Virtusa announces 4Q and full Year 2017 consolidated financial results

Virtusa Corporation, a global business consulting and IT outsourcing company that accelerates business outcomes for its clients, reported consolidated financial results for thefourthquarter and fiscalyear ended March 31, 2017.

Fourth quarter Fiscal 2017 consolidated results
Revenue for the fourth quarter of fiscal 2017 was US$226 million, an increase of 4.0 percent sequentially and 31.5 percent year-over-year.  On a constant currency basis, fourth quarter revenue increased 4.1 percent sequentially and 34.7 percent year-over-year. 
Virtusa reported GAAP income from operations of US$10.2million for the fourth quarter of fiscal 2017, an increasefrom US$6.5 million for the third quarter of fiscal 2017 and US$5.5 million for the fourth quarter of fiscal 2016.Fourth quarter fiscal 2017 GAAP income from operations includes approximately US$0.5 million of restructuring charges related to certain cost savings initiatives.
On a GAAP basis, net incomeattributable to common shareholders was US$10.5millionfor the fourth quarter of fiscal 2017, or US$0.34per diluted share, compared to US$4.4 million, or US $0.15per diluted share, for the third quarter of fiscal 2017, and US$12.3 million, or US$0.41per 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.

Balance Sheet and Cash Flow
The company ended fiscal year 2017 with US$237 million of cash, cash equivalents, and short-term and long-term investments. Cashflow from operations was US $0.6million for the fourth quarter and US$22.2 million for the fiscal year 2017.

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 guidancerange 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 ascontinued 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 programme.”

Financial outlook 
Virtusa management provided the following current financial guidance:
First quarter fiscal 2018 revenue is expected to be in the range of US$222.5 to US$227.5 million. GAAP diluted EPS is expected to be in the range of US$0.07 to US $0.13.Non-GAAP diluted EPS is expected to be in the range of US$0.24to US$0.30.
Fiscal year 2018 revenue is expected to be in the range of US$920.0to US$950.0million. GAAP diluted EPS is expected to be in the range of US$0.81to US$1.07.Non-GAAP diluted EPS is expected to be in the range of US$1.42to US$1.66.
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:
GAAP EPS guidance was calculated under the assumption that these convertible securities will remain out-of-the-money during fiscal year 2018.  Hence, when calculating EPS, dividends paid on the convertible preferred shares have been deducted from net income attributable to common stockholders and the convertible preferred shares have been excluded from weighted average shares outstanding.
Non-GAAP EPS guidance was calculated by excluding the impact of dividends paid on the convertible preferred shares from net income attributable to common stockholders and including the impact of the convertible preferred shares in weighted average shares outstanding, as the Company expects these convertible preferred shares to eventually be converted into shares of common stock.
The company’s first quarter and fiscal year 2018 diluted GAAP EPS estimates are based on average share counts of approximately 30.7million and 30.8million, 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 US$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.