Endava plc (DAVA) Cash Flow Statement

The extreme volatility in the OCF/NI ratio suggests that accrual-based accounting metrics are failing to capture the underlying cash reality of the firm's project-based revenue model. Investors should monitor whether this divergence stems from aggressive revenue recognition or an inability to collect on billable hours in a tightening macroeconomic environment.

This downward trajectory in FCF margins indicates that the company's cost structure is no longer scaling effectively with its revenue base. The shift into negative territory suggests that the business may be entering a phase where it consumes rather than generates liquidity to sustain its current operational footprint.

The inconsistent nature of working capital swings implies that Endava is facing friction in its cash conversion cycle, likely due to delayed client payments or inventory-like build-ups in unbilled receivables. This trend warrants further investigation into whether the company is being forced to extend credit terms to retain key financial services clients.

This capital allocation strategy appears aggressive given the current lack of organic cash generation, potentially signaling a management attempt to support the share price despite fundamental headwinds. Investors should monitor whether this reliance on cash reserves for non-operational deployment will necessitate future external financing if the current burn rate persists.