- First quarter fiscal 2019 revenue of
$300.0 million increased 6.6% sequentially and 32.0%
year-over-year.
- First quarter fiscal 2019 GAAP
diluted EPS of $(0.25). Non-GAAP diluted EPS of $0.50, doubling
first quarter fiscal 2018 non-GAAP EPS.
- First quarter fiscal 2019 GAAP
operating income of $13.9 million. Non-GAAP operating income of
$27.5 million, up 106% from $13.4 million in first quarter fiscal
2018.
- Completed Polaris delisting from
India Stock Exchanges on August 1, 2018.
Virtusa Corporation (NASDAQ GS: VRTU), a global provider of
digital engineering and IT outsourcing services that accelerate
business outcomes for its clients, today reported consolidated
financial results for the first quarter fiscal 2019, ended June 30,
2018.
First Quarter Fiscal 2019 Consolidated Financial
Results
Revenue for the first quarter of fiscal 2019 was $300.0 million,
an increase of 6.6% sequentially and 32.0% year-over-year. On a
constant currency basis, (1) first quarter revenue increased 7.4%
sequentially and 30.7% year-over-year.
Virtusa reported GAAP income from operations of $13.9 million
for the first quarter of fiscal 2019, compared to $16.4 million for
the fourth quarter of fiscal 2018 and $6.1 million for the first
quarter of fiscal 2018.
GAAP net loss available to common shareholders for the first
quarter of fiscal 2019 was $7.4 million, or a ($0.25) loss per
diluted share, compared to GAAP net income of $1.8 million, or
$0.06 per diluted share, for the fourth quarter of fiscal 2018, and
GAAP net income of $3.0 million, or $0.10 per diluted share, for
the first quarter of fiscal 2018. First quarter fiscal 2019 GAAP
net loss includes $4.5 million of net unrealized foreign exchange
losses on an after-tax basis and $6.3 million of deferred tax
charge related to Virtusa’s election to treat certain subsidiaries
as disregarded entities for US tax purposes, both of which were not
included in prior guidance.
Non-GAAP Results:
Non-GAAP income from operations, which excludes stock-based
compensation expense, restructuring charges and acquisition related
charges, was $27.5 million for the first quarter of fiscal 2019,
compared with $27.9 million for the fourth quarter of fiscal 2018
and $13.4 million for the first quarter of fiscal 2018.
Non-GAAP net income was $16.8 million, or $0.50 per diluted
share, for the first quarter of fiscal 2019, compared to $18.3
million, or $0.55 per diluted share, for the fourth quarter of
fiscal 2018, and $7.4 million, or $0.25 per diluted share, for the
first quarter of fiscal 2018.
Balance Sheet and Cash Flow
The Company ended the first quarter of fiscal 2019 with $213.0
million of cash, cash equivalents and investments (2). Cash used in
operating activities was $6.7 million for the first quarter of
fiscal 2019.
Management Commentary
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “We are
off to a solid start in fiscal 2019 as the momentum we established
in FY 2018 continues. Across every one of our industry groups, the
need for digital transformation has moved from being a strategic
option to being a business imperative. Virtusa’s strong execution
and the depth and breadth of our digital engineering capabilities
allow us to help our clients realize the full potential of digital
transformation and are powering our performance.”
Ranjan Kalia, Chief Financial Officer, said, “We are pleased
with our fiscal 2019 first quarter results. We reported revenue
toward the high-end of our guidance range and generated strong
year-over-year organic revenue growth, margin expansion and EPS
accretion. Our fiscal 2019 first quarter momentum has allowed us to
maintain the midpoint of our FY 2019 revenue guidance even after
absorbing one percent of currency headwinds compared to our prior
guidance. We expect strong fiscal year 2019 non-GAAP diluted EPS
growth of 38% at the midpoint based on our increased earnings
guidance.”
Financial Outlook
Virtusa management provided the following current financial
guidance:
- Second quarter fiscal 2019 revenue is
expected to be in the range of $301.0 to $309.0 million. GAAP
diluted EPS is expected to be in the range of $0.09 to $0.13.
Non-GAAP diluted EPS is expected to be in the range of $0.50 to
$0.56.
- Fiscal year 2019 revenue is expected to
be in the range of $1,235.0 to $1,265.0 million. GAAP diluted EPS
is expected to be in the range of $0.09 to $0.19. Non-GAAP diluted
EPS is expected to be in the range of $2.16 to $2.34.
In accordance with US GAAP, Virtusa applies the if-converted
method to its convertible preferred shares when reporting its
fiscal year 2019 results. The if-converted method is used to
calculate the share impact of convertible securities. Under this
method, only when the convertible securities are considered
dilutive are they then included in the computation of weighted
average shares outstanding in reported results and full year
guidance.
- First quarter GAAP Income per share was
calculated by including the impact of dividends and accretion on
the convertible preferred shares in net income available to common
stockholders and excluding the impact of the convertible preferred
shares from the weighted average shares. First quarter non-GAAP EPS
was calculated by excluding the impact of dividends and accretion
on the convertible preferred shares from net income available to
common stockholders and including the impact of the convertible
preferred shares in the weighted average shares outstanding as
these shares were dilutive on a non-GAAP basis.
- GAAP EPS guidance was calculated under
the assumption that these convertible preferred shares will be
anti-dilutive in fiscal 2019. Thus, in determining full fiscal year
2019 GAAP EPS guidance, dividends and accretion on the convertible
preferred shares are deducted from net income available to common
stockholders and the convertible preferred shares have been
excluded from weighted average shares outstanding.
- Non-GAAP EPS guidance was calculated
under the assumption that these convertible preferred shares will
be dilutive in fiscal year 2019. Thus, in determining full fiscal
year 2019 non-GAAP EPS guidance, dividends and accretion on the
convertible preferred shares are excluded from net income available
to common stockholders and the impact of the convertible preferred
shares are included in the weighted average shares
outstanding.
The Company’s second quarter and fiscal year 2019 diluted GAAP
EPS estimates are based on average share counts of approximately
30.7 million and 30.8 million, respectively (assuming no further
exercises of stock-based awards). The Company’s second quarter and
fiscal year 2019 diluted Non-GAAP EPS estimates are based on
average share counts of approximately 33.7 million and 33.8
million, respectively (assuming no further exercises of stock-based
awards). GAAP and Non-GAAP average share counts assume a stock
price of $52.88, which was derived from the average closing price
of the Company’s stock over the five trading days ended on August
2, 2018. Deviations from this stock price may cause actual diluted
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, August 8, 2018 at
5:00 p.m. Eastern Time to discuss the Company’s first quarter
fiscal 2019 financial results, current financial guidance, and
other corporate developments. To access this call, please dial
888-394-8218 (domestic) or 323-701-0225 (international). The
passcode is 9387160. A replay of this conference call will be
available through August 15, 2018 at 844-512-2921 (domestic) or
412-317-6671 (international). The replay passcode is 9387160. 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
Virtusa Corporation (NASDAQ GS: VRTU) is a global provider of
Digital Business Transformation, Digital Engineering, and
Information Technology (IT) outsourcing services that accelerate
our clients’ journey to their Digital Future. Virtusa serves Global
2000 companies in Banking, Financial Services, Insurance,
Healthcare, Telecommunications, Media, Entertainment, Travel,
Manufacturing, and Technology industries.
Using a combination of digital strategy, digital engineering,
business implementation, and IT platform modernization services,
Virtusa helps clients execute successful end-to-end digital
business transformation initiatives.
Virtusa engages its clients to re-imagine their business models
and develop strategies to defend and grow their business by
introducing innovative products and services, developing
distinctive digital consumer experiences, creating operational
efficiency using digital labor, developing operational and IT
platforms for the future, and rationalizing and modernizing their
existing IT applications infrastructure. As a result, its clients
are simultaneously able to drive business growth through
digital-first customer experiences, while also consolidating and
modernizing their IT application infrastructure to support digital
business transformation.
Holding a proven record of success across industries, Virtusa
readily understands its clients' business challenges and uses its
domain expertise to deliver innovative applications of technology
to address its clients’ critical business challenges. Examples
include building the world's largest property & casualty claims
modernization program; one of the largest corporate customer
portals for a premier global bank; an order to cash implementation
for a multinational telecommunications provider; and digital
transformation initiatives for media and banking companies.
Founded in 1996 and headquartered in Massachusetts, Virtusa has
operations in North America, Europe, and Asia.
© 2018 Virtusa Corporation. All rights reserved.
Virtusa, Accelerating Business Outcomes, BPM Test Drive and
Productization are registered trademarks of Virtusa Corporation.
All other company and brand names may be trademarks or service
marks of their respective holders.
Non-GAAP Financial Information
This press release includes certain non-GAAP financial measures
as defined by Regulation G by the Securities and Exchange
Commission. These non-GAAP financial measures are not based on any
comprehensive set of accounting rules or principles and should not
be considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and may be different from
non-GAAP measures used by other companies. In addition, these
non-GAAP measures should be read in conjunction with Virtusa’s
financial statements prepared in accordance with GAAP.
Virtusa believes the following financial measures will provide
additional insights to measure the operational performance of the
business.
- Virtusa presents constant currency
revenue growth rates 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).
- Virtusa presents a reconciliation of
its cash and cash equivalents to total cash, cash equivalents,
short term and long term investments which Virtusa believes
provides insight into its cash position and overall liquidity (see
footnote 2).
- Virtusa also presents the following
consolidated statements of income (loss) measures that exclude,
when applicable, acquisition-related charges, restructuring
charges, stock-based compensation expense, foreign currency
transaction gains and losses, non-recurring third party financing
costs, the tax impact of dividends received from foreign
subsidiaries, the initial impact of our election to treat certain
subsidiaries as disregarded entities for US tax purposes, and the
impact from the U.S. government enacted comprehensive tax
legislation (“Tax Act”) to provide further insights into the
comparison of Virtusa’s operating results among the periods:
- Non-GAAP income from operations: income
from operations, as reported on Virtusa’s consolidated statements
of income, excluding stock-based compensation expense,
acquisition-related charges and restructuring charges.
- Non-GAAP operating margin: non-GAAP
income from operations as a percentage of reported revenues.
- Non-GAAP net income available to
Virtusa common stockholders: net income (loss) available to Virtusa
common stockholders, as reported on our consolidated statements of
income (loss), excluding stock-based compensation,
acquisition-related charges, restructuring charges, foreign
currency transaction gains and losses, non-recurring third party
financing costs, the tax impact of the above items, the initial
impact of our election to treat certain subsidiaries as disregarded
entities for US tax purposes, the tax impact of dividends received
from foreign subsidiaries, and the impact from the Tax Act.
- Non-GAAP diluted earnings per share:
diluted earnings (loss) per share, as reported on Virtusa’s
consolidated statements of income (loss) available to Virtusa
common stockholders, excluding stock-based compensation,
acquisition-related charges, restructuring charges, foreign
currency transaction gains and losses, non-recurring third party
financing costs, the tax impact of the above items, the initial
impact of our election to treat certain subsidiaries as disregarded
entities for US tax purposes, the tax impact of dividends received
from foreign subsidiaries, and the impact from the Tax Act.
Non-GAAP diluted earnings per share is also subject to dilutive and
anti-dilutive requirements of the if-converted method related to
our Series A Convertible Preferred Stock that could result in a
difference between GAAP to non-GAAP diluted weighted average shares
outstanding.
The following table presents a reconciliation of each Non-GAAP
financial measure to the most comparable GAAP measure:
(in thousands, except per share
amounts) Three Months Ended June 30, 2018
2017 GAAP income from
operations $ 13,924 $ 6,070 Add: Stock-based
compensation expense 7,938 4,788 Add: Acquisition-related charges
and restructuring charges(a) 5,665
2,509
Non-GAAP income from operations $ 27,527
$ 13,367
GAAP operating
margin 4.6 % 2.7 % Effect of above adjustments to income from
operations 4.5 % 3.2 %
Non-GAAP
operating margin 9.1 % 5.9 %
GAAP net income (loss) available to Virtusa common
stockholders $ (7,383 ) $ 2,957 Add: Stock-based compensation
expense 7,938 4,788 Add: Acquisition-related charges and
restructuring charges(a) 6,127 2,509 Add: Foreign currency
transaction losses(b) 10,758 77 Tax adjustments (c) (1,817 ) (2,522
) Noncontrolling interest, net of taxes (d) 127
(366 )
Non-GAAP net income available to
Virtusa common stockholders $ 15,750 $
7,443
GAAP diluted earnings (loss) per share
(f) $ (0.25 ) $ 0.10 Effect of stock-based compensation
expense (g) 0.24 0.16 Effect of acquisition-related charges and
restructuring charges(a) (g) 0.18 0.08 Effect of foreign currency
transaction losses(b) (g) 0.32 - Effect of tax adjustments (c) (g)
(0.05 ) (0.08 ) Effect of noncontrolling interest (d) (g) - (0.01 )
Effect on dividend on Series A Convertible Preferred Stock (f) (g)
0.03 - Effect of change in dilutive shares for non-GAAP (f)
0.03 -
Non-GAAP diluted
earnings per share (e) (g) $ 0.50 $
0.25
(a) Acquisition-related charges include, when applicable,
amortization of purchased intangibles, external deal costs,
acquisition-related retention bonuses, changes in the fair value of
contingent consideration liabilities, accreted interest related to
deferred acquisition payments, charges for impairment of acquired
intangible assets and other acquisition-related costs including
integration expenses consisting of outside professional and
consulting services and direct and incremental travel costs.
Restructuring charges, when applicable, include termination
benefits, as well as certain professional fees related to the
restructuring. The following table provides the details of the
acquisition-related charges and restructuring charges:
Three Months Ended June 30, 2018
2017 Amortization of intangible assets $ 2,775
$ 2,509 Acquisition & integration costs $ 2,890
$ - Acquisition-related charges included in cost of
goods sold and operating expense $ 5,665 $ 2,509 Accreted interest
related to deferred acquisition payments $ 462 $ -
Total acquisition-related charges and restructuring charges
$ 6,127 $ 2,509 (b) Foreign
currency transaction gains and losses are inclusive of gains and
losses on related foreign exchange forward contracts not designated
as hedging instruments for accounting purposes. (c)
Tax adjustments reflect the tax effect of the non-GAAP adjustments
using the tax rates at which these adjustments are expected to be
realized for the respective periods, excluding the initial impact
of our election to treat certain subsidiaries as disregarded
entities for US tax purposes. (d) Noncontrolling
interest represents the minority shareholders interest of Polaris.
(e) Non-GAAP diluted earnings per share is subject to
rounding. (f) During the three months ended June 30, 2018
and 2017, the weighted average shares outstanding of Series A
Convertible Preferred Stock of 3,000,000 and 1,912,088
respectively, were excluded from the calculations of GAAP diluted
earnings per share as their effect would have been anti-dilutive
using the if-converted method.
The following table provides the non-GAAP
net income available to Virtusa common stockholders and non-GAAP
dilutive weighted average shares outstanding using if-converted
method to calculate the non-GAAP diluted earnings per share for the
three months ended June 30, 2018 and 2017:
Three Months Ended June 30, 2018
2017 Non-GAAP net income available to Virtusa common
stockholders $ 15,750 $ 7,443 Add: Dividends and
accretion on Series A Convertible Preferred Stock $ 1,087
$ - Non-GAAP net income available to Virtusa common
stockholders and assumed conversion $ 16,837 $ 7,443
GAAP dilutive weighted average shares outstanding
29,633,026 30,251,150 Add: Dilutive effect of employee stock
options and unvested restricted stock awards and restricted stock
units 872,545 - Add: Series A Convertible Preferred Stock as
converted 3,000,000 - Non-GAAP dilutive
weighted average shares outstanding 33,505,571
30,251,150 (g) To the extent the Series A Convertible
Preferred Stock is dilutive using the if-converted method, the
Series A Convertible Preferred Stock is included in the weighted
average shares outstanding to determine non-GAAP diluted earnings
per share.
Footnotes
(1) To determine sequential revenue change in constant currency
for the Company's first quarter of fiscal 2019, revenue from
entities reporting in U.K. Pounds (GBP), Euros, and Swedish Krona
(SEK) were converted into U.S. dollars at the average exchange
rates in effect for the three months ended March 31, 2018, rather
than the actual exchange rate in effect for the three months ended
June 30, 2018. To determine year-over-year revenue change in
constant currency for the Company's first quarter of fiscal 2019,
revenue from entities reporting in U.K. Pounds (GBP), Euros, and
Swedish Krona (SEK) were converted into U.S. dollars at the average
exchange rates in effect for the three months ended June 30, 2017,
rather than the actual exchange rate in effect for the three months
ended June 30, 2018. The average exchange rates for the three
months ended June 30, 2017, March 31, 2018, and June 30, 2018 are
presented in the following table:
Average U.S. Dollar Exchange Rate For the Three
Months Ended
June 30,
2017
March 31,
2018
June 30,
2018
GBP 1.28 1.40 1.35
Euro 1.11 1.23 1.19
SEK 0.11 0.12 0.11
(2) The Company considers the total measure of cash, cash
equivalents, short-term and long-term investments to be an
important indicator of the Company's overall liquidity. All of the
Company's investments are classified as either equity or
available-for-sale securities, 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.
(3) Earnings per share amounts for each quarter may not
necessarily total to the yearly earnings per share due to the
weighting of shares outstanding on a quarterly and year to date
basis.
(4) On March 3, 2016 Virtusa acquired a majority interest in
Polaris. In accordance with US GAAP, Polaris financial results for
the quarter ending June 30, 2018 and assets and liabilities as of
that date have been consolidated in full into Virtusa’s financial
statements. Net assets attributable to ownership in Polaris by
minority shareholders (Non-controlling Interest) in our
Consolidated Balance Sheets was $16.7 million at June 30, 2018.
Profit attributable to minority shareholders (Non-controlling
Interest) in the Consolidated Statements of Income was $0.7 million
on a GAAP basis and $0.6 million on a non-GAAP basis for the
quarter ending June 30, 2018.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended,
including statements regarding, management's forecast of financial
performance, the growth of our business and management's plans,
objectives, and strategies. These forward-looking statements
include, but are not limited to, plans, objectives, expectations
and intentions and other statements contained in this press release
that are not historical facts, and statements identified by words
such as “expects,” “anticipates,” “intends,” “plans,” “believes,”
“see,” “seeks,” “estimates,” “will,” “should,” “may,” “confident,”
“positions,” “look forward to,” and variations of such words or
words of similar meaning and the use of future dates. These
forward-looking statements reflect our current views about our
plans, intentions, expectations, strategies and prospects, and our
growth rate, which are based on the information currently available
to us and on assumptions we have made. Although we believe that our
plans, intentions, expectations, strategies and prospects as
reflected in or suggested by those forward-looking statements are
reasonable, we can give no assurance that these plans, intentions,
expectations or strategies will be attained or achieved.
Furthermore, actual results may differ materially from those
described in the forward-looking statements and will be affected by
a variety of risks and factors that are beyond our control
including, without limitation: any increase in Virtusa’s borrowings
in connection with the acquisition of the balance of shares in
Polaris and Virtusa’s ability to service such indebtedness with
future cash flows; Virtusa’s failure to realize the intended
benefits of the Polaris delisting transaction, including the
inability to integrate Virtusa’s and Polaris’ business and
operations to realize the anticipated synergies and cost savings in
the expected amounts or within the anticipated time frames or cost
expectations or at all; Virtusa incurring unexpected costs or
liabilities in connection with the Polaris delisting offer and
related transactions; the possibility that Virtusa’s current or
future estimated guidance may differ materially from expectations;
Virtusa incurring unexpected costs or liabilities in connection
with the Polaris acquisition and delisting process; inability of
Virtusa to service the debt incurred by Virtusa to acquire Polaris
and the delisting process or to maintain compliance with certain
financial covenants under the loan facility; Virtusa’s ability to
integrate the operations of, and achieve expected synergies and
operating efficiencies in connection with, acquired businesses,
including eTouch; unanticipated acquisition related costs and
negative effects on Virtusa’s reported results of operations from
previous acquisitions; Virtusa’s failure to realize the intended
benefits of the Orogen convertible preferred stock financing, the
inability to pay cash dividends on the convertible preferred stock,
thus increasing the dilutive impact of the financing; the inability
of Virtusa to redeem the convertible preferred stock at maturity,
if there has been no conversion event prior to maturity; 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; currency exchange rate fluctuations of the
Indian and Sri Lankan rupee, the U.S. dollar, the U.K pound
sterling, the Swedish krona, and the euro; the international nature
of our business; restrictions on immigration or changes in
immigration laws; 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; 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 and Virtusa’s
ability to comply with changing or complex laws and maintain
effective internal controls to ensure ongoing compliance; the loss
of any key member of Virtusa's senior management team, 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; and the volatility of the market price of
Virtusa's common stock. 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, 2018 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)
June 30, 2018
March 31, 2018 Assets: Cash and cash equivalents $
154,792 $ 194,897 Short-term investments 56,396 45,900 Accounts
receivable, net 146,510 151,455 Unbilled accounts receivable
117,911 103,829 Prepaid expenses 32,028 31,724 Restricted cash 505
301 Other current assets 21,182 21,229 Total current
assets 529,324 549,335 Property and equipment, net 124,463
121,565 Investments accounted for using equity method 1,480 1,588
Long-term investments 1,842 4,140 Deferred income taxes 35,667
31,528 Goodwill 289,303 297,251 Intangible assets, net 91,515
96,001 Other long-term assets 16,532 11,772 Total
assets $ 1,090,126 $ 1,113,180
Liabilities: Accounts
payable $ 29,050 $ 29,541 Accrued employee compensation and
benefits 55,068 71,500 Deferred revenue 6,795 7,908 Accrued
expenses and other 100,204 91,306 Current portion of long-term debt
13,657 11,407 Income taxes payable 7,030 5,038 Total
current liabilities 211,804 216,700 Deferred income taxes 19,310
21,341 Long-term debt, less current portion 285,376 288,227
Long-term liabilities 45,252 43,833 Total liabilities
561,742 570,101 Series A convertible preferred
stock 107,037 106,996 Virtusa stockholders' equity 404,622
418,623 Noncontrolling interest 16,725 17,460
Stockholders' equity 421,347 436,083 Total
liabilities, Series A convertible preferred stock and
stockholders' equity
$ 1,090,126 $ 1,113,180
Virtusa Corporation and
Subsidiaries Consolidated Statements of Income (Loss)
(In thousands except share and per share amounts, unaudited)
Three Months Ended
June 30, 2018 2017
Revenue $ 300,031 $ 227,345 Costs of revenue 216,481
166,279 Gross profit 83,550
61,066 Total operating expenses 69,626
54,996 Income from operations 13,924 6,070
Other income (expense): Interest income 1,292 1,005 Interest
expense (4,254 ) (1,658 ) Foreign currency transaction losses
(10,758 ) (77 ) Other, net 95 105 Total
other income (expense) (13,625 ) (625 ) Income
before income tax expense 299 5,445 Income tax expense 5,864
798 Net income (loss) (5,565 ) 4,647 Less: net
income attributable to noncontrolling interests, net of tax
731 989 Net income (loss) available to Virtusa
stockholders (6,296 ) $ 3,658 Less: Series A convertible preferred
stock dividends and accretion 1,087 701
Net income (loss) available to Virtusa common stockholders
(7,383 ) $ 2,957 Basic earnings (loss) per
share available to Virtusa common stockholders ($0.25 ) $
0.10 Diluted earnings (loss) per share available to Virtusa
common stockholders ($0.25 ) $ 0.10 Weighted average
number of common shares outstanding: Basic 29,633,026
29,651,602 Diluted 29,633,026
30,251,150
Virtusa
Corporation and Subsidiaries Consolidated Statements of Cash
Flows (In thousands, unaudited) Three Months
Ended June 30, 2018
2017 Cash flows from operating activities: Net income
(loss) ($5,565 ) $ 4,647 Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Depreciation and amortization 7,273 6,643 Share-based compensation
expense 7,938 4,788
Provision (recovery) for doubtful
accounts, net
(206 ) 411 Gain on disposal of property and equipment (8 ) (8 )
Foreign currency transaction losses, net 10,758 77 Amortization of
discounts and premiums on investments 51 93 Amortization of debt
issuance cost 273 284 Deferred income taxes, net (3,594 ) - Net
changes in operating assets and liabilities: Accounts receivable
and unbilled receivable (12,750 ) (4,832 ) Prepaid expenses and
other current assets (7,519 ) (2,667 ) Other long-term assets
(4,150 ) (179 ) Accounts payable 1,218 1,358 Accrued employee
compensation and benefits (14,855 ) (9,424 ) Accrued expenses and
other current liabilities 6,562 3,135 Income taxes payable 6,412
(2,648 ) Other long-term liabilities 1,432
(614 ) Net cash (used in) provided by operating activities
(6,730 ) 1,064 Cash flows from investing activities:
Proceeds from sale of property and equipment 186 30 Purchase of
short-term investments (38,008 ) (8,867 ) Proceeds from sale or
maturity of short-term investments 29,292 29,002 Purchase of
long-term investments - (8,753 ) Business acquisition, net of cash
acquired - (600 ) Purchase of property and equipment (13,461
) (3,044 ) Net cash (used in) provided by investing
activities (21,991 ) 7,768 Cash flows
from financing activities: Proceeds from exercise of common stock
options 294 1,629 Proceeds from exercise of subsidiary stock
options 196 142 Payment of debt (875 ) (81,000 ) Payments of
withholding taxes related to net share settlements of restricted
stock (2,450 ) (1,416 ) Series A convertible preferred stock
proceeds, net of issuance costs of $1,154 - 106,846 Repurchase of
common stock - (27,319 ) Principal payments on capital lease
obligation (22 ) (31 ) Payment of dividend on Series A convertible
preferred stock (1,046 ) - Net cash used in
financing activities (3,903 ) (1,149 ) Effect of
exchange rate changes on cash and cash equivalents (7,279 )
1,551 Net (decrease) increase in cash and cash
equivalents (39,903 ) 9,234 Cash, cash equivalents and restricted
cash, beginning of period 195,236 145,086
Cash, cash equivalents and restricted cash, end of period $
155,333 $ 154,320
Supplemental
Non-GAAP Financial Information as of June 30, 2018 and 2017
Reconciliation from cash, cash equivalents and restricted
cash to total cash and cash equivalents, short-term investments and
long-term investments: Cash, cash equivalents and restricted
cash, end of period $ 155,333 $ 154,320 Less : Restricted cash
541 341 Total Cash and cash equivalents
end of period 154,792 153,979
Short-term investments 56,396 62,432 Long-term investments
1,842 18,655 Total short-term and long-term
investments, end of period 58,238 81,087
Total cash and cash equivalents, short-term
and long-term investments $ 213,030 235,066
Virtusa Corporation and Subsidiaries
Reconciliation of Non-GAAP Guidance**
Three months ending
Fiscal Year ending September 30, 2018 March 31,
2019 Low High
Low High GAAP
diluted earnings per share $0.09 $0.13
$0.09 $0.19 Effect of stock-based compensation
expense 0.26 0.26 0.93 0.93 Effect of acquisition-related charges
and restructuring charges 0.18 0.18 0.71 0.71 Effect of foreign
currency transaction (gains) losses 0.00 0.00 0.32 0.32 Effect of
change in dilutive shares for non-GAAP (0.01) (0.01) (0.01) (0.02)
Effect of tax impact from Tax Act 0.00 0.00 0.00 0.00 Effect of tax
adjustments (0.04) (0.02) (0.01) 0.08 Effect of noncontrolling
interest (0.00) (0.00) (0.00) (0.00) Effect on dividend on Series A
Convertible Preferred Stock 0.03 0.03
0.13 0.13
Non-GAAP diluted earnings
per share# $0.50
$0.56 $2.16 $2.34
Weighted average diluted shares outstanding - GAAP 30.7 30.7
30.8 30.8 - Non-GAAP 33.7 33.7 33.8 33.8 ** EPS impact is
subject to rounding # To the extent the Series A Convertible
Preferred Stock is dilutive using the if-converted method, the
Series A Convertible Preferred Stock is included in the weighted
average shares outstanding to determine non-GAAP diluted earnings
per share for each of the non-GAAP adjustments
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180808005661/en/
Media:GreenoughAmy Legere,
617-275-6517alegere@greenough.bizorInvestors:ICRWilliam
Maina, 646-277-1236william.maina@icrinc.com
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