- Fourth quarter fiscal 2019 revenue
of $327.6 million increased 4.1% sequentially and 16.5%
year-over-year.
- Fourth quarter fiscal 2019 GAAP
diluted EPS of $0.24, including a $(0.04) impact from BEAT tax.
Non-GAAP diluted EPS of $0.46, including a $(0.13) impact from BEAT
tax.
- Fiscal year 2019 revenue of $1,247.9
million increased 22.3% year-over-year.
- Fiscal year 2019 GAAP diluted EPS of
$0.38. Non-GAAP diluted EPS of $2.12.
- Fiscal year 2019 GAAP operating
margin expansion of 110 basis points year-over-year. Non-GAAP
operating margin expansion of 140 basis points
year-over-year.
Virtusa Corporation (NASDAQ GS: VRTU), a global provider of
digital strategy, digital engineering, and IT outsourcing services
that accelerates business outcomes for its clients, today reported
consolidated financial results for the fourth quarter and fiscal
year ended March 31, 2019.
Fourth Quarter Fiscal 2019 Consolidated Financial
Results
Revenue for the fourth quarter of fiscal 2019 was $327.6
million, an increase of 4.1% sequentially and 16.5% year-over-year.
On a constant currency basis, (1) fourth quarter revenue increased
3.8% sequentially and 17.9% year-over-year.
Virtusa reported GAAP income from operations of $23.0 million
for the fourth quarter of fiscal 2019, an increase from $19.3
million for the third quarter of fiscal 2019 and $16.4 million for
the fourth quarter of fiscal 2018.
GAAP net income available to common shareholders for the fourth
quarter of fiscal 2019 was $7.3 million, or $0.24 per diluted
share, compared to $11.5 million, or $0.37 per diluted share, for
the third quarter of fiscal 2019, and $1.8 million, or $0.06 per
diluted share, for the fourth quarter of fiscal 2018. Fourth
quarter fiscal 2019 GAAP net income includes $1.3 million, or
$(0.04) per diluted share, of Base Erosion and Anti-Abuse or, BEAT,
tax which was not previously expected or contemplated in the
Company’s prior guidance.
Non-GAAP Results*:
Non-GAAP income from operations was $34.0 million for the fourth
quarter of fiscal 2019, an increase from $32.7 million for the
third quarter of fiscal 2019 and from $27.9 million for the fourth
quarter of fiscal 2018.
Non-GAAP net income was $15.6 million, or $0.46 per diluted
share, for the fourth quarter of fiscal 2019 compared to $20.7
million, or $0.61 per diluted share, for the third quarter of
fiscal 2019, and $18.3 million, or $0.55 per diluted share, for the
fourth quarter of fiscal 2018. Fourth quarter fiscal 2019 non-GAAP
net income includes $4.3 million, or $(0.13) per diluted share, of
BEAT tax which was not previously expected or contemplated in the
Company’s prior guidance.
Fiscal Year 2019 Consolidated Financial Results
For the fiscal year ended March 31, 2019, revenue was $1,247.9
million, an increase of 22.3%, compared to $1,020.7 million for the
fiscal year ended March 31, 2018. On a constant currency basis,
revenue increased 22.7% year-over-year.
Virtusa reported GAAP income from operations of $70.3 million
for fiscal year 2019, an increase from $46.4 million for fiscal
year 2018.
GAAP net income available to common shareholders was $11.8
million for fiscal year 2019, or $0.38 per diluted share, compared
to net loss of ($2.7) million, or ($0.09) per diluted share for
fiscal year 2018.
Non-GAAP Results*:
Non-GAAP income from operations was $123.2 million for fiscal
year 2019, an increase from $87.1 million for fiscal year 2018.
Non-GAAP net income was $71.3 million for fiscal year 2019, or
$2.12 per diluted share, compared to $52.8 million, or $1.63 per
diluted share, for fiscal year 2018.
Balance Sheet and Cash Flow
The Company ended fiscal year 2019 with $223.1 million of cash,
cash equivalents, and short-term and long-term investments (2).
Cash used for operations was $1.2 million for the fiscal fourth
quarter and cash flow from operations was $68.6 million for fiscal
year 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.
Management Commentary
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “Deep
digital is becoming a significant part of our clients’
transformation agenda in all industries, and Virtusa is incredibly
well positioned to capitalize on this multi-year wave. Our years of
investment in deepening our industry knowledge and expanding our
digital engineering competency are elevating our status as the
digital partner of choice for our clients. Virtusa’s differentiated
skills and capabilities are the source of our competitive
advantage, and we are confident we will continue to play a
leadership role in digital and be a market share winner.”
Ranjan Kalia, Chief Financial Officer, said, “We are pleased
with our full fiscal year 2019 financial and operating results,
including 22% year-over-year revenue growth, 140 basis points of
non-GAAP operating margin improvement, and 30% year-over-year
non-GAAP EPS growth. Looking ahead, our FY 2020 guidance assumes a
slower than previously expected start to the fiscal year, but we
are well-positioned to generate double-digit revenue growth,
non-GAAP margin accretion of 100 basis points, and strong non-GAAP
EPS growth of 27% at the midpoint of our guidance.”
Financial Outlook
Virtusa management provided the following current financial
guidance:
- First quarter fiscal 2020 revenue is
expected to be in the range of $313.0 to $321.0 million. GAAP
diluted EPS is expected to be in the range of $0.11 to $0.16.
Non-GAAP diluted EPS is expected to be in the range of $0.37 to
$0.43.
- Fiscal year 2020 revenue is expected to
be in the range of $1,359 to $1,399 million. GAAP diluted EPS is
expected to be in the range of $1.53 to $1.76. Non-GAAP diluted EPS
is expected to be in the range of $2.58 to $2.82.
In accordance with US GAAP, Virtusa applies the if-converted
method to its convertible preferred shares when reporting its
fiscal year 2019 and 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.
- Fourth 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. Fourth 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.
- First and Second quarter fiscal 2020
GAAP EPS guidance was calculated under the assumption that these
convertible preferred shares will be anti-dilutive. Thus, in
determining first and second quarter fiscal 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.
- 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 excluded from
net income available to common stockholders and the impact of the
convertible preferred shares are included in the weighted average
shares outstanding.
- Non-GAAP EPS guidance was calculated
under the assumption that these convertible preferred shares will
be dilutive for the entire fiscal year 2020, which is consistent
with non-GAAP fiscal year 2019. Thus, in determining full fiscal
year 2020 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 first quarter and fiscal year 2020 diluted GAAP
EPS estimates are based on average share counts of approximately
31.0 million and 32.7 million, respectively. The Company’s first
quarter and fiscal year 2020 diluted Non-GAAP EPS estimates are
based on average share counts of approximately 34.0 million and
34.2 million, respectively. GAAP and Non-GAAP average share counts
assume a stock price of $53.48, which was derived from the average
closing price of the Company’s stock over the five trading days
ended on May 10, 2019. 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, May 15, 2019 at 5:00
p.m. Eastern Time to discuss the Company’s fourth quarter and
fiscal year 2019 financial results, current financial guidance, and
other corporate developments. To access this call, please dial
877-317-6789 (domestic) or 412-317-6789 (international). A replay
of this conference call will be available through May 29, 2019 at
877-344-7529 (domestic) or 412-317-0088 (international). The replay
passcode is 10130442. 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.
© 2019 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, 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:
- Non-GAAP income from operations: income
from operations, as reported on Virtusa’s consolidated statements
of income (loss), 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, impairment of investments, impairment
of long-lived assets, 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, impairment of investments,
impairment of long-lived assets, 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 for the three
and twelve months ended March 31:
(in thousands, except per share
amounts) Three Months Ended March 31, Fiscal
Year Ended March 31, 2019 2018 2019
2018 GAAP income from operations $ 23,040 $
16,375 $ 70,268 $ 46,387 Add: Stock-based compensation expense
4,952 7,363 29,056 27,411 Add: Acquisition-related charges and
restructuring charges(a) 6,032 4,191 23,904 13,278
Non-GAAP income from operations $ 34,024 $ 27,929 $
123,228 $ 87,076
GAAP operating margin 7.0%
5.8% 5.6% 4.5% Effect of above adjustments to income from
operations 3.4% 4.1% 4.3% 4.0%
Non-GAAP operating
margin 10.4% 9.9% 9.9% 8.5%
GAAP net
income (loss) available to Virtusa common stockholders $ 7,273
$ 1,795 $ 11,796 $ (2,709) Add: Stock-based compensation expense
4,952 7,363 29,056 27,411 Add: Acquisition-related charges and
restructuring charges(a) 6,431 4,259 25,710 13,346 Add:
Non-recurring third party financing cost (i) - 701 - 701 Add:
Impairment of investment (j) 526 - 1,411 - Add: Other impairment
charges (k) 3,955 - 3,955 - Add: Foreign currency transaction
losses, net(b) 1,336 4,562 13,130 3,543 Add: Impact from Tax Act(h)
- 2,909 (1,628) 22,724 Add: Tax adjustments (c) (9,792) (4,239)
(16,365) (14,037) Noncontrolling interest, net of taxes (d) (144)
(143) (68) (1,469)
Non-GAAP net income available
to Virtusa common stockholders $ 14,537 $ 17,207 $
66,997 $ 49,510
GAAP diluted earnings (loss) per
share (f) $ 0.24 $ 0.06 $ 0.38 $ (0.09) Effect of
stock-based compensation expense (g) 0.14 0.22 0.86 0.85 Effect of
acquisition-related charges and restructuring charges(a) (g) 0.19
0.13 0.77 0.41 Effect of non-recurring third party financing cost
(i) (g) - 0.02 - 0.02 Effect of impairment of investment (j) (g)
0.01 - 0.04 - Effect of other impairment charges (k) (g) 0.12 -
0.12 - Effect of foreign currency transaction (gains) losses(b) (g)
0.04 0.14 0.39 0.11 Effect of tax impact from Tax Act (g) (h) -
0.09 (0.05) 0.70 Effect of tax adjustments (c) (g) (0.29) (0.13)
(0.49) (0.43) Effect of noncontrolling interest (d) (g) - - -
(0.05) Effect on dividend on Series A Convertible Preferred Stock
(f) (g) 0.03 0.03 0.13 0.10 Effect of change in dilutive shares for
non-GAAP (f) (0.02) (0.01) (0.03) 0.01
Non-GAAP
diluted earnings per share (e) (g) $ 0.46 $ 0.55
$ 2.12 $ 1.63 (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 March 31,
Fiscal Year Ended March 31, 2019
2018 2019 2018 Amortization of
intangible assets $ 2,765 $ 2,418 $ 11,394 $ 10,089
Acquisition & integration costs $ 2,858 $ 1,390 $ 12,101 $
1,821 Restructuring charges $ 409 $ 383 $ 409 $ 1,368
Acquisition-related charges included in costs of revenue and
operating expense $ 6,032 $ 4,191 $ 23,904 $ 13,278 Accreted
interest related to deferred acquisition payments $ 399 $ 68
$ 1,806 $ 68
Total acquisition-related charges and
restructuring charges $ 6,431 $
4,259 $ 25,710 $ 13,346 (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. 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 twelve months ended March 31, 2019, the weighted average
shares outstanding of Series A Convertible Preferred Stock of
3,000,000 and 1,500,000 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.
During the three and twelve months ended
March 31, 2018, the weighted average shares outstanding of Series A
Convertible Preferred Stock of 3,000,000 and 2,728,022
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 and twelve months ended March 31, 2019 and 2018:
Three Months Ended March 31,
Fiscal Year Ended March 31, 2019 2018
2019 2018 Non-GAAP net income available to
Virtusa common stockholders $ 14,537 $ 17,207 $ 66,997
$ 49,510 Add: Dividends and accretion on Series A
Convertible Preferred Stock $ 1,088 $ 1,088 $ 4,350 $
3,262 Non-GAAP net income available to Virtusa common stockholders
and assumed conversion $ 15,625 $ 18,295 $ 71,347 $
52,772 GAAP dilutive weighted average shares
outstanding 30,844,275 30,427,258 30,659,654 29,397,350 Add:
Incremental dilutive effect of employee stock options and unvested
restricted stock awards and restricted stock units - - - 728,820
Add: Incremental effect of Series A Convertible Preferred Stock as
converted 3,000,000 3,000,000 3,000,000
2,250,000 Non-GAAP dilutive weighted average shares
outstanding 33,844,275 33,427,258
33,659,654 32,376,170 (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. (h) Impact from the
U.S. government enacted comprehensive tax legislation (“Tax Act”)
(i) Non-recurring third party financing costs related to the
new credit facility. (j) Other-than-temporary impairment of
a available-for-sale securities recognized in earnings. (k)
Impairment related to a long-lived asset.
Footnotes
(1) To determine sequential revenue change in constant currency
for the Company's fourth 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 December 31, 2018,
rather than the actual exchange rate in effect for the three months
ended March 31, 2019. To determine year-over-year revenue change in
constant currency for the Company's fourth 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 March 31, 2019. To determine year-over-year revenue change in
constant currency for the Company's full fiscal year 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 twelve months ended March 31,
2018, rather than the actual exchange rate in effect for the twelve
months ended March 31, 2019. The average exchange rates for the
three months ended March 31, 2018, December 31, 2018, and March 31,
2019, and for the twelve months ended March 31, 2018 and March 31,
2019 are included in the table below:
Average U.S. Dollar Exchange
Rate For the Three Months Ended For the Twelve
Months Ended March 31, 2018
December 31, 2018 March 31,
2019 March 31, 2018
March 31, 2019 GBP 1.40 1.28 1.31 1.33
1.31
Euro 1.23 1.14 1.13 1.18 1.16
SEK 0.12 0.11 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 available-for-sale
securities and equity 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 March 31, 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 $23.6 million at March 31, 2019.
Profit attributable to minority shareholders (Non-controlling
Interest) in the Consolidated Statements of Income was $1.5 million
on a GAAP basis and $1.6 million on a non-GAAP basis for the
quarter ending March 31, 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 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: 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, 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)
March 31, 2019
March 31, 2018 Assets: Cash and cash
equivalents $ 189,676 $ 194,897 Short-term investments 33,138
45,900 Accounts receivable, net 162,396 151,455 Unbilled accounts
receivable 113,431 103,829 Prepaid expenses 42,314 31,724
Restricted cash 351 301 Asset held for sale 8,978 - Other current
assets 29,967 21,229 Total current assets 580,251
549,335 Property and equipment, net 119,865 121,565
Investments accounted for using equity method 1,446 1,588 Long-term
investments 322 4,140 Deferred income taxes 28,770 31,528 Goodwill
279,543 297,251 Intangible assets, net 92,440 96,001 Other
long-term assets 29,836 11,772 Total assets $
1,132,473 $ 1,113,180
Liabilities, Series A Convertible
Preferred Stock, Redeemable noncontrolling interest and
Stockholders' equity: Accounts payable $ 46,471 $ 29,541
Accrued employee compensation and benefits 73,764 71,500 Deferred
revenue 6,421 7,908 Accrued expenses and other 70,050 91,306
Current portion of long-term debt 11,407 11,407 Income taxes
payable 4,844 5,038 Total current liabilities 212,957
216,700 Deferred income taxes 15,824 21,341 Long-term debt, less
current portion 351,320 288,227 Long-term liabilities 30,861
43,833 Total liabilities 610,962 570,101
Series A Convertible Preferred Stock 107,161 106,996
Redeemable noncontrolling interest 23,576 - Stockholders'
equity 390,774 418,623 Noncontrolling interest -
17,460 Stockholders' equity 390,774 436,083
Total liabilities, Series A convertible preferred stock, redeemable
noncontrolling interest and stockholders' equity $ 1,132,473
$ 1,113,180
Virtusa Corporation and Subsidiaries
Consolidated Statements of Income (Loss) (In thousands
except share and per share amounts, unaudited)
Three Months Ended
Fiscal Year Ended March 31, March 31,
2019 2018 2019
2018 Revenue $ 327,631 $ 281,341
$ 1,247,863 $ 1,020,669 Costs of revenue 230,364
197,342 884,652 725,445
Gross profit 97,267 83,999 363,211 295,224 Total operating expenses
74,227 67,624 292,943
248,837 Income from operations 23,040 16,375
70,268 46,387 Other income (expense): Interest income 684
1,252 2,672 4,264 Interest expense (4,799 ) (3,258 ) (18,164 )
(7,634 ) Foreign currency transaction losses, net (1,336 ) (4,562 )
(13,130 ) (3,543 ) Other, net (4,479 ) 986
(3,482 ) 2,362 Total other expense
(9,930 ) (5,582 ) (32,104 ) (4,551 )
Income before income tax expense 13,110 10,793 38,164 41,836 Income
tax expense 4,611 6,163 20,473
32,888 Net income 8,499 4,630 17,691 8,948
Less: net income attributable to noncontrolling interests, net of
tax 138 1,747 1,545
7,694 Net income available to Virtusa stockholders
8,361 $ 2,883 $ 16,146 $ 1,254 Less: Series A Convertible Preferred
Stock dividends and accretion 1,088 1,088
4,350 3,963 Net income (loss)
available to Virtusa common stockholders 7,273 $
1,795 11,796 ($2,709 )
Basic earnings (loss) per share available to Virtusa common
stockholders $ 0.24 $ 0.06 $ 0.40
($0.09 ) Diluted earnings (loss) per share available to Virtusa
common stockholders $ 0.24 $ 0.06 $ 0.38
($0.09 ) Weighted average number of common shares
outstanding: Basic 29,976,583 29,425,468
29,817,526 29,397,350 Diluted
30,844,275 30,427,258 30,659,654
29,397,350
Virtusa Corporation and
Subsidiaries Consolidated Statements of Cash Flows
(In thousands, unaudited)
Fiscal Year Ended March 31, 2019 2018
Cash flows from operating activities: Net income $ 17,691 $ 8,948
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 29,001 27,537
Share-based compensation expense 29,056 27,411 Provision (recovery)
for doubtful accounts (864 ) 1,248 Gain on disposal of property and
equipment (71 ) (10 ) Impairment of long-lived asset classified as
held for sale 3,955 - Impairment of investment 1,411 - Deferred
income taxes, net (1,770 ) (9,946 ) Foreign currency transaction
losses, net 13,130 3,543 Amortization of discounts and premiums on
investments 83 313 Amortization of debt issuance cost 1,092 1,057
Net changes in operating assets and liabilities: Accounts
receivable and unbilled receivable (22,741 ) (36,542 ) Prepaid
expenses and other current assets (21,498 ) (9,260 ) Other
long-term assets (21,812 ) (1,377 ) Accounts payable 16,452 4,413
Accrued employee compensation and benefits 3,663 13,772 Accrued
expenses and other current liabilities 13,059 3,931 Income taxes
payable 4,120 12,683 Other long-term liabilities 4,662
14,978 Net cash provided by operating
activities 68,619 62,699 Cash flows
from investing activities: Proceeds from sale of property and
equipment 1,033 261 Purchase of short-term investments (96,557 )
(100,486 ) Proceeds from sale or maturity of short-term investments
109,512 157,194 Purchase of long-term investments - (16,772 )
Proceeds from sale or maturity of long-term investments - 1,606
Business acquisition, net of cash acquired - (78,376 ) Payment of
deferred consideration related to business acquisition (52,784 ) -
Purchase of property and equipment (35,912 )
(16,096 ) Net cash used in investing activities (74,708 )
(52,669 ) Cash flows from financing activities:
Proceeds from exercise of common stock options 1,019 4,063 Proceeds
from exercise of subsidiary stock options 549 1,837 Proceeds from
debt - 141,000 Payment of debt (12,500 ) (81,000 ) Payment of debt
issuance cost - (2,716 ) Proceeds from revolving credit facility
74,500 75,000 Repayment of revolving credit facility - (20,000 )
Payment of contingent consideration related to acquisition (100 ) -
Acquisition of noncontrolling interest - (147,026 ) Purchase of
redeemable noncontrolling interest related to Polaris (31,979 ) -
Acquisition of other noncontrolling interest (373 ) (42 ) Principal
payments on capital lease obligation (89 ) (220 ) Payments of
withholding taxes related to net share settlements of restricted
stock (12,094 ) (7,173 ) Series A Convertible Preferred Stock
proceeds, net of issuance costs of $1,154 - 106,846 Repurchase of
common stock - (30,000 ) Payment of dividend on Series A
Convertible Preferred Stock (4,184 ) (3,127 ) Net
cash provided by financing activities 14,749
37,442 Effect of exchange rate changes on cash, cash
equivalents and restricted cash (13,783 ) 2,677
Net (decrease) increase in cash, cash equivalents and
restricted cash (5,123 ) 50,149 Cash, cash equivalents and
restricted cash, beginning of year 195,236
145,086 Cash, cash equivalents and restricted cash, end of
year $ 190,113 $ 195,235
Supplemental Non-GAAP Financial Information as of March 31, 2019
and 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 year $ 190,113 $ 195,235
Less : Restricted cash (437 ) (338 ) Total Cash and
cash equivalents end of year 189,676 194,897
Short-term investments 33,138 45,900 Long-term
investments 322 4,140 Total short-term
and long-term investments, end of year 33,460
50,040 Total cash and cash equivalents,
short-term and long-term investments $ 223,136
244,937
Reconciliation of Non-GAAP Guidance**
Three months
ending Fiscal Year ending June 30, 2019 March
31, 2020 Low High
Low High GAAP
diluted earnings per share $ 0.11 $
0.16 $ 1.53 $ 1.76 Effect
of stock-based compensation expense 0.21 0.21 0.87 0.87 Effect of
acquisition-related charges and restructuring charges 0.11 0.11
0.44 0.44 Effect of foreign currency transaction (gains) losses
0.00 0.00 0.00 0.00 Effect of change in dilutive shares for
non-GAAP (0.01 ) (0.01 ) (0.07 ) (0.08 ) Effect of tax impact from
Tax Act 0.00 0.00 0.00 0.00 Effect of tax adjustments (0.09 ) (0.08
) (0.25 ) (0.23 ) 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 0.06
0.06
Non-GAAP diluted earnings per share#
$ 0.37 $
0.43 $ 2.58
$ 2.82 Weighted average diluted shares
outstanding - GAAP 31.0 31.0 32.7 32.7 - Non-GAAP 34.0 34.0 34.2
34.2 ** 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/20190515005899/en/
Media:Conversion MarketingRon Favali,
727-512-4490ron@conversionam.comInvestors:ICRWilliam Maina,
646-277-1236william.maina@icrinc.com
Virtusa (NASDAQ:VRTU)
Historical Stock Chart
From Mar 2024 to Apr 2024
Virtusa (NASDAQ:VRTU)
Historical Stock Chart
From Apr 2023 to Apr 2024