Westborough, MA – (July 28, 2015) invalid link: https://symphony.virtusa.comVirtusa 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 2016, ended June 30, 2015.
First Quarter Fiscal 2016 Consolidated Financial Results
Revenue for the first quarter of fiscal 2016 was $134.8 million, an increase of 7% sequentially and 20% year-over-year, including contribution from the acquisition of Apparatus, Inc. which closed on April 1, 2015. On a constant currency basis,(1) first quarter revenue increased 7% sequentially and 22% year-over-year.
Virtusa reported GAAP income from operations of $12.4 million for the first quarter of fiscal 2016, compared to $14.5 million for the fourth quarter of fiscal 2015, and an increase compared to $11.2 million for the first quarter of fiscal 2015.
On a GAAP basis, net income for the first quarter of fiscal 2016 was $10.1 million, or $0.34 per diluted share, compared to $11.6 million, or $0.39 per diluted share, for the fourth quarter of fiscal 2015, and an increase from $9.0 million, or $0.31 per diluted share, for the first quarter of fiscal 2015.
Non GAAP Results:
Non-GAAP income from operations, which excludes stock-based compensation expense and acquisition related expenses, was $18.2 million for the first quarter of fiscal 2016, compared to $19.2 million for the fourth quarter of fiscal 2015, and an increase compared to $14.0 million for the first quarter of fiscal 2015.
Non-GAAP net income, which excludes stock-based compensation expense, acquisition related expenses, and foreign currency transaction gains and losses, each net of tax, for the first quarter of fiscal 2016 was $14.4 million, or $0.48 per diluted share, compared to $ 15.1 million, or $0.51 per diluted share, for the fourth quarter of fiscal 2015, and compared to $11.1 million, or $0.38 per diluted share, for the first quarter of fiscal 2015.
Balance Sheet and Cash Flow
The Company ended the first quarter of fiscal 2016 with $200.7 million of cash, cash equivalents, and short-term and long-term investments.(2) During the June quarter Virtusa invested $33.4 million of cash to complete the acquisition of Apparatus, Inc.
Acquisition of Agora Group
On July 28, 2015, Virtusa acquired the business of Agora Group, Inc., an IT consulting organization headquartered in Atlanta, Georgia, USA, focused on implementing and integrating business process management (BPM) solutions on leading BPM suites. Agora Group employs approximately 60 experienced practitioners with deep knowledge in BPM-related solutions.
Under the terms of the asset purchase agreement, Virtusa acquired Agora Group, Inc.’s business for approximately $7.5 million in cash (net of working capital adjustments). Virtusa has also agreed to issue an aggregate of up to $2.89 million in restricted stock awards from Virtusa’s stock option and incentive plan, not to exceed 77,067 shares, to certain Agora employees. The restricted stock awards will vest annually over a four year period.
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “The first quarter was a strong start to fiscal year 2016. Our growth continues to be driven by our differentiated value proposition, which enables our clients to improve operating efficiencies and reduce costs through our industry-leading solutions. Simultaneously, we help clients reimagine their business and expand their addressable market through our transformational digital solutions.”
Ranjan Kalia, Chief Financial Officer, said, “We are pleased with our first quarter results, and believe we are well positioned to achieve our fiscal year 2016 outlook. Mr. Kalia added, “The Apparatus integration remains on track with initial success generating synergy revenue opportunities within the Virtusa client base.”
Virtusa management provided the following current financial guidance:
Second quarter fiscal 2016 revenue is expected to be in the range of $140.3 to $143.3 million. GAAP diluted EPS is expected to be in the range of $0.33 to $0.35 and non-GAAP diluted EPS is expected to be in the range of $0.47 to $0.49.
Fiscal year 2016 revenue is expected to be in the range of $582 to $594 million. GAAP diluted EPS is expected to be in the range of $1.53 to $1.65 and non-GAAP diluted EPS is expected to be in the range of $2.13 to $2.25.
Virtusa’s current guidance for the second fiscal quarter and the full fiscal year ending March 31, 2016 reflects the inclusion of Agora Group. Virtusa expects Agora to contribute revenue of $1.7 million for the second quarter of fiscal 2016 and $10 million for the full year fiscal 2016. In addition, Virtusa expects Agora to be dilutive by $0.01 per share on a GAAP basis in the second quarter of fiscal 2016, inclusive of expected transaction and integration costs, and $0.01 accretive on a non-GAAP basis. Agora is expected to be EPS neutral to fiscal year 2016 on a GAAP basis, and $0.03 accretive to EPS on a non-GAAP basis.
The Company’s second quarter and fiscal year 2016 diluted EPS both estimate an average share count of approximately 30.0 million (assuming no further exercises of stock-based awards) and assume a stock price of $50.56, which was derived from the average closing price of the Company’s stock over the five trading days ended on July 27, 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, July 28, 2015 at 5:00 pm Eastern time to discuss the Company’s first quarter fiscal 2016 financial results, current financial guidance, and other corporate developments. To access this call, please dial 800-580-5706 (domestic) or 913-312-0638 (international). The passcode is 9913951. A replay of this conference call will be available through August 4, 2015 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 9913951. 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 metrics as defined by Regulation G by the Securities and Exchange Commission. These non-GAAP financial metrics are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial metrics calculated in accordance with GAAP, and may be different from non-GAAP metrics used by other companies. In addition, these non-GAAP metrics should be read in conjunction with Virtusa’s financial statements prepared in accordance with GAAP.
Virtusa believes the following financial metrics 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) below for further detail).
Virtusa presents a reconciliation of its cash, cash equivalents, short term and long term investments which Virtusa believes provides insight into its cash position and overall liquidity (see footnote (2) below for further detail).
Virtusa also presents the following consolidated statement of income metrics that exclude acquisition-related charges, stock-based compensation expense and foreign currency transaction gains and losses to provide further insights into the comparison of Virtusa’s operating results among the periods, as well as enhancing comparability with operating results of peer companies:
Non-GAAP income from operations: income from operations, as reported on Virtusa’s consolidated statements of income, excluding stock-based compensation expense and acquisition-related charges.
Non-GAAP operating margin: non-GAAP income from operations as a percentage of reported revenues.
Non-GAAP net income: net income, as reported on Virtusa’s consolidated statements of income, excluding the tax adjusted impact of the following, stock-based compensation, acquisition-related charges and foreign currency transaction gains and losses.
Non-GAAP diluted earnings per share: diluted earnings per share, as reported on Virtusa’s consolidated statements of income, excluding tax adjusted per share impact of the following, stock-based compensation, acquisition-related charges and foreign currency transaction gains and losses.
The following table presents a reconciliation of each non-GAAP financial metric to the most comparable GAAP metric: