- Third quarter fiscal 2015 revenue increased 4.5% sequentially and 22% year-over-year to $123.0 million.
- Third quarter fiscal 2015 operating income increased 19% sequentially and 31% year-over-year to $14.6 million.
- Generated $12.6 million of cash from operating activities during the third quarter of fiscal 2015.
- Third quarter fiscal 2015 diluted EPS increased to $0.40, compared to diluted EPS of $0.34 in the prior quarter and $0.35 in the year ago period.
- Added four new clients during the third quarter of fiscal 2015.
Westborough, MA – (February 4, 2015) 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 third quarter fiscal year 2015, ended December 31, 2014.
Third Quarter Fiscal 2015 Consolidated Financial Results
Revenue for the third quarter of fiscal 2015 was $123.0 million, an increase of 4.5% sequentially and 22% year-over-year in reported currency. On a constant currency basis,(1) third quarter revenue increased 6% sequentially and 22% year-over-year.
Income from operations increased to $14.6 million for the third quarter of fiscal 2015, compared to $12.2 million for the second quarter of fiscal 2015, and $11.2 million for the third quarter of fiscal 2014.
Net income for the third quarter of fiscal 2015 increased to $11.8 million, or $0.40 per diluted share, compared to $10.1 million, or $0.34 per diluted share, for the second quarter of fiscal 2015, and compared to $9.3 million, or $0.35 per diluted share, for the third quarter of fiscal 2014.
The Company ended the third quarter of fiscal 2015 with $224.5 million of cash, cash equivalents, and short-term and long-term investments.(2) Cash flow from operations for the third quarter of fiscal 2015 was $12.6 million.
Kris Canekeratne, Virtusa's Chairman and CEO, stated, "Our results this quarter further validate that our initiatives to meet our clients’ dual mandate of simultaneously improving operational efficiencies through business transformation, and generating incremental revenue growth through digital initiatives are working. We continue to strengthen our client relationships, increasing the value we deliver through our industry expertise and delivery excellence.”
Ranjan Kalia, Chief Financial Officer, said, “Our business continues to benefit from a greater number of transformational programs. Investments in increased onsite effort will impact margins as these transformational programs ramp, but are expected to deliver returns as revenue scales and we leverage our global delivery model.” Kalia continued, “Our fourth quarter revenue guidance reflects continued strong growth, even when absorbing an expected impact of approximately $1.8 million from European currency movements.”
Financial Outlook
Virtusa management provided the following current financial guidance:
- Fourth quarter fiscal year 2015 revenue is expected to be in the range of $125.0 to $127.0 million, with diluted EPS of $0.39 to $0.41.
- Fiscal year 2015 revenue is expected to be in the range of $478.0 to $480.0 million, with diluted EPS of $1.44 to $1.46.
The Company’s fourth quarter and full fiscal year 2015 diluted EPS estimates assume an average share count of approximately 29.8 million and 29.6 million respectively, (assuming no further exercises of stock-based awards) and assume a stock price of $38.14, which was derived from the average closing price of the Company’s stock over the five trading days ended on February 3, 2015. 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, February 4, 2015 at 5:00 pm Eastern time to discuss the Company’s third fiscal quarter 2015 financial results, current financial guidance, and other corporate developments. To access this call, please dial 888-677-8756 (domestic) or 913-312-0642 (international). The passcode is 7766113. A replay of this conference call will be available through February 11, 2015 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 7766113. 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.
Footnotes
- To determine year-over-year constant currency revenue for the Company's third 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 December 31, 2013 of 1.62 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended December 31, 2014 of 1.58 U.S. dollars to U.K. pounds sterling. To determine sequential revenue change in constant currency for the Company's third 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 September 30, 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 December 31, 2014 of 1.58 U.S. dollars to U.K. pounds sterling.
- 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.
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; Virtusa’s ability to integrate the operations of, and achieve expected synergies and operating efficiencies in connection with, acquired businesses; unanticipated acquisition related costs and negative effects on Virtusa’s reported results of operations from acquisition-related charges; 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, Sri Lanka or other geographies where Virtusa is located ; 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, the Euro, the Swedish krona 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.