Westborough, MA - (August 1, 2013) Virtusa Corporation (NASDAQ: 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 first quarter fiscal year 2014, ended June 30, 2013.
First Quarter Fiscal 2014 Consolidated Financial Results
Revenue for the first quarter of fiscal 2014 was $90.5 million, an increase of 19% year-over-year and 1% sequentially. On a constant currency basis (1), first quarter revenue increased 19% year-over-year and was flat sequentially.
Virtusa reported income from operations of $8.9 million for the first quarter of fiscal 2014, compared to $9.4 million for the fourth quarter of fiscal 2013, and an increase compared to $6.9 million for the first quarter of fiscal 2013.
Net income for the first quarter of fiscal 2014 was $7.5 million, or $0.29 per diluted share, compared to $9.1 million, or $0.35 per diluted share, for the fourth quarter of fiscal 2013, and an increase compared to $6.1 million, or $0.24 per diluted share, for the first quarter of fiscal 2013. Net income for the first quarter of fiscal 2014 included $0.4 million of foreign currency transaction gains compared to a gain of $0.2 million in the fourth quarter of fiscal 2013, and a gain of $0.4 million in the first quarter of fiscal 2013.
The Company ended the first quarter of fiscal 2014 with $89.7 million of cash, cash equivalents, and short-term and long-term investments (2). The Company used $1.8 million of cash for operating activities during the first quarter of fiscal 2014.
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, "We are pleased with our first quarter results. Our year-over-year growth continues to be driven by our key strengths and differentiators that generate tangible business benefits for our clients, including our IT rationalization expertise, industry leading transformational solutions, regulatory and compliance services, and leadership position in millennial enablement. We continue to have success extending our strategic role with our clients and as a result, we are increasing our market opportunity."
Ranjan Kalia, Chief Financial Officer, said, "Our first quarter played out as expected, setting the foundation for strong sequential revenue growth rates throughout the remainder of the fiscal year." Mr. Kalia added, "We remain well positioned to drive above market growth rates in fiscal year 2014 while delivering on our stated objective of meaningful operating margin expansion."
Virtusa management provided the following current financial guidance:
The Company's second quarter and fiscal year 2014 diluted EPS estimates both assume an average share count of approximately 26.3 million (assuming no further exercises of stock-based awards), and assume a stock price of $25.89, which was derived from the average closing price of the Company’s stock over the five trading days ended on July 31, 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, August 1, 2013 at 5:00 pm Eastern time to discuss the Company’s first quarter fiscal year 2014 financial results, current financial guidance, and other corporate developments. To access this call, dial 800-946-0783 (domestic) or 719-457-2731 (international). The passcode is 7563826. A replay of this conference call will be available through August 8, 2013 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 7563826. 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
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) below 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) below 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.
(1) To determine year-over-year constant currency revenue for the Company's first quarter of fiscal 2014, 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 June 30, 2012 of 1.57 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended June 30, 2013 of 1.539 U.S. dollars to U.K. pounds sterling. To determine sequential revenue change in constant currency for the Company's first quarter of fiscal 2014, 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 March 31, 2013 of 1.542 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended June 30, 2013 of 1.539 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.
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, 2013 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.