Recent IPO Endava (DAVA 28.40, -0.80, -2.74%) has quietly made a strong debut
since it entered the public markets in late July. Endava is a UK-based
next-generation technology services provider. It helps clients undertake
digital transformations. From proof of concept, to prototype, to production,
Endava uses its engineering expertise to deliver enterprise platforms capable
of handling millions of transactions per day.
At the core of Endava's approach is its proprietary Distributed Enterprise Agile scaling framework, known as The Endava Agile Scaling framework, or TEAS. Endava has a deep familiarity with many technologies, including mobile connectivity, social media, automation, big data analytics, and cloud delivery, as well as next-generation technologies such as IoT, artificial intelligence, machine learning, augmented reality, virtual reality, and blockchain.
Technological transformation poses numerous challenges for companies, especially those laden down with legacy infrastructure and applications that are deeply embedded in core systems. While companies have historically looked to traditional IT service providers to undertake technology development projects, these traditional players are more focused on legacy systems using offshore delivery. Endava's expertise spans the ideation-to-production spectrum across three broad areas: Digital Evolution, Agile Transformation, and Automation.
Endava, which is based in London, provides services from its nearshore delivery centers, located in two E.U. countries (Romania and Bulgaria), three other Central Europe countries (Macedonia, Moldova, and Serbia), and four countries in Latin America (Argentina, Colombia, Uruguay, and Venezuela). Endava has close-to-client offices in four Western European countries (Denmark, Germany, the Netherlands, and the U.K.) as well as in the U.S. Endava currently has 4,700 employees, approximately 53.7% of whom work in nearshore delivery centers in E.U. countries. Endava has 249 active clients.
Turning quickly to the financials, the company is profitable and growing nicely. It has a June 30 fiscal year end. Revenue for the nine months ended March 31, 2018 rose 34% year/year to US$219.1 mln. It has a decent, but not huge, operating margin of 12.2%, although they may report a higher non-GAAP margin number when they report for the first time as a public company.
The stock has made a nice move since coming public on July 27. The 6.34 mln share IPO priced at $20, above the expected $17-19 range. It then opened at $25.00 and quickly traded as high as $30.50 in mid-August. It has a lot of what investors like to see in an IPO: low float, tech space, growing nicely, profitable, etc.
Looking ahead, in terms of catalysts, the company's Q4 (Jun) earnings report is upcoming. However, no release date for that report has been finalized yet. Also, we would expect some bullish sell side initiations on the stock once the quiet period ends in the next couple of weeks. The deal had some notch underwriters, led by Morgan Stanley, Citigroup, Credit Suisse, Deutsche Bank; we would expect some initiation reports from them soon. On a final note, these tech IPOs can be pretty volatile, so investors should consider proceeding with caution. However, Endava has gotten off to a good start, and it seems to have some good attributes, so it's worth keeping on the radar.
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