At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to one of your speakers for today, Laurence Madsen, Investor Relations Manager. Please go ahead.
Thank you. Good afternoon, everyone, and welcome to Endava's first quarter of fiscal year 2021 conference call. As a reminder, this conference call is being recorded. Joining me today are John Cotterell, Endava's Chief Executive Officer, and Mark Thurston, Endava's Chief Financial Officer. Before we begin, a quick reminder to our listeners. Our remarks today include forward-looking statements, including our guidance for Q2 fiscal year 2021 and for the full fiscal year 2021, our expected near and medium-term revenue growth, the potential impact of the COVID-19 pandemic and associated global economic uncertainty, our expectations regarding digital transformation of existing businesses and industries, the necessity of digital transformation for many, and Endava's ability to benefit therefrom, and anticipated client demand for Endava's services, as well as other forward-looking statements.
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, and 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 the company undertakes no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law. Please refer to the Risk Factors section of our annual report on Form 20-F filed with the Securities and Exchange Commission on September 15, 2020, which contains and identifies important factors that could cause actual results to differ materially from those contained in any forward-looking statements.
Also, during the call, we'll present both IFRS and non-IFRS financial measures. A reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which you can find on our investor relations website. A link to the replay of this call will also be available there. With that, I'll turn the call over to John.
Thank you, Laurence. I would like to thank you all for joining us today, and I hope you're all staying safe and healthy. Mark and I are pleased to be here to provide an update on our business and financial performance for the three months ended September the 30th, 2020. We're coming to the close of an extraordinary calendar year, and unfortunately, the pandemic continues to wreak damage on lives and economies, with some regions back in lockdown. Within all these challenges, the good news for Endava has been that digital transformation has become even more of a priority in the new world order, and we continue to see growing numbers of engagements with existing and new clients on how to shape their digital future and transform their operating model.
COVID-19 has accelerated recognition of the amount of digital transformation work still to be done and has brought forward the urgency to do it now. As I mentioned previously, the Endava Enterprise distributed agile delivery model was designed to be extremely flexible, and it has served us well, enabling a fast reaction and protecting our business performance and our people in this rapidly changing business environment. With a second wave of COVID-19 hitting our main markets in the Northern Hemisphere, there is a question about whether we will see similar uncertainty and volatility in customer decision-making as was experienced in March and April when the first wave hit. This time around feels very different. In communication with our customers, they are much clearer on their priorities in the current pandemic environment, and we're seeing more business-as-usual type stability in decision-making.
So far, we have not seen sudden decisions to stop or reduce project activity, while we are seeing plenty of new projects and expansion of existing projects in much more normal fashion. All of this is driven by digital acceleration in their marketplaces. As a result, we have decided to provide full fiscal year guidance consistent with how we are currently seeing behavior and decision-making at our customers. Moving on to our results. Endava had a solid quarter to start our new financial year, with revenue of GBP 95.1 million, a growth of 15.5% year-on-year from GBP 82.4 million in the same period in the prior year. If we pro forma adjust for the revenue from the Worldpay captive divested in August 2019, our revenue growth on a constant currency basis was 20.1% year-on-year.
Our strong revenue growth was driven by the expansion of work for our existing customers and the acquisition of new ones during the quarter. During the quarter, we continued to broaden our client base, and ended the quarter with 501 active clients, up from 278 at the end of the same period in the prior year, an 80.2% year-on-year increase. Continuing on the trend I highlighted last quarter, revenue growth coming from our largest clients increased sequentially as large corporations continued to invest in digital transformation during the pandemic. Revenue from clients who paid us above GBP 5 million over the past 12 months increased 11.2% sequentially over Q4. This quarter, we have started to see a recovery in projects from our smaller clients. We continue to grow our client base despite the sales and marketing challenges arising from reduced travel and attendance of industry events.
This quarter, we grew in all of our regions and verticals. Our European acquisitions of CDS, Exozet, and Intuitus are all integrating nicely into the Endava family and complementing our existing offerings. Today, I'd like to take you through one of our fast growth segments, mobility. The industry's focused on the movement of people and goods, including automotive, travel, logistics, airlines, smart cities, and so on. We see these industries as going through a long wave, technology-driven transformation, ultimately, in 30 or 40 years' time, facilitated by autonomous vehicles, mobility as a service, and new monetization models. It will take time to realize the full scope of our new mobility-enhanced future. Endava is all about helping clients to utilize next-gen technologies to take the steps on this transformation path, which will deliver business benefit now, while laying the foundations for the long-term trends.
We believe the future of mobility lies in the connection of various presently disparate systems to create a new fabric of interactivity with which we will reduce friction in many parts of our personal and professional lives. We are actively engaged in helping our clients in their mobility journey, and in particular, helping them create excellent customer experiences that drive business activity. Endava has been a strategic partner to the Royal Mail Group for just over three years. We have recently completed a major transformation program for their final mile optimization, focusing on the postal workers' route management for the whole of the U.K. to enable greater efficiency and improved customer service. We are also working with one of the largest global logistics systems integrators to deliver advanced intralogistics projects worldwide. We help the client with their digital transformation journey, spanning from receiving to shipping goods.
We automated warehouse processes such as product registration stations, storage retrieval systems, and intralogistic transport. We improved their ability to deliver projects to end customers and shortened time to market. We started with the creation of system architecture all the way through to implementation. We delivered secure, robust, and scalable software services. The client praised our quality assurance testing capabilities. We're a key strategic technology partner for Aer Lingus, helping them accelerate their digital transformation and innovate their approach to payments, loyalty, and customer experience. We recently delivered an innovative payments hub platform, making it easier to effectively integrate new alternative forms of payment, such as Apple Pay and loyalty program points. In turn, this allows the airline to choose the payment service providers who help to improve the guest experience and purchasing activity. This platform also automates back office payment processing.
The automotive industry is undergoing a fundamental transformation, and we believe it's being disrupted by some key trends, including services centered around customer needs and desires. Vehicles seamlessly connected to a broad digital ecosystem like payments, insurance, finance, e-commerce, and smart city services, and shared mobility services or mobility as a service, providing seamless end-to-end mobility across multiple vehicles and service offerings, reducing the number of private vehicles and the overall CO2 emission. We're working with our clients in all of these areas. We created a virtual motor show for Volkswagen earlier this year following the cancellation of the Geneva International Motor Show, which brought in over 240,000 visitors globally. This virtual motor show was very well received by Volkswagen and the entire industry.
We created a similar offering for Audi with the global Audi e-tron launch through a virtual reality solution, allowing Audi to present their new models globally at various locations within a narrowed timeframe and with a limited number of car prototypes. Finally, Endava deployed a digital media supply chain solution delivering smart digital signage services to over 2,000 Audi dealers globally. This solution provides state-of-the-art digital customer engagement and product and service presentation within the dealer showrooms. Our client growth continues to translate into strong employee growth. We ended the quarter with 7,199 employees, a 21.9% increase from 5,904 in the same period last year. We have increased our head count organically every quarter since the start of the pandemic, and our attrition rate remains low.
As we continue to redefine the future of work and explore the impact of much more time spent by our people working from home, we've been pleased to note continued improvement in productivity with a percentage improvement in high single digits compared to productivity pre-pandemic. Working from home also brings new physical and mental health challenges. This quarter, we launched the Endava Wellbeing Program, which includes a wide array of tools and training to help our people adjust and thrive in the new working environment. Over 60% of Endavans have already engaged with this program. Our expectation is that post-pandemic, we will move to a hybrid model where our teams spend some time in the office together, mixed with other time working from home. We continue to recruit people on the basis that they must be able to regularly attend an Endava office.
As shown by these results, client demand for our services continues to be strong as digital transformation continues to rise up their agenda. Mark and I, and the entire team, are extremely pleased with our performance for the quarter just ended despite the challenging environment. We are excited about the opportunities ahead of us and remain confident in our ability to deliver value for all of our stakeholders. I'll now pass the call on to Mark, who will walk you through our financial results for the quarter and provide guidance for the coming quarter and fiscal year.
Thanks, John. Here are some highlights for the most recent quarter. Endava's revenue totaled GBP 95.1 million for the three months ended September 30th, 2020, compared to GBP 82.4 million in the same period last year, a 15.5% increase over the same period in the prior year. In constant currency, our revenue growth rate was 16.9%. As John mentioned, if we pro forma adjust for the revenue from the Worldpay captive last year, our revenue growth on a constant currency basis was 20.1% year-on-year. Profit before tax for Q1 fiscal year 2020 was GBP 8.7 million, compared to profit before tax of GBP 17.5 million in the same period in the prior year. Our adjusted profit before tax for the three months ended September 30th, 2020, was GBP 18.2 million, compared to GBP 16.9 million for the same period last year, a 7.8% year-over-year increase.
Our adjusted profit before tax margin was 19.2% for the three months ended September 30th, 2020, compared to 20.5% for the same period last year. Adjusted profit before tax, adjusted PBT, is defined as the company's profit before tax, adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses, net gain on disposal of subsidiary. Share-based compensation expense, amortization of acquired intangible assets, unrealized foreign currency gains are non-cash expenses. Adjusted PBT margin is adjusted PBT as a percentage of total revenue. Our adjusted diluted EPS was GBP 0.26 for the three months ended September 30th, 2020, calculated on 56.6 million diluted shares as compared to GBP 0.24 for the same period last year, calculated on 55.4 million diluted shares, up 8.3% year-over-year.
Revenue from our 10 largest clients accounted for 39% of revenue for the three months ended September 30th, 2020, compared to 41% in the same period last year. Additionally, the average spend per client from our 10 largest clients increased from GBP 3.3 million to GBP 3.7 million for the three months ended September 30th, 2020. In the three months ended September 30th, 2020, North America accounted for 29% of revenue compared to 27% in the same period last year.
Europe accounted for 25% of revenue, compared to 26% in the same period last year, and the U.K. accounted for 43% of revenue, compared to 45% in the same period last year. While the rest of the world accounted for 3% of revenue, compared to 2% in the same period last year. Revenue from North America grew 23.8% for the three months ended September 30th, 2020, over the same quarter of 2019.
Comparing the same periods, revenue from Europe grew 15.3% and the U.K. grew 8.4%. Excluding the impact of the Worldpay captive from the prior year period, comparative growth for the U.K. would've been 6.7% higher or 15.1%. We grew in all three of our industry verticals during the quarter. Revenue from payments and financial services grew 10.3% for the three months ended September 30th, 2020. Excluding the impact of the Worldpay captive from prior year period, comparative growth would've been 5.8% higher or 16.1%. Revenue from payments and financial services accounted for 50% of revenue, compared to 53% in the same period last year. Revenue from TMT grew 28.7% for the three months ended September 30th, 2020, over the same quarter of 2019, and accounted for 28% of revenue, compared to 25% in the same period last year.
Revenue from other grew 12.7% three months ended September 30th, 2020, over the same quarter of 2019, and now accounts for 22% of revenue, unchanged from the same period last year. This growth was mainly driven by clients in the mobility and retail sectors. We now turn to our adjusted free cash flow, which is our net cash provided by operating activities, plus grants received, less net purchases of non-current tangible and intangible assets.
Our adjusted free cash flow was GBP 21.2 million for the three months ended September 30th, 2020, compared to GBP 13.5 million during the same period last year. Our cash and cash equivalents at the end of the period remained strong at GBP 70 million at September 30th, 2020, compared to GBP 101.3 million at June 30th, 2020. We spent GBP 50.8 million net of cash acquired in the quarter on our acquisition of Comtrade Digital Services in August.
CapEx for the three months ended September 30th, 2020, as a percentage of revenue, was 0.6% compared to 3% in the same period last year. Our guidance for Q2 fiscal year 2021 is as follows. Endava expects revenue will be in the range of GBP 102 million-GBP 104 million, representing constant currency revenue growth of between 17.5% and 18%. Endava expects adjusted diluted EPS to be in the range of GBP 0.25-GBP 0.26 per share. The constant currency growth figure above excludes the Worldpay captive, which Endava sold in August 2019, and starting in the second quarter of fiscal 2021, will not be included in quarterly comparative financial metrics. Endava does not intend to refer to Worldpay captive in future quarterly guidance. Endava has decided to reinstate full-year guidance, with our guidance for the full year of fiscal year 2021 as follows.
Endava expects revenue will be in the range of GBP 419 million-GBP 421 million, representing constant currency growth of between 20%-20.5%. Endava expects adjusted diluted EPS to be in the range of GBP 1.04-GBP 1.08 per share. The constant currency growth figure now quoted for the full fiscal year 2021 guidance still includes the pro forma adjustment for the Worldpay captive, as it remains in the full-year comparative. This above guidance for Q2 fiscal year 2021, and the full fiscal year 2021, assumes the exchange rates at the end of October, when the exchange rate was one British pound to $1.29 and EUR 1.11. This concludes our prepared comments. Operator, we are now ready to open the line for Q&A.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound or hash key. Your first question this morning comes from Bryan Bergin from Cowen. Please go ahead.
Hi. Thank you. Wanted to ask here on calendar 2021 budget outlooks for clients. It seems you obviously had improved visibility to reinstate the full fiscal year outlook. Can you provide some color on the conversations you're having with clients, what they're telling you about their calendar 2021 spending intentions, and any broad trends you're picking up in those that are different?
Hi, Bryan. Thanks for that. Yeah. Visibility's actually pretty good, in line with my opening remarks. We're seeing clients have got clear priorities of what they want to invest in, and we're seeing those plans come through. I think probably the best way of illustrating that is our contracted and committed spend
As a proportion of our guidance is at normal levels for this time of year. Our ratios indicate that we're in a normal place. I think interestingly, looking at budgets for next year, in conversations with clients this week following the announcement of the vaccine, a number of clients have indicated that additional budget might become available if the vaccine enables activity to normalize things like travel, et cetera. It's clear that clients are still where their business is being restrained by the impact of the pandemic on economic activity, that they are still holding back a little bit. If the world normalizes, we may see some of that come through.
Okay. It's good to hear. On Comtrade, can you just give us a comment on the integration process there and the progress you're making? Does that bring any large relationships as well? I see the big jump in client count that would seem to suggest otherwise, but I'm just curious if there are any large potential enterprise relationships that they may have, that you can push on as well.
Sure. The integration is going very well. They're a very positive and aligned team. Of course, we have teams in region, in Belgrade in Serbia, and so on, that mean it isn't a pandemic-constrained relationship that we're building, because people in the local market are able to see each other. The reaction in the local market from a recruitment perspective has been very positive. Essentially seeing the two brand leaders combine, and that's had a very positive impact. We're seeing a number of joint bids, nearly 10 opportunities that we're working on together already. There's been a number of new names that we've already closed in the last three months or so. The alignment across the business is very good, and they've brought some real strengths.
For instance, a couple of the examples that I gave in the opening remarks around mobility, are stories that have come from CDS, which we're using to leverage. The Aer Lingus example, for instance, where spend is continuing, and the intralogistics company that we were talking about that is a very, very large multinational. There are large clients there with quite substantial spend with CDS, where we're looking and seeing opportunities to scale what we're doing with them.
All right. Thank you.
Our next question comes from Charles Brennan from Credit Suisse. Please go ahead.
Great. Thanks for taking my questions. I've got two, if that's possible. Firstly, just to pick you up on those mobility comments. There's much more focus around that industry than we normally get from you. Is that something that you need to bulk up through your M&A route and you're warming us up to expect more deals in that space? On an unrelated topic, can I just talk about the organic trends? It may well be my numbers that are wrong, but on an organic basis, if you strip out the acquisitions, it feels like Q1 growth was a little bit slower than Q4. When I think about your guide for the second quarter, you've got a full quarter of Comtrade in there. It feels like that might be another slowdown in organic growth. Have I got my numbers right?
What's the reason, do you think, for the relative caution in your organic guidance?
Let me do the mobility one first. Hi, Charlie. Yes, mobility, we put that into these opening remarks basically as part of a launch, and pulling together of all the stuff that we're doing in the mobility space. There's a lot of overlap of activity of how technology is impacting those different industries that we've put under the mobility banner. Actually, we've already been doing M&A to beef up what we've got in that space. I mentioned a couple of those examples that come from the CDS deal. The automotive examples that I went through in the opening remarks came from the Exozet deal, the business in Berlin, that came on board last December. Then a lot of the logistics work is from Endava from many years back.
It's an area that we've already been focused on in terms of looking to see whether we could beef that up with some M&A. It is strengthening as a proportion of our business, one of the fastest-growing areas, albeit from lower levels of turnover. We do see a big opportunity there just because of those macro trends that are gathering speed. We will, as part of any other M&A that we're looking at, be looking to see whether there's a mobility component to it. We're not just going to focus on that in terms of our M&A strategy. Mark, do you want to-
Yeah. There isn't any slowing in the organic growth. When we were guiding for Q1 sequentially, which is what we were focusing on, it was about 4%, we've done 5%. Actually, the differential between the 4% and the 5% is FX. The FX headwinds were less strong than anticipated, mainly because of the dollar. You look at the guide for Q2, again, focusing on sequential. We're going for 9.5% at the top of the range. There is a pickup, and the only additional contribution from CDS, as you may recall, this quarter that we're in, Q2, we will have a full quarter's contribution from CDS, whereas in Q1 we actually had about 6 weeks. We're getting half as much again contribution. The CDS contribution for this quarter is relatively modest.
In terms of our pro forma, excluding Worldpay constant currency growth, we're roughly around that sort of 20%. I don't see any slowdown in organic growth that you're seeing. Maybe we can pick it up offline.
Our next question comes from Ashwin Shirvaikar from Citi. Please go ahead.
Hello, good morning. Maybe I should say good afternoon to you guys.
For us, yeah.
Good quarter here. I wanted to ask, as you think of your ideation to production end to end, in the current mode of how you work, it's easy to see perhaps that the production parts of it are maybe easier to do in a remote fashion. You've always done it that way. What about the ideation piece? How has that adapted?
Hi, Ashwin. Thanks for the question. Yeah. You'll have picked up from my opening remarks that we strongly believe that we'll end up with a delivery model post-pandemic that has a mixture of people face-to-face in the office, in teams, doing sprint kickoffs and retrospectives, doing some of that ideation, particularly in the early stages of programs where the scrum teams are working on how new technology can be introduced. That needs to be more of a face-to-face activity going forward. Having said that, somewhat to our surprise, we're actually seeing good ideation happening, and clients who are very happy with things that we're coming up with, during this pandemic period. However, it is our belief that to really get the best out of it, teams need to form and do some face-to-face activity to enable that to happen, to drive the best ideation.
It is going to be part of our model going forward. That's why we're making sure when we recruit people, even during this period, that they are able to attend Endava offices, and we're not just picking people up all over the world, which I know some of our competitors are looking at doing. The productivity metrics that I touched on that have been improving is very much at the production end, as you're touching on. Once you get into production and developers can work at home and have the space to concentrate that little bit more, you get good productivity when you're building out systems, which is what you're touching on, I think.
Right. No, based on your comments, I wanted to confirm that.
Yeah
the ideation piece was actually happening. It can obviously be done better or more efficiently face-to-face, but it doesn't mean that it has ground to a halt or is happening inefficiently, based on what you just said. The other question I had was, you've done obviously over the course of your history, a number of acquisitions. Are you finding perhaps that it has become or becoming a bit more of core competency, where you can use the current situation to accelerate M&A? Many other companies seem to be doing that. It is difficult for one company to do everything. Just a question on M&A and can you speed up M&A? You certainly have the balance sheet for it.
Yeah. M&A for us is always a balancing act between seeing good businesses that are going to really add value to Endava. There's a lot of businesses being touted around out there at the moment. It needs to be balanced with our ability to integrate. We're very strong believers that the worst thing you can do with M&A is to do too many and get indigestion. You don't integrate properly. The people therefore don't settle down in Endava well. You don't fully extract and exploit the sales messages and strengths of the organization that you're bringing through if you don't integrate properly. We've, as you've noted, done many M&A deals over the last 10 years or so. We've always focused on making sure that there's a clear integration before
-on more. We're continuing to do that. Having said that, there are some very good opportunities out there. We keep an eye on that to make sure we're not missing out on something that's going to be really additive to Endava's capability. We have got in place an integration team who are permanently available to do these integrations now. That does enable us to run a little bit faster than we did four or five years ago.
Understood. Thank you.
Our next question comes from Bryan Keane from Deutsche Bank. Please go ahead.
Hi, guys. I wanted to ask about the new client growth or at least the increase in total number of clients. Was most of that increase, looks like about an 85 increase, was that just from the acquisition of CDS in the total, or was there a bigger growth in organic growth in new clients this quarter?
There was a contribution from CDS. Well spotted. We also managed to grow the roster on an organic basis as well. We're continuing to add clients organically.
Got it. Mark, any comments on the pricing environment currently, but also when you've given the outlook, what have you incorporated into price going forward for the guide for the fiscal year?
Yeah. I think the pricing we're seeing the same levels as we saw in Q4. It's remaining relatively robust. Q4 was down on Q3. We are certainly seeing some stability, sort of reflects our sort of outlook.
Got it. Then, for the fiscal year, what will be now the contribution from acquisitions, just so we can get our models correct?
In terms of the guide, we haven't obviously factored in anything we haven't done. In terms of the revenue guide, it includes CDS from the acquisition date, which was mid-August, 10 and a half months. A useful sort of run rate to think about is our Q2, which is clean, if I can call it that. It has all the most recent acquisitions in the last sort of 12 months, that gives you the base to extrapolate for the rest of the year.
How much was CDS then? How much should that be, at least on an annual contribution? I guess we can figure out the quarterly.
Well, I won't give you the exact sort of figure, but I mean, when we said with CDS, we acquired 460 delivery heads. They are at about a 10% discount to our revenue per head. You can impute an annual revenue of around sort of a GBP 25 million. You have to take into account it's 10 and a half months. Hopefully that gives you some help in computing those figures.
Got it. Thanks for taking the questions.
Thanks, Bryan.
Our next question comes from Mayank Tandon from Needham & Company. Please go ahead.
Thank you. Congrats, John and Mark, on a good quarter. I wanted to pivot over to margins. What are you looking at in terms of margin trajectory for the remainder of the year? Maybe the puts and takes around that as well. Specifically utilization, is there still more room to expand utilization, or do you feel like you've capped that out? The growth will be more driven by headcount and pricing.
In terms of the sort of outlook, we've had a good quarter, as you can see for Q1. The PBT margin was about 19.2%, adjusted basis. That was driven by strong performance on our gross margin, adjusted again to around 43%. I expect that to come off from that level as we look into sort of Q2, mainly because there's a number of small one-off factors in the Q1 result, particularly around something called an R&D tax credit. I expect utilization to come down sort of slightly as we recruit into that demand that we see in the second half. The second quarter utilization will come down slightly. For the balance of the year, we will then start to pick up as we grow into that people bench that we're recruiting to.
I think overall, we will, in terms of full year, our gross margin will be slightly below what we report in FY 2020, probably a percentage or so. Probably, and it's implied basically in the guide, our adjusted PBT margin will be something between 18% and 18.5%.
Great. That's very helpful, Mark Thurston. Then maybe a broader question on the talent. Just given the re-acceleration in revenue, I was wondering if you're having more competition for talent. I would imagine so, given that digital transformation is the broad theme these days. Maybe just some thoughts on talent acquisition. Can you hire the skill sets to meet the demand improvement, and any implications that you see for employee attrition going forward and wage inflation levels? Thank you.
Sure. Yeah, it's an interesting market at the moment. Obviously, the pandemic impacted through our Q4. A lot of other companies laid people off during that time, and that has made employees a little bit more nervous in the market. Endava didn't lay anyone off, and actually, we continued to grow organically all the way through the period. That's had a very positive impact on the markets that we're operating in. Our attrition levels are at historic lows, and our ability to recruit in the employee proposition, if you like, that we have in the marketplace, has been significantly strengthened in all the locations that we operate in. As a result, we're recruiting very strongly at the moment. We've had very strong levels of acceptance.
October, we've had the highest month ever by some distance in terms of numbers of people accepting a job offer at Endava. We remain in a very strong and confident position about our ability to attract the talent that we need in the markets that we operate in.
John, sorry, just to be clear, any implications for wage inflation and attrition levels going forward, given your comments? What do you see over the remainder of fiscal 2021 and maybe longer term?
At the moment, attrition levels are still trending down. We expect that that would turn at some point, just as the market starts to normalize and return trends perhaps slowly upwards to more normal attrition levels. We are very substantially below normality at the moment, even on a rolling 12-month basis, which includes a lot of period before the pandemic hit. In terms of wages that we're paying, inflation is below normal at the moment. Having said that, we have our pay round to come in January. There's always a step up in our costs that happen in January simply because that's the moment when the vast majority of our staff receive their annual increases. Is there anything you want to say on that, Mark?
No, that typically has an impact, obviously, on gross margin. It's anywhere between 1% and 2%, and then we start to recover that through renewals discussions with clients. It's a normal pattern that we've seen historically.
Great. Thank you for taking my questions.
Pleasure.
Our next question comes from Maggie Nolan from William Blair. Please go ahead.
Hi. Thank you. On the point about your hiring plans, some of your peers are using hiring outside of their normal office hubs as a way to structurally change their cost structure versus historical spend. I'm wondering if you're able to achieve something similar, even when you're expecting that employees have some level of frequency of in-person office visits in the future.
Hi, Maggie. Yeah, we've observed some of our peers doing that. Actually, we've seen them appear in some of the places that we are, not actually taking any Endava employees, but hiring outside of the places where they have offices. We've decided we're not going to go down that route. Our belief is that whilst working from home has been demonstrated to work and be a real added value in terms of delivery model, we think moving to a 100% working from home, by putting people in cities and countries that we're not even in, is not a sustainable long-term model for the way in which Endava does business. In part, that's the ideation dimension that Ashwin was asking about earlier.
The ideation element of how Endava operates, i.e., the multidisciplinary teams who are able to look at technology from a business perspective and come up with new ways of using it to transform business models, and do that in proof of concepts and prototypes before we get into production, we believe requires teams to gel in a way that you can't achieve if they're working all over the map and never meeting each other in person. We are continuing to hire people within range of our offices so that they can spend a day or two, or sometimes five, a week working together in the office. This is an area that is going to have huge debate, I'm sure, over the next 6 to 12 months.
It's very much the Endava view that in order to sustain our business model and the quality of what we do for clients, we will need teams to have a good amount of face-to-face time going forward.
Got it. I find the mobility trend pretty interesting. I know that you mentioned it's a long tail, but I'm wondering if the demand for services within mobility has been increasing. Just in this current environment, given some of the implications on things like supply chain and globalization in general, I'm wondering if you have any comments there. Thank you.
Yes. Whilst we see mobility as being that very long transformative trend that I touched on in the opening remarks, there has definitely been a push in some of those areas very strongly over the last six months. Logistics, last mile deliveries, et cetera, being a couple of areas. By contrast, some of the other dimensions of mobility, such as airlines and travel, has had a massive brake put on it. It's a mixed story. The automotive area has been interesting because a lot of the push in that space has been around marketing, and how do you continue to get your cars in front of people, when they're not going to visit a dealer in the way that they have done historically. That's pushed a lot of the products that we've been engaged with in the automotive space around.
Very mixed stories about what's happening under the covers during COVID in the mobility space.
All right. Well, thank you. Nice quarter.
Thanks, Maggie.
Thank you.
Our next question comes from Steve Enders from KeyBanc. Please go ahead.
All right. Great. Thanks for taking my question. I was just wondering, I think last quarter you talked quite a bit around digital necessity projects, but I'm wondering if you have seen any change in those kind of project dynamics and if we're kind of back to a new normal in terms of project dimensions and the demand for them.
Hi, Steve. Yeah. There is some of the digital necessity stuff. Just picking on my last comments about mobility, some of that last mile stuff has been digital necessity where much higher volumes have hit the logistics and distribution industry, and investment in their systems to enable customer service to keep up with the higher volumes that are going through has been a big step-up in activity over the last six months. Having said that, I think, if you look at what clients are spending and talking to us about now, there's much more of a shift back to their longer-term trends and investments rather than the fixing the problems that emerged during March and April.
Okay, great. Thank you.
Our next question comes from James Faucette from Morgan Stanley. Please go ahead.
Thank you very much. I wanted to see if you could give us a little bit of incremental color on the different verticals and activity and outlooks there. You mentioned a little bit what was going on from a mobility project perspective, but can you speak to the wider trends and engagement levels and kind of what you're expecting in each of those areas?
Yeah. Thanks, James. Let me pick out in the areas where we're seeing a pickup. We've seen a pickup in banking, in payments, insurance, in all three areas of TMT, i.e. tech, media, and telco. Media being the strongest of those three. In other, in the mobility space that we've talked a bit about, and in retail. Travel and entertainment is still very challenged. Actually we have little exposure to them as a business. It has impacted some of the other spaces. Payments, while being up very strongly on e-commerce, and things like self-service onboarding, even PIN on Glass, and the open banking arena. In the area of payments attached to travel, so cross-border payments, and FX-related activities, we've seen a drop-down in activity. Likewise, in insurance, whilst most of the insurance spaces are looking strong, travel insurance has taken quite a strong pullback.
There is a bit of cross-sector impact happening from those sort of macroeconomic effects that are visible around travel.
Got it. That's really helpful. Then just a quick question. As we've heard, increasingly, this narrative behind vendor consolidation and how the current environment is creating a situation where at least some customers will reevaluate, do they really need as many IT service vendors as they're using, et cetera. Are you seeing that at all? You're obviously doing quite well, so what do you think may be, if that is happening, contributing to your ability to take share and maintain position? Is it just your focus or are there more specific skill sets and abilities you're delivering to the customers?
Yeah. Vendor consolidation is definitely happening. We're not focused as a business on getting into conversations with procurement departments around vendor consolidation activity. We're focused on, in each of the business areas that our clients are in, on how can technology make a big impact on that business to change their business models, improve efficiency, and so on. We tend to see ourselves growing market share in clients as we drive those conversations through proof of concepts and prototypes, turning into projects and so on. Clients do make larger and larger multi-year commitments to us. Probably behind the scenes, they are consolidating what they're doing with other vendors, often probably in the legacy space, where we don't play. That compression of spend with vendors who provide legacy support is benefiting us.
It's not a directly competitive activity, if you understand what I mean, because we're offering a rather different service. Having said that, I have observed some of the other players talk about seeing a weakening of demand in some of the areas that we're in, like payments, where we continue to see a strengthening of demand. It could well be that they're getting consolidated out in some of the markets where we're seeing strong growth.
That's really helpful. Thanks a lot.
Thanks, James.
Our next question comes from Brian Satterly from [RoCo]. Please go ahead.
Hi. Thanks for taking my question, and congratulations on a great quarter. I wanted to touch on something that was said earlier about the number of clients added over the past quarter, because it was quite a lot, about 85 clients. A lot of that's come from an acquisition, as you mentioned, but maybe you can give us some color on the types of clients that are onboarded. Are they big companies, small companies in a particular sector? Then, as of late, what's been the most successful new logo acquisition channel?
Yeah. The main movement was, as I said, our acquisition of Comtrade, CDS. That brought roughly around 60-odd clients with it. We've been onboarding new logos basically across the piece. I wouldn't say there's been any particular sort of sector. Obviously, you have to take cognizance of the relation, the current sort of situation in the mobility sub-segment of travel. It has been across the geographies and also sectors. It's been a good quarter sequentially for us. Just on your second question around new logo acquisition. Our pipeline comes through seeking to set up meetings with clients, put our propositions in their industry space in front of them, move that forward through proof of concepts that then turn into larger production systems. Now, we do that very much on an industry-focused basis.
Interestingly, the channels that open up meetings in different industries can be quite different. Whereas in payments, we would see strength through LinkedIn as a channel and through shows and events. In other areas like insurance, you see other activities such as cold calling being much stronger. It also actually varies geographically by market. The response you get into the U.S. to the different channels can be different to Europe, with the U.K. somewhere in the middle. The key, though, is our propositions that we develop around how technology can impact these different industry segments, and that's what gets engagement with clients, when we're able to talk about their business very much at a business level and how technology can impact and transform it, and then get them interested in a proof of concept that gets the whole ball rolling. That's our successful logo acquisition.
Great. Thank you so much.
Okay. Thank you.
This concludes the Q&A portion of our call. I'll turn it back for any closing remarks.
Great. Well, thank you all for joining us today. As you'll have noted, that even although the pandemic continues to wreak a terrible impact, we're actually more confident that our clients have incorporated the challenges into their investment plans, and we're seeing a much more stable decision-making than we saw back in March and April. We've therefore guided for the full fiscal year, and we're feeling pretty positive about our business position. Look forward to seeing you all on our next earnings call in February.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.