- Second quarter fiscal 2019 revenue
of $305.5 million increased 1.8% sequentially and 23.1%
year-over-year.
- Second quarter fiscal 2019 GAAP
diluted EPS of $0.01. Non-GAAP diluted EPS of $0.54, up 54.3%
year-over-year.
- Second quarter fiscal 2019 GAAP
operating income of $14.0 million. Non-GAAP operating income of
$29.0 million, up 46.5% year-over-year.
- Second quarter fiscal 2019 operating
cash flow of $40.0 million, representing 13.1% of revenue.
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 second quarter fiscal 2019, ended
September 30, 2018.
Second Quarter Fiscal 2019 Consolidated Financial
Results
Revenue for the second quarter of fiscal 2019 was $305.5
million, an increase of 1.8% sequentially and 23.1% year-over-year.
On a constant currency basis, (1) second quarter revenue increased
2.5% sequentially and 23.4% year-over-year.
Virtusa reported GAAP income from operations of $14.0 million
for the second quarter of fiscal 2019, compared to $13.9 million
for the first quarter of fiscal 2019 and $10.3 million for the
second quarter of fiscal 2018.
GAAP net income available to common shareholders for the second
quarter of fiscal 2019 was $0.4 million, or $0.01 per diluted
share, compared to GAAP net loss of $7.4 million, or ($0.25) per
diluted share, for the first quarter of fiscal 2019, and GAAP net
income of $3.7 million, or $0.12 per diluted share, for the second
quarter of fiscal 2018. Second quarter fiscal 2019 GAAP net loss
includes $4.2 million of net unrealized foreign exchange losses on
an after-tax basis, which were not included in the Company’s prior
guidance.
Non-GAAP Results*:
Non-GAAP income from operations was $29.0 million for the second
quarter of fiscal 2019, compared with $27.5 million for the first
quarter of fiscal 2019 and $19.8 million for the second quarter of
fiscal 2018.
Non-GAAP net income was $18.2 million, or $0.54 per diluted
share, for the second quarter of fiscal 2019, compared to $16.8
million, or $0.50 per diluted share, for the first quarter of
fiscal 2019, and $11.4 million, or $0.35 per diluted share, for the
second quarter of fiscal 2018.
*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 2019 with $232.5
million of cash, cash equivalents and investments (2). Cash
provided by operating activities was $40.0 million for the second
quarter of fiscal 2019.
Management Commentary
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “We
delivered another solid quarter driven by our differentiated value
proposition and excellence in execution and service delivery.
Virtusa continues to strengthen its position as a preferred partner
enabling end-to-end digital transformation to many of the world’s
leading companies. Our above-industry growth and continued momentum
give us confidence in our strategy and long-term
opportunities.”
Ranjan Kalia, Chief Financial Officer, said, “Our fiscal second
quarter results are highlighted by double-digit year-over-year
organic revenue growth, significant margin accretion, and non-GAAP
EPS growth of 54%. As contemplated in our prior guidance, growth
resumed at our largest client in the fiscal second quarter. Also,
the recently completed eTouch acquisition continues to perform
well. We are maintaining the midpoint of our fiscal 2019 guidance,
which continues to reflect above-industry revenue growth on an
organic basis even after absorbing an incremental $4 million of
forecasted currency headwinds in the second half.”
Financial Outlook
Virtusa management provided the following current financial
guidance:
- Third quarter fiscal 2019 revenue is
expected to be in the range of $308 to $316 million. GAAP diluted
EPS is expected to be in the range of $0.12 to $0.16. Non-GAAP
diluted EPS is expected to be in the range of $0.56 to $0.62.
- Fiscal year 2019 revenue is expected to
be in the range of $1,241 to $1,259 million. GAAP diluted EPS is
expected to be in the range of $0.09 to $0.17. Non-GAAP diluted EPS
is expected to be in the range of $2.19 to $2.31.
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.
- Second 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. 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.
- 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 third quarter and fiscal year 2019 diluted GAAP
EPS estimates are both based on average share counts of
approximately 30.7 million (assuming no further exercises of
stock-based awards). The Company’s third quarter and fiscal year
2019 diluted Non-GAAP EPS estimates are both based on average share
counts of approximately 33.7 million (assuming no further exercises
of stock-based awards). GAAP and Non-GAAP average share counts
assume a stock price of $48.67, which was derived from the average
closing price of the Company’s stock over the five trading days
ended on November 5, 2018. Deviations from this stock price may
cause actual diluted EPS to vary based on share dilution from
Virtusa’s stock options.
Conference Call and Webcast
Virtusa will host a conference call today, November 8, 2018 at
5:00 p.m. Eastern Time to discuss the Company’s second quarter
fiscal 2019 financial results, current financial guidance, and
other corporate developments. To access this call, please dial
866-548-4713 (domestic) or 323-794-2597 (international). The
passcode is 6886046. A replay of this conference call will be
available through November 15, 2018 at 844-512-2921 (domestic) or
412-317-6671 (international). The replay passcode is 6886046. 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, stock-based compensation expense, acquisition
related charges, restructuring charges, 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 (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, 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 for the three
and six months ended September 30, 2018:
(in thousands, except per share
amounts) Three Months Ended September 30, Six Months
Ended September 30, 2018 2017 2018
2017 GAAP income from operations $ 14,019
$ 10,279 $ 27,943 $ 16,349 Add: Stock-based compensation
expense 9,124 6,142 17,062 10,930 Add: Acquisition-related charges
and restructuring charges(a) 5,829
3,351 11,495 5,860
Non-GAAP income from operations $ 28,972 $
19,772 $ 56,500 $ 33,139
GAAP
operating margin 4.6 % 4.1 % 4.6 % 3.4 % Effect of above
adjustments to income from operations 4.9 %
3.9 % 4.7 % 3.6 %
Non-GAAP operating
margin 9.5 % 8.0 % 9.3 %
7.0 %
GAAP net income (loss) available to Virtusa
common stockholders $ 417 $ 3,681 $ (6,966 ) $ 6,638 Add:
Stock-based compensation expense 9,124 6,142 17,062 10,930 Add:
Acquisition-related charges and restructuring charges(a) 6,300
3,351 12,427 5,860 Add: Foreign currency transaction losses, net(b)
9,355 1,480 20,113 1,557 Tax adjustments (c) (8,126 ) (4,066 )
(9,943 ) (6,588 ) Noncontrolling interest, net of taxes (d)
50 (313 ) 177 (679
)
Non-GAAP net income available to Virtusa common
stockholders $ 17,120 $ 10,275 $ 32,870
$ 17,718
GAAP diluted earnings
(loss) per share (f) $ 0.01 $ 0.12 $ (0.23 ) $ 0.22
Effect of stock-based compensation expense (g) 0.27 0.19 0.51 0.35
Effect of acquisition-related charges and restructuring charges(a)
(g) 0.19 0.10 0.37 0.18 Effect of foreign currency transaction
losses(b) (g) 0.28 0.05 0.60 0.05 Effect of tax adjustments (c) (g)
(0.24 ) (0.13 ) (0.30 ) (0.21 ) Effect of noncontrolling interest
(d) (g) - (0.01 ) - (0.02 ) Effect on dividend on Series A
Convertible Preferred Stock (f) (g) 0.03 0.03 0.06 0.03 Effect of
change in dilutive shares for non-GAAP (f) -
- 0.03 -
Non-GAAP diluted earnings per share (e) (g) $ 0.54
$ 0.35 $ 1.04 $ 0.60
(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, 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 September 30,
Six Months Ended September 30, 2018
2017 2018 2017 Amortization of
intangible assets $ 2,994 $ 2,594 $ 5,770 $ 5,103
Acquisition & integration costs $ 2,835 $ - $ 5,725 $ -
Restructuring charges $ - $ 757 $ - $ 757
Acquisition-related charges included in costs of revenue and
operating expense $ 5,829 $ 3,351 $ 11,495 $ 5,860 Accreted
interest related to deferred acquisition payments $ 471 $ -
$ 932 $ -
Total acquisition-related charges and
restructuring charges $ 6,300 $ 3,351 $
12,427 $ 5,860 (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 six months ended
September 30, 2018, the weighted average shares outstanding of
Series A Convertible Preferred Stock of 3,000,000 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 six months ended
September 30, 2017, the weighted average shares outstanding of
Series A Convertible Preferred Stock of 3,000,000 and 2,456,044,
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 six months ended September 30, 2018 and 2017:
Three Months
Ended September 30, Six Months Ended September
30, 2018 2017 2018
2017 Non-GAAP net income available to Virtusa common
stockholders $ 17,120 $ 10,275 $ 32,870 $ 17,718
Add: Dividends and accretion on Series A
Convertible Preferred Stock
$ 1,088 $ 1,087 $ 2,175 $ 1,087 Non-GAAP net income
available to Virtusa common stockholders and assumed conversion $
18,208 $ 11,362 $ 35,045 $ 18,805 GAAP
dilutive weighted average shares outstanding 30,627,044 29,820,581
29,700,151 30,035,865
Add: Dilutive effect of employee stock
options and unvested restricted stock awards and restricted stock
units
- - 866,156 -
Add: Series A Convertible Preferred Stock
as converted
3,000,000 3,000,000 3,000,000
1,500,000 Non-GAAP dilutive weighted average shares
outstanding 33,627,044 32,820,581
33,566,307 31,535,865
(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 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, 2018, rather
than the actual exchange rate in effect for the three months ended
September 30, 2018. To determine year-over-year revenue change in
constant currency for the Company's second 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 September 30,
2017, rather than the actual exchange rate in effect for the three
months ended September 30, 2018. The average exchange rates for the
three months ended September 30, 2017, June 30, 2018, and September
30, 2018 are presented in the following table:
Average U.S. Dollar Exchange Rate
For the Three Months Ended September 30,
2017 June 30, 2018
September 30, 2018 GBP 1.31 1.35 1.30
Euro 1.18 1.19 1.16
SEK 0.12 0.11 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 September 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 $24.6 million at September 30,
2018. Profit attributable to minority shareholders (Non-controlling
Interest) in the Consolidated Statements of Income was $0.5 million
on a GAAP basis and $0.4 million on a non-GAAP basis for the
quarter ending September 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: 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, including eTouch; 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) September 30, 2018 March 31,
2018 Assets: Cash and cash equivalents $176,981 $194,897
Short-term investments 54,108 45,900 Accounts receivable, net
162,497 151,455 Unbilled accounts receivable 96,605 103,829 Prepaid
expenses 33,865 31,724 Restricted cash 1,298 301 Other current
assets 19,221 21,229 Total current assets 544,575 549,335
Property and equipment, net 120,264 121,565 Investments accounted
for using equity method 1,398 1,588 Long-term investments 1,410
4,140 Deferred income taxes 38,310 31,528 Goodwill 275,002 297,251
Intangible assets, net 94,212 96,001 Other long-term assets 15,728
11,772 Total assets $1,090,899 $1,113,180
Liabilities,
Series A convertible preferred stock, redeemable noncontrolling
interest and stockholders' equity Accounts payable $27,717
$29,541 Accrued employee compensation and benefits 62,925 71,500
Deferred revenue 6,175 7,908 Accrued expenses and other 109,677
91,306 Current portion of long-term debt 11,407 11,407 Income taxes
payable 5,034 5,038 Total current liabilities 222,935 216,700
Deferred income taxes 17,462 21,341 Long-term debt, less current
portion 314,524 288,227 Long-term liabilities 44,854 43,833 Total
liabilities 599,775 570,101 Series A convertible preferred
stock 107,079 106,996 Redeemable noncontrolling interest 24,614 -
Stockholders' equity 359,156 418,623 Noncontrolling interest
275 17,460 Stockholders' equity 359,431 436,083 Total liabilities,
Series A convertible preferred stock, redeemable noncontrolling
interest and stockholders' equity $1,090,899 $1,113,180
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, 2018 2017
2018 2017 Revenue $305,520 $248,174 $605,551
$475,519 Costs of revenue 216,346 178,404 432,827 344,683 Gross
profit 89,174 69,770 172,724 130,836 Total operating expenses
75,155 59,491 144,781 114,487 Income from operations 14,019
10,279 27,943 16,349 Other income (expense): Interest income
589 928 1,353 1,932 Interest expense (4,514) (1,413) (8,768)
(3,071) Foreign currency transaction losses, net (9,355) (1,480)
(20,113) (1,557) Other, net 819 778 1,443 884 Total other expense
(12,461) (1,187) (26,085) (1,812) Income before income tax
(benefit) expense 1,558 9,092 1,858 14,537 Income tax (benefit)
expense (402) 1,500 5,463 2,298 Net income (loss) 1,960 7,592
(3,605) 12,239 Less: net income attributable to noncontrolling
interests, net of tax 455 2,824 1,186 3,813 Net income (loss)
available to Virtusa stockholders 1,505 $4,768 ($4,791) $8,426
Less: Series A convertible preferred stock dividends and accretion
1,088 1,087 2,175 1,788 Net income (loss) available to Virtusa
common stockholders 417 $3,681 (6,966) $6,638 Basic
earnings (loss) per share available to Virtusa common stockholders
$0.01 $0.13 ($0.23) $0.23 Diluted earnings (loss) per share
available to Virtusa common stockholders $0.01 $0.12 ($0.23) $0.22
Weighted average number of common shares outstanding: Basic
29,767,276 29,216,600 29,700,151 29,434,101 Diluted 30,627,044
29,820,581 29,700,151 30,035,865
Virtusa
Corporation and Subsidiaries Consolidated Statements of Cash
Flows (In thousands, unaudited) Six Months
Ended September 30, 2018 2017 Cash flows
from operating activities: Net income (loss) ($3,605) $12,239
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization 14,593 13,646
Share-based compensation expense 17,062 10,930 Provision (recovery)
for doubtful accounts (236) 723 Gain on disposal of property and
equipment (159) (49) Foreign currency transaction losses, net
20,113 1,557 Amortization of discounts and premiums on investments
76 185 Amortization of debt issuance cost 546 565 Deferred income
taxes, net (6,522) - Net changes in operating assets and
liabilities: Accounts receivable and unbilled receivable (1,975)
(4,492) Prepaid expenses and other current assets (11,238) (4,450)
Other long-term assets (4,009) (815) Accounts payable 232 740
Accrued employee compensation and benefits (5,834) (579) Accrued
expenses and other current liabilities 11,179 4,712 Income taxes
payable 3,133 (3,586) Other long-term liabilities (73) (1,494) Net
cash provided by operating activities 33,283 29,832 Cash flows from
investing activities: Proceeds from sale of property and equipment
451 180 Purchase of short-term investments (68,803) (50,549)
Proceeds from sale or maturity of short-term investments 60,571
62,829 Purchase of long-term investments - (12,273) Business
acquisition, net of cash acquired (34) (600) Purchase of property
and equipment (18,875) (8,195) Net cash used in investing
activities (26,690) (8,608) Cash flows from financing
activities: Proceeds from exercise of common stock options 428
2,717 Proceeds from exercise of subsidiary stock options 326 196
Proceeds from revolving credit facility 32,000 - Payment of debt
(6,250) (81,000) Payments of withholding taxes related to net share
settlements of restricted stock (7,602) (2,431) Series A
convertible preferred stock proceeds, net of issuance costs of
$1,154 - 106,846 Repurchase of common stock - (30,000) Principal
payments on capital lease obligation (43) (124) Payment of
contingent consideration related to acquisition (100) - Payment of
redeemable noncontrolling interest (28,396) - Payment of dividend
on Series A convertible preferred stock (2,092) (1,035) Net cash
used in financing activities (11,729) (4,831) Effect of exchange
rate changes on cash, cash equivalents and restricted cash (11,694)
1,753 Net (decrease) increase in cash, cash equivalents and
restricted cash (16,830) 18,146 Cash, cash equivalents and
restricted cash, beginning of period 195,236 145,086 Cash, cash
equivalents and restricted cash, end of period $178,406 $163,232
Supplemental Non-GAAP Financial Information as of
September 30, 2018 and 2017
Reconciliation from cash, cash equivalents
and restricted cash to total cash and cashequivalents, short-term
investments and long-term investments:
Cash, cash equivalents and restricted cash, end of period
$178,406 $163,232 Less : Restricted cash 1,425 975 Total Cash and
cash equivalents end of period 176,981 162,257 Short-term
investments 54,108 76,662 Long-term investments 1,410 15,120 Total
short-term and long-term investments, end of period 55,518 91,782
Total cash and cash equivalents, short-term and
long-term investments $ 232,499 254,039
Virtusa
Corporation and Subsidiaries Reconciliation of Non-GAAP
Guidance** Three months
ending Fiscal Year ending December 31, 2018
March 31, 2019
Low
High
Low
High
GAAP diluted earnings per share $0.12
$0.16 $0.09 $0.17 Effect of stock-based
compensation expense 0.22 0.22 0.93 0.93 Effect of
acquisition-related charges and restructuring charges 0.21 0.21
0.76 0.76 Effect of foreign currency transaction (gains) losses
0.00 0.00 0.60 0.60 Effect of change in dilutive shares for
non-GAAP (0.01 ) (0.01 ) (0.01 ) (0.01 ) Effect of tax impact from
Tax Act 0.00 0.00 0.00 0.00 Effect of tax adjustments (0.01 ) 0.02
(0.30 ) (0.26 ) 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# $0.56 $0.62
$2.19 $2.31
Weighted average diluted shares outstanding - GAAP 30.7 30.7 30.7
30.7 - Non-GAAP 33.7 33.7 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/20181108005906/en/
Media:GreenoughAmy Legere,
617-275-6517alegere@greenough.bizorInvestors:ICRWilliam
Maina, 646-277-1236william.maina@icrinc.com
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