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Virtusa Announces Fourth Quarter and Fiscal Year 2011 Consolidated Financial Results

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  Published in Science and Technology on Wednesday, May 11th 2011 at 13:20 GMT by Market Wire
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WESTBOROUGH, Mass.--([ BUSINESS WIRE ])--[ Virtusa Corporation ] (NASDAQ: VRTU), a global IT services company that offers a broad spectrum of business consulting and outsourcing services, today reported consolidated financial results for the fourth quarter and fiscal year ended March 31, 2011.

"Our current fiscal year 2012 guidance calls for Virtusa to continue to exceed industry growth rates and realize ongoing operating margin expansion."

Fourth Quarter Fiscal 2011 Consolidated Financial Results

Revenue for the fourth quarter of fiscal 2011 was $58.3 million, an increase of 5% sequentially and 22% year-over-year. On a constant currency basis (1), fourth quarter revenue increased 4% sequentially and 21% year-over-year.

Virtusa reported income from operations of $5.7 million for the fourth quarter of fiscal 2011, an increase compared to $5.0 million for the third quarter of fiscal 2011, and an increase compared to $3.2 million for the fourth quarter of fiscal 2010.

Net income for the fourth quarter of fiscal 2011 was $5.2 million, or $0.21 per diluted share, an increase compared to $4.2 million, or $0.17 per diluted share, for the third quarter of fiscal 2011 and an increase compared to $3.6 million, or $0.15 per diluted share, for the fourth quarter of fiscal 2010.

The Company ended the fourth quarter of fiscal 2011 with $111.8 million of cash, cash equivalents, short-term investments and long-term investments (2). The Company generated cash from operations of $6.4 million during the fourth quarter of fiscal 2011.

Fiscal Year 2011 Consolidated Financial Results

For the fiscal year ended March 31, 2011, revenue increased 33%, to a record $218 million, compared to the fiscal year ended March 31, 2010. On a constant currency basis (1), fiscal year 2011 revenue increased 33% year-over-year.

Virtusa reported income from operations of $17.8 million for fiscal year 2011, an increase compared to $12.9 million for fiscal year 2010.

Net income for fiscal year 2011 was $16.2 million, or $0.66 per diluted share, an increase compared to $12.1 million, or $0.50 per diluted share, for fiscal 2010.

The Company generated cash from operations of $19.8 million for fiscal year 2011.

Kris Canekeratne, Virtusaa™s Chairman and CEO, stated, aWe are very pleased with our performance in the fourth quarter and fiscal year 2011. Our differentiated value proposition, combined with the investments we have been making in strengthening our business consulting, industry specialization and solutions offerings, is resonating particularly well within the marketplace. As we enter fiscal 2012, we have the strongest client base in our history, and we will remain focused on reducing our clientsa™ total cost of ownership, accelerating their time-to-market and improving their customer experience.a

Ranjan Kalia, Chief Financial Officer, said, aThe fourth quarter was a strong finish to a fiscal year in which we achieved revenue, operating profit and EPS growth, each in excess of 30 percent,a Mr. Kalia added, aOur current fiscal year 2012 guidance calls for Virtusa to continue to exceed industry growth rates and realize ongoing operating margin expansion.a

Financial Outlook

Virtusa management provided the following current financial guidance:

• First quarter fiscal 2012 revenue is expected to be in the range of $59.6 to $61.6 million, with diluted EPS of $0.16 to $0.20.
• Fiscal year 2012 revenue is expected to be in the range of $252 to $266 million, with diluted EPS of $0.78 to $0.94.

The Companya™s first quarter and fiscal year 2012 diluted EPS estimates assume an average share count of approximately 25.2 million and 25.4 million respectively, (assuming no further exercises of stock-based awards) and assume a stock price of $18.11, which was derived from the average closing price of the Companya™s stock over the five trading days ended on May 10, 2011. Deviations from this stock price may cause actual EPS to vary based on share dilution from Virtusaa™s stock options and stock appreciation rights.

Executive Management Team Appointments

On May 10, 2011, the Company made the following executive management appointments and promotions, effective immediately:

• Samir Dhir, who was serving as the Companya™s Senior Vice President, Global Delivery Head and Head of India Operations, was promoted to an executive officer of the Company under the same title. Samir joined Virtusa in March 2010. Prior to Virtusa, Samir worked at Wipro Limited for over six years and served in senior management roles. Prior to Wipro, he held leadership positions with Avaya Inc. and Lucent Technologies Inc. in the United Kingdom.
• Thomas R. Holler, who was serving as the Company's Executive Vice President and Chief Operating Officer, was promoted to Executive Vice President and Chief Strategy Officer. Tom has been with Virtusa for 10 years, and in his new role will be responsible for leading and managing the Companya™s strategic and business development initiatives.
• Keith Modder, who was serving as the Company's President, Asia and Executive Vice President, was promoted to the Companya™s Executive Vice President and Chief Operating Officer. Keith has been with Virtusa for 10 years, and in his new role will be responsible for global operations management with a focus on driving efficiencies across our enterprise.

Kris Canekeratne, Virtusa's Chairman and CEO, stated, "I am pleased to announce these executive management appointments which will further strengthen our Company. Keith will oversee operations with Samir managing global delivery, quality and service excellence, while Tom will lead our strategy and business development initiatives. I am excited for Tom, Keith and Samir as they assume new and increased responsibilities.a

Conference Call and Webcast

Virtusa will host a conference call today, May 11, 2011 at 5:00 pm Eastern time to discuss the Companya™s fourth quarter and full fiscal year 2011 financial results, current financial guidance, and other corporate developments. To access this call, dial 888-466-4447 (domestic) or 719-325-2103 (international). A replay of this conference call will be available through May 18, 2011 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 3901705. A live webcast of this conference call will be available on the aInvestorsa page of the Companya™s website ([ www.virtusa.com ]), and a replay will be archived on the website as well.

About Virtusa Corporation

Virtusa provides end-to-end information technology (IT) services to Global 2000 companies. These services, which include IT consulting, application maintenance, development, systems integration and managed services, leverage a unique Platforming methodology that transforms clientsa™ businesses through IT rationalization. Virtusa helps customers accelerate business outcomes by consolidating, rationalizing and modernizing their core customer facing processes into one or more core systems.

Virtusa delivers cost-effective solutions through a global delivery model, applying advanced methods such as Agile and Accelerated Solution Design to ensure that its solutions meet the clientsa™ requirements. As a result, its clients simultaneously reduce their IT operations cost while increasing their ability to meet changing business needs.

Founded in 1996 and headquartered in Massachusetts, Virtusa has operations inNorth America, Europe and Asia.

© 2011 All rights reserved. Virtusa, Accelerating Business Outcomes^SMand all other related logos/service names are either registered trademarks or trademarks of Virtusa Corporation in the US, UK, EU, India and/or Sri Lanka. All other company and service names are the property of their respective holders.

Non-GAAP Financial Information

(1) To determine year-over-year constant currency revenue for the Company's fourth quarter of fiscal 2011, revenue from entities reporting in U.K. pound sterling was converted into U.S. dollars at the average exchange rate in effect for the three months ended March 31, 2010 of 1.54 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended March 31, 2011 of 1.61 U.S. dollars to U.K. pounds sterling. To determine sequential revenue change in constant currency for the Company's fourth quarter of fiscal 2011, revenue from entities reporting in U.K. pounds sterling was converted into U.S. dollars at the average exchange rate in effect for the three months ended December 31, 2010 of 1.58 U.S. dollars to U.K. pounds sterling, rather than the actual exchange rate in effect for the three months ended March 31, 2011 of 1.61 U.S. dollars to U.K. pounds sterling.

(2) The Company considers the measure of cash, cash equivalents, short-term and long-term investments to be a more meaningful 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.

This press release includes certain non-GAAP financial information as defined by Regulation G by the Securities and Exchange Commission. Virtusa presents constant currency revenue 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) above for further detail). Virtusa also presents a reconciliation of its cash, cash equivalents, short term and long term investments which it believes provides insight into its cash position and overall liquidity (see footnote (2) above for further detail). While Virtusa's management believes that these non-GAAP revenue measures and cash reconciliation presentations are useful in evaluating Virtusa's revenue and cash position and overall liquidity, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.

Forward-Looking Statements

Certain statements made in this press release that are not based on historical information are forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This press release contains express or implied forward-looking statements relating to, among other things, Virtusa's expectations concerning management's forecast of financial performance, the growth of our business, and management's plans, objectives, and strategies. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond Virtusa's control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things: 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; 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; restrictions on immigration or changes in immigration laws; the loss of any key member of Virtusa's senior management team, increasing competition in the IT services outsourcing industry; Virtusa's ability to attract and retain clients and meet their expectations; Virtusa's ability to sustain profitability or maintain profitable engagements; Virtusa's ability to assimilate and integrate the operations of InSource, LLC and ConVista Consulting, LLC; unanticipated acquisition related costs and negative effects on Virtusa's reported results of operations from acquisition-related charges; Virtusa's ability to achieve expected synergies and operating efficiencies in the acquisitions within expected time-frames or at all; 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; 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; currency exchange rate fluctuations of the Indian and Sri Lankan rupee, the U.S. dollar and the U.K. pound sterling; and the volatility of the market price of Virtusa's common stock. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Virtusa undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise. 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, 2010, and subsequent Quarterly Reports on Form 10-Q, as filed with the Securities and Exchange Commission.