Yahoo Finance

John Cotterell

Thank you, Laurence, and welcome everyone. Thank you for joining us for our second quarter fiscal year 2025 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 350 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 go so far as to say that their organization's mission or purpose has also changed as a direct result of the same.
At our Investor Day back in November, we highlighted how Endava 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, Gen AI adoption is becoming a key priority for clients. With our hands on experience, 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.
And 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 Endava and the broader IT services industry as adoption gathers pace.
Implementation of Gen AI solutions requires a fundamental re-architecture. 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, and a willingness to challenge long-standing 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 totalling $100 million, 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.
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 long-standing clients. I'll now share some examples. We're helping a leading global fintech and payments provider refresh their technology stack by tackling technical debt and assisting with their data center migration and consolidation.
Using [RA] and infra accelerators, we are also providing an independent third party view of risks, opportunities, and strengths of the applications and products they offer to their clients. We also secured a core modernization project with a leading financial institution in North America. In the first phase, we used our [RA] accelerator to create a comprehensive inventory of applications, focusing on key outputs such as modernization paths, a risk model, a prioritization model, and a costing model.
The second phase will build on these outcomes, delivering deeper application level insights and finalizing the frameworks established in Phase 1. Using our maps and dash accelerators, we expect to develop a detailed modernization mode map for the organization's core applications, helping them drive transformation with clarity and confidence.
These two clients are in our banking and capital markets industry vertical. We're seeing strong growth in this sector, which is up 43.6% over the past 12 months. And these two engagements are illustrative of the scale of spend we can unlock as we apply our accelerators to 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 strengths in technology innovation and core modernization. We also extended a multi-year partnership with a major European commodities trader, becoming their prime technology partner.
Together we are focusing on providing advanced technology and data engineering solutions to meet the demands of the fast changing global commodities trading markets, including areas like market data, 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 application for clients and providers to improve the customer experience.
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.
And in the US, we launched a campaign targeting an emerging energy industry need. We've just signed Austin Energy, one of several US energy providers we are working with to address a common need to modernize similar legacy technology platforms. We're aiming to secure additional US energy providers as clients for this service.
As I mentioned earlier, Gen AI continues to be a major driver of technological advancement. We're 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 life cycle, advancement in agentic AI, and the increase of available open source models. All of this leads to more choice and options to build exciting solutions for our clients.
But in Dava, we believe AI is the single most defining technological advance of our lifetimes. It has the potential to change every aspect of our professional and personal lives, and we are already seeing this impact unfold daily. Through cutting edge innovation, we are guiding our clients on their AI 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 business, we are working to transform one of their critical clinical code processes, 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. To 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.
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 the 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 the 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 can 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 transform their business, and 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 ChatGPT Enterprise and 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.
However, existing solutions for golfer swing analysis did not meet the quality and precision standards that they are known for. That's where we came in.
Together we developed a tailored AI solution 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, struggle to meet deadlines for developing in cabin facial identification technology and scaling its internal synthetic data capabilities.
To help the team overcome these challenges, they partnered with Indala as their technology augmentation partner. We stepped in with cutting edge solutions. Conducting R&D and developing a prototype facial recognition solution that pushed technological boundaries.
To support their synthetic data needs, we used advanced 3D graphics tools to create tailored assets and provided technical consultation to optimize and streamline their pipeline. This scaled development of pipeline optimization 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 Endeavor, the integration of galaxy 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 am 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. And 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 Endavans 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 Endavans for their commitment and determination as we are navigating the digital 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 the fiscal year.

Mark Thurston

Thanks John. Endava's revenue totaled GBP195.6 million for the three months ending December 31, 2024 compared to GBP183.6 million in the same period in the prior year, representing a 6.6% increase. In constant currency, our revenue increased 9.1% from the same period in the prior year.
Profit before tax for the three months ending December 31, 2024 was GBP2.5 million compared to GBP10.6 million in the same period in the prior year. Adjusted PBT for the three months ended December 31, 2024 GBP21.8 million compared to GBP22.7 million for the same period in the prior year. Our adjusted PBT margin was 11.2% for the three months ending December 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 2025, 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 '25, which I'll comment on shortly.
Our adjusted diluted earnings per share was 30p for the three months ended December 31, 2024, calculated on GBP59.6 million diluted shares as compared to 30p for the same period in the prior year calculated on GBP58.6 million diluted shares.
Our adjusted diluted earnings per share in Q2 was stronger than our previous guide of 24p 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 GBP5.5 million 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, which should largely benefit future quarters.
Additionally, the adjusted tax rate in the quarter was 18.2%, down from 21.5% in Q1 FY25. UK and Romania agreed on a new tax treaty in November, which will exempt Endava from Romania dividend withholding tax once it is fully ratified by both countries.
This charge added 1p to adjusted EPS in the quarter. The impact against the statutory EPS figure is approximately 6p. As a result of this tax change, we now expect our adjusted tax rate to be around 18.5% for the remainder of fiscal year 2025.
Revenue from our 10 largest clients accounted for 36% of revenue for the three months ending December 31, 2024, compared to 34% for the same period last fiscal year. The average spend per client from our 10 largest clients increased from GBP6.3 million to GBP7.1 million for the three months ended December 31, 2024 as compared to the three months ended December 31, 2023, representing a 13% year-over-year increase.
In three months ended December 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 32.7%, three months end December 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 boosted by the contribution of the Galaxy business, while the decrease in Europe is mainly due to a slowdown of a client in TMT and an FX headwind. The decline in the Rest of the 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. We saw a strong pick up in 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 in media was acquired in Q1 fiscal '25, 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 rampdown for one large US client project in the last 12 months.
Healthcare revenue growth is primarily explained by the Galaxy acquisition. Our adjusted free cash flow was GBP31.6 million for the three months ended December 31, 2024 compared to GBP34 million during the same period last fiscal year. Our cash and cash equivalents at the end of the period total GBP60.1 million December 31, 2024, compared to GBP62.4 million at June 30, 2024.
Our borrowings totaled GBP123.7 million at December 31, 2024, compared to GBP144.8 million at June 30, 2024. Capital expenditure for the three months ended December 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 a $100 million share repurchase program 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 March 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 the Rest of World regions due to a worsening macroeconomic environment, leading to increased 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 2025 is as follows. Endava expects revenue to be in the range of GBP198 million to GBP200 million, representing constant currency revenue growth of between 13% and 14% on a year-over-year basis. Endava expects adjusted diluted EPS to be in a range of 31p to 32p per share.
Our guidance for the full year fiscal year 2025 is as follows. Endava expects revenue to be in the range of GBP795 million to GBP800 million pounds, representing constant currency revenue increase between 8.5% and 9% on a year-over-year basis.
Endava expects a just a diluted EPS to be in the range of 120p to 123p per share. This above guidance for Q3 fiscal 2025 and for full year fiscal '25 assumes the exchange rates on January 31, 2025, and the exchange rate was GBP1 to USD1.24 and EUR1.20.
This concludes our prepared comments. Operator, we are now ready to open a line for Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Bryan Bergin, TD Cowen

Zachary Ajzenman

Hi, thanks. This is Zach Azman on for Bryan. First question we had is on the outlook. We were hoping that you can maybe go deeper into the underlying assumptions that inform the 3Q guide and the implied acceleration in 4Q sequentially, just hoping for 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 GOs earlier this calendar year, but just kind of curious what the assumptions are underpinning the March queue and June quarter guides.

John Cotterell

Thanks Zach. Quite a lot to cover there. I think Mark's 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 so that overlaps.

Mark Thurston

Yeah, so Zach on the Q3 outlook as we sort of said in the reduction and there's some macro effects. I mean, basically North America remains strong for us. Europe stable with some puts and takes in there. But the UK definitely signing towards the negative side, and that's what's really for a reduction mainly around financials and similarly sort of Rest of World again, a negative sort of sentiment.
If you look at it by industry verticals, banking and capital markets is strong, so good growth there on the quarter and actually it's one of our stronger areas, as is insurance. Payments are stable again, but there is pressure there and puts and takes 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 judgments that we've made. I mean, 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.

John Cotterell

Yeah, 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 call 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. To enable a cost-effective, assured delivery and speedy core modernization program that they struggled with in the past. Once they get their heads around, the possible, they then need to, and want to prove out the approach often via trial or a proof of concept. Then they want to raise budgets and get their business cases together.
Sign deals and then there's a slower scaling as we put 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 that is visible, in terms of booking revenue coming through.
Ad an example of that is, we've been working on a core modernization with a large banking and capital markets client, and that started around two years ago. This time last year, they were spending $1.5 million a quarter with us. It's now 4 times that and continues to grow.
And 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. And outside of further macro, we'd expect to see the acceleration going into Q4.

Zachary Ajzenman

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.

John Cotterell

Yeah, so where we're seeing the strength is in the AI driven core modernization driven space. So we see, you see that with the healthcare client that was a Galaxy client where they've been doing core modernization work using their accelerators 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 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 market space where banks are investing in their payments infrastructure, but that isn't visible as payments work because it's part of a banking organization of 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 market segment.
And a lot of that is for modernization related. I just gave the example a moment ago of one large bank in North America where they're ramping up with us in terms of the spend, and we're seeing huge interest in the banking space around that capability, and expect that to be a leading sector for us in adopting our capabilities and core modernization.

Mark Thurston

Appreciate that color.

John Cotterell

(inaudible).

Operator

Tyler DuPont, Bank of America.

Tyler DuPont

Hi, good morning. Thanks for taking our questions. I just want to also start with a demand related question. It sounds like some of your clients you 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 end of February and budgets tend to be set around this time, I guess both on an absolute basis and versus this time last year.

John Cotterell

Yeah, 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 modernization is pretty new in the market. It's a pretty unusual and unique proposition that we have.
And so, clients not knowing that is available and having confidence in it until they've done the proof and concepts and so on and not sitting on budget going we're expecting to do this piece of work. The opportunity to do the work opens up as they understand the art of the possible. And so with some clients, we're seeing them shape that into that 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.

Tyler DuPont

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.

John Cotterell

I mean, we're actually seeing a slow improvement in pricing. I mean this is measured on a sort of average, revenue per work day and 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 [prerogivity] we're achieving on some of our outcome-based deals.
I think the core modernization, I think as we land those bigger deals, they'll be multi-year and will be around us extracting sort of efficiency. So they will play very much to a 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.

Tyler DuPont

Good, thank you very much.

John Cotterell

Thanks, Tyler.

Operator

Jonathan Lee, Guggenheim Partners.

Jonathan Lee

Great, thanks for taking our questions. If 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?

John Cotterell

They have been relatively broad based. I mean, they've been more noticeable for the geographies that we sort of called out the UK and the Rest of the World. I guess, given our 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. It's general sort of softness, which we think is, certainly, let's call it macro-driven, 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 unnotified ramps, obviously we get 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.

Jonathan Lee

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, especially given the sequential ramp that you're seeing in fiscal 4Q.

John Cotterell

So I think with Q3 coming up, we'll see sort of the headcounts 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 of between, organically about [4%,6%] year-on-year, we will start to recruit to make that happen.
So you will see headcount start to build maybe towards, you won't see it, I don't think, towards the end of March, but certainly we will build headcount as we go through the fourth quarter of June.

Mark Thurston

I'll just add to that. There's a bit of rotation of 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 head down to be growing slower than the revenues we look for.

John Cotterell

Yes, absolutely.

Jonathan Lee

Got it, thanks for the detailed commentary there.

John Cotterell

Thanks, Jonathan.

Operator

Jane Fawcett, Morgan Stanley

Hey guys, thanks for the question. It's Antonio on for James Fawcett. 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? And what is baked into that increase in, I mean like profitability that you're, I'm expecting in the back half of the year?

John Cotterell

So we're well progressed, certainly from a systems perspective, we aim to cut over at the end of this month, and derive our financial, so all our operating systems, financial systems will be locked. We are currently working in a joint 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 cost optimization.
We are focused more on G&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 Galaxies. We bring the two organizations together. And I think there'll be more further actual opportunity for that actually into FY26 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 how that's trending both onshore and offshore. Thank you.

John Cotterell

Bench is stable. It's low by historic standards for us. I think we're operating at around, I think 6%, 7%. I think we will operate at that level subject to the sort of integration further with Galaxy. We expect utilization to move up modestly from where we are at the moment. It's reasonably high for 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, but we see sort of modest improvements from utilization towards the end of this fiscal.

Got it. Thank you for the color, guys.

Operator

Maggie Nolan, William Blair

Kate Krostein

Hi everyone, it's Kate Krostein on from Maggie. Thanks for taking my question. My first question is, you guys mentioned the continued focus on hiring for AI and data skills, and you also talked about the digital skills shift going on in the market. Can you talk a little bit more about what you're seeing in the hiring market right now and how you feel your access to this talent has evolved over the past year.

John Cotterell

Thanks Kate. Yeah, 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 daily, 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 Endavans into the AI space as opposed to just recruiting new talent in the market. Everyone has gone back to the start from an AI point of view. Just over two years ago. And so actually the best way of us moving forward is actually to equip our people and retrain them.
If you look at the ChatGPT 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 Endavans, 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 environments and the clients haven't made G&A AI available to them yet, although we are seeing progression in that direction.
So the big push is on developing our own people and through training, through the, (inaudible) University and so on, and we're seeing rapid progress there. We are bringing people in, particularly around the data science, space, but also, where we find a few people who've gone further down the road in the use of AI, for instance, in the agentic AI space and 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 million restructuring charge that you took during the quarter and actions that you're taking to improve overall efficiencies in the business?
Yeah. So, 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. We do certainly do our system switch 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 point forward. I think there will be further opportunities to 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.

Kate Krostein

Great. Thank you both.

John Cotterell

Thank you.

Operator

Jamie Friedman, Susquehanna.

Jamie Friedman

Hi, good morning, good afternoon. I was just wondering if you could talk about what you're thinking or contemplating in terms of revenue realization, meaning like the revenue per headcount, because some of the companies are now seeing revenue grow faster than headcount, 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?

John Cotterell

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, and we're still predominantly time and material, although we will increasingly sort of shift with our larger contracts to potentially more outcome-based, but for the near term retirement materials, so there is a heavy linkage with the workdays delivered. We are seeing some pricing improvement.
So, if with 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 head count, revenue growth, what's about linkage, you'll see us run a little bit hot, I think, towards Q3, Q4.
But I think going forward, if that's linkage with headcount and revenue holds true, which I think will change actually is the big deal sort of come in. You would then start to see us recruit at the same rate.

Jamie Friedman

Okay, thank you. And then in terms of the concerns that you're mentioning with regard to the macro in the UK. Could you just elaborate on that, when did that start, or is that more the same and is it, and to what extent is it contemplated to weigh on the guidance?

John Cotterell

It does weigh. We basically saw it through, January, February, I guess it's not followed the UK economy that closely in the US, but 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. And it's similar position in the Rest of the World. So, it's something that is materialized as we cross over from the end of December into January, February.

Jamie Friedman

Great. I'll drop back in the queue. Thank you.

John Cotterell

Thanks Jamie.

Operator

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

John Cotterell

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 re-emphasize 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 to cut through the hype and focus on delivering tangible benefits from the technology, which is backed up by our deep industry experience.
So, I look forward to speaking with you all at our next earnings call in May. Thank you.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.