Virtusa reports $ 42.5 m revenue in 3Q

Westborough, MA – Virtusa Corporation (NASDAQ: VRTU), a global information technology (IT) services company that provides IT consulting, technology implementation and application outsourcing services through an enhanced global delivery model, recently reported its financial results for the third quarter of fiscal 2008, ended December 31, 2007.

For the third quarter of fiscal 2008, Virtusa’s revenue increased 26% year-over-year and 5.5% sequentially, to $42.5 million.

Virtusa reported third quarter income from operations of $5.9 million, or 13.8% of revenue. This represents an increase of 44% compared to $4.1 million for the third quarter of fiscal 2007.

Net income for the third quarter of fiscal 2008 was $5.3 million, or $0.21 per diluted share, compared to $8.7 million, or $0.47 per diluted share, for the third quarter of fiscal 2007. The year-over-year decrease in net income of $3.4 million is primarily due to a one-time income tax benefit of $5 million in the prior year quarter caused by the reversal of the Company’s deferred tax valuation allowance. Earnings per share for the third quarter of fiscal 2008 reflects the lack of the one-time income tax benefit and a 34% year-over-year increase in diluted shares outstanding primarily due to the successful completion of the Company’s initial public offering.

Kris Canekeratne, Virtusa’s Chairman and CEO stated, “We are pleased with our financial results in the third quarter. We saw ongoing strength within our largest clients as well as ramp up of newer clients which we believe will help fuel the long term growth of the Company.”

“Our ability to increase IT productivity and improve time-to-market through our differentiated platforming approach is resonating well within the marketplace,” he added.

The Company ended the third quarter of fiscal 2008 with $107.6 million of cash and cash equivalents, short-term investments and long-term investments, which is an increase of $7.4 million from the prior quarter, due primarily to higher net income and improved collection of receivables. The Company continues to be free of long-term debt.

“Our third quarter performance was highlighted by significant operating income growth even in the face of further Indian rupee appreciation,” said Tom Holler, Chief Financial Officer. “To further mitigate future operating margin volatility associated with potential movement in the Indian rupee, the Company has adopted a foreign currency hedge programme whereby the Company will enter into foreign currency forward contracts on a rolling eight quarter basis.”

Financial Outlook
Virtusa management provided the following current financial guidance:

•Fourth quarter 2008 revenue is expected to be in the range of $44.5 to $45.7 million, with diluted EPS of $0.18 to $0.20.

•Fiscal year 2008 revenue is expected to be in the range of $164.7 to $165.9 million, with diluted EPS of $0.72 to $0.76.

The Company’s fourth quarter 2008 and fiscal year 2008 diluted EPS estimates assume an average diluted share count of approximately 24.9 million and 23.3 million, respectively, (assuming no further exercises of stock-based awards) and a stock price of $14.05, which was derived from the average closing price of our stock over the five trading days ended on January 30, 2008. Deviations from this stock price will cause actual EPS to vary based on share dilution from Virtusa’s stock options and stock appreciation rights.

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Virtusa is a global information technology (IT) services company providing IT consulting, technology implementation and application outsourcing services. Using its enhanced global delivery model, innovative platforming approach and industry expertise, Virtusa provides cost-effective services that enable its clients to use IT to enhance business performance, accelerate time-to-market, increase productivity and improve customer service.

Founded in 1996 and headquartered in Massachusetts, Virtusa has offices in the United States and the United Kingdom, and global delivery centers in India and Sri Lanka.