Virtusa Corporation (VRTU)

F1Q11 (Qtr End 06/30/10) Earnings Call

July 28, 2010 05:00 pm ET

Executives

Staci Strauss Mortenson - IR, ICR

Kris Canekeratne - Chairman and CEO

Tom Holler - EVP and COO

Ranjan Kalia - SVP and CFO

Analysts

Jon Maietta - Needham & Company

Puneet Jain - JPMorgan

Rahul Bhangare - William Blaire & Company

Brian Kinstlinger - Sidoti & Company

Vincent Colicchio - Noble Financial

Presentation

Operator

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the Virtusa Corporation first quarter 2011 earnings conference call. At this time all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference is being recorded.

And now I’d like turn the conference over to Ms. Staci Strauss Mortenson, Integrated Corporate Relations. Please go ahead.

Staci Strauss Mortenson

Thank you. Good evening and welcome to Virtusa’s first quarter fiscal year 2011 earnings conference call, where we will be discussing our financial results for the quarter ended June 30, 2010. On the call with me are Kris Canekeratne, Chairman and Chief Executive Officer; Tom Holler, Executive Vice President and Chief Operating Officer; and Ranjan Kalia, Senior Vice President and Chief Financial Officer of Virtusa.

Certain statements made in this call 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.

During this call, we may make express or implied forward-looking statements relating to among other things Virtusa’s expectations and assumptions concerning management’s forecast of financial performance. Virtusa’s ability to assimilate and integrate the operations of InSource and ConVista Consulting, acquisition of new clients and growth of business, the ability Virtusa’s clients to realize benefits from the use of Virtusa’s IT services, the potential impact of currency exchange on our business and operation and management’s plan 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 would cause actual result to differ materially from those contemplated in these forward-looking statements. Existing and perspective investors are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. Virtusa undertakes no obligations to update and revise the information disclosed during this call, whether as a result of new information, future events or circumstances or otherwise.

Other statements in this call also includes certain non-GAAP financial information as defined by the SEC. We present constant currency revenue to provide a framework for assessing how our revenue performed excluding the effect of foreign currency rate fluctuations. We also present a reconciliation of cash, cash equivalents, short-term and long-term investments that we believe provide insight into our total cash position and overall liquidity.

For additional disclosure regarding these and other risks faced by Virtusa, see the disclosures contained in Virtusa’s public filings with the Securities and Exchange Commission and on our earning press release. With that, I would like turn the call over to Chris. Chris, please go ahead.

Kris Canekeratne

Thank you Staci and thank you for joining us on our first quarter 2011 conference call. We are pleased to report strong Q1 results and increase of our fiscal year 2011 revenue guidance. The momentum we built during the second half of fiscal year 2010, continued into the first quarter and we are expecting the improved demand environment to continue for the remainder of the fiscal year. Our value proposition continues to resonate meaningfully within the marketplace enabling us to drive business transformation, accelerate time-to-market and improve total cost of ownership for our clients. With our expanded solution and service offerings, we are capturing a larger portion of the market opportunity and this is reflected in our significant year-over-year growth rate.

Here are some of the highlights from the first quarter fiscal year 2011. For the June quarter, total revenue was $51.4 million, an increase of 38% year-over-year and 8% sequentially. Our operating income was $3.1 million or 6% and earnings per diluted share was $0.13. Our Q1 growth was broad-based and spent many of our services, geographies and industries. Financial services revenue was particularly strong growing 58% year-over-year driven by the ongoing need of our clients to find operating efficiencies and increases in discretionary spending.

Let me take a moment to provide you with additional detail on what is driving this trend of other business and why we believe that our growth drivers are sustainable. First, the demand environment is improving, clients continue to look to Virtusa to drive operational efficiencies and rationalize their IT spend. We are uniquely able to do this through our platforming approach and optimized global delivery model.

What has changed, however, is that the savings we generate for our clients are now being reinvested in growth initiatives. This is enabling Virtusa to participate in this entire life-cycle from reducing application maintenance costs to investment in support of business outcomes that accelerate time-to-market and improve the consumer experience.

Our value proposition matched with a better business environment, is also translating to strong client wins. During the quarter, we added five new clients. All five clients are high quality and have the potential to become strategic. Second, our engagement teams are focused on improving our clients’ end-user experience. This provides us with insights into customer facing processes and critical business drivers enabling us to innovate reduced cycle time, improve application efficiency and create competitive advantage for our clients. This focus on our clients’ consumer experience continues to differentiate us within the marketplace.

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