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Virtusa Announces Second Quarter Fiscal 2013 Consolidated Financial Results

  Virtusa Announces Second Quarter Fiscal 2013 Consolidated Financial Results

               Raises Full Fiscal Year 2013 Financial Guidance

  *Second quarter fiscal 2013 revenue of $80.5 million increased 6%
    sequentially and 15% year-over-year
  *Second quarter fiscal 2013 operating income of $7.4 million or 9.2% of
    revenue compared to $5.5 million or 7.8% of revenue in the year ago period
  *Second quarter fiscal 2013 diluted EPS increased 22% to $0.23, compared to
    diluted EPS of $0.18 in the year ago period. Second quarter fiscal 2013
    diluted EPS includes approximately ($0.5) million of foreign currency
    transaction losses, compared to ($0.1) million in the second quarter of
    fiscal 2012
  *Announces promotion of Ranjan Kalia to Executive Vice President

Business Wire

WESTBOROUGH, Mass. -- November 01, 2012

Virtusa Corporation (NASDAQ: VRTU), a global IT services company that offers a
broad spectrum of business consulting and outsourcing services, including IT
consulting, technology implementation and application outsourcing services,
today reported consolidated financial results for the second quarter fiscal
year 2013, ended September 30, 2012.

Second Quarter Fiscal 2013 Consolidated Financial Results

Revenue for the second quarter of fiscal 2013 was $80.5 million, an increase
of 6% sequentially and 15% year-over-year on both a reported and constant
currency basis(1).

Virtusa reported income from operations of $7.4 million or 9.2% of revenue for
the second quarter of fiscal 2013, an increase compared to $6.9 million or 9%
of revenue for the first quarter of fiscal 2013, and an increase compared to
$5.5 million or 7.8% of revenue for the second quarter of fiscal 2012.

Net income for the second quarter of fiscal 2013 was $5.8 million, or $0.23
per diluted share, compared to $6.1 million, or $0.24 per diluted share, for
the first quarter of fiscal 2013, and an increase compared to $4.7 million, or
$0.18 per diluted share, for the second quarter of fiscal 2012. Net income for
the second quarter of fiscal 2013 included ($0.5) million of foreign currency
transaction losses compared to a gain of $0.4 million in the first quarter of
fiscal 2013, and a loss of ($0.1) million in the second quarter of fiscal
2012.

The Company ended the second quarter of fiscal 2013 with $80.0 million of
cash, cash equivalents, and short-term and long-term investments (2), compared
to $78.4 million as of June 30, 2012.

Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “This was a very solid
quarter for Virtusa, and we have strong momentum entering the second half of
the fiscal year. We have steadily expanded client relationships, added more
sources of recurring revenue and established Virtusa as a thought leader on
transformational programs and millennial enterprise readiness. Our targeted
solutions and services are increasing the value we provide to our clients and
helping us to navigate the macroeconomic challenges more effectively.” Mr.
Canekeratne continued, “I also wanted to congratulate Ranjan on his promotion
to Executive Vice President. Ranjan’s dedication and hard work are exemplary
and I am very pleased with the contributions he has made towards building a
sustainable and predictable growth platform, as well as leading a world-class
finance organization.”

Ranjan Kalia, Chief Financial Officer, said, “We were pleased with our ability
to grow operating profit and expand operating margins during the quarter even
while absorbing our annual wage increases.” Mr. Kalia added, “Based on our
strong performance for the first half of the fiscal year and our ongoing
momentum, we are raising our guidance for the full fiscal year 2013.”

Financial Outlook

Virtusa management provided the following current financial guidance:

  *Third quarter fiscal 2013 revenue is expected to be in the range of $84.5
    to $86.5 million, with diluted EPS of $0.26 to $0.30.
  *Fiscal year 2013 revenue is expected to be in the range of $328.0 to
    $334.0 million, with diluted EPS of $1.03 to $1.11.

The Company’s third quarter and fiscal year 2013 diluted EPS estimates assume
an average share count of approximately 25.6 million (assuming no further
exercises of stock-based awards and no repurchases of the Company’s stock
under its share repurchase program) and assume a stock price of $17.07, which
was derived from the average closing price of the Company’s stock over the
five trading days ended on October 31, 2012. Deviations from this stock price
may cause actual EPS to vary based on share dilution from Virtusa’s stock
options and stock appreciation rights.

Conference Call and Webcast

Virtusa will host a conference call today, November 1, 2012 at 5:00 pm Eastern
time to discuss the Company’s second quarter fiscal year 2013 financial
results, current financial guidance, and other corporate developments. To
access this call, dial 1-877-548-7913 (domestic) or 1-719-325-4940
(international). The passcode is 6518084. A replay of this conference call
will be available through November 8, 2012 at 1-877-870-5176 (domestic) or
1-858-384-5517 (international). The replay passcode is 6518084. A live webcast
of this conference call will be available on the “Investors” page of the
Company’s website (www.virtusa.com), and a replay will be archived on the
website as well.

About Virtusa Corporation

Virtusa provides end-to-end information technology (IT) services to Global
2000 companies. These services, which include IT consulting, application
maintenance, development, systems integration and managed services, leverage a
unique Platforming methodology that transforms clients’ businesses through IT
rationalization. Virtusa helps customers accelerate business outcomes by
consolidating, rationalizing, and modernizing their core customer-facing
processes into one or more core systems.

Virtusa delivers cost-effective solutions through a global delivery model,
applying advanced methods such as Agile and Accelerated Solution Design to
ensure that its solutions meet the clients’ requirements. As a result, its
clients simultaneously reduce their IT operations cost while increasing their
ability to meet changing business needs.

Founded in 1996 and headquartered in Massachusetts, Virtusa has operations in
North America, Europe, and Asia.

© 2012 Virtusa Corporation. All rights reserved.

Virtusa, Accelerating Business Outcomes, BPM Test Drive and
Productizationareregistered trademarks of Virtusa Corporation. All other
company andbrand names may be trademarks or service marks of their respective
holders.

Non-GAAP Financial Information

This press release includes certain non-GAAP financial information as defined
by Regulation G by the Securities and Exchange Commission. Virtusa presents
constant currency revenue to provide insights into, and a framework for
assessing, how Virtusa's revenue performed excluding the effect of foreign
currency rate fluctuations (see footnote (1) below for further detail).
Virtusa also presents a reconciliation of its cash, cash equivalents, short
term and long term investments which it believes provides insight into its
cash position and overall liquidity (see footnote (2) below for further
detail). While Virtusa's management believes that these non-GAAP revenue
measures and cash reconciliation presentations are useful in evaluating
Virtusa's revenue and cash position and overall liquidity, this information
should be considered as supplemental in nature and not as a substitute for the
related financial information prepared in accordance with GAAP.

Footnotes

(1) To determine year-over-year constant currency revenue for the Company's
second quarter of fiscal 2013, revenue from entities reporting in U.K. pound
sterling was converted into U.S. dollars at the average exchange rate in
effect for the three months ended September 30, 2011 of 1.60 U.S. dollars to
U.K. pounds sterling, rather than the actual exchange rate in effect for the
three months ended September 30, 2012 of 1.59 U.S. dollars to U.K. pounds
sterling. To determine sequential revenue change in constant currency for the
Company's second quarter of fiscal 2013, revenue from entities reporting in
U.K. pounds sterling was converted into U.S. dollars at the average exchange
rate in effect for the three months ended June 30, 2012 of 1.57 U.S. dollars
to U.K. pounds sterling, rather than the actual exchange rate in effect for
the three months ended September 30, 2012 of 1.59 U.S. dollars to U.K. pounds
sterling.

(2) The Company considers the measure of cash, cash equivalents, short-term
and long-term investments to be a more meaningful indicator of the Company's
overall liquidity. All of the Company's investments are classified as
available-for-sale, including the Company's long-term investments which
consist of fixed income securities, including government agency bonds and
municipal and corporate bonds, which meet the credit rating and
diversification requirements of the Company's investment policy as approved by
the Company's audit committee and board of directors.

Forward-Looking Statements

Certain statements made in this press release that are not based on historical
information are forward-looking statements which are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
This press release contains express or implied forward-looking statements
relating to, among other things, Virtusa's expectations concerning
management's forecast of financial performance, the growth of our business,
and management's plans, objectives, and strategies. These statements are
neither promises nor guarantees, but are subject to a variety of risks and
uncertainties, many of which are beyond Virtusa's control, which could cause
actual results to differ materially from those contemplated in these
forward-looking statements. In particular, the risks and uncertainties
include, among other things: Virtusa's dependence on a limited number of
clients as well as clients located principally in the United States and United
Kingdom and in concentrated industries; Virtusa's ability to hire and retain
enough sufficiently trained IT professionals to support its operations;
Virtusa's ability to expand its business or effectively manage growth;
Virtusa's ability to sustain profitability or maintain profitable engagements;
Virtusa's ability to assimilate and integrate the operations of acquired
businesses; unanticipated acquisition related costs and negative effects on
Virtusa's reported results of operations from acquisition-related charges;
Virtusa's ability to achieve expected synergies and operating efficiencies in
the acquisitions within expected time-frames or at all; restrictions on
immigration or changes in immigration laws; the loss of any key member of
Virtusa's senior management team; increasing competition in the IT services
outsourcing industry; Virtusa's ability to attract and retain clients and meet
their expectations; quarterly fluctuations in Virtusa's earnings; client
terminations or contracting delays, or delays in revenue recognition in any
reporting period; Virtusa's ability to successfully manage its billing and
utilization rates and its targeted on-site to offshore delivery mix;
technological innovation; Virtusa's ability to effectively manage its
facility, infrastructure and capacity needs; regulatory, legislative and
judicial developments in Virtusa's operations areas; political or economic
instability in India or Sri Lanka; any reduction or withdrawal of tax benefits
provided to Virtusa by the governments of India and Sri Lanka, or new
legislation by such governments which could be harmful to Virtusa; wage
inflation and increases in government mandated benefits in India and Sri
Lanka; telecommunications or technology disruptions; worldwide economic and
business conditions; currency exchange rate fluctuations of the Indian and Sri
Lankan rupee, the U.S. dollar and the U.K. pound sterling; and the volatility
of the market price of Virtusa's common stock. Existing and prospective
investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Virtusa undertakes no
obligation to update or revise the information contained in this press
release, whether as a result of new information, future events or
circumstances or otherwise. For additional disclosure regarding these and
other risks faced by Virtusa, see the disclosure contained in Virtusa's public
filings with the Securities and Exchange Commission, including Virtusa’s
Annual Report on Form 10-K for the fiscal year ended March 31, 2012 and
subsequent Quarterly Reports on Form 10-Q, as filed with the Securities and
Exchange Commission.

                                                       
Virtusa Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, unaudited)
                                                                
                                                                
                                                                
                                                               
                                          September 30,         March 31, 2012
                                          2012
Assets:
Cash and cash equivalents                 $46,596               $58,105
Short-term investments                    26,354                23,055
Accounts receivable, net                  67,907                58,789
Unbilled accounts receivable              7,334                 7,634
Prepaid expenses                          5,838                 6,552
Deferred income taxes                     3,429                 3,693
Restricted cash                           399                   2,828
Other current assets                      7,205                 5,831
Total current assets                      165,062               166,487
                                                                
Property and equipment, net               34,683                32,843
Long-term investments                     7,006                 4,269
Deferred income taxes                     7,864                 8,348
Goodwill                                  35,472                35,472
Intangible assets, net                    16,967                18,248
Other long-term assets                    9,591                 7,726
Total assets                              $276,645              $273,393
                                                                
Liabilities:
Accounts payable                          $5,607                $8,649
Accrued employee compensation and         15,022                17,844
benefits
Accrued expenses and other                16,576                22,011
current liabilities
Income taxes payable                      6,427                 3,553
Total current liabilities                 43,632                52,057
Long-term liabilities                     1,775                 3,162
Total liabilities                         45,407                55,219
                                                                
Stockholders' equity                      231,238               218,174
Total liabilities and                     $276,645              $273,393
stockholders' equity

                                                            
Virtusa Corporation and Subsidiaries
Consolidated Statements of Income
(In thousands except share and per share amounts, unaudited)
                                                                       
                                                                       
                Three Months Ended                    Six Months Ended
                September 30,                         September 30,
                2012             2011                 2012             2011
                                                                       
Revenue         $80,535          $70,311              $156,752         $131,356
Costs of        52,902          45,395              102,496         83,377     
revenue
Gross           27,633          24,916              54,256          47,979     
profit
Total
operating       20,204          19,449              39,958          37,725     
expenses
                                                                       
Income from     7,429            5,467                14,298           10,254
operations
                                                                       
Other
income
(expense):
Interest        754              554                  1,469            1,159
income
Foreign
currency        (490       )     (81        )         (49        )     (263       )
transaction
losses
Other, net      (23        )     (28        )         61              (51        )
Total other
income          241             445                 1,481           845        
(expense)
                                                                       
Income
before          7,670            5,912                15,779           11,099
income tax
expense
Income tax      1,907           1,224               3,877           2,456      
expense
                                                                       
Net income      $5,763          $4,688              $11,902         $8,643     
                                                                       
Net income
per share
of common
stock:
Basic           $0.23           $0.19               $0.48           $0.35      
Diluted         $0.23           $0.18               $0.47           $0.34      
Weighted
average
number of
common
shares
outstanding
Basic           24,866,477      24,652,654          24,846,056      24,555,064 
Diluted         25,518,240      25,364,751          25,502,093      25,346,622 

                                                             
Virtusa Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(In thousands, unaudited)
                                                                     
                                                   Six Months Ended
                                                   September 30,
                                                   2012              2011
Cash flows provided by operating
activities:
Net income                                         $11,902           $8,643
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization                      4,160             3,985
Share-based compensation expense                   2,620             2,587
Gain on sale of plant and equipment                (110    )         (2      )
Foreign currency losses, net                       49                263
Net changes in operating assets and
liabilities:
Accounts receivable, net                           (8,923  )         (11,560 )
Prepaid expenses and other current                 (430    )         4
assets
Other long-term assets                             (1,142  )         (1,765  )
Accounts payable                                   (2,921  )         (2,018  )
Accrued employee compensation and                  (3,929  )         (1,132  )
benefits
Accrued expenses and other current                 (828    )         1,883
liabilities
Income taxes payable                               2,162             1,282
Other long-term liabilities                        167              (950    )
Net cash provided by operating                     2,777            1,220   
activities
Cash flows used for investing
activities:
Proceeds from sale of property and                 116               110
equipment
Purchase of short-term investments                 (5,918  )         (1,847  )
Proceeds from sale or maturity of                  4,356             27,874
short-term investments
Purchase of long-term investments                  (5,837  )         (1,380  )
Proceeds from sale or maturity of                  1,050             9,956
long-term investments
Business acquisition                               (2,775  )         (25,055 )
Decrease (increase) in restricted                  2,423             (2,777  )
cash
Purchase of property and equipment                 (5,447  )        (7,764  )
Net cash used for investing                        (12,032 )        (883    )
activities
Cash flows used for financing
activities:
Proceeds from exercise of common                   613               1,495
stock options
Purchase of treasury stock                         (1,408  )         -
Payment of contingent consideration                -                 (1,620  )
related to acquisition
Principal payments on capital lease                (1,018  )         (932    )
obligation
Net cash used for financing                        (1,813  )         (1,057  )
activities
Effect of exchange rate changes on                 (441    )         (797    )
cash and cash equivalents
Net decrease in cash and cash                      (11,509 )         (1,517  )
equivalents
Cash and cash equivalents, beginning               58,105           50,218  
of period
Cash and cash equivalents, end of                  $46,596          $48,701 
period
                                                                     
                                                                     
Supplemental Non-GAAP Financial Information as
of September 30, 2012 and 2011
                                                                     
Reconciliation to total cash and cash
equivalents, short-term investments and
long-term investments:
                                                                     
Cash and cash equivalents, end of                  $46,596           $48,701
period
                                                                     
Short-term investments                             26,354            22,858
Long-term investments                              7,006            3,210   
Total short-term and long-term                     33,360            26,068
investments, end of period
                                                                     
Total cash and cash equivalents,
short-term investments and long-term               $79,956          $74,769 
investments

Contact:

Media Contact:
Greenough
Andrea LePain, 617-275-6516
alepain@greenough.biz
or
Investor Contact:
ICR
Staci Strauss Mortenson, 203-682-8273
staci.mortenson@icrinc.com
 
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