- Second quarter fiscal 2020 revenue of $328.5 million
increased 3.0% sequentially and 7.5% year-over-year.
- Second quarter fiscal 2020 GAAP diluted EPS of $0.20.
Non-GAAP diluted EPS of $0.54.
- Second quarter fiscal 2020 GAAP operating income of $19.2
million. Non-GAAP operating income of $29.4 million.
- Cash provided by operating activities of $21.6 million,
representing 7% of revenue.
- Repurchased approximately 505,000 shares for $18.7 million
under share repurchase program.
Virtusa Corporation (NASDAQ
GS: VRTU), a global provider of digital strategy, digital
engineering and IT services and solutions that help clients change
and disrupt markets through innovation engineering, today
reported consolidated financial results for the second quarter
fiscal 2020, ended September 30, 2019.
Second Quarter Fiscal 2020 Consolidated Financial
Results
Revenue for the second quarter of fiscal 2020 was $328.5
million, an increase of 3.0% sequentially and 7.5% year-over-year.
On a constant currency basis, (1) second quarter revenue increased
3.5% sequentially and 8.4% year-over-year.
Virtusa reported GAAP income from operations of $19.2 million
for the second quarter of fiscal 2020, compared to $13.4 million
for the first quarter of fiscal 2020 and $14.0 million for the
second quarter of fiscal 2019.
GAAP net income available to common shareholders for the second
quarter of fiscal 2020 was $6.0 million, or $0.20 per diluted
share, compared to $4.7 million, or $0.15 per diluted share, for
the first quarter of fiscal 2020, and $0.4 million, or $0.01 per
diluted share, for the second quarter of fiscal 2019.
Non-GAAP Results*
Non-GAAP income from operations was $29.4 million for the second
quarter of fiscal 2020, compared with $24.2 million for the first
quarter of fiscal 2020 and $29.0 million for the second quarter of
fiscal 2019.
Non-GAAP net income was $18.1 million, or $0.54 per diluted
share, for the second quarter of fiscal 2020, compared to $13.9
million, or $0.41 per diluted share, for the first quarter of
fiscal 2020, and $18.2 million, or $0.54 per diluted share, for the
second quarter of fiscal 2019.
*Please refer to the Non-GAAP Financial Information section of
this press release for definitions of our Non-GAAP financial
measures and reconciliations to the most comparable GAAP financial
measures.
Balance Sheet and Cash Flow
The Company ended the second quarter of fiscal 2020 with $198.5
million of cash, cash equivalents and investments (2). Cash
provided by operating activities was $21.6 million for the second
quarter of fiscal 2020.
Share Repurchase
During the second quarter of fiscal 2020, pursuant to the
Company’s share repurchase program, Virtusa repurchased 505,565
shares for $18.7 million at an average price of $36.93. As of
September 30, 2019, a total of approximately $11.3 million remained
available for future use under Virtusa’s share repurchase
program.
Management Commentary
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “The
demand for digital and cloud transformation is virtually universal
across all our industries and geographies, as every organization
today is under pressure to deliver greater customer value and
increased efficiency. Our creativity, engineering expertise and
deep domain knowledge position us extraordinarily well to
capitalize on this long-term demand trend. Nevertheless, we are not
standing still, we are highly focused on continuing to improve our
overall business model through greater revenue diversification,
investing to stay ahead of next generation technologies, and
increasing our own operating efficiency.”
Ranjan Kalia, Chief Financial Officer, said, “We delivered solid
second quarter fiscal 2020 results with revenue and non-GAAP EPS
above the midpoint of our guidance and strong operating cash flow.
Looking to the second half of the fiscal year, based on current
demand trends and business momentum, we expect our business to
perform in line with our expectations and we reiterate the midpoint
of our FY 2020 revenue guidance and raise the midpoint of our
non-GAAP EPS guidance.”
Financial Outlook
Virtusa management provided the following current financial
guidance:
- Third quarter fiscal 2020 revenue is expected to be in the
range of $332 to $340 million. GAAP diluted EPS is expected to be
in the range of $0.38 to $0.44. Non-GAAP diluted EPS is expected to
be in the range of $0.73 to $0.79.
- Fiscal year 2020 revenue is expected to be in the range of
$1,330 to $1,350 million. GAAP diluted EPS is expected to be in the
range of $1.25 to $1.39. Non-GAAP diluted EPS is expected to be in
the range of $2.51 to $2.65.
In accordance with US GAAP, Virtusa applies the if-converted
method to its convertible preferred shares when reporting its
fiscal year 2020 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.
- Second quarter GAAP EPS 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 outstanding as these shares were anti-dilutive on a
GAAP basis. Second 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.
- Third and fourth quarter fiscal 2020 GAAP EPS guidance was
calculated under the assumption that these convertible preferred
shares will be dilutive. Thus, in determining third and fourth
quarter fiscal 2020 GAAP EPS guidance, dividends and accretion on
the convertible preferred shares are not deducted from net income
available to common stockholders and the impact of the convertible
preferred shares are included in the weighted average shares
outstanding.
- Fiscal 2020 GAAP EPS guidance was calculated under the
assumption that these convertible preferred shares will be
anti-dilutive. Thus, in determining full fiscal year 2020 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.
- Fiscal 2020 non-GAAP EPS guidance was calculated under the
assumption that these convertible preferred shares will be dilutive
for the third and fourth quarters of fiscal year 2020. Thus, in
determining third quarter, fourth quarter and full fiscal year 2020
non-GAAP EPS guidance, dividends and accretion on the convertible
preferred shares are not deducted 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 third quarter and fiscal year 2020 diluted GAAP
EPS estimates are based on average share counts of approximately
33.4 million and 30.7 million, respectively. The Company’s third
quarter and fiscal year 2020 diluted Non-GAAP EPS estimates are
based on average share counts of approximately 33.4 million and
33.7 million, respectively. GAAP and Non-GAAP average share counts
assume a stock price of $37.12, which was derived from the average
closing price of the Company’s stock over the five trading days
ended on November 1, 2019.
Conference Call and Webcast
Virtusa will host a conference call today, November 7, 2019 at
5:00 p.m. Eastern Time to discuss the Company’s second quarter
fiscal 2020 financial results, current financial guidance, and
other corporate developments. To access this call, please dial
844-695-5524 (domestic) or 412-317-5461 (international). A replay
of this conference call will be available through November 14, 2019
at 877-344-7529 (domestic) or 412-317-0088 (international). The
replay passcode is 10135674. 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 strategy, digital engineering, and information
technology (IT) services and solutions that help clients change,
disrupt, and unlock new value through innovation engineering.
Virtusa serves Global 2000 companies in Banking, Financial
Services, Insurance, Healthcare, Communications, Media,
Entertainment, Travel, Manufacturing, and Technology
industries.
Virtusa helps clients grow their business with innovative
products and services that create operational efficiency using
digital labor, future-proof operational and IT platforms, and
rationalization and modernization of IT applications
infrastructure. This is achieved through a unique approach blending
deep contextual expertise, empowered agile teams, and measurably
better engineering to create holistic solutions that drive business
forward at unparalleled velocity enabled by a culture of
cooperative disruption.
© 2019 Virtusa Corporation. All rights reserved.
Virtusa is a registered trademark 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 consolidated statements of income (loss)
measures that exclude, when applicable, stock-based compensation
expense, acquisition related charges, restructuring charges,
foreign currency transaction gains and losses, impairment of
investments, impairment of long-lived assets, 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.
The following table presents a reconciliation of each non-GAAP
financial measure to the most comparable GAAP measure for the three
and six months ended September 30:
(in thousands, except per share amounts) Three Months
Ended September 30, Six Months Ended September 30,
2019
2018
2019
2018
GAAP income from operations
$
19,235
$
14,019
$
32,663
$
27,943
Add: Stock-based compensation expense
5,834
9,124
12,510
17,062
Add: Acquisition-related charges and restructuring charges(a)
4,299
5,829
8,396
11,495
Non-GAAP income from operations
$
29,368
$
28,972
$
53,569
$
56,500
GAAP operating margin
5.9
%
4.6
%
5.0
%
4.6
%
Effect of above adjustments to income from operations
3.0
%
4.9
%
3.3
%
4.7
%
Non-GAAP operating margin
8.9
%
9.5
%
8.3
%
9.3
%
GAAP net income (loss) available to Virtusa common
stockholders
$
6,014
$
417
$
10,761
$
(6,966
)
Add: Stock-based compensation expense
5,834
9,124
12,510
17,062
Add: Acquisition-related charges and restructuring charges(a)
4,420
6,300
8,663
12,427
Add: Foreign currency transaction losses(b)
3,437
9,355
2,235
20,113
Tax adjustments (c)
(2,664
)
(8,126
)
(4,314
)
(9,943
)
Noncontrolling interest, net of taxes (d)
7
50
(28
)
177
Non-GAAP net income available to Virtusa common stockholders
$
17,048
$
17,120
$
29,827
$
32,870
GAAP diluted earnings (loss) per share (f)
$
0.20
$
0.01
$
0.35
$
(0.23
)
Effect of stock-based compensation expense (g)
0.17
0.27
0.37
0.51
Effect of acquisition-related charges and restructuring charges(a)
(g)
0.13
0.19
0.26
0.37
Effect of foreign currency transaction losses(b) (g)
0.10
0.28
0.07
0.60
Effect of tax adjustments (c) (g)
(0.08
)
(0.24
)
(0.13
)
(0.30
)
Effect of noncontrolling interest (d) (g)
-
-
-
-
Effect on dividend on Series A Convertible Preferred Stock (f) (g)
0.03
0.03
0.06
0.06
Effect of change in dilutive shares for non-GAAP (f)
(0.01
)
-
(0.03
)
0.03
Non-GAAP diluted earnings per share (e) (g)
$
0.54
$
0.54
$
0.95
$
1.04
(a) Acquisition-related charges include, when
applicable, amortization of purchased intangibles, external deal
costs, transaction-related professional fees, 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, facility exit costs
as well as certain professional fees related to restructuring. The
following table provides the details of the acquisition-related
charges and restructuring charges:
Three Months Ended
September 30, Six Months Ended September 30,
2019
2018
2019
2018
Amortization of intangible assets
$
3,440
$
2,994
$
6,661
$
5,770
Acquisition and integration costs
$
859
$
2,835
$
1,735
$
5,725
Acquisition-related charges included in costs of revenue and
operating expense
$
4,299
$
5,829
$
8,396
$
11,495
Accreted interest related to deferred acquisition payments
$
121
$
471
$
267
$
932
Total acquisition-related charges and restructuring charges
$
4,420
$
6,300
$
8,663
$
12,427
(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 U.S. tax purposes and for fiscal year
2020, excluding BEAT tax impact in contemplation of a
reorganization of our Indian legal entities. Tax adjustments also
assumes application of foreign tax credit benefits in the United
States. (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 and six months ended September 30, 2019 and 2018, all of the
3,000,000 shares of Series A Convertible Preferred Stock 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 the if-converted
method to calculate the non-GAAP diluted earnings per share for the
three and six months ended September 30, 2019 and 2018:
Three
Months Ended September 30, Six Months Ended September
30,
2019
2018
2019
2018
Non-GAAP net income available to Virtusa common stockholders
$
17,048
$
17,120
$
29,827
$
32,870
Add: Dividends and accretion on Series A Convertible Preferred
Stock
$
1,088
$
1,088
$
2,175
$
2,175
Non-GAAP net income available to Virtusa common stockholders and
assumed conversion
$
18,136
$
18,208
$
32,002
$
35,045
GAAP dilutive weighted average shares outstanding
30,708,162
30,627,044
30,821,287
29,700,151
Add: Incremental dilutive effect of employee stock options and
unvested restricted stock awards and restricted stock units
-
-
-
866,156
Add: Incremental effect of Series A Convertible Preferred Stock as
converted
3,000,000
3,000,000
3,000,000
3,000,000
Non-GAAP dilutive weighted average shares outstanding
33,708,162
33,627,044
33,821,287
33,566,307
(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 second quarter of fiscal 2020, 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, 2019, rather
than the actual exchange rate in effect for the three months ended
September 30, 2019. To determine year-over-year revenue change in
constant currency for the Company's second quarter of fiscal 2020,
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 September 30,
2018, rather than the actual exchange rate in effect for the three
months ended September 30, 2019. The average exchange rates for the
three months ended September 30, 2018, June 30, 2019, and September
30, 2019 are included in the table below:
Average U.S. Dollar Exchange Rate For the Three Months
Ended September 30, 2018
June 30, 2019 September 30, 2019 GBP
1.30
1.28
1.23
Euro
1.16
1.12
1.11
SEK
0.11
0.11
0.10
(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 available-for-sale debt
securities and equity securities, including the Company's long-term
investments, 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 September 30, 2019 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 $15.1 million at September 30,
2019. Profit attributable to minority shareholders (Non-controlling
Interest) in the Consolidated Statements of Income was $0.1 million
on a GAAP basis and $0.1 million on a non-GAAP basis for the
quarter ending September 30, 2019.
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 share repurchase program, 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: the
potential material assessment by the Indian government of certain
statutory defined contribution obligations of employees and
employers, the potential material assessment by the IRS in
connection with a notice of proposed adjustment related to the
employment tax treatment of certain payments made to certain
Company employees, 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; 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; unanticipated acquisition related costs
and negative effects on Virtusa’s reported results of operations
from previous acquisitions; the inability to pay cash dividends on
the convertible preferred stock in connection with the Orogen
convertible preferred stock financing, 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; 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, 2019 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, 2019 March 31,
2019 Assets: Cash and cash equivalents
$
183,372
$
189,676
Short-term investments
14,908
33,138
Accounts receivable, net
155,510
162,396
Unbilled accounts receivable
113,683
113,431
Prepaid expenses
52,736
42,314
Restricted cash
233
351
Asset held for sale
8,844
8,978
Other current assets
32,862
29,967
Total current assets
562,148
580,251
Property and equipment, net
111,412
119,865
Operating lease right-of-use assets
50,933
-
Investments accounted for using equity method
1,474
1,446
Long-term investments
198
322
Deferred income taxes
29,735
28,770
Goodwill
277,061
279,543
Intangible assets, net
101,330
92,440
Other long-term assets
39,895
29,836
Total assets
$
1,174,186
$
1,132,473
Liabilities, Series A Convertible Preferred Stock,
Redeemable noncontrolling interest and Stockholders' equity:
Accounts payable
$
35,032
$
46,471
Accrued employee compensation and benefits
72,506
74,801
Deferred revenue
6,887
6,421
Accrued expenses and other
66,910
70,050
Current portion of long-term debt
14,532
11,407
Operating lease liabilities
10,882
-
Income taxes payable
5,184
4,844
Total current liabilities
211,933
213,994
Deferred income taxes
15,271
15,824
Operating lease liabilities, noncurrent
44,535
-
Long-term debt, less current portion
369,992
351,320
Long-term liabilities
27,815
29,824
Total liabilities
669,546
610,962
Series A Convertible Preferred Stock
107,243
107,161
Redeemable noncontrolling interest
-
23,576
Virtusa stockholders' equity
382,269
390,774
Noncontrolling interest in subsidiaries
15,128
-
Total stockholders' equity
397,397
390,774
Total liabilities, Series A convertible preferred stock, redeemable
noncontrolling interest and stockholders' equity
$
1,174,186
$
1,132,473
Virtusa Corporation and Subsidiaries
Consolidated Statements of Income (Loss) (In
thousands except share and per share amounts, unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2019
2018
2019
2018
Revenue
$
328,501
$
305,520
$
647,525
$
605,551
Costs of revenue
238,584
216,346
473,319
432,827
Gross profit
89,917
89,174
174,206
172,724
Total operating expenses
70,682
75,155
141,543
144,781
Income from operations
19,235
14,019
32,663
27,943
Other income (expense): Interest income
551
589
1,224
1,353
Interest expense
(4,835
)
(4,514
)
(9,743
)
(8,768
)
Foreign currency transaction losses, net
(3,437
)
(9,355
)
(2,235
)
(20,113
)
Other, net
564
819
928
1,443
Total other expense
(7,157
)
(12,461
)
(9,826
)
(26,085
)
Income before income tax expense (benefit)
12,078
1,558
22,837
1,858
Income tax expense (benefit)
4,830
(402
)
9,569
5,463
Net income (loss)
7,248
1,960
13,268
(3,605
)
Less: net income attributable to noncontrolling interests, net of
tax
146
455
332
1,186
Net income (loss) available to Virtusa stockholders
$
7,102
$
1,505
$
12,936
($ 4,791
)
Less: Series A Convertible Preferred Stock dividends and accretion
1,088
1,088
2,175
2,175
Net income (loss) available to Virtusa common stockholders
$
6,014
$
417
$
10,761
($ 6,966
)
Basic earnings (loss) per share available to Virtusa
common stockholders
$
0.20
$
0.01
$
0.36
($ 0.23
)
Diluted earnings (loss) per share available to Virtusa common
stockholders
$
0.20
$
0.01
$
0.35
($ 0.23
)
Weighted average number of common shares outstanding: Basic
30,107,942
29,767,276
30,137,926
29,700,151
Diluted
30,708,162
30,627,044
30,821,287
29,700,151
Virtusa Corporation and Subsidiaries Consolidated
Statements of Cash Flows (In thousands, unaudited)
Six Months Ended September 30,
2019
2018
Cash flows from operating activities: Net income (loss)
$
13,268
(
$ 3,605
)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization
15,711
14,593
Share-based compensation expense
12,510
17,062
Provision (recovery) for doubtful accounts
(313
)
(236
)
Gain on disposal of property and equipment
(351
)
(159
)
Foreign currency transaction losses, net
2,235
20,113
Amortization of discounts and premiums on investments
(6
)
76
Amortization of debt issuance cost
546
546
Deferred income taxes, net
62
(6,522
)
Net changes in operating assets and liabilities: Accounts
receivable and unbilled receivable
4,221
(1,975
)
Prepaid expenses and other current assets
(7,735
)
(11,238
)
Other long-term assets
(12,673
)
(4,009
)
Accounts payable
(8,298
)
232
Accrued employee compensation and benefits
(4,744
)
(5,834
)
Accrued expenses and other current liabilities
11,382
11,179
Operating lease liabilities
141
-
Income taxes payable
(2,748
)
3,133
Other long-term liabilities
596
(73
)
Net cash provided by operating activities
23,804
33,283
Cash flows from investing activities: Proceeds from sale of
property and equipment
651
451
Purchase of short-term investments
(20,279
)
(68,803
)
Proceeds from sale or maturity of short-term investments
38,240
60,571
Payments for asset acquisitions
(7,251
)
-
Payment of deferred consideration related to business acquisition
(17,500
)
-
Business acquisition, net of cash acquired
-
(34
)
Purchase of property and equipment
(8,479
)
(18,875
)
Net cash used in investing activities
(14,618
)
(26,690
)
Cash flows from financing activities: Proceeds from exercise of
common stock options
194
428
Proceeds from exercise of subsidiary stock options
93
326
Proceeds from revolving credit facility
-
32,000
Proceeds from debt
27,500
-
Payment of debt
(6,250
)
(6,250
)
Repurchase of common stock
(18,680
)
-
Payments of withholding taxes related to net share settlements of
restricted stock
(3,658
)
(7,602
)
Purchase of redeemable noncontrolling interest related to Polaris
(8,675
)
(28,396
)
Payment of contingent consideration related to acquisition
-
(100
)
Principal payments on capital lease obligation
(32
)
(43
)
Payment of dividend on Series A Convertible Preferred Stock
(2,092
)
(2,092
)
Net cash used in financing activities
(11,600
)
(11,729
)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
(4,012
)
(11,694
)
Net decrease in cash, cash equivalents and restricted cash
(6,426
)
(16,830
)
Cash, cash equivalents and restricted cash, beginning of year
190,113
195,236
Cash, cash equivalents and restricted cash, end of period
$
183,687
$
178,406
Supplemental Non-GAAP
Financial Information as of September 30, 2019 and 2018:
Six Months Ended
September 30,
2019
2018
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
$
183,687
$
178,406
Less : Restricted cash
(315
)
(1,425
)
Total Cash and cash equivalents end of period
183,372
176,981
Short-term investments
14,908
54,108
Long-term investments
198
1,410
Total short-term and long-term investments, end of period
15,106
55,518
Total cash and cash equivalents, short-term and
long-term investments
$
198,478
$
232,499
Virtusa Corporation and Subsidiaries Reconciliation of
Non-GAAP Guidance** Three months ending Fiscal
Year ending December 31, 2019 March 31, 2020
Low
High
Low
High
GAAP diluted earnings per share
$
0.38
$
0.44
$
1.25
$
1.39
Effect of stock-based compensation expense
0.17
0.17
0.70
0.70
Effect of acquisition-related charges and restructuring charges
0.13
0.13
0.51
0.51
Effect of foreign currency transaction (gains) losses
0.00
0.00
0.07
0.07
Effect of change in dilutive shares for non-GAAP
0.00
0.00
(0.11
)
(0.12
)
Effect of tax impact from Tax Act
0.00
0.00
0.00
0.00
Effect of tax adjustments
0.05
0.05
(0.03
)
(0.01
)
Effect of noncontrolling interest
(0.00
)
(0.00
)
(0.00
)
(0.00
)
Effect on dividend on Series A Convertible Preferred Stock
0.00
0.00
0.13
0.13
Non-GAAP diluted earnings per share#
$
0.73
$
0.79
$
2.51
$
2.65
Weighted average diluted shares outstanding - GAAP
33.4
33.4
30.7
30.7
- Non-GAAP
33.4
33.4
33.7
33.7
** 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/20191107006063/en/
Media: Conversion Marketing Ron Favali, 727-512-4490
ron@conversionam.com Investors: ICR William Maina,
646-277-1236 william.maina@icrinc.com
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