TMCnet News
Virtusa Announces Fourth Quarter and Full Year 2017 Consolidated Financial ResultsVirtusa Corporation (NASDAQ GS: VRTU), a global business consulting and IT outsourcing company that accelerates business outcomes for its clients, today reported consolidated financial results for the fourth quarter and fiscal year ended March 31, 2017. Fourth Quarter Fiscal 2017 Consolidated Financial Results Revenue for the fourth quarter of fiscal 2017 was $226.0 million, an increase of 4.0% sequentially and 31.5% year-over-year. On a constant currency basis, (1) fourth quarter revenue increased 4.1% sequentially and 34.7% year-over-year. Virtusa reported GAAP income from operations of $10.2 million for the fourth quarter of fiscal 2017, an increase from $6.5 million for the third quarter of fiscal 2017 and $5.5 million for the fourth quarter of fiscal 2016. Fourth quarter fiscal 2017 GAAP income from operations includes approximately $0.5 million of restructuring charges related to certain cost savings initiatives. On a GAAP basis, net income attributable to common shareholders was $10.5 million for the fourth quarter of fiscal 2017, or $0.34 per diluted share, compared to $4.4 million, or $0.15 per diluted share, for the third quarter of fiscal 2017, and $12.3 million, or $0.41 per diluted share, for the fourth quarter of fiscal 2016. Fourth 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 net income attributable to common shareholders, which excludes stock-based compensation expense, restructuring charges, acquisition related charges, foreign currency transaction gains and losses, each net of tax, and the tax impact of dividends received from foreign subsidiaries for the fourth quarter of fiscal 2017, was $12.9 million, or $0.43 per diluted share, compared to $11.0 million, or $0.37 per diluted share, for the third quarter of fiscal 2017, and compared to $16.6 million, or $0.55 per diluted share, for the fourth quarter of fiscal 2016. Fiscal Year 2017 Consolidated Financial Results For the fiscal year ended March 31, 2017, revenue was $858.7 million, an increase of 43.0% compared to $600.3 million for the fiscal year ended March 31, 2016. On a constant currency basis, revenue increased 46.3% year-over-year. Virtusa reported GAAP income from operations of $18.4 million for fiscal year 2017, compared with $45.3 million for fiscal year 2016. On a GAAP basis, net income attributable to common shareholders was $11.9 million for fiscal year 2017, compared to $44.8 million for fiscal year 2016. Diluted earnings per share for fiscal year 2017 was $0.39, compared to $1.49 for fiscal year 2016.
Non-GAAP Results: Non-GAAP net income attributable to common shareholders was $37.6 million for fiscal year 2017, or $1.25 per diluted share, compared to $61.9 million, or $2.06 per diluted share, for fiscal year 2016.
Balance Sheet and Cash Flow Management Commentary Kris Canekeratne, Virtusa's Chairman and CEO, stated, "We made excellent progress against our FY 2017 strategic goals. Most notably, we are pleased with the integration of Polaris and our ability to greatly expand our addressable market in BFSI, Communications & Technology and Media & Information. We are very pleased with the number of leading enterprises that rely on Virtusa for their most strategic end-to-end digital transformation programs. Looking to fiscal 2018, we will intensify our digital offerings and strengthen our leadership position in this rapidly growing area. We are delighted that Vikram S. Pandit joined our board and the strategic value he brings. Additionally, we are enthusiastic about leveraging Orogen's and Atairos' network to advance our growth strategy by bringing our digital offerings to enterprises in their network." Ranjan Kalia, Chief Financial Officer, said, "We delivered strong sequential revenue growth and operating margin accretion in the fourth quarter. Our Q4 non-GAAP EPS was below the midpoint of our guidance range primarily due to a shift forward of certain expenses in our cost of sales. Looking to fiscal 2018, we expect to deliver above-industry revenue growth as well as continued margin accretion even after absorbing INR headwinds of approximately 45 basis points. Additionally, due to the recently completed strategic investment by the Orogen group, we have strengthened our balance sheet by increasing our net cash position and expect to return capital to shareholders through our share buyback program." Financial Outlook Virtusa management provided the following current financial guidance:
In accordance with US GAAP, Virtusa will be applying the if-converted method to its newly issued convertible preferred shares when reporting its Fiscal Year 2018 results. The if-converted method is used to calculate the share impact of convertible securities. Under this method, only in-the-money convertible securities are considered when calculating EPS. EPS guidance has been calculated on a GAAP and Non-GAAP basis as follows:
The Company's first quarter and fiscal year 2018 diluted GAAP EPS estimates are based on average share counts of approximately 30.7 million and 30.8 million, respectively, (assuming no further exercises of stock-based awards). The Company's first quarter and fiscal year 2018 diluted Non-GAAP EPS estimates are based on average share counts of approximately 32.6 million and 33.5 million, respectively, (assuming no further exercises of stock-based awards). GAAP and Non-GAAP average share counts assume a stock price of $31.75, which was derived from the average closing price of the Company's stock over the five trading days ended on May 11, 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, May 16, 2017 at 8:00 a.m. Eastern Time to discuss the Company's fourth quarter and fiscal year 2017 financial results, current financial guidance, and other corporate developments. To access this call, please dial 888-539-3679 (domestic) or 719-457-2648 (international). The passcode is 9381078. A replay of this conference call will be available through May 23, 2017 at 844-512-2921 (domestic) or 412-317-6671 (international). The replay passcode is 9381078. 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. About Virtusa Virtusa Corporation (NASDAQ GS: VRTU) is a global provider of information technology (IT) consulting and outsourcing services that accelerate business outcomes for Global 2000 companies and leading software vendors in banking and financial services, insurance, healthcare, telecommunications, technology, and media & entertainment. Virtusa helps CXOs address the dual challenge of growing revenues while improving IT cost efficiencies. Virtusa's digital transformation & innovation (DTi) solutions enable clients to reimagine the customer experience, accelerate revenue growth and create lasting business value. The company's operational excellence (OE) solutions help clients reduce risk, improve operational efficiencies, and lower IT costs. Virtusa delivers services across the IT lifecycle, including consulting, solution design, technology selection, implementation, testing, and maintenance, including infrastructure support. With a strong heritage in software engineering, Virtusa is highly qualified to both develop and maintain software, using a proven platforming methodology and advanced Agile and Accelerated Solution Design techniques to reliably deliver results on time and within budget. Holding a proven record of success across industries, Virtusa readily understands its clients' business challenges and uses its domain expertise to deliver distinctive, differentiated and innovative applications of technology to address its client critical business challenges. Examples include the building the world's largest P&C claims modernization program; one of the largest corporate customer portals for a premier global bank; an order to cash implementation for a multinational telecommunications provider; and digital transformation initiatives for media and banking companies. Through the acquisition of a majority interest in Polaris Consulting Services Ltd. in March 2016, Virtusa has created a robust platform to provide end-to-end solutions and services in banking and financial services, strengthening its positioning as a top, global FinTech services provider. Virtusa Corporation is headquartered in Massachusetts and has 50 offices across North America, Europe and Asia. Polaris Consulting & Services is a subsidiary of Virtusa Corporation. Copyright © 2017 Virtusa Corporation. All Rights Reserved. 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.
The following table presents a reconciliation of each Non-GAAP financial measure to the most comparable GAAP measure:
(b) Foreign currency transaction gains and losses are inclusive of gains and losses on related foreign exchange forward contracts not designated as hedging instruments for accounting purposes. (c) Tax adjustments reflect the tax effect of the non-GAAP adjustments using the tax rates at which these adjustments are expected to be realized for the respective periods. The tax adjustment includes the elimination of $5.9M of taxes related to a dividend received from a foreign subsidiary during the three and twelve months ended March 31, 2017. (d) Noncontrolling interest represents the minority shareholders interest of Polaris (e) Non-GAAP diluted earnings per share is subject to rounding Footnotes (1) To determine sequential revenue change in constant currency for the Company's fourth quarter of fiscal 2017, revenue from entities reporting in U.K. Pounds (GBP), Euros, and Swedish Krona (SEK) were converted into U.S. dollars at the average exchange rates in effect for the three months ended December 31, 2016, rather than the actual exchange rate in effect for the three months ended March 31, 2017. To determine year-over-year revenue change in constant currency for the Company's fourth quarter of fiscal 2017, revenue from entities reporting in U.K. Pounds (GBP), Euros, and Swedish Krona (SEK) were converted into U.S. dollars at the average exchange rates in effect for the three months ended March 31, 2016, rather than the actual exchange rate in effect for the three months ended March 31, 2017. To determine year-over-year revenue change in constant currency for the Company's full fiscal year 2017, revenue from entities reporting in U.K. Pounds (GBP), Euros, and Swedish Krona (SEK) were converted into U.S. dollars at the average exchange rates in effect for the twelve months ended March 31, 2016, rather than the actual exchange rate in effect for the twelve months ended March 31, 2017. The average exchange rates for the three months ended March 31, 2016, December 31, 2016, and March 31, 2017, and for the twelve month ended March 31, 2016 and March 31, 2017 are included in the table below:
(2) The Company considers the measure of cash, cash equivalents, short-term and long-term investments to be an important 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. (3) On March 3, 2016 Virtusa acquired a majority interest in Polaris. In accordance with US GAAP, Polaris financial results for the quarter ending March 31, 2017 and assets and liabilities as of that date have been consolidated in full into Virtusa's financial statements. Net assets attributable to ownership in Polaris by minority shareholders (Non-controlling Interest) in our Consolidated Balance Sheets was $88 million at March 31, 2017. Profit attributable to minority shareholders (Non-controlling Interest) in the Consolidated Statements of Income was $1.3 million on a GAAP basis and $2.1 million on a non-GAAP basis for the quarter ending March 31, 2017. Forward-Looking Statements This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding, Virtusa's expectations concerning the Orogen investment and Mr. Pandit's addition to our Board, the previously announced share repurchase program, management's forecast of financial performance, the growth of our business and management's plans, objectives, and strategies. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts, and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "see," "seeks," "estimates," "will," "should," "may," "confident," "positions," "look forward to," and variations of such words or words of similar meaning and the use of future dates. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that these plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation: Virtusa's failure to realize the intended benefits of the Orogen convertible preferred stock financing, the inability to pay cash dividends on the convertible preferred stock, thus increasing the dilutive impact of the financing; the inability of Virtusa to redeem the convertible preferred stock at maturity, if there has been no conversion event prior to maturity; Virtusa's failure to realize the intended benefits of the Polaris acquisition, including the inability to integrate Virtusa's and Polaris' business and operations or the inability to realize the anticipated synergies and revenues or growth rates in the expected amounts or within the anticipated time frames or cost expectations or at all; the possibility that Virtusa's current or future estimated combined or standalone guidance may differ materially from expectations; the ability of Virtusa to manage an Indian public company; Virtusa incurring unexpected costs or liabilities in connection with the Polaris acquisition; unanticipated acquisition related costs and negative effects on Virtusa's reported results of operations from acquisition related charges; increase in client or employee attrition due to the Polaris acquisition; inability of Virtusa to service the term loan incurred by Virtusa to acquire Polaris or to maintain compliance with certain financial covenants under the loan facility; 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 previous acquisitions; 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; currency exchange rate fluctuations of the Indian and Sri Lankan rupee, the U.S. dollar, the U.K. pound sterling, the Swedish Krona, and the Euro; the international nature of our business; 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; and the volatility of the market price of Virtusa's common stock. 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, 2016 and subsequent Quarterly Reports on Form 10-Q, as filed with the Securities and Exchange Commission.
** EPS impact is subject to rounding
View source version on businesswire.com: http://www.businesswire.com/news/home/20170516005818/en/ |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
