Westborough, MA – (August 5, 2014) Virtusa Corporation (NASDAQ GS: 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 2015, ended June 30, 2014.
First Quarter Fiscal 2015 Consolidated Financial Results
Revenue for the first quarter of fiscal 2015 was $112.3 million, an increase of 1% sequentially and 24% year-over-year in reported currency. On a constant currency basis,(1) first quarter revenue increased 1% sequentially and 22% year-over-year.
Virtusa reported income from operations of $11.2 million for the first quarter of fiscal 2015, compared to $12.5 million for the fourth quarter of fiscal 2014, and $8.9 million for the first quarter of fiscal 2014.
Net income for the first quarter of fiscal 2015 was $9.0 million, or $0.31 per diluted share, compared to $10.0 million, or $0.35 per diluted share, for the fourth quarter of fiscal 2014, and compared to $7.5 million, or $0.29 per diluted share, for the first quarter of fiscal 2014.
The Company ended the first quarter of fiscal 2015 with $194.8 million of cash, cash equivalents, and short-term and long-term investments.(2) Cash used for operations for the first quarter of fiscal 2015 was $2.5 million.
Kris Canekeratne, Virtusa's Chairman and CEO, stated, "This was another strong quarter driven by our differentiated value proposition which enables our clients to expand their addressable market through digital channels and improves their BAU operation through industry leading transformational solutions. We continue to deepen our relationships across our blue chip client base, diversifying geographically and growing our non-Top 10 clients at a faster rate, further strengthening our growth platform."
Ranjan Kalia, Chief Financial Officer, said, “We are pleased with our first quarter results, and we are positioned well for strong sequential growth throughout the fiscal year.” Mr. Kalia added, “During the quarter, we made investments in sales and marketing, business development, and billable head count in order to position ourselves to capture the large market opportunity we see for our differentiated solutions.”
Virtusa management provided the following current financial guidance:
The Company’s second quarter and full fiscal year 2015 diluted EPS estimates assume an average share count of approximately 29.3 million and 29.4 million respectively, (assuming no further exercises of stock-based awards) and assume a stock price of $31.80, which was derived from the average closing price of the Company’s stock over the five trading days ended on August 4, 2014. 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 5, 2014 at 5:00 pm Eastern time to discuss the Company’s first fiscal quarter 2015 financial results, current financial guidance, and other corporate developments. To access this call, please dial 877-681-3367(domestic) or 719-325-4798(international). The passcode is 6007730. A replay of this conference call will be available through August 12, 2014 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 6007730. 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.
(1) To determine year-over-year constant currency revenue for the Company's first quarter of fiscal 2015, 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, 2013 of 1.54 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended June 30, 2014 of 1.69 U.S. dollars to U.K. pounds sterling. To determine sequential revenue change in constant currency for the Company's first quarter of fiscal 2015, 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, 2014 of 1.66 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended June 30, 2014 of 1.69 U.S. dollars to U.K. pounds sterling.
(2) The Company considers the measure of cash, cash equivalents and short-term investments together with 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.
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) above for further detail). Virtusa also presents its cash, cash equivalents and short term investments together with its long term investments to provide additional insight into its overall liquidity and cash position (see footnote (2) above for further detail). These non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. Virtusa's management believes that these non-GAAP revenue measures and liquidity presentations, when viewed with our results under U.S. GAAP and the accompanying reconciliations, are useful in providing additional information and evaluating Virtusa's revenue and overall liquidity position. This information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.
Reconciliations of these non-GAAP revenue measures and liquidity presentations to GAAP financial measures are included in this press release.
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 ability to integrate the operations of, and achieve expected synergies and operating efficiencies in connection with, acquired businesses, including Virtusa’s most recent acquisitions of OSB Consulting LLC and TradeTech Consulting Scandinavia AB and its subsidiaries; unanticipated acquisition related costs and negative effects on Virtusa’s reported results of operations from acquisition-related charges; 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; 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; 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, 2014 and subsequent Quarterly Reports on Form 10-Q, as filed with the Securities and Exchange Commission.