Virtusa reports 3Q17 consolidated financial results
Virtusa Corporation, 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, reported consolidated financial results for the third quarter of fiscal 2017, ended December 31, 2016.
Revenue for the third quarter of fiscal 2017 was US $ 217.2 million, an increase of 3.4 percent sequentially and 44.2 percent year-over-year. On a constant currency basis, (1) third quarter revenue increased 4.2 percent sequentially and 48.6 percent year-over-year.
Virtusa reported GAAP income from operations of US $ 6.5million for the third quarter of fiscal 2017, compared to US $ 3.5 million for the second quarter of fiscal 2017 and US $ 14.1 million for the third quarter of fiscal 2016. Third quarter fiscal 2017 GAAP income from operations includes US $ 1.9 million of restructuring charges related to certain cost savings initiatives.
On a GAAP basis, the net income for the third quarter of fiscal 2017 was US $ 4.4 million or US $ 0.15 per diluted share, compared to US $ 3.2 million or US $ 0.11 per diluted share, for the second quarter of fiscal 2017 and US $ 11.3 million, or US $ 0.38 per diluted share, for the third quarter of fiscal 2016. The third quarter fiscal 2017 GAAP net income includes the impact of the aforementioned restructuring charges related to certain cost savings initiatives, net of tax.
Balance sheet and cash flow
The company ended the third quarter of fiscal 2017 with US $ 237.2 million of cash, cash equivalents, and short-term and long-term investments (2). Cash flow from operations was US $ 13.5 million for the third quarter of fiscal 2017.
Management commentary
Virtusa Chairman and CEO Kris Canekeratne 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.”
Chief Financial Officer Ranjan Kalia 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 percent at the midpoint.
In addition, our 4Q 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 US $ 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 US $ 224 to US $ 229 million. GAAP diluted EPS is expected to be in the range of US $ 0.31 to US $ 0.35. NON-GAAP diluted EPS is expected to be in the range of US $ 0.43 to US $ 0.47. Fiscal year 2017 revenue is expected to be in the range of US $ 856.8 to US $ 861.8 million. GAAP diluted EPS is expected to be in the range of US $ 0.36 to US $ 0.40. NON-GAAP diluted EPS is expected to be in the range of US $ 1.24 to US $ 1.28. Virtusa anticipates a restructuring charge in the fourth quarter fiscal 2017 of approximately US $ 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 US $ 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.