our larger contracts to potentially more outcome based. But for the near term, we're time immaterial. So there is a heavy linkage with the workdays delivered. We are seeing some pricing improvement So if we've a modest improvement in utilization, which again is what we're seeing through the adoption of the tools that we have internally. We will see that revenue per head move up. It is modest, but it is moving up. So I guess with us, I think if you were trying to sort of do a headcount revenue growth what's the right linkage you'll see us run a little bit hot, I think, towards Q3, Q4.

I think going forward, if that's linkage with headcount and Endava revenue holds true, which I think will change as as the big deals sort of come in. You would then start to see us recruit at the same rate Okay. Thank you. And then in terms of the concerns, Mark, that you're mentioning with regard to the macro in The UK, Could you just elaborate on that? When did that starters that more the same? And is it to what extent is it contemplated to weigh on [indiscernible] It does weigh. We basically saw it through January, February, I guess it's not followed The UK.

Economy that closely. In The U. S. [indiscernible] the inflation is difficult. Growth is difficult. There is some uncertainty in terms of the outlook. And we've definitely seen that being a factor in clients being more cautious. So they are delaying the speed at which things progress, but also they are in some cases ramping down existing work Endava similar position in rest of world. So it's something that is materialized as we've crossed over from the December into January, February. Thanks, Jamie.

This concludes our question and answer session. I would like to turn the conference back over to Mr. John Cottrell for any closing remarks.

Thank you, and thank you all for joining us today. As I mentioned, in my prepared remarks, we're continuing to see excitement in the market about AI enabled capabilities such as Morpheus and Compass on the core modernization side, and progress on closing deals and initiating those ramps into production. But I just want to reemphasize these are large projects with longer sales cycles and slower paths to scale. And so whilst we're seeing that coming through, it will take a while to reach revenue. The adoption of Gen AI is becoming more top of mind for clients. And with our hands on experience with this technology, We think we're in a strong position delivering tangible benefits from the technology which is backed up by our deep industry experience. I look forward to speaking with you all at our next earnings call in May.

Thank you.

The conference is now concluded.

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