Endava Expects Adjustments of Up to 4% of 2025 Revenue in 2026 Restatement
Key Facts
Endava said it will restate financial results previously reported for fiscal 2026, estimating revenue adjustments at about 2% to 4% of fiscal 2025 revenue. The company said it does not expect any adjustments to 2025 results, although it is using that year's revenue as the basis for measuring the expected impact on 2026. It also said results for several financial periods should no longer be relied upon, moving the matter from an accounting investigation to an actual correction of published figures. The audit committee said the affected periods include the three months ended September 30, 2025, the two periods ended December 31, 2025, and then the two periods ended March 31, 2026. External audit procedures related to the investigation, the annual audit and the restatement are ongoing, the company said.
The investigation found that some agreements Endava entered into in fiscal 2026 with parties that were both customers and suppliers lacked economic substance or were negotiated and priced as a single arrangement. The company said this accounting treatment did not comply with relevant accounting standards, and that the parties involved represented about 1.5% of its customer base as of March 31, 2026. Management also identified separate errors in revenue recognition. Some transaction entries are being reversed, while other revenue will be restated to reflect the consideration due for services delivered. The restatement will also include non-cash balance-sheet adjustments, including accounts related to goodwill and intangible assets, reducing adjusted pretax profit.
Endava said the audit committee's review is nearing completion and that the committee has completed most of its review, but the external auditor's procedures are not yet complete. Management identified deficiencies in the internal control environment, including what the company described as senior management's tone, and expects to report one or more material weaknesses in internal control over financial reporting. The company is preparing a remediation plan covering changes to accounting and reporting procedures, hiring additional qualified finance staff, and strengthening governance and training. Details of the plan will be included in the annual report for the fiscal year ended June 30, 2026. In parallel, the company is assessing the impact of the restatement on its past compliance with revolving credit facility covenants and is in discussions with lenders, while it estimated cash and cash equivalents at about 55 million pounds sterling on September 30, 2026.
The developments were accompanied by changes in senior management: Mark Thurston resigned as chief financial officer and from the board effective October 25, 2026, while Rohit Boothalingam resigned as general counsel and company secretary effective October 26. Connor McShane of Alex Partners is serving as interim chief financial officer after being appointed and assigned the duties of principal financial and accounting officer effective September 21, 2026. Founder and Chief Executive John Cotterell informed the board of his decision to retire effective October 19, 2027. Rob Machin is due to be appointed interim chief executive and an executive director effective November 2, 2026. The leadership changes come as the company voided its previous fourth-quarter and fiscal 2026 guidance, saying it should no longer be relied upon.
Endava does not expect to file its annual report for fiscal 2026 by the November 2, 2026 deadline and intends to notify the U.S. Securities and Exchange Commission of the filing delay. In September 2025, the company had forecast annual revenue of between 750.0 million and 765.0 million pounds sterling, with constant-currency change ranging from a decline of 1.5% to growth of 0.5%, but that guidance is now among the forecasts the company withdrew. The delay follows an 8.4% decline in fiscal third-quarter 2026 revenue to 178.5 million pounds sterling and a drop in adjusted pretax profit to 3.2 million pounds, or 1.8% of revenue, from 24.6 million pounds and 12.6% a year earlier. The company attributed the pressure to uneven demand across sectors, extended deal cycles and customer scrutiny of technology spending, and recorded a non-cash goodwill impairment of 364.6 million pounds. The company's shares closed at 2.05 dollars on October 26 and 1.96 dollars on October 27, while Endava said it would announce the date for its results, conference call and fiscal 2027 first-quarter results timetable after filing the annual report.