Third quarter fiscal 2017 revenue of $217.2 million, an increase of 3.4% sequentially and 44.2% year-over-year.
Third quarter fiscal 2017 diluted EPS of $0.15 on a GAAP basis, and $0.37 on a Non-GAAP basis.
$237.2 million of cash, cash equivalents, and short-term and long-term investments at the end of third quarter fiscal 2017.

Westborough, MA – (February 9, 2017) Virtusa Corporation(NASDAQ GS: VRTU), a global business consulting and IT outsourcing company that combines innovation, technology leadership and industry solutions to enhance business performance, accelerate time-to-market, increase productivity and improve customer experience, today reported consolidated financial results for the third quarter of fiscal 2017, ended December 31, 2016.

Third Quarter Fiscal 2017 Consolidated Financial Results

Revenue for the third quarter of fiscal 2017 was $217.2 million, an increase of 3.4% sequentially and 44.2% year-over-year. On a constant currency basis,(1) third quarter revenue increased 4.2% sequentially and 48.6% year-over-year.

Virtusa reported GAAP income from operations of $6.5 million for the third quarter of fiscal 2017, compared to $3.5 million for the second quarter of fiscal 2017 and $14.1 million for the third quarter of fiscal 2016. Third quarter fiscal 2017 GAAP income from operations includes $1.9 million of restructuring charges related to certain cost savings initiatives.

On a GAAP basis, net income for the third quarter of fiscal 2017 was $4.4 million, or $0.15 per diluted share, compared to $3.2 million, or $0.11 per diluted share, for the second quarter of fiscal 2017, and $11.3 million, or $0.38 per diluted share, for the third quarter of fiscal 2016. Third quarter fiscal 2017 GAAP net income includes the impact of the aforementioned restructuring charges related to certain cost savings initiatives, net of tax.

Non GAAP Results:

Non-GAAP income from operations, which excludes stock-based compensation expense, restructuring charges and acquisition related charges, was $16.3 million for the third quarter of fiscal 2017, compared to $12.9 million for the second quarter of fiscal 2017, and compared to $20.7 million for the third quarter of fiscal 2016.

Non-GAAP net income, which excludes stock-based compensation expense, restructuring charges, acquisition related charges, and foreign currency transaction gains and losses, each net of tax, for the third quarter of fiscal 2017, was $11.0 million, or $0.37 per diluted share, compared to $8.4 million, or $0.27 per diluted share, for the second quarter of fiscal 2017, and compared to $15.9 million, or $0.54 per diluted share, for the third quarter of fiscal 2016.

Balance Sheet and Cash Flow

The Company ended the third quarter of fiscal 2017 with $237.2 million of cash, cash equivalents, and short-term and long-term investments (2). Cash flow from operations was $13.5 million for the third quarter of fiscal 2017.

Management Commentary

Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “We are pleased with our third quarter results. We see continuing client demand across our industry groups and geographies for our Digital Transformation and Innovation and Operational Excellence solutions. Our differentiated solution strategy and deep domain expertise are enabling us to win in the market, and position us well for sustained growth.”

Ranjan Kalia, Chief Financial Officer, said, “During the third quarter, we delivered solid revenue growth across all industry groups and geographies. We expect this trend will continue into the fourth quarter, leading to our fourth quarter sequential revenue growth guidance of 4% at the midpoint. In addition, our Q4 fiscal 2017 guidance calls for strong non-GAAP operating margin accretion driven by top-line growth and SG&A leverage. The midpoint of our fiscal 2017 non-GAAP EPS guidance is reduced by $0.04 primarily due to a change in our effective tax rate assumption.”

Financial Outlook

Virtusa management provided the following current financial guidance:

Fourth quarter fiscal 2017 revenue is expected to be in the range of $224 to $229 million. GAAP diluted EPS is expected to be in the range of $0.31 to $0.35. Non-GAAP diluted EPS is expected to be in the range of $0.43 to $0.47

Fiscal year 2017 revenue is expected to be in the range of $856.8 to $861.8 million. GAAP diluted EPS is expected to be in the range of $0.36 to $0.40. Non-GAAP diluted EPS is expected to be in the range of $1.24 to $1.28.

Virtusa anticipates a restructuring charge in the fourth quarter fiscal 2017 of approximately $0.8 million related to certain cost savings initiatives. This charge will not impact reported non-GAAP EPS.

The Company’s fourth quarter and fiscal year 2017 diluted EPS estimates are based on average share counts of approximately 30.4 million and 30.2 million, respectively, (assuming no further exercises of stock-based awards) and assumes a stock price of $25.57, which was derived from the average closing price of the Company’s stock over the five trading days ended on February 6, 2017. Deviations from this stock price may cause actual diluted 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 9, 2017 at 8:00 a.m. Eastern Time to discuss the Company’s third quarter fiscal 2017 financial results, current financial guidance, and other corporate developments. To access this call, please dial 888-487-0346 (domestic) or 719-325-2108 (international). The passcode is 4170077. A replay of this conference call will be available through February 16, 2017 at 844-512-2921(domestic) or 412-317-6671 (international). The replay passcode is 4170077. 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 measures as defined by Regulation G by the Securities and Exchange Commission. These Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from Non-GAAP measures used by other companies. In addition, these Non-GAAP measures should be read in conjunction with Virtusa’s financial statements prepared in accordance with GAAP.

Virtusa believes the following financial measures 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 measures that exclude acquisition-related charges, restructuring 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:
- Non-GAAP income from operations: income from operations, as reported on Virtusa’s consolidated statements of income, excluding stock-based compensation expense, acquisition-related charges, and restructuring 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, restructuring 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, restructuring charges, and foreign currency transaction gains and losses.

The following table presents a reconciliation of each Non-GAAP financial measure to the most comparable GAAP measure:

Services

Industries

Insights

Careers

About

Services

Industries

Insights

Careers

About