Second quarter fiscal 2016 revenue of $143 million increased 6% sequentially and 21% year-over-year.
Second quarter fiscal 2016 diluted EPS on a GAAP basis was $0.37, compared to $0.34 in the year ago period.
Generated $17 million of cash from operating activities during the second quarter of fiscal 2016.
Commenced work with nine new clients in the quarter.

Westborough, MA – (November 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 second quarter fiscal year 2016, ended September 30, 2015.

Second Quarter Fiscal 2016 Consolidated Financial Results

Revenue for the second quarter of fiscal 2016 was $143 million, an increase of 6% sequentially and 21% year-over-year. On a constant currency basis,(1) second quarter revenue increased 6% sequentially and 23% year-over-year.

Virtusa reported GAAP income from operations of $13.3 million for the second quarter of fiscal 2016, compared to $12.4 million for the first quarter of fiscal 2016, and an increase compared to $12.2 million for the second quarter of fiscal 2015.

GAAP net income for the second quarter of fiscal 2016 was $11.1 million, or $0.37 per diluted share, compared to $10.1 million, or $0.34 per diluted share, for the first quarter of fiscal 2016, and an increase from $10.1 million, or $0.34 per diluted share, for the second quarter of fiscal 2015.

Non GAAP Results

Non-GAAP income from operations, which excludes stock-based compensation expense and acquisition related expenses, was $18.7 million for the second quarter of fiscal 2016, compared to $18.2 million for the first quarter of fiscal 2016, and an increase compared to $16.1 million for the second 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 second quarter of fiscal 2016, was $15.0 million, or $0.50 per diluted share, compared to $14.4 million, or $0.48 per diluted share, for the first quarter of fiscal 2016, and compared to $13.0 million, or $0.44 per diluted share, for the second quarter of fiscal 2015.

Balance Sheet and Cash Flow

The Company ended the second quarter of fiscal 2016 with $203.4 million of cash, cash equivalents, and short-term and long-term investments.(2) Cash flow from operations for the second quarter of fiscal 2016 was $17.0 million.

Commenting on the second quarter, Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “We are pleased to report another strong quarter. Our fiscal second quarter performance is evidence that our clients are investing in expanding their addressable market and looking for ways to accelerate cost reduction programs. Our digital and millennial offerings and our transformational solutions are targeted towards helping our clients grow their revenue and accelerate cost reduction initiatives.”

Ranjan Kalia, Chief Financial Officer, said, “We delivered revenue at the high end of our fiscal second quarter guidance range and EPS that exceeded our outlook. Our revenue growth was strong across our industry groups, geographies and client portfolio. We continue to position Virtusa for ongoing growth by making investments in revenue-generating activities and in strategic initiatives aimed at expanding our addressable market.”

Financial Outlook

Virtusa management provided the following current financial guidance:

Third quarter fiscal 2016 revenue is expected to be in the range of $150 to $153 million. GAAP diluted EPS is expected to be in the range of $0.39 to $0.41 and non-GAAP diluted EPS is expected to be in the range of $0.54 to $0.56.

Fiscal year 2016 revenue is expected to be in the range of $584.6 to $591.6 million. GAAP diluted EPS is expected to be in the range of $1.57 to $1.63 and non-GAAP diluted EPS is expected to be in the range of $2.15 to $2.21.

The Company’s third quarter and fiscal year 2016 diluted EPS both estimate an average share count of approximately 30.1 million, (assuming no further exercises of stock-based awards) and assume a stock price of $56.99, which was derived from the average closing price of the Company’s stock over the five trading days ended on October 30, 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, November 4, 2015 at 8:00 am Eastern time to discuss the Company’s second quarter fiscal 2016 financial results, current financial guidance, and other corporate developments. To access this call, please dial 877-879-6203 (domestic) or 719-325-4790 (international). The passcode is 874923. A replay of this conference call will be available through November 11, 2015 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 874923. 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).

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).

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:

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