Virtusa Announces Record Fourth Quarter and Full Year Fiscal 2013 Consolidated Financial Results

Virtusa Announces Record Fourth Quarter and Full Year Fiscal 2013 Consolidated Financial Results

  • Fourth quarter fiscal 2013 revenue of $89.9 million increased 4% sequentially and 21% year-over-year. Fourth quarter fiscal 2013 diluted EPS increased to $0.35, compared to diluted EPS of $0.23 for the year ago period.

  • Full year fiscal 2013 revenue of $333.2 million increased 20% year-over-year.

  • Income from operations for the full year fiscal 2013 increased 37% to $32.9 million.

  • Full year fiscal 2013 diluted EPS increased 40% to $1.11, compared to diluted EPS of $0.79 for the full year fiscal 2012.

WESTBOROUGH, Mass.--(BUSINESS WIRE)-- Virtusa Corporation (NAS: VRTU) , a global business consulting and IT outsourcing company that combines innovation, technology leadership and industry solutions to transform the customer experience, today reported consolidated financial results for the fourth quarter and fiscal year 2013, ended March 31, 2013.

Fourth Quarter Fiscal 2013 Consolidated Financial Results


Revenue for the fourth quarter of fiscal 2013 was $89.9 million, an increase of 4% sequentially and 21% year-over-year in reported currency. On a constant currency basis,(1) fourth quarter revenue increased 5% sequentially and 22% year-over-year.

Virtusa reported income from operations of $9.4 million for the fourth quarter of fiscal 2013, an increase compared to $9.1 million for the third quarter of fiscal 2013, and an increase compared to $7.1 million for the fourth quarter of fiscal 2012.

Net income for the fourth quarter of fiscal 2013 was $9.1 million, or $0.35 per diluted share, an increase compared to $7.4 million, or $0.29 per diluted share, for the third quarter of fiscal 2013, and an increase compared to $5.8 million, or $0.23 per diluted share, for the fourth quarter of fiscal 2012.

Fiscal Year 2013 Consolidated Financial Results

For the fiscal year ended March 31, 2013, revenue increased 20% in both reported and constant currency, to a record $333.2 million, compared to $277.8 million for the fiscal year ended March 31, 2012.

Virtusa reported income from operations of $32.9 million for fiscal year 2013, an increase of 37% compared to $23.9 million for fiscal year 2012.

Net income for fiscal year 2013 was $28.4 million, or $1.11 per diluted share, an increase compared to $20.0 million, or $0.79 per diluted share, for fiscal year 2012.

The Company ended fiscal year 2013 with $95.0 million of cash, cash equivalents, and short-term and long-term investments.(2) Cash generated from operations was $22.0 million for fiscal year 2013.

Kris Canekeratne, Virtusa's Chairman and CEO, stated, "The fourth quarter capped off a strong fiscal year 2013 for Virtusa. Our industry leading growth was driven by our ability to provide thought leadership at the intersection of business and technology in the industries we serve. Our leadership position in Millennial Enablement, regulatory and compliance services, transformational solutions and IT rationalization has been at the core of winning larger engagements and expanding client relationships."

Ranjan Kalia, Chief Financial Officer, said, "We are pleased with our results for the full fiscal year 2013 which delivered on our promise of above market revenue growth and significant operating margin expansion." Mr. Kalia added, "Our full fiscal year 2014 guidance calls for continued revenue momentum along with meaningful earnings per share growth."

Financial Outlook

Virtusa management provided the following current financial guidance:

  • First quarter fiscal year 2014 revenue is expected to be in the range of $89.5 to $91.5 million, with diluted EPS of $0.26 to $0.30.

  • Fiscal year 2014 revenue is expected to be in the range of $376.0 to $392.0 million, with diluted EPS of $1.22 to $1.38.

The Company's first quarter and fiscal year 2014 diluted EPS estimates assume an average share count of approximately 26.1 million and 26.2 million respectively, (assuming no further exercises of stock-based awards) and assume a stock price of $22.79, which was derived from the average closing price of the Company's stock over the five trading days ended on May 7, 2013. Deviations from this stock price may cause actual EPS to vary based on share dilution from Virtusa's stock options and stock appreciation rights.

Conference Call and Webcast

Virtusa will host a conference call today, May 8, 2013 at 5:00 pm Eastern time to discuss the Company's fourth quarter and full fiscal year 2013 financial results, current financial guidance, and other corporate developments. To access this call, dial 800-946-0712 (domestic) or 719-325-2207 (international). The passcode is 9902153. A replay of this conference call will be available through May 16, 2013 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 9902153. 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 (NAS: VRTU) is a global business consulting and IT outsourcing company that combines innovation, technology leadership and industry solutions to transform the customer experience. Virtusa helps its clients accelerate business outcomes by consolidating, rationalizing and modernizing customer-facing processes into one or more enterprise platforms.

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

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

© 2011 All rights reserved. Virtusa, Accelerating Business OutcomesSM and all other related logos/service names are either registered trademarks or trademarks of Virtusa Corporation in the US, UK, EU, India and/or Sri Lanka. All other company and service names are the property of their respective holders.

Footnotes and Non-GAAP Financial Information

(1) To determine year-over-year constant currency revenue for the Company's fourth quarter of fiscal 2013, revenue from entities reporting in U.K. pound sterling was converted into U.S. dollars at the average exchange rate in effect for the three months ended March 31, 2012 of 1.58 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended March 31, 2013 of 1.54 U.S. dollars to U.K. pounds sterling. To determine sequential revenue change in constant currency for the Company's fourth quarter of fiscal 2013, revenue from entities reporting in U.K. pounds sterling was converted into U.S. dollars at the average exchange rate in effect for the three months ended December 31, 2012 of 1.61 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended March 31, 2013 of 1.54 U.S. dollars to U.K. pounds sterling.

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

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

Forward-Looking Statements

Certain statements made in this press release that are not based on historical information are forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This press release contains express or implied forward-looking statements relating to, among other things, Virtusa's expectations concerning management's forecast of financial performance, the growth of our business and management's plans, objectives, and strategies. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond Virtusa's control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things: Virtusa's dependence on a limited number of clients as well as clients located principally in the United States and United Kingdom and in concentrated industries; 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; Virtusa's ability to assimilate and integrate the operations of acquired businesses; unanticipated acquisition related costs and negative effects on Virtusa's reported results of operations from acquisition-related charges; Virtusa's ability to achieve expected synergies and operating efficiencies in the acquisitions within expected time-frames or at all; 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'a 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; currency exchange rate fluctuations of the Indian and Sri Lankan rupee, the U.S. dollar and the U.K. pound sterling; and the volatility of the market price of Virtusa's common stock. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Virtusa undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise. For additional disclosure regarding these and other risks faced by Virtusa, see the disclosure contained in Virtusa's public filings with the Securities and Exchange Commission, including Virtusa's Annual Report on Form 10-K for the fiscal year ended March 31, 2012 and subsequent Quarterly Reports on Form 10-Q, as filed with the Securities and Exchange Commission.

Virtusa Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, unaudited)

March 31, 2013

March 31, 2012

Assets:

Cash and cash equivalents

$

57,199

$

58,105

Short-term investments

29,452

23,055

Accounts receivable, net

68,612

58,789

Unbilled accounts receivable

15,702

7,634

Prepaid expenses

7,562

7,759

Deferred income taxes

7,674

8,470

Restricted cash

350

2,828

Other current assets

8,333

5,831

Total current assets

194,884

172,471

Property and equipment, net

36,775

32,843

Long-term investments

8,319

4,269

Deferred income taxes

9,275

8,348

Goodwill

35,472

35,472

Intangible assets, net

15,692

18,248

Other long-term assets

3,502

3,143

Total assets

$

303,919

$

274,794

Liabilities:

Accounts payable

$

9,231

$

8,649

Accrued employee compensation and benefits

17,683

17,844

Accrued expenses and other current liabilities

17,811

22,011

Income taxes payable

4,509

4,954

Total current liabilities

49,234

53,458

Long-term liabilities

2,478

3,162

Total liabilities

51,712

56,620

Stockholders' equity

252,207

218,174

Total liabilities and stockholders' equity

$

303,919

$

274,794

Virtusa Corporation and Subsidiaries

Consolidated Statements of Income

(In thousands except share and per share amounts, unaudited)

Three Months Ended
March 31,

Year Ended
March 31,

2013

2012

2013

2012

Revenue

$

89,949

$

74,231

$

333,175

$

277,771

Costs of revenue

57,672

47,786

215,866

177,434

Gross profit

32,277

26,445

117,309

100,337

Total operating expenses

22,858

19,378

84,450

76,438

Income from operations

9,419

7,067

32,859

23,899

Other income (expense):

Interest income

743

716

2,977

2,478

Foreign currency transaction gains (losses)

176

291

(68

)

227

Other, net

26

(85

)

91

(158

)

Total other income (expense)

945

922

3,000

2,547

Income before income tax expense

10,364

7,989

35,859

26,446

Income tax expense

1,272

2,191

7,461

6,411

Net income

$

9,092

$

5,798

$

28,398

$

20,035

Net income per share of common stock:

Basic

$

0.36

$

0.23

$

1.14

$

0.81

Diluted

$

0.35

$

0.23

$

1.11

$

0.79

Weighted average number of

common shares outstanding

Basic

25,086,734

24,757,310

24,937,162

24,643,063

Diluted

25,936,859

25,483,096

25,638,839

25,383,650

Virtusa Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(In thousands, unaudited)

Year Ended
March 31,

2013

2012

Cash flows provided by operating activities:

Net income

$

28,398

$

20,035

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

9,040

8,305

Share-based compensation expense

5,876

5,102

Provision for doubtful accounts

193

602

(Gain) loss on disposal of property and equipment

(100

)

16

Deferred income taxes, net

(2,302

)

(1,778

)

Foreign currency loss (gain) , net

68

(227

)

Excess tax benefits from stock option exercises

(759

)

(1,422

)

Net changes in operating assets and liabilities:

Accounts receivable and unbilled receivable

(19,462

)

(17,883

)

Prepaid expenses and other current assets

(3,501

)

(3,196

)

Other long-term assets

6,617

(2,805

)

Accounts payable

805

1,579

Accrued employee compensation and benefits

(1,440

)

4,088

Accrued expenses and other current liabilities

3,883

3,983

Income taxes payable

(5,130

)

5,188

Other long-term liabilities

(232

)

(670

)

Net cash provided by operating activities

21,954

20,917

Cash flows used for investing activities:

Proceeds from sale of property and equipment

117

114

Purchase of short-term investments