Westborough, MA – (October 27, 2010) – Virtusa Corporation (NASDAQ: VRTU), a global information technology (IT) services company that provides IT consulting, technology implementation and application outsourcing services through an enhanced global delivery model, today reported financial results for the second quarter fiscal year 2011, ended September 30, 2010.
Second Quarter Fiscal 2011 Financial Results
Revenue for the second quarter of fiscal 2011 was $52.7 million, an increase of 40% year-over-year and 2% sequentially. On a constant currency basis (1), second quarter fiscal 2011 revenue increased 42% year-over-year and 1% sequentially.
Virtusa reported income from operations of $4.0 million for the second quarter of fiscal 2011, an increase compared to $3.2 million for the second quarter of fiscal 2010, and an increase compared to $3.1 million for the first quarter of fiscal 2011.
Net income for the second quarter of fiscal 2011 increased to $3.7 million, or $0.15 per diluted share, compared to $3.0 million, or $0.12 per diluted share, for the second quarter of fiscal 2010, and $3.1 million, or $0.13 per diluted share, for the first quarter of fiscal 2011.
The Company ended the second quarter of fiscal 2011 with $95.0 million of cash, cash equivalents, short-term investments and long-term investments (2). The Company generated cash from operations of $7.0 million during the second quarter of fiscal 2011.
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “This was another solid quarter for Virtusa, driven primarily by increased contributions from the high quality clients we have added over the last 18 months.” Mr. Canekeratne continued, “These clients are ramping faster and contributing greater revenue as they realize the benefits of our value proposition and our ability to accelerate their business outcomes.”
Ranjan Kalia, Chief Financial Officer, said, “Based on our first half performance and the underlying momentum of our business, we are raising our revenue guidance for the full fiscal year 2011.” Mr. Kalia continued, “We remain focused on margin expansion by driving productivity and efficiency programs as we scale the business to meet top line growth.”
Virtusa management provided the following current financial guidance:
The Company’s third quarter and fiscal year 2011 diluted EPS estimates assume an average share count of approximately 24.8 million and 24.7 million, respectively (assuming no further exercises of stock-based awards), and assume a stock price of $12.30 per share, which was derived from the average closing price of the Company’s stock over the five trading days ended on October 26, 2010. 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, Wednesday, October 27, 2010 at 5:00 pm Eastern time to discuss the Company’s second quarter 2011 financial results, current financial guidance and other corporate developments.
To access this call, dial 888-500-6975 (domestic) or 719-325-2253 (international). A replay of this conference call will be available through November 3, 2010 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 6320140. 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.
Non-GAAP Financial Information
(1) To determine year-over-year constant currency revenue for the Company’s second quarter of fiscal 2011, 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 September 30, 2009 of 1.64 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended September 30, 2010 of 1.55 U.S. dollars to U.K. pounds sterling. To determine sequential revenue change in constant currency for the Company’s second quarter of fiscal 2011, 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 June 30, 2010 of 1.49 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended September 30, 2010 of 1.55 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, other than certain auction-rate securities, 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.
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; 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; restrictions on immigration or changes in immigration laws; the loss of any key member of Virtusa’s senior management team, increasing competition in the IT services outsourcing industry; Virtusa’s ability to attract and retain clients and meet their expectations; Virtusa’s ability to sustain profitability or maintain profitable engagements; Virtusa’s ability to assimilate and integrate the operations of InSource, LLC and ConVista Consulting, LLC; 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; 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; 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, 2010, and subsequent Quarterly Reports on Form 10-Q, as filed with the Securities and Exchange Commission.
Virtusa Corporation 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 innovative 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 the business forward at unparalleled velocity enabled by a culture of cooperative disruption.
Virtusa is a registered trademark of Virtusa Corporation. All other company and brand names may be trademarks or service marks of their respective holders.