Virtusa Announces Second Quarter Fiscal 2008 Financial Results

Business Wire, Oct 31, 2007

* Revenue grows 34% year-over-year to $40.3 million

* Income from operations grows 28% year-over-year to $4.7 million

* Cash and marketable securities grow to $100.2 million

WESTBOROUGH, Mass. -- 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, today reported its financial results for the second quarter of fiscal 2008, ended September 30, 2007.

Second Quarter Fiscal 2008 Financial Results

For the second quarter of fiscal 2008, Virtusa's revenue increased 33.8% year-over-year and 7.5% sequentially, to $40.3 million.

Virtusa reported second quarter income from operations of $4.7 million, or 11.7% of revenue. This represents an increase of 27.8% compared to $3.7 million for the second quarter of fiscal 2007.

Net income for the second quarter of fiscal 2008 was $4.6 million, or $0.20 per diluted share, compared to $3.8 million, or $0.21 per diluted share, for the second quarter of fiscal 2007. The change in diluted net income per share year-over-year was influenced by a higher effective tax rate and an increase in diluted shares outstanding. The Company's effective tax rate increased to 17.1% in the second quarter of fiscal 2008 from 3.3% in the second quarter of fiscal 2007 as the Company is no longer recognizing an income statement benefit from the use of its deferred tax assets due to the release of its valuation allowance in fiscal 2007. In addition, the diluted shares outstanding in the second quarter of fiscal 2008 increased 29% year-over-year 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 the progress we made in our second quarter towards our long-term objective of predictable growth with increasing profitability." Canekeratne continued, "We added 5 new clients and expanded our existing client relationships in the quarter. We believe that this is indicative of the increased value that we provide through our broad range of IT services, transformational platforming approach and optimal global delivery model, where we provide 20% or less of our services onsite and 80% or more offshore."

The Company ended the second quarter of fiscal 2008 with $100.2 million of cash and cash equivalents, short-term investments and long-term investments, which is an increase of $60.7 million from the prior quarter, due primarily to the net proceeds that were raised through the Company's initial public offering, completed on August 8, 2007. The Company ended the second quarter of fiscal 2008 with no long-term debt.

"Our second quarter performance demonstrated our ability to leverage operating expenses while growing revenue in-line with our guidance," said Tom Holler, Chief Financial Officer. "Although our second quarter cost management initiatives enabled us to exceed profit guidance, we remain committed to our strategy of investing in business development and people practices to support long-term revenue growth."

Financial Outlook

Virtusa management provided the following current financial guidance:

* Third quarter 2008 revenue is expected to be in the range of $42.0 to $43.0 million, with diluted EPS of $0.16 to $0.18.

* Fiscal year 2008 revenue is expected to be in the range of $164.0 to $167.0 million, with diluted EPS of $0.67 to $0.71.

Conference Call and Webcast

Virtusa will host a conference call on October 31, 2007 at 8:00 am Eastern time to discuss the Company's second quarter financial results, current financial guidance and other corporate developments. To access this call, dial 888-271-8602 (domestic) or 913-312-1393 (international). A replay of this conference call will be available through November 7, 2007 at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 9072946. 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 Corporation

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.

"Virtusa" is a registered trademark of Virtusa Corporation.

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 acquisition of new clients and growth of 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 our 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: our dependence on a limited number of clients as well as clients located principally in the United States and United Kingdom and in concentrated industries; our ability to expand our business or effectively manage growth; restrictions on immigration; the loss of any key member of our senior management team, increasing competition in the IT services outsourcing industry; our ability to hire and retain enough sufficiently trained IT professionals to support our operations; quarterly fluctuations in our earnings; client terminations or contracting delays, or delays in revenue recognition in any reporting period, our ability to attract and retain clients and meet their expectations; our ability to sustain profitability or maintain profitable engagements; our ability to successfully manage our billing and utilization rates and our targeted on-site to offshore delivery mix; technological innovation; our ability to effectively manage our facility, infrastructure and capacity needs; regulatory, legislative and judicial developments in our operations areas; political or economic instability in India or Sri Lanka; any reduction or withdrawal of tax benefits provided to us by the governments of India and Sri Lanka, or new legislation by such governments which could be harmful to us; 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, and the US dollar and the U.K. pound sterling; and the volatility of the market price of our 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 our public filings with the Securities and Exchange Commission including our Quarterly Report on Form 10-Q for the first fiscal quarter ended June 30, 2007 filed with the Securities and Exchange Commission on September 7, 2007.