Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Dec. 31, 2014 | Feb. 02, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | VIRTUSA CORP | |
Entity Central Index Key | 1207074 | |
Document Type | 10-Q | |
Document Period End Date | 31-Dec-14 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -28 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 29,602,143 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q3 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2014 | Mar. 31, 2014 |
In Thousands, unless otherwise specified | ||
Current assets: | ||
Cash and cash equivalents | $98,278 | $82,761 |
Short-term investments | 85,923 | 55,888 |
Accounts receivable, net of allowance of $1,006 and $1,130 at December 31, 2014 and March 31, 2014, respectively | 73,582 | 64,662 |
Unbilled accounts receivable | 25,175 | 26,548 |
Prepaid expenses | 11,651 | 9,036 |
Deferred income taxes | 6,026 | 6,610 |
Restricted cash | 1,792 | 2,662 |
Other current assets | 12,582 | 11,922 |
Total current assets | 315,009 | 260,089 |
Property and equipment, net of depreciation of $35,015 and 30,625 at December 31, 2014 and March, 2014, respectively | 35,888 | 35,346 |
Long-term investments | 40,271 | 62,015 |
Deferred income taxes | 4,272 | 4,651 |
Goodwill | 51,331 | 53,448 |
Intangible assets, net | 23,572 | 28,661 |
Other long-term assets | 5,788 | 5,215 |
Total assets | 476,131 | 449,425 |
Current liabilities: | ||
Accounts payable | 9,418 | 11,002 |
Accrued employee compensation and benefits | 22,047 | 27,175 |
Accrued expenses and other current liabilities | 27,784 | 27,299 |
Income taxes payable | 2,478 | 1,294 |
Total current liabilities | 61,727 | 66,770 |
Deferred income taxes | 2,037 | 2,744 |
Long-term liabilities | 5,125 | 5,841 |
Total liabilities | 68,889 | 75,355 |
Commitments and guarantees | ||
Stockholders' equity: | ||
Undesignated preferred stock, $0.01 par value: Authorized 5,000,000 shares at December 31, 2014 and March 31, 2014; zero shares issued and outstanding at December 31, 2014 and March 31, 2014 | ||
Common stock, $0.01 par value: Authorized 120,000,000 shares at December 31, 2014 and March 31, 2014; issued 30,805,814 and 30,263,243 shares at December 31, 2014 and March 31, 2014, respectively; outstanding 28,949,111 and 28,406,540 shares at December 31, 2014 and March 31, 2014, respectively | 308 | 303 |
Treasury stock, 1,856,703 common shares, at cost, at December 31, 2014 and March 31, 2014, respectively | -9,652 | -9,652 |
Additional paid-in capital | 279,723 | 269,511 |
Retained earnings | 172,519 | 141,622 |
Accumulated other comprehensive loss | -35,656 | -27,714 |
Total stockholders' equity | 407,242 | 374,070 |
Total liabilities, undesignated preferred stock and stockholders' equity | $476,131 | $449,425 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Mar. 31, 2014 |
In Thousands, except Share data, unless otherwise specified | ||
Consolidated Balance Sheets | ||
Accounts receivable, allowance (in dollars) | $1,006 | $1,130 |
Property and equipment, accumulated depreciation (in dollars) | $35,015 | $30,625 |
Undesignated preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Undesignated preferred stock, Authorized shares | 5,000,000 | 5,000,000 |
Undesignated preferred stock, shares issued | 0 | 0 |
Undesignated preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, Authorized shares | 120,000,000 | 120,000,000 |
Common stock, issued shares | 30,805,814 | 30,263,243 |
Common stock, outstanding shares | 28,949,111 | 28,406,540 |
Treasury stock, common shares | 1,856,703 | 1,856,703 |
Consolidated_Statements_of_Inc
Consolidated Statements of Income (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Consolidated Statements of Income | ||||
Revenue | $122,996 | $101,043 | $352,969 | $285,833 |
Costs of revenue | 77,144 | 63,821 | 224,701 | 182,126 |
Gross profit | 45,852 | 37,222 | 128,268 | 103,707 |
Operating expenses: | ||||
Selling, general and administrative expenses | 31,233 | 26,026 | 90,180 | 73,806 |
Income from operations | 14,619 | 11,196 | 38,088 | 29,901 |
Other income (expense): | ||||
Interest income | 1,410 | 1,021 | 3,799 | 2,623 |
Foreign currency transaction (losses) gains | -132 | 138 | -200 | -434 |
Other, net | 82 | -4 | 16 | 207 |
Total other income | 1,360 | 1,155 | 3,615 | 2,396 |
Income before income tax expense | 15,979 | 12,351 | 41,703 | 32,297 |
Income tax expense | 4,200 | 3,023 | 10,806 | 7,969 |
Net income | $11,779 | $9,328 | $30,897 | $24,328 |
Net income per share of common stock: | ||||
Basic (in dollars per share) | $0.41 | $0.36 | $1.08 | $0.95 |
Diluted (in dollars per share) | $0.40 | $0.35 | $1.05 | $0.92 |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Consolidated Statements of Comprehensive Income | ||||
Net income | $11,779 | $9,328 | $30,897 | $24,328 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | -5,388 | 2,099 | -10,838 | -8,829 |
Pension plan adjustment | -172 | 13 | -159 | 156 |
Unrealized gain (loss) on available-for-sale securities, net of tax | 4 | 9 | -37 | 12 |
Unrealized gain (loss) on effective cash flow hedges, net of tax | 621 | 1,555 | 3,092 | -7,737 |
Other comprehensive (loss) income | -4,935 | 3,676 | -7,942 | -16,398 |
Comprehensive income | $6,844 | $13,004 | $22,955 | $7,930 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 |
Cash flows from operating activities: | ||
Net income | $30,897 | $24,328 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 10,459 | 7,892 |
Share-based compensation expense | 7,974 | 5,725 |
Reversal of contingent consideration | -1,833 | |
Provision for doubtful accounts | -30 | 524 |
Loss on sale of property and equipment | 40 | 10 |
Deferred income taxes | 73 | |
Foreign currency losses, net | 200 | 434 |
Amortization of discounts and premiums on investments | 962 | |
Excess tax benefits from stock option exercises | -3,968 | -2,974 |
Net change in operating assets and liabilities: | ||
Accounts receivable and unbilled receivable | -10,655 | 6,205 |
Prepaid expenses and other current assets | 109 | -3,022 |
Other long-term assets | -705 | -923 |
Accounts payable | -898 | -1,171 |
Accrued employee compensation and benefits | -8,710 | 67 |
Accrued expenses and other current liabilities | 5,840 | -1,921 |
Income taxes payable | 1,371 | 4,639 |
Other long-term liabilities | 645 | -286 |
Net cash provided by operating activities | 31,771 | 39,527 |
Cash flows from investing activities: | ||
Proceeds from sale of property and equipment | 84 | 71 |
Purchase of short-term investments | -8,605 | -12,302 |
Proceeds from sale or maturity of short-term investments | 16,017 | 5,024 |
Purchase of long-term investments | -25,911 | -7,074 |
Proceeds from sale or maturity of long-term investments | 7,500 | 800 |
Decrease (increase) in restricted cash | 669 | -362 |
Business acquisition | -684 | -6,156 |
Purchase of property and equipment | -9,146 | -5,825 |
Net cash used in investing activities | -20,076 | -25,824 |
Cash flows from financing activities: | ||
Borrowings on revolving credit facility | 20,000 | |
Proceeds from exercise of common stock options | 2,535 | 2,330 |
Payment of contingent consideration related to acquisitions | -441 | |
Principal payments on capital lease obligation | -91 | -12 |
Excess tax benefits from stock option exercises | 3,968 | 2,974 |
Net cash provided by financing activities | 5,971 | 25,292 |
Effect of exchange rate changes on cash and cash equivalents | -2,149 | -2,788 |
Net increase in cash and cash equivalents | 15,517 | 36,207 |
Cash and cash equivalents, beginning of period | 82,761 | 57,199 |
Cash and cash equivalents, end of period | $98,278 | $93,406 |
Nature_of_Business
Nature of Business | 9 Months Ended |
Dec. 31, 2014 | |
Nature of Business | |
Nature of Business | |
(1) Nature of Business | |
Virtusa Corporation (the “Company” or “Virtusa”) is a global information technology services company. The Company uses a global delivery model to provide a broad range of information technology, or IT, services, including IT consulting, technology implementation and application outsourcing. Using its enhanced global delivery model, innovative platforming approach and industry expertise, the Company provides cost-effective services that enable its clients to accelerate time to market, improve service and enhance productivity. Headquartered in Massachusetts, Virtusa has offices in the United States, the United Kingdom, Sweden, Germany, Netherlands and Austria and global delivery centers in India, Sri Lanka, Hungary, Singapore and Malaysia, as well as a near shore center in the United States. | |
Unaudited_Interim_Financial_In
Unaudited Interim Financial Information | 9 Months Ended |
Dec. 31, 2014 | |
Unaudited Interim Financial Information | |
Unaudited Interim Financial Information | |
(2) Unaudited Interim Financial Information | |
Basis of Presentation | |
The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with U.S. generally accepted accounting principles and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, and should be read in conjunction with the Company’s audited consolidated financial statements (and notes thereto) for the fiscal year ended March 31, 2014 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 23, 2014. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of the accompanying unaudited consolidated financial statements have been included, and all material adjustments are of a normal and recurring nature. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire fiscal year. | |
Principles of Consolidation | |
The consolidated financial statements reflect the accounts of the Company and its direct and indirect subsidiaries, Virtusa Consulting Services Private Limited and Virtusa Software Services Private Limited, each organized and located in India, Virtusa (Private) Limited, organized and located in Sri Lanka, Virtusa UK Limited, organized and located in the United Kingdom, Virtusa Securities Corporation, a Massachusetts securities corporation, InSource LLC, a limited liability company organized in Connecticut, Virtusa International, B.V., organized and located in the Netherlands, Virtusa Hungary Kft., incorporated and located in Hungary, Virtusa Germany GmbH, organized and located in Germany, Virtusa Singapore Private Limited, organized and located in Singapore, Virtusa Malaysia Private Limited, organized and located in Malaysia, Virtusa Austria GmbH, organized and located in Austria, Virtusa Philippines Inc., organized and located in the Philippines, TradeTech Consulting Scandinavia AB, organized and located in Sweden and Virtusa Canada, Inc., a corporation organized under the laws of British Columbia, Canada. All intercompany transactions and balances have been eliminated in consolidation. | |
Use of Estimates | |
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Management reevaluates these estimates on an ongoing basis. The most significant estimates relate to the recognition of revenue and profits based on the percentage of completion method of accounting for fixed price contracts, share based compensation, income taxes, including reserves for uncertain tax positions, deferred taxes and liabilities, intangible assets, contingent consideration and valuation of financial instruments including derivative contracts and investments. Management bases its estimates on historical experience and on various other factors and assumptions that are believed to be reasonable under the circumstances. The actual amounts may vary from the estimates used in the preparation of the accompanying consolidated financial statements. | |
Fair Value of Financial Instruments | |
At December 31, 2014 and March 31, 2014, the carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, unbilled accounts receivable, restricted cash, accounts payable, accrued employee compensation and benefits and other accrued expenses, approximate their fair values due to the nature of the items. See Note 5 for a discussion of the fair value of the Company’s other financial instruments. | |
Net_Income_per_Share
Net Income per Share | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Net Income per Share | ||||||||||||||
Net Income per Share | (3) Net Income per Share | |||||||||||||
Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period, and diluted earnings per share is computed by including the dilutive impact of common stock equivalents outstanding for the period in the denominator. Common stock equivalents include shares issuable upon the exercise of outstanding stock options, stock appreciation rights, unvested restricted stock awards and unvested restricted stock units, net of shares assumed to have been purchased with the proceeds, using the treasury stock method. The following table sets forth the computation of basic and diluted net income per share for the periods set forth below: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Numerators: | ||||||||||||||
Net income | $ | 11,779 | $ | 9,328 | $ | 30,897 | $ | 24,328 | ||||||
Denominators: | ||||||||||||||
Weighted average common shares outstanding | 28,871,023 | 25,652,538 | 28,681,156 | 25,499,625 | ||||||||||
Dilutive effect of employee stock options and unvested restricted stock | 748,620 | 874,810 | 781,270 | 819,364 | ||||||||||
Dilutive effect of stock appreciation rights | 7,978 | 13,334 | 8,663 | 14,731 | ||||||||||
Weighted average shares-diluted | 29,627,621 | 26,540,682 | 29,471,089 | 26,333,720 | ||||||||||
Net income per share-basic | $ | 0.41 | $ | 0.36 | $ | 1.08 | $ | 0.95 | ||||||
Net income per share-diluted | $ | 0.40 | $ | 0.35 | $ | 1.05 | $ | 0.92 | ||||||
During the three and nine months ended December 31, 2014, options to purchase 19,847 and 22,564 shares of common stock, respectively, were excluded from the calculations of diluted earnings per share as their effect would have been anti-dilutive. | ||||||||||||||
During the three and nine months ended December 31, 2013, options to purchase 28,613 and 100,408 shares of common stock, respectively, were excluded from the calculations of diluted earnings per share as their effect would have been anti-dilutive. | ||||||||||||||
Investment_Securities
Investment Securities | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Investment Securities | ||||||||||||||
Investment Securities | ||||||||||||||
(4) Investment Securities | ||||||||||||||
At December 31, 2014 and March 31, 2014, all of the Company’s investment securities were classified as available-for-sale and were carried on its balance sheet at their fair market value. A fair market value hierarchy based on three levels of inputs was used to measure each security (see Note 5). | ||||||||||||||
The following is a summary of investment securities at December 31, 2014: | ||||||||||||||
Amortized | Gross | Gross | Fair | |||||||||||
Cost | Unrealized | Unrealized | Value | |||||||||||
Gains | Losses | |||||||||||||
Available-for-sale securities: | ||||||||||||||
Corporate bonds: | ||||||||||||||
Current | $ | 49,265 | $ | 4 | $ | (52 | ) | $ | 49,217 | |||||
Non-current | 26,978 | 2 | (68 | ) | 26,912 | |||||||||
Auction-rate securities: | ||||||||||||||
Non-current | — | — | — | — | ||||||||||
Agency and short-term notes: | ||||||||||||||
Current | 1,013 | 1 | — | 1,014 | ||||||||||
Non-current | 13,370 | — | (11 | ) | 13,359 | |||||||||
Commercial paper: | ||||||||||||||
Current | — | — | — | — | ||||||||||
Municipal bonds: | ||||||||||||||
Current | 200 | — | — | 200 | ||||||||||
Time deposits: | ||||||||||||||
Current | 35,492 | — | — | 35,492 | ||||||||||
Total available-for-sale securities | $ | 126,318 | $ | 7 | $ | (131 | ) | $ | 126,194 | |||||
The following is a summary of investment securities at March 31, 2014: | ||||||||||||||
Amortized | Gross | Gross | Fair | |||||||||||
Cost | Unrealized | Unrealized | Value | |||||||||||
Gains | Losses | |||||||||||||
Available-for-sale securities: | ||||||||||||||
Corporate bonds: | ||||||||||||||
Current | $ | 20,255 | $ | 9 | $ | (8 | ) | $ | 20,256 | |||||
Non-current | 50,264 | 5 | (70 | ) | 50,199 | |||||||||
Auction-rate securities: | ||||||||||||||
Non-current | 300 | — | (12 | ) | 288 | |||||||||
Agency and short-term notes: | ||||||||||||||
Current | 561 | — | — | 561 | ||||||||||
Non-current | 11,341 | 1 | (14 | ) | 11,328 | |||||||||
Commercial paper: | ||||||||||||||
Current | 5,497 | — | — | 5,497 | ||||||||||
Municipal bonds: | ||||||||||||||
Non-current | 200 | — | — | 200 | ||||||||||
Time deposits: | ||||||||||||||
Current | 29,574 | — | — | 29,574 | ||||||||||
Total available-for-sale securities | $ | 117,992 | $ | 15 | $ | (104 | ) | $ | 117,903 | |||||
The Company evaluates investments with unrealized losses to determine if the losses are other than temporary. The Company has determined that the gross unrealized losses at December 31, 2014 and March 31, 2014 are temporary. In making this determination, the Company considered the financial condition, credit ratings and near-term prospects of the issuers, the underlying collateral of the investments, and the magnitude of the losses as compared to the cost and the length of time the investments have been in an unrealized loss position. Additionally, while the Company classifies the securities as available for sale, the Company does not currently intend to sell such investments and it is more likely than not the Company will not be required to sell such investments prior to the recovery of their carrying value, except as disclosed in Note 5. | ||||||||||||||
Fair_Value_of_Financial_Instru
Fair Value of Financial Instruments | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Fair Value of Financial Instruments | ||||||||||||||
Fair Value of Financial Instruments | ||||||||||||||
(5) Fair Value of Financial Instruments | ||||||||||||||
The Company uses a framework for measuring fair value under U.S. generally accepted accounting principles and enhanced disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company’s financial assets and liabilities reflected in the consolidated financial statements at carrying value include marketable securities and other financial instruments which approximate fair value. Fair value for marketable securities is determined using a market approach based on quoted market prices at period end in active markets. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following: | ||||||||||||||
· | Level 1—Quoted prices in active markets for identical assets or liabilities. | |||||||||||||
· | Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |||||||||||||
· | Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | |||||||||||||
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2014: | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | ||||||||||||||
Investments: | ||||||||||||||
Available-for-sales securities—current | $ | — | $ | 85,923 | $ | — | $ | 85,923 | ||||||
Available-for-sales securities—non-current | — | 40,271 | 40,271 | |||||||||||
Foreign currency derivative contracts | — | 2,184 | — | 2,184 | ||||||||||
Total assets | $ | — | $ | 128,378 | $ | $ | 128,378 | |||||||
Liabilities: | ||||||||||||||
Foreign currency derivative contracts | $ | — | $ | 3,576 | $ | — | $ | 3,576 | ||||||
Contingent consideration | — | — | 4,610 | 4,610 | ||||||||||
Total liabilities | $ | — | $ | 3,576 | $ | 4,610 | $ | 8,186 | ||||||
The Company determines the fair value of the contingent consideration related to the Company’s acquisition on November 1, 2013 of OSB Consulting LLC (“OSB”) and on January 2, 2014 of TradeTech Consulting Scandinavia AB (“TradeTech”) based on the probability of attaining certain revenue and profit margin targets using an appropriate discount rate to present value the liability. See Note 7 of the notes to our financial statements included herein for a description of OSB and TradeTech acquisitions and related contingent consideration targets. The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities at December 31, 2014. | ||||||||||||||
Level 3 | ||||||||||||||
Liabilities | ||||||||||||||
Balance at April 1, 2014 | $ | 5,925 | ||||||||||||
Payment of OSB contingent consideration (See Note 7) | (500 | ) | ||||||||||||
Reversal of the TradeTech earn-out recognized in earnings (See Note 7) | (1,833 | ) | ||||||||||||
Increase of the OSB earn-out recognized in earnings (See Note 7) | 1,068 | |||||||||||||
Cumulative foreign currency translation adjustments | (50 | ) | ||||||||||||
Balance at December 31, 2014 | $ | 4,610 | ||||||||||||
Derivative_Financial_Instrumen
Derivative Financial Instruments | 9 Months Ended | |||||||||||||||
Dec. 31, 2014 | ||||||||||||||||
Derivative Financial Instruments | ||||||||||||||||
Derivative Financial Instruments | ||||||||||||||||
(6) Derivative Financial Instruments | ||||||||||||||||
The Company evaluates its foreign exchange policy on an ongoing basis to assess its ability to address foreign exchange exposures on its consolidated balance sheets, statements of income and consolidated statement of cash flows from all foreign currencies, including most significantly the U.K. pound sterling, Indian rupee, Euro, Swedish krona and Sri Lankan rupee. The Company enters into hedging programs with highly rated financial institutions in accordance with its foreign exchange policy (as approved by the Company’s audit committee and board of directors) which permits hedging of material, known foreign currency exposures. Currently, the Company maintains three hedging programs, each with varying contract types, duration and purposes. The Company’s “Cash Flow Program” is designed to mitigate the impact of volatility in the U.S. dollar equivalent of the Company’s Indian rupee denominated expenses over a rolling 36 month period. The Cash Flow Program transactions currently meet the criteria for hedge accounting as cash flow hedges. The Company’s “Balance Sheet Program” involves the use of 30 day derivative instruments designed to mitigate the monthly impact of foreign exchange gains/losses on certain intercompany balances and payments. The Company’s “Economic Hedge Program” involves the purchase of derivative instruments with maturities of up to 92 days, and is designed to mitigate the impact of foreign exchange on the U.K. pound sterling, Euro and Swedish krona denominated revenue and costs with respect to the quarter for which such instruments are purchased. The Balance Sheet Program and the Economic Hedge Program are treated as economic hedges as these programs do not meet the criteria for hedge accounting and all gains and losses are recognized in consolidated statement of income under the same line item as the underlying exposure being hedged. | ||||||||||||||||
The Company evaluates all of its derivatives based on market observable inputs, including both forward and spot prices for currencies. Any significant change in the forward or spot prices for hedged currencies would have a significant impact on the value of the Company’s derivatives. Changes in fair value of the designated cash flow hedges for the Company’s Cash Flow Program are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”), net of tax, until the forecasted hedged transactions occur and are then recognized in the consolidated statement of income in the same line item as the item being hedged. The Company evaluates hedge effectiveness at the time a contract is entered into, as well as on an ongoing basis. If, and when, all or part of a hedge relationship is discontinued because the forecasted transaction is deemed probable of not occurring by the end of the originally specified period or within an additional two-month period of time thereafter, the contract, or the relative amount of the contract, is deemed “ineffective” and any related derivative amounts recorded in equity are reclassified to earnings. There were no gains (losses) that were reclassified from AOCI into earnings as a result of forecasted transactions that were considered probable of not occurring for the three months and nine month periods ended December 31, 2014 and 2013. | ||||||||||||||||
Changes in the fair value of the derivatives purchased under the Balance Sheet Program are reflected in the Company’s consolidated statement of income and are included in foreign currency transaction gains (losses) for each period. Changes in the fair value of the derivatives purchased under the Economic Hedge Program are also reflected in the Company’s consolidated statement of income and are included in the same line item as the underlying exposure being hedged for each period. | ||||||||||||||||
The U.S. dollar notional equivalent market value, which consists of the notional value and net unrealized gain or loss, of all outstanding foreign currency derivative contracts, was $113,947 and $102,801, at December 31, 2014 and March 31, 2014, respectively. Unrealized net losses related to these contracts which are expected to be reclassified from AOCI to earnings during the next 12 months were $985 at December 31, 2014. At December 31, 2014, the maximum outstanding term of any derivative instrument was 33 months. | ||||||||||||||||
The following table sets forth the fair value of derivative instruments included in the consolidated balance sheets at December 31, 2014 and March 31, 2014: | ||||||||||||||||
Derivatives designated as hedging instruments | ||||||||||||||||
December 31, 2014 | March 31, 2014 | |||||||||||||||
Foreign currency exchange contracts: | ||||||||||||||||
Other current assets | $ | 1,550 | $ | 398 | ||||||||||||
Other long-term assets | $ | 634 | $ | 586 | ||||||||||||
Accrued expenses and other current liabilities | $ | 2,535 | $ | 3,925 | ||||||||||||
Long-term liabilities | $ | 1,041 | $ | 2,449 | ||||||||||||
The following tables set forth the effect of the Company’s foreign currency exchange contracts on the consolidated financial statements of the Company for the three and nine months ended December 31, 2014 and 2013: | ||||||||||||||||
Amount of Gain or (Loss) Recognized in AOCI on Derivative | ||||||||||||||||
(Effective Portion) | ||||||||||||||||
Derivatives Designated as Cash Flow | Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
Hedging Relationships | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Foreign currency exchange contracts | $ | 553 | $ | 1,167 | $ | 2,067 | $ | (15,798 | ) | |||||||
Location of Gain or (Loss) Reclassified | Amount of Gain or (Loss) Reclassified from AOCI into Income | |||||||||||||||
(Effective Portion) | ||||||||||||||||
from AOCI into Income (Effective | Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
Portion) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Costs of revenue | $ | (61 | ) | $ | (780 | ) | $ | (1,227 | ) | $ | (2,839 | ) | ||||
Operating expenses | $ | (34 | ) | $ | (471 | ) | $ | (704 | ) | $ | (1,760 | ) | ||||
Amount of Gain or (Loss) Recognized in Income on Derivatives | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
Derivatives not Designated | Location of Gain or (Loss) | December 31, | December 31, | |||||||||||||
as Hedging Instrument | Recognized in Income on Derivatives | 2014 | 2013 | 2014 | 2013 | |||||||||||
Foreign currency exchange contracts | Foreign currency transaction gains (losses) | $ | (216 | ) | $ | 420 | $ | (299 | ) | $ | (3,034 | ) | ||||
Revenue | $ | 183 | $ | (74 | ) | $ | 319 | $ | (555 | ) | ||||||
Costs of revenue | $ | (106 | ) | $ | 30 | $ | (187 | ) | $ | 214 | ||||||
Selling, general and administrative expenses | $ | (38 | ) | $ | 3 | $ | (51 | ) | $ | 23 | ||||||
Acquisitions
Acquisitions | 9 Months Ended |
Dec. 31, 2014 | |
Acquisitions | |
Acquisitions | |
(7) Acquisitions | |
On November 1, 2013, the Company acquired substantially all of the business and assets of OSB pursuant to an asset purchase agreement dated November 1, 2013 (the “Asset Purchase Agreement”) by and among OSB and the sole member of OSB. The acquisition of OSB extends the Company’s service offerings to include a broader set of finance transformation services in the financial services and insurance domains to existing and new clients, including service offerings targeted to enable clients to automate their finance and accounting processes, reporting capabilities, including SAP based capabilities, and regulatory compliance programs. | |
The purchase price was $6,840 in cash. Ten percent of the purchase price is subject to a hold back by the Company for a period of 12 months as security for the sellers’ indemnification obligations under the Asset Purchase Agreement. The purchase price is subject to adjustment after the closing of up to an additional $6,000 in earn-out consideration, in the aggregate, upon the achievement of certain revenue and operating margin targets for the five months ended March 31, 2014, the nine months ending December 31, 2014 and the twelve months ending December 31, 2015. At March 31, 2014, the Company determined that OSB had met 100% of the performance targets for the five months ending March 31, 2014. The fair value of the contingent consideration at December 31, 2014 and March 31, 2014 was $4,610 and $4,042, respectively. During the nine months ended December 31, 2014, the Company paid the $500 earn-out consideration to OSB. The change in fair value of $1,068 was recorded as a change to selling, general and administration expenses in the nine months ended December 31, 2014. In November 2014, the Company released $684 to OSB with respect to the hold back. | |
Under the terms of the Asset Purchase Agreement, the Company agreed to offer employment to all of the employees of OSB, including certain key employees and the sole member of OSB. | |
There are no material relationships between the Company or any of its affiliates and any of the parties to the Asset Purchase Agreement and related agreements, other than with respect to such agreements themselves. | |
On January 2, 2014, Virtusa International B.V., a wholly owned subsidiary of the Company organized and formed in the Netherlands (“Virtusa BV”), acquired all of the outstanding shares of TradeTech and its subsidiaries (together with TradeTech, the “TradeTech Group”), pursuant to a share purchase agreement dated as of January 2, 2014 (the “Share Purchase Agreement”) by and among Virtusa BV and the shareholders of TradeTech. The acquisition expands the Company’s position within the banking, financial services and insurance industries by increasing its asset management and treasury services domain and technology expertise, as well as by expanding the Company’s global presence into the Nordic countries. | |
Under the terms of the Share Purchase Agreement, Virtusa BV acquired all the outstanding shares of TradeTech for $19,087 in cash, reflective of a working capital adjustment as part of the Share Purchase Agreement, subject to adjustment after the closing by up to $4,080 of potential earn-out consideration contingent upon TradeTech Group’s achievement of certain revenue and EBITA targets for the 12-month period ending December 31, 2014. At June 30, 2014, the Company determined that the earn-out consideration targets would not be achieved for the 12-month period ending December 31, 2014, resulting in a reduction of $1,833 in the fair value of the recorded earn-out liability for the nine months ended December 31, 2014. At December 31, 2014, there is no liability recorded. The reduction of the entire fair value of the earn-out consideration of $1,833 was recorded as a reduction to selling, general and administration expenses in the nine-month period ended December 31, 2014. Under the terms of the Share Purchase Agreement, 12.5% of the purchase price was also held back and placed into escrow by the Company for a period of 12 months as security for the indemnification obligations of the TradeTech Shareholders. The Company also agreed to issue an aggregate of up to $2,000 in deferred restricted stock awards from the Company’s stock option and incentive plan, not to exceed an aggregate of 65,000 shares, to certain of these new TradeTech Group employees. The shares will be recognized as compensation cost over the requisite employee service period. The shares will vest annually over a five year period. | |
Goodwill_and_Intangible_Assets
Goodwill and Intangible Assets | 9 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Goodwill and Intangible Assets | |||||||||||||
Goodwill and Intangible Assets | |||||||||||||
(8) Goodwill and Intangible Assets | |||||||||||||
Goodwill: | |||||||||||||
The Company has one reportable segment at December 31, 2014. The following are details of the changes in goodwill balance at December 31, 2014: | |||||||||||||
Amount | |||||||||||||
Balance at April 1, 2014 | $ | 53,448 | |||||||||||
Cumulative foreign currency translation adjustments | (2,117 | ) | |||||||||||
Balance at December 31, 2014 | $ | 51,331 | |||||||||||
The acquisition costs and goodwill balance deductible for the Company’s business acquisitions for tax purposes are $41,834. The acquisition costs and goodwill balance not deductible for tax purposes are $10,888 and relate to the Company’s TradeTech acquisition. | |||||||||||||
The Company performed the annual assessment of its goodwill during the fourth quarter of the fiscal year ended March 31, 2014 and determined that the estimated fair value of the Company’s reporting unit exceeded its carrying value and therefore goodwill was not impaired. The Company will continue to complete goodwill impairment assessments at least annually during the fourth quarter of each ensuing fiscal year. The Company will continue to evaluate whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets, including intangible assets, may warrant revision or that the carrying value of these assets may be impaired. Any write -downs are treated as permanent reductions in the carrying amount of the assets. | |||||||||||||
Intangible Assets: | |||||||||||||
The following are details of the Company’s intangible asset carrying amounts acquired and amortization at December 31, 2014. | |||||||||||||
Weighted Average | Gross Carrying | Accumulated | Net Carrying | ||||||||||
Useful Life | Amount | Amortization | Amount | ||||||||||
Amortizable intangible assets: | |||||||||||||
Customer relationships | 9.4 | $ | 34,814 | $ | 11,369 | $ | 23,445 | ||||||
Partner relationships | 6.5 | 700 | 573 | 127 | |||||||||
Trademark | 1.0 | 63 | 63 | — | |||||||||
Backlog | 1.0 | 1,259 | 1,259 | — | |||||||||
9.0 | $ | 36,836 | $ | 13,264 | $ | 23,572 | |||||||
Income_Taxes
Income Taxes | 9 Months Ended |
Dec. 31, 2014 | |
Income Taxes | |
Income Taxes | |
(9) Income Taxes | |
The Company’s effective tax rate was 26.3% and 25.9% for the three and nine months ended December 31, 2014, as compared to an effective tax rate of 24.5% and 24.7% for the three and nine months ended December 31, 2013. The increase in the effective tax rate for three months ended December 31, 2014 was primarily due to geographical income distribution and expiration of certain holiday benefits in India. This was partially offset by new tax benefits generated from special economic zone (“SEZ”) tax holiday incentives located in Bangalore and Pune, India. The increase in the effective tax rate in the nine months ended December 31, 2014 was primarily due to geographical income distribution and expiration of certain tax benefits in India. This was partially offset by a tax benefit associated with the reduction in fair value of $1.8 million in the nine months period ended December 31, 2014 related to the determination that Trade Tech would not achieve its performance targets for earn-out consideration and new tax benefits generated from SEZ tax holiday incentives located in Bangalore and Pune, India. | |
One of the Company’s Indian subsidiaries, Virtusa (India) Private Limited, which was merged with and into Virtusa Consulting Services Private Limited (collectively referred to as “Virtusa India”), is an export oriented company. The Indian Income Tax Act of 1961 entitles taxpayers to claim tax exemption for a period of ten consecutive years for each Software Technology Park (“STP”) that it operates. Virtusa India operates two STPs, one in Chennai and one in Hyderabad, India. The STP tax holiday in Hyderabad, India expired on March 31, 2010 and the STP tax holiday in Chennai, India expired on March 31, 2011. For the three and nine months ended December 31, 2014 and 2013, all profits in the STPs in Hyderabad and Chennai, India were fully taxable at the Indian statutory tax rate of 34.0%. In anticipation of, and to mitigate the impact of, the phase-out of the STP tax holidays in Hyderabad and Chennai, India, the Company located new Indian operations in areas designated as an SEZ under the SEZ Act of 2005 through two operating subsidiaries, Virtusa Software Services Private Limited and Virtusa Consulting Services Private Limited. In the fiscal year ended March 31, 2014, the Company leased a facility in SEZ designated locations in Bangalore and Pune, India, each of which is eligible for tax holiday benefits that began in the fiscal year ended March 31, 2014.The Company’s profits from these SEZ operations are eligible for certain additional income tax exemptions for a period of up to 15 years based on export income. | |
In addition, the Company’s Sri Lankan subsidiary, Virtusa (Private) Limited, is operating under a 12 year income tax holiday arrangement that is set to expire on March 31, 2019 and which required Virtusa (Private) Limited to meet certain job creation and investment criteria by March 31, 2014. The Company is required each year to apply for certification during the 12 year holiday period. During the fiscal year ended March 31, 2014, the Company believes it fulfilled its hiring and investment commitments and is eligible for the tax holiday benefits through March 2019. The current agreement provides income tax exemption for all export business income. During the three months ended December 31, 2014, the Company submitted and received confirmation of exemption for the fiscal year ended March 31, 2014. At December 31, 2014, the Company believes it is eligible for the entire 12 year tax holiday. | |
The Company’s effective income tax rate is based on the composition of estimated income in different jurisdictions, including those where the Company is enjoying tax holidays, for the applicable fiscal year and adjustments, if any, in the applicable quarterly periods, for unrecognized tax benefits for uncertain income tax positions or other discrete items required to be reported during interim periods. The Company’s aggregate income tax rate in foreign jurisdictions is lower than its income tax rate in the United States due primarily to lower rates generally in jurisdictions in which the Company operates and applicable tax holiday benefits of the Company, obtained primarily in India and Sri Lanka. | |
Unrecognized tax benefits represent uncertain tax positions for which the Company has established reserves. At December 31, 2014 and March 31, 2014, the total liability for unrecognized tax benefits was $406 and $410, respectively, all of which would negatively impact the Company’s annual effective tax rate, if realized. Each fiscal year, unrecognized tax benefits may be adjusted upon the closing of the statute of limitations for income tax returns filed in various jurisdictions. During the nine months ended December 31, 2014 and December 31, 2013, the unrecognized tax benefits decreased by $4 and $3,873, respectively. The decrease in unrecognized tax benefits in the nine months period ending December 31, 2014 was predominantly due to a cash settlement with tax authorities, partially offset by increases for incremental interest accrued on existing uncertain tax positions. The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. Recently, the Internal Revenue Service (“IRS”) conducted a routine audit of the Company’s fiscal years 2008 to 2011, pursuant to which the IRS made certain assessments. In connection with the audit, during the fourth quarter of fiscal year 2013, the Company executed a settlement arrangement with the IRS for all periods under audit to close out the audit. The Company has fully accrued for all such assessments and the settlement impact on the Company’s financial statements is properly reflected at December 31, 2014. | |
The Company’s U.S. tax return for the fiscal year ended March 31, 2012 was recently audited by the IRS pursuant to which the IRS made certain assessments. During the three months ended June 30, 2014, the Company executed a settlement agreement with the IRS for the fiscal year ended March 31, 2012. The Company has fully accrued for all such assessments and the settlement impact on the Company’s financial statements is properly reflected at December 31, 2014. In addition, tax returns for various years are under examination by tax authorities of foreign jurisdictions. Currently, several issues are at various levels of appeal with the Indian and Sri Lankan tax authorities. While it is difficult to predict the final outcome, the Company believes its reserves represent the most likely outcome and continues to evaluate all tax return positions. | |
Undistributed Earnings of Foreign Subsidiaries | |
A substantial amount of the Company’s income before provision for income tax is from operations earned in its Indian and Sri Lankan subsidiaries and is subject to tax holiday. The Company intends to use accumulated and future earnings of foreign subsidiaries to expand operations outside the United States and, accordingly, undistributed income is considered to be indefinitely reinvested. The Company does not provide for U.S. income taxes on foreign earnings. At December 31, 2014, the Company had $184,273 of unremitted earnings from foreign subsidiaries and approximately $94,144 of cash and short-term investments that would otherwise be available for potential distribution, if not indefinitely reinvested. If required, such cash and investments could be repatriated to the United States. However, under current law, any repatriation would be subject to United States federal income tax less applicable foreign tax credits. Due to the various methods by which such earnings could be repatriated in the future, the amount of taxes attributable to the undistributed earnings is not practicably determinable. | |
Concentration_of_Revenue_and_A
Concentration of Revenue and Assets | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Concentration of Revenue and Assets | ||||||||||||||
Concentration of Revenue and Assets | ||||||||||||||
(10) Concentration of Revenue and Assets | ||||||||||||||
Total revenue is attributed to geographic areas based on the location of the client. Long-lived assets represent property, plant and equipment, intangible assets and goodwill, net of accumulated depreciation and amortization, and are attributed to geographic area based on their location. Geographic information is summarized as follows: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Client revenue: | ||||||||||||||
North America | $ | 83,324 | $ | 70,510 | $ | 232,773 | $ | 205,547 | ||||||
Europe | 31,658 | 24,895 | 98,141 | 64,686 | ||||||||||
Rest of world | 8,014 | 5,638 | 22,055 | 15,600 | ||||||||||
Consolidated revenue | $ | 122,996 | $ | 101,043 | $ | 352,969 | $ | 285,833 | ||||||
December 31, | March 31, | |||||||||||||
2014 | 2014 | |||||||||||||
Long-lived assets, net of accumulated depreciation and amortization: | ||||||||||||||
United States | $ | 59,916 | $ | 61,562 | ||||||||||
Asia | 31,043 | 32,235 | ||||||||||||
Europe | 19,832 | 23,658 | ||||||||||||
Consolidated long-lived assets, net | $ | 110,791 | $ | 117,455 | ||||||||||
Revenue from significant clients as a percentage of the Company’s consolidated revenue was as follows: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Customer 1 | 11.9 | % | 13.3 | % | 12.5 | % | 12.4 | % | ||||||
Customer 2 | 11.1 | % | 13.1 | % | 10.0 | % | 13.4 | % | ||||||
Debt
Debt | 9 Months Ended |
Dec. 31, 2014 | |
Debt | |
Debt | |
(11) Debt | |
On December 31, 2013, the Company entered into an amended and restated credit agreement with JPMorgan Chase Bank, N.A. (“JPM”). The credit agreement amended and restated the Company’s $3,000 secured revolving credit agreement with JPM and provides for a $25,000 secured revolving credit facility, which shall be available to fund working capital and other corporate purposes, as well as to serve as security in support of the Company’s foreign currency hedging programs. The credit agreement contains financial covenants that require the Company to maintain a Funded Debt to Adjusted EBITDA Ratio of not more than 2.00 to 1.00 and a Fixed Charge Coverage Ratio of less than 2.50 to 1.00, each as determined for the trailing twelve month period ending on each fiscal quarter. The Company is currently in compliance with all covenants contained in the credit agreement and believes that the credit agreement provides sufficient flexibility to enable continued compliance with its terms. Interest under this credit facility accrues at a rate between LIBOR plus 1.5% and LIBOR plus 1.75% based on the Company’s ratio of indebtedness to Adjusted EBITDA. The term of the credit facility is five years, ending December 31, 2018. This facility replaced the Company’s prior $3,000 line of credit with JPM. At December 31, 2014, there were no borrowings outstanding under the credit facility. | |
Beginning in fiscal 2009, the Company’s U.K. subsidiary entered into an agreement with a financial institution to sell, without recourse, certain of its Europe-based accounts receivable balances to the financial institution. During the nine months ended December 31, 2014, $22,744 of receivables was sold under the terms of the financing agreement. Fees paid pursuant to this agreement were immaterial during the three and nine months ended December 31, 2014. No amounts were outstanding under the financing agreement at December 31, 2014. | |
Pensions_and_Postretirement_be
Pensions and Post-retirement benefits | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Pensions and post-retirement benefits | ||||||||||||||
Pensions and post-retirement benefits | ||||||||||||||
(12) Pensions and post-retirement benefits | ||||||||||||||
The Company has noncontributory defined benefit plans covering its employees in India and Sri Lanka as mandated by the Indian and Sri Lankan governments. The following tables provide information regarding pension expense recognized: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Components of net periodic pension cost | ||||||||||||||
Service cost | $ | 154 | $ | 129 | $ | 425 | $ | 397 | ||||||
Interest cost | 58 | 56 | 175 | 160 | ||||||||||
Expected return on plan assets | (53 | ) | (58 | ) | (162 | ) | (164 | ) | ||||||
Amortization past service cost | 2 | 2 | 7 | 8 | ||||||||||
Amortization of actuarial loss | 38 | 22 | 87 | 68 | ||||||||||
Net periodic pension cost | $ | 199 | $ | 151 | 532 | $ | 469 | |||||||
The Company expects to contribute approximately $508 in cash to the pension plans during the fiscal year ending March 31, 2015. The Company made cash contributions of $332 to the plans during the nine months ended December 31, 2014. | ||||||||||||||
Accumulated_Other_Comprehensiv
Accumulated Other Comprehensive Loss | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||
(13) Accumulated Other Comprehensive Loss | ||||||||||||||
Changes in accumulated other comprehensive income (loss) by component were as follows for the three and nine months ended December 31, 2014 and 2013: | ||||||||||||||
Accumulated Other Comprehensive Income (Loss) | Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | |||||||||||||
(In thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 | ||||||||||
Investment securities | ||||||||||||||
Beginning balance | $ | (95 | ) | $ | — | $ | (54 | ) | $ | (3 | ) | |||
Other comprehensive income (loss) (OCI) before reclassifications net of tax of $0 for all periods | 5 | 9 | (36 | ) | 12 | |||||||||
Reclassifications from OCI to other income — net of tax of $0 for all periods | (1 | ) | — | (1 | ) | — | ||||||||
Comprehensive income (loss) on investment securities, net of tax of $0 for all periods | 4 | 9 | (37 | ) | 12 | |||||||||
Closing Balance | $ | (91 | ) | $ | 9 | $ | (91 | ) | $ | 9 | ||||
Currency Translation Adjustments | ||||||||||||||
Beginning balance | $ | (28,703 | ) | $ | (27,846 | ) | $ | (23,253 | ) | $ | (16,918 | ) | ||
OCI before reclassifications | (5,388 | ) | 2,099 | (10,838 | ) | (8,829 | ) | |||||||
Closing Balance | $ | (34,091 | ) | $ | (25,747 | ) | $ | (34,091 | ) | $ | (25,747 | ) | ||
Cash Flow Hedges | ||||||||||||||
Beginning balance | $ | (1,358 | ) | $ | (10,305 | ) | $ | (3,829 | ) | $ | (1,013 | ) | ||
OCI before reclassifications net of tax of $21, $(488), $(340) and $5,046 | 573 | 680 | 1,727 | (10,751 | ) | |||||||||
Reclassifications from OCI to | ||||||||||||||
- Costs of revenue, net of tax of $(31), $(223), $(360) and $(978) | 30 | 557 | 867 | 1,860 | ||||||||||
- Selling, general and administrative expenses, net of tax of $(16), $(153), $(206) and $(607) | 18 | 318 | 498 | 1,154 | ||||||||||
Comprehensive income (loss) on cash flow hedges, net of tax of $(26), $(864), $(906) and $3,461 | 621 | 1,555 | 3,092 | (7,737 | ) | |||||||||
Closing Balance | $ | (737 | ) | $ | (8,750 | ) | $ | (737 | ) | $ | (8,750 | ) | ||
Benefit plans | ||||||||||||||
Beginning balance | $ | (565 | ) | $ | (637 | ) | $ | (578 | ) | $ | (780 | ) | ||
OCI before reclassifications net of tax of $0 for all periods | (216 | ) | — | (216 | ) | — | ||||||||
Reclassifications from OCI for prior service credit (cost) to: | ||||||||||||||
- Costs of revenue, net of tax of $0 for all periods | 2 | 2 | 6 | 6 | ||||||||||
- Selling, general and administrative expenses, net of tax of $0 for all periods | 1 | — | 1 | 2 | ||||||||||
Reclassifications from OCI for net actuarial gain (loss) amortization to: | ||||||||||||||
- Costs of revenue, net of tax of $0 for all periods | 23 | 18 | 52 | 53 | ||||||||||
- Selling, general and administrative expenses, net of tax of $0 for all periods | 15 | 5 | 35 | 16 | ||||||||||
Other adjustments | 3 | (12 | ) | (37 | ) | 79 | ||||||||
Comprehensive income (loss) on benefit plans, net of tax of $0 for all periods | (172 | ) | 13 | (159 | ) | 156 | ||||||||
Closing Balance | $ | (737 | ) | (624 | ) | (737 | ) | (624 | ) | |||||
Accumulated other comprehensive loss closing balance | $ | (35,656 | ) | $ | (35,112 | ) | $ | (35,656 | ) | $ | (35,112 | ) | ||
Subsequent_Events
Subsequent Events | 9 Months Ended |
Dec. 31, 2014 | |
Subsequent Events | |
Subsequent Events | |
(14) Subsequent Events | |
On January 8, 2015, the Company purchased multiple foreign currency forward contracts designed to hedge fluctuation in the U.K. pound sterling against the U.S. dollar (the “U.K. contracts”), the Swedish krona (“SEK”) against the U.S. dollar (the “SEK contracts”) and the Euro (“EUR”) against the U.S. dollar (the “Euro contracts”), each of which will expire on various dates during the period ending March 31, 2015. The U.K. contracts have an aggregate notional amount of approximately £6,982 (approximately $10,493), the SEK contracts have an aggregate notional amount of approximately SEK 7,301 (approximately $914) and the EUR contracts have an aggregate notional amount of approximately EUR 376 (approximately $441). The weighted average U.K. pound sterling settlement rate associated with the U.K. contracts is approximately $1.50, the weighted average U.S. dollar settlement rate associated with the SEK contracts is approximately $0.13, and the weighted average U.S. dollar settlement rate associated with the EUR contracts is approximately $1.17. | |
Unaudited_Interim_Financial_In1
Unaudited Interim Financial Information (Policies) | 9 Months Ended |
Dec. 31, 2014 | |
Unaudited Interim Financial Information | |
Basis of Presentation | Basis of Presentation |
The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with U.S. generally accepted accounting principles and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, and should be read in conjunction with the Company’s audited consolidated financial statements (and notes thereto) for the fiscal year ended March 31, 2014 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 23, 2014. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of the accompanying unaudited consolidated financial statements have been included, and all material adjustments are of a normal and recurring nature. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire fiscal year. | |
Principles of Consolidation | Principles of Consolidation |
The consolidated financial statements reflect the accounts of the Company and its direct and indirect subsidiaries, Virtusa Consulting Services Private Limited and Virtusa Software Services Private Limited, each organized and located in India, Virtusa (Private) Limited, organized and located in Sri Lanka, Virtusa UK Limited, organized and located in the United Kingdom, Virtusa Securities Corporation, a Massachusetts securities corporation, InSource LLC, a limited liability company organized in Connecticut, Virtusa International, B.V., organized and located in the Netherlands, Virtusa Hungary Kft., incorporated and located in Hungary, Virtusa Germany GmbH, organized and located in Germany, Virtusa Singapore Private Limited, organized and located in Singapore, Virtusa Malaysia Private Limited, organized and located in Malaysia, Virtusa Austria GmbH, organized and located in Austria, Virtusa Philippines Inc., organized and located in the Philippines, TradeTech Consulting Scandinavia AB, organized and located in Sweden and Virtusa Canada, Inc., a corporation organized under the laws of British Columbia, Canada. All intercompany transactions and balances have been eliminated in consolidation. | |
Use of Estimates | |
Use of Estimates | |
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Management reevaluates these estimates on an ongoing basis. The most significant estimates relate to the recognition of revenue and profits based on the percentage of completion method of accounting for fixed price contracts, share based compensation, income taxes, including reserves for uncertain tax positions, deferred taxes and liabilities, intangible assets, contingent consideration and valuation of financial instruments including derivative contracts and investments. Management bases its estimates on historical experience and on various other factors and assumptions that are believed to be reasonable under the circumstances. The actual amounts may vary from the estimates used in the preparation of the accompanying consolidated financial statements. | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments |
At December 31, 2014 and March 31, 2014, the carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, unbilled accounts receivable, restricted cash, accounts payable, accrued employee compensation and benefits and other accrued expenses, approximate their fair values due to the nature of the items. See Note 5 for a discussion of the fair value of the Company’s other financial instruments. | |
Net_Income_per_Share_Tables
Net Income per Share (Tables) | 9 Months Ended | ||||||||||||||
Dec. 31, 2014 | |||||||||||||||
Net Income per Share | |||||||||||||||
Schedule of computation of basic and diluted net income per share | Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Numerators: | |||||||||||||||
Net income | $ | 11,779 | $ | 9,328 | $ | 30,897 | $ | 24,328 | |||||||
Denominators: | |||||||||||||||
Weighted average common shares outstanding | 28,871,023 | 25,652,538 | 28,681,156 | 25,499,625 | |||||||||||
Dilutive effect of employee stock options and unvested restricted stock | 748,620 | 874,810 | 781,270 | 819,364 | |||||||||||
Dilutive effect of stock appreciation rights | 7,978 | 13,334 | 8,663 | 14,731 | |||||||||||
Weighted average shares-diluted | 29,627,621 | 26,540,682 | 29,471,089 | 26,333,720 | |||||||||||
Net income per share-basic | $ | 0.41 | $ | 0.36 | $ | 1.08 | $ | 0.95 | |||||||
Net income per share-diluted | $ | 0.40 | $ | 0.35 | $ | 1.05 | $ | 0.92 | |||||||
Investment_Securities_Tables
Investment Securities (Tables) | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Investment Securities | ||||||||||||||
Schedule of investment securities | The following is a summary of investment securities at December 31, 2014: | |||||||||||||
Amortized | Gross | Gross | Fair | |||||||||||
Cost | Unrealized | Unrealized | Value | |||||||||||
Gains | Losses | |||||||||||||
Available-for-sale securities: | ||||||||||||||
Corporate bonds: | ||||||||||||||
Current | $ | 49,265 | $ | 4 | $ | (52 | ) | $ | 49,217 | |||||
Non-current | 26,978 | 2 | (68 | ) | 26,912 | |||||||||
Auction-rate securities: | ||||||||||||||
Non-current | — | — | — | — | ||||||||||
Agency and short-term notes: | ||||||||||||||
Current | 1,013 | 1 | — | 1,014 | ||||||||||
Non-current | 13,370 | — | (11 | ) | 13,359 | |||||||||
Commercial paper: | ||||||||||||||
Current | — | — | — | — | ||||||||||
Municipal bonds: | ||||||||||||||
Current | 200 | — | — | 200 | ||||||||||
Time deposits: | ||||||||||||||
Current | 35,492 | — | — | 35,492 | ||||||||||
Total available-for-sale securities | $ | 126,318 | $ | 7 | $ | (131 | ) | $ | 126,194 | |||||
The following is a summary of investment securities at March 31, 2014: | ||||||||||||||
Amortized | Gross | Gross | Fair | |||||||||||
Cost | Unrealized | Unrealized | Value | |||||||||||
Gains | Losses | |||||||||||||
Available-for-sale securities: | ||||||||||||||
Corporate bonds: | ||||||||||||||
Current | $ | 20,255 | $ | 9 | $ | (8 | ) | $ | 20,256 | |||||
Non-current | 50,264 | 5 | (70 | ) | 50,199 | |||||||||
Auction-rate securities: | ||||||||||||||
Non-current | 300 | — | (12 | ) | 288 | |||||||||
Agency and short-term notes: | ||||||||||||||
Current | 561 | — | — | 561 | ||||||||||
Non-current | 11,341 | 1 | (14 | ) | 11,328 | |||||||||
Commercial paper: | ||||||||||||||
Current | 5,497 | — | — | 5,497 | ||||||||||
Municipal bonds: | ||||||||||||||
Non-current | 200 | — | — | 200 | ||||||||||
Time deposits: | ||||||||||||||
Current | 29,574 | — | — | 29,574 | ||||||||||
Total available-for-sale securities | $ | 117,992 | $ | 15 | $ | (104 | ) | $ | 117,903 | |||||
Fair_Value_of_Financial_Instru1
Fair Value of Financial Instruments (Tables) | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Fair Value of Financial Instruments | ||||||||||||||
Schedule of financial assets and liabilities measured at fair value on a recurring basis | ||||||||||||||
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2014: | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | ||||||||||||||
Investments: | ||||||||||||||
Available-for-sales securities—current | $ | — | $ | 85,923 | $ | — | $ | 85,923 | ||||||
Available-for-sales securities—non-current | — | 40,271 | 40,271 | |||||||||||
Foreign currency derivative contracts | — | 2,184 | — | 2,184 | ||||||||||
Total assets | $ | — | $ | 128,378 | $ | $ | 128,378 | |||||||
Liabilities: | ||||||||||||||
Foreign currency derivative contracts | $ | — | $ | 3,576 | $ | — | $ | 3,576 | ||||||
Contingent consideration | — | — | 4,610 | 4,610 | ||||||||||
Total liabilities | $ | — | $ | 3,576 | $ | 4,610 | $ | 8,186 | ||||||
Schedule of changes in fair value of the Company's Level 3 financial liabilities | Level 3 | |||||||||||||
Liabilities | ||||||||||||||
Balance at April 1, 2014 | $ | 5,925 | ||||||||||||
Payment of OSB contingent consideration (See Note 7) | (500 | ) | ||||||||||||
Reversal of the TradeTech earn-out recognized in earnings (See Note 7) | (1,833 | ) | ||||||||||||
Increase of the OSB earn-out recognized in earnings (See Note 7) | 1,068 | |||||||||||||
Cumulative foreign currency translation adjustments | (50 | ) | ||||||||||||
Balance at December 31, 2014 | $ | 4,610 | ||||||||||||
Derivative_Financial_Instrumen1
Derivative Financial Instruments (Tables) | 9 Months Ended | |||||||||||||||
Dec. 31, 2014 | ||||||||||||||||
Derivative Financial Instruments | ||||||||||||||||
Schedule of fair value of derivative instruments included in the consolidated balance sheets | December 31, 2014 | March 31, 2014 | ||||||||||||||
Foreign currency exchange contracts: | ||||||||||||||||
Other current assets | $ | 1,550 | $ | 398 | ||||||||||||
Other long-term assets | $ | 634 | $ | 586 | ||||||||||||
Accrued expenses and other current liabilities | $ | 2,535 | $ | 3,925 | ||||||||||||
Long-term liabilities | $ | 1,041 | $ | 2,449 | ||||||||||||
Schedule of effect of the foreign currency exchange contracts on the consolidated financial statements | Amount of Gain or (Loss) Recognized in AOCI on Derivative | |||||||||||||||
(Effective Portion) | ||||||||||||||||
Derivatives Designated as Cash Flow | Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
Hedging Relationships | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Foreign currency exchange contracts | $ | 553 | $ | 1,167 | $ | 2,067 | $ | (15,798 | ) | |||||||
Location of Gain or (Loss) Reclassified | Amount of Gain or (Loss) Reclassified from AOCI into Income | |||||||||||||||
(Effective Portion) | ||||||||||||||||
from AOCI into Income (Effective | Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
Portion) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Costs of revenue | $ | (61 | ) | $ | (780 | ) | $ | (1,227 | ) | $ | (2,839 | ) | ||||
Operating expenses | $ | (34 | ) | $ | (471 | ) | $ | (704 | ) | $ | (1,760 | ) | ||||
Amount of Gain or (Loss) Recognized in Income on Derivatives | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
Derivatives not Designated | Location of Gain or (Loss) | December 31, | December 31, | |||||||||||||
as Hedging Instrument | Recognized in Income on Derivatives | 2014 | 2013 | 2014 | 2013 | |||||||||||
Foreign currency exchange contracts | Foreign currency transaction gains (losses) | $ | (216 | ) | $ | 420 | $ | (299 | ) | $ | (3,034 | ) | ||||
Revenue | $ | 183 | $ | (74 | ) | $ | 319 | $ | (555 | ) | ||||||
Costs of revenue | $ | (106 | ) | $ | 30 | $ | (187 | ) | $ | 214 | ||||||
Selling, general and administrative expenses | $ | (38 | ) | $ | 3 | $ | (51 | ) | $ | 23 | ||||||
Goodwill_and_Intangible_Assets1
Goodwill and Intangible Assets (Tables) | 9 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Goodwill and Intangible Assets | |||||||||||||
Schedule of changes in goodwill | Amount | ||||||||||||
Balance at April 1, 2014 | $ | 53,448 | |||||||||||
Cumulative foreign currency translation adjustments | (2,117 | ) | |||||||||||
Balance at December 31, 2014 | $ | 51,331 | |||||||||||
Schedule of carrying amount and amortization of acquired intangible asset | |||||||||||||
The following are details of the Company’s intangible asset carrying amounts acquired and amortization at December 31, 2014. | |||||||||||||
Weighted Average | Gross Carrying | Accumulated | Net Carrying | ||||||||||
Useful Life | Amount | Amortization | Amount | ||||||||||
Amortizable intangible assets: | |||||||||||||
Customer relationships | 9.4 | $ | 34,814 | $ | 11,369 | $ | 23,445 | ||||||
Partner relationships | 6.5 | 700 | 573 | 127 | |||||||||
Trademark | 1.0 | 63 | 63 | — | |||||||||
Backlog | 1.0 | 1,259 | 1,259 | — | |||||||||
9.0 | $ | 36,836 | $ | 13,264 | $ | 23,572 | |||||||
Concentration_of_Revenue_and_A1
Concentration of Revenue and Assets (Tables) | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Concentration of Revenue and Assets | ||||||||||||||
Schedule of revenue attributed to geographic areas based on location of the client | Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Client revenue: | ||||||||||||||
North America | $ | 83,324 | $ | 70,510 | $ | 232,773 | $ | 205,547 | ||||||
Europe | 31,658 | 24,895 | 98,141 | 64,686 | ||||||||||
Rest of world | 8,014 | 5,638 | 22,055 | 15,600 | ||||||||||
Consolidated revenue | $ | 122,996 | $ | 101,043 | $ | 352,969 | $ | 285,833 | ||||||
Schedule of long-lived assets, net of accumulated depreciation and amortization attributed to geographic areas based on location of assets | December 31, | March 31, | ||||||||||||
2014 | 2014 | |||||||||||||
Long-lived assets, net of accumulated depreciation and amortization: | ||||||||||||||
United States | $ | 59,916 | $ | 61,562 | ||||||||||
Asia | 31,043 | 32,235 | ||||||||||||
Europe | 19,832 | 23,658 | ||||||||||||
Consolidated long-lived assets, net | $ | 110,791 | $ | 117,455 | ||||||||||
Schedule of revenue from significant clients as a percentage of consolidated revenue | Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Customer 1 | 11.9 | % | 13.3 | % | 12.5 | % | 12.4 | % | ||||||
Customer 2 | 11.1 | % | 13.1 | % | 10.0 | % | 13.4 | % | ||||||
Pensions_and_Postretirement_be1
Pensions and Post-retirement benefits (Tables) | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Pensions and post-retirement benefits | ||||||||||||||
Schedule of pension expense recognized | Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Components of net periodic pension cost | ||||||||||||||
Service cost | $ | 154 | $ | 129 | $ | 425 | $ | 397 | ||||||
Interest cost | 58 | 56 | 175 | 160 | ||||||||||
Expected return on plan assets | (53 | ) | (58 | ) | (162 | ) | (164 | ) | ||||||
Amortization past service cost | 2 | 2 | 7 | 8 | ||||||||||
Amortization of actuarial loss | 38 | 22 | 87 | 68 | ||||||||||
Net periodic pension cost | $ | 199 | $ | 151 | 532 | $ | 469 | |||||||
Accumulated_Other_Comprehensiv1
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||
Schedule of changes in accumulated other comprehensive income (loss) by component | Accumulated Other Comprehensive Income (Loss) | Three Months Ended | Nine Months Ended | |||||||||||
December 31, | December 31, | |||||||||||||
(In thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 | ||||||||||
Investment securities | ||||||||||||||
Beginning balance | $ | (95 | ) | $ | — | $ | (54 | ) | $ | (3 | ) | |||
Other comprehensive income (loss) (OCI) before reclassifications net of tax of $0 for all periods | 5 | 9 | (36 | ) | 12 | |||||||||
Reclassifications from OCI to other income — net of tax of $0 for all periods | (1 | ) | — | (1 | ) | — | ||||||||
Comprehensive income (loss) on investment securities, net of tax of $0 for all periods | 4 | 9 | (37 | ) | 12 | |||||||||
Closing Balance | $ | (91 | ) | $ | 9 | $ | (91 | ) | $ | 9 | ||||
Currency Translation Adjustments | ||||||||||||||
Beginning balance | $ | (28,703 | ) | $ | (27,846 | ) | $ | (23,253 | ) | $ | (16,918 | ) | ||
OCI before reclassifications | (5,388 | ) | 2,099 | (10,838 | ) | (8,829 | ) | |||||||
Closing Balance | $ | (34,091 | ) | $ | (25,747 | ) | $ | (34,091 | ) | $ | (25,747 | ) | ||
Cash Flow Hedges | ||||||||||||||
Beginning balance | $ | (1,358 | ) | $ | (10,305 | ) | $ | (3,829 | ) | $ | (1,013 | ) | ||
OCI before reclassifications net of tax of $21, $(488), $(340) and $5,046 | 573 | 680 | 1,727 | (10,751 | ) | |||||||||
Reclassifications from OCI to | ||||||||||||||
- Costs of revenue, net of tax of $(31), $(223), $(360) and $(978) | 30 | 557 | 867 | 1,860 | ||||||||||
- Selling, general and administrative expenses, net of tax of $(16), $(153), $(206) and $(607) | 18 | 318 | 498 | 1,154 | ||||||||||
Comprehensive income (loss) on cash flow hedges, net of tax of $(26), $(864), $(906) and $3,461 | 621 | 1,555 | 3,092 | (7,737 | ) | |||||||||
Closing Balance | $ | (737 | ) | $ | (8,750 | ) | $ | (737 | ) | $ | (8,750 | ) | ||
Benefit plans | ||||||||||||||
Beginning balance | $ | (565 | ) | $ | (637 | ) | $ | (578 | ) | $ | (780 | ) | ||
OCI before reclassifications net of tax of $0 for all periods | (216 | ) | — | (216 | ) | — | ||||||||
Reclassifications from OCI for prior service credit (cost) to: | ||||||||||||||
- Costs of revenue, net of tax of $0 for all periods | 2 | 2 | 6 | 6 | ||||||||||
- Selling, general and administrative expenses, net of tax of $0 for all periods | 1 | — | 1 | 2 | ||||||||||
Reclassifications from OCI for net actuarial gain (loss) amortization to: | ||||||||||||||
- Costs of revenue, net of tax of $0 for all periods | 23 | 18 | 52 | 53 | ||||||||||
- Selling, general and administrative expenses, net of tax of $0 for all periods | 15 | 5 | 35 | 16 | ||||||||||
Other adjustments | 3 | (12 | ) | (37 | ) | 79 | ||||||||
Comprehensive income (loss) on benefit plans, net of tax of $0 for all periods | (172 | ) | 13 | (159 | ) | 156 | ||||||||
Closing Balance | $ | (737 | ) | (624 | ) | (737 | ) | (624 | ) | |||||
Accumulated other comprehensive loss closing balance | $ | (35,656 | ) | $ | (35,112 | ) | $ | (35,656 | ) | $ | (35,112 | ) | ||
Net_Income_per_Share_Details
Net Income per Share (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Numerators: | ||||
Net income | $11,779 | $9,328 | $30,897 | $24,328 |
Denominators: | ||||
Weighted average common shares outstanding | 28,871,023 | 25,652,538 | 28,681,156 | 25,499,625 |
Dilutive effect of employee stock options and unvested restricted stock (in shares) | 748,620 | 874,810 | 781,270 | 819,364 |
Dilutive effect of stock appreciation rights (in shares) | 7,978 | 13,334 | 8,663 | 14,731 |
Weighted average shares-diluted | 29,627,621 | 26,540,682 | 29,471,089 | 26,333,720 |
Net income per share-basic (in dollars per share) | $0.41 | $0.36 | $1.08 | $0.95 |
Net income per share-diluted (in dollars per share) | $0.40 | $0.35 | $1.05 | $0.92 |
Options excluded from the calculations of diluted earnings per share (in shares) | 19,847 | 28,613 | 22,564 | 100,408 |
Investment_Securities_Details
Investment Securities (Details) (USD $) | Dec. 31, 2014 | Mar. 31, 2014 |
In Thousands, unless otherwise specified | ||
Investment Securities | ||
Amortized Cost | $126,318 | $117,992 |
Gross Unrealized Gains | 7 | 15 |
Gross Unrealized Losses | -131 | -104 |
Fair Value | 126,194 | 117,903 |
Corporate bonds | Current | ||
Investment Securities | ||
Amortized Cost | 49,265 | 20,255 |
Gross Unrealized Gains | 4 | 9 |
Gross Unrealized Losses | -52 | -8 |
Fair Value | 49,217 | 20,256 |
Corporate bonds | Non-current | ||
Investment Securities | ||
Amortized Cost | 26,978 | 50,264 |
Gross Unrealized Gains | 2 | 5 |
Gross Unrealized Losses | -68 | -70 |
Fair Value | 26,912 | 50,199 |
Auction-rate securities | Non-current | ||
Investment Securities | ||
Amortized Cost | 300 | |
Gross Unrealized Losses | -12 | |
Fair Value | 288 | |
Agency and short-term notes | Current | ||
Investment Securities | ||
Amortized Cost | 1,013 | 561 |
Gross Unrealized Gains | 1 | |
Fair Value | 1,014 | 561 |
Agency and short-term notes | Non-current | ||
Investment Securities | ||
Amortized Cost | 13,370 | 11,341 |
Gross Unrealized Gains | 1 | |
Gross Unrealized Losses | -11 | -14 |
Fair Value | 13,359 | 11,328 |
Commercial paper | Current | ||
Investment Securities | ||
Amortized Cost | 5,497 | |
Fair Value | 5,497 | |
Municipal bonds | Current | ||
Investment Securities | ||
Amortized Cost | 200 | |
Fair Value | 200 | |
Municipal bonds | Non-current | ||
Investment Securities | ||
Amortized Cost | 200 | |
Fair Value | 200 | |
Time deposits | Current | ||
Investment Securities | ||
Amortized Cost | 35,492 | 29,574 |
Fair Value | $35,492 | $29,574 |
Fair_Value_of_Financial_Instru2
Fair Value of Financial Instruments (Details) (USD $) | Dec. 31, 2014 | Mar. 31, 2014 |
In Thousands, unless otherwise specified | ||
Level 3 | ||
Liabilities: | ||
Total liabilities | $4,610 | $5,925 |
Recurring | Level 2 | ||
Investments: | ||
Available-for-sale securities - current | 85,923 | |
Available-for-sale securities - non-current | 40,271 | |
Foreign currency derivative contracts | 2,184 | |
Total assets | 128,378 | |
Liabilities: | ||
Foreign currency derivative contracts | 3,576 | |
Total liabilities | 3,576 | |
Recurring | Level 3 | ||
Liabilities: | ||
Contingent consideration | 4,610 | |
Total liabilities | 4,610 | |
Recurring | Total | ||
Investments: | ||
Available-for-sale securities - current | 85,923 | |
Available-for-sale securities - non-current | 40,271 | |
Foreign currency derivative contracts | 2,184 | |
Total assets | 128,378 | |
Liabilities: | ||
Foreign currency derivative contracts | 3,576 | |
Contingent consideration | 4,610 | |
Total liabilities | $8,186 |
Fair_Value_of_Financial_Instru3
Fair Value of Financial Instruments (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Changes in fair value of the Company's Level 3 financial liabilities | ||||
Increase (decrease) in contingent consideration (See Note 7) | ($1,833) | |||
Cumulative foreign currency translation adjustments | -5,388 | 2,099 | -10,838 | -8,829 |
OSB | ||||
Changes in fair value of the Company's Level 3 financial liabilities | ||||
Increase (decrease) in contingent consideration (See Note 7) | 1,068 | |||
Level 3 | ||||
Changes in fair value of the Company's Level 3 financial liabilities | ||||
Balance at start of period | 5,925 | |||
Cumulative foreign currency translation adjustments | -50 | |||
Balance at end of period | 4,610 | 4,610 | ||
Level 3 | OSB | ||||
Changes in fair value of the Company's Level 3 financial liabilities | ||||
Payment of OSB contingent consideration (See Note 7) | -500 | |||
Increase (decrease) in contingent consideration (See Note 7) | 1,068 | |||
Level 3 | TradeTech | ||||
Changes in fair value of the Company's Level 3 financial liabilities | ||||
Increase (decrease) in contingent consideration (See Note 7) | ($1,833) |
Derivative_Financial_Instrumen2
Derivative Financial Instruments (Details) (Foreign currency exchange contracts, USD $) | 9 Months Ended | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Mar. 31, 2014 |
item | |||||
Derivative Financial Instruments and Trading Activities | |||||
Number of hedging programs maintained | 3 | ||||
U.S. dollar notional equivalent market value | $113,947 | $113,947 | $102,801 | ||
Maximum outstanding term of derivative instruments | 33 months | ||||
Derivatives designated as hedging instruments | |||||
Derivative Financial Instruments and Trading Activities | |||||
Period hedged by Cash Flow Program | 36 months | ||||
Additional period after which the contract is deemed ineffective | 2 months | ||||
Unrealized net losses related to derivative instruments expected to be reclassified from AOCI into earnings during the next 12 months | 985 | ||||
Other current assets | 1,550 | 1,550 | 398 | ||
Other long-term assets | 634 | 634 | 586 | ||
Accrued expenses and other current liabilities | 2,535 | 2,535 | 3,925 | ||
Long-term liabilities | 1,041 | 1,041 | 2,449 | ||
Derivatives designated as hedging instruments | Cash Flow Hedges | Reclassification out of accumulated other comprehensive income | |||||
Derivative Financial Instruments and Trading Activities | |||||
Amount reclassified to earnings as a result of hedge ineffectiveness | $0 | $0 | $0 | $0 | |
Derivatives not Designated as Hedging Instrument | |||||
Derivative Financial Instruments and Trading Activities | |||||
Maturity period of Balance Sheet Program derivatives | 30 months | ||||
Maximum outstanding term of derivative instruments | 92 days |
Derivative_Financial_Instrumen3
Derivative Financial Instruments (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Costs of revenue | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion) | ($61) | ($780) | ($1,227) | ($2,839) |
Operating expenses | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion) | -34 | -471 | -704 | -1,760 |
Derivatives designated as hedging instruments | Foreign currency exchange contracts | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in AOCI on Derivatives (Effective Portion) | 553 | 1,167 | 2,067 | -15,798 |
Derivatives not Designated as Hedging Instrument | Foreign currency exchange contracts | Foreign currency transaction gains (losses) | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income on Derivatives | -216 | -420 | -299 | -3,034 |
Derivatives not Designated as Hedging Instrument | Foreign currency exchange contracts | Revenue | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income on Derivatives | 183 | -74 | 319 | -555 |
Derivatives not Designated as Hedging Instrument | Foreign currency exchange contracts | Costs of revenue | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income on Derivatives | -106 | 30 | -187 | 214 |
Derivatives not Designated as Hedging Instrument | Foreign currency exchange contracts | Selling, general and administrative expenses | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income on Derivatives | ($38) | $3 | ($51) | $23 |
Acquisitions_Details
Acquisitions (Details) (USD $) | 9 Months Ended | 0 Months Ended | 1 Months Ended | 5 Months Ended | 0 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Nov. 01, 2013 | Nov. 30, 2014 | Mar. 31, 2014 | Jan. 02, 2014 | Jan. 02, 2013 |
Consideration Transferred: | |||||||
Payments for earn-out consideration | $441 | ||||||
Increase (decrease) in contingent consideration (See Note 7) | -1,833 | ||||||
Payment of hold back | 684 | 6,156 | |||||
OSB | |||||||
Acquisitions | |||||||
Purchase price in cash | 6,840 | ||||||
Hold back percentage | 10.00% | ||||||
Hold back period | 12 months | ||||||
Percentage of the performance targets met | 100.00% | ||||||
Consideration Transferred: | |||||||
Payments for earn-out consideration | 500 | ||||||
Increase (decrease) in contingent consideration (See Note 7) | 1,068 | ||||||
Fair value of contingent consideration | 4,610 | 4,042 | |||||
Payment of hold back | 684 | ||||||
OSB | Maximum | |||||||
Acquisitions | |||||||
Additional earn-out consideration | 6,000 | ||||||
Trade Tech Consulting Scandinavia A B | Virtusa BV | |||||||
Acquisitions | |||||||
Purchase price in cash | 19,087 | ||||||
Hold back percentage | 12.50% | ||||||
Hold back period | 12 months | ||||||
Consideration Transferred: | |||||||
Increase (decrease) in contingent consideration (See Note 7) | -1,833 | ||||||
Fair value of contingent consideration | 0 | ||||||
Trade Tech Consulting Scandinavia A B | Deferred restricted stock awards | |||||||
Purchase Price Allocation | |||||||
Authorized value of awards | 2,000 | ||||||
Number of authorized shares | 65,000 | ||||||
Vesting period | 5 years | ||||||
Trade Tech Consulting Scandinavia A B | Maximum | Virtusa BV | |||||||
Acquisitions | |||||||
Additional earn-out consideration | $4,080 |
Goodwill_and_Intangible_Assets2
Goodwill and Intangible Assets (Details) (USD $) | 9 Months Ended |
In Thousands, unless otherwise specified | Dec. 31, 2014 |
Changes in goodwill | |
Balance at the beginning of the period | $53,448 |
Cumulative foreign currency translation adjustments | -2,117 |
Balance at the end of the period | 51,331 |
Acquisition costs and goodwill deductible for tax purposes | 41,834 |
Trade Tech Consulting Scandinavia A B | |
Changes in goodwill | |
Acquisition costs and goodwill not deductible for tax purposes | $10,888 |
Goodwill_and_Intangible_Assets3
Goodwill and Intangible Assets (Details 2) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2014 | Mar. 31, 2014 |
Intangible Assets | ||
Weighted Average Useful Life | 9 years | |
Gross Carrying Amount | $36,836 | |
Accumulated Amortization | 13,264 | |
Net Carrying Amount | 23,572 | 28,661 |
Customer relationships | ||
Intangible Assets | ||
Weighted Average Useful Life | 9 years 4 months 24 days | |
Gross Carrying Amount | 34,814 | |
Accumulated Amortization | 11,369 | |
Net Carrying Amount | 23,445 | |
Partner relationships | ||
Intangible Assets | ||
Weighted Average Useful Life | 6 years 6 months | |
Gross Carrying Amount | 700 | |
Accumulated Amortization | 573 | |
Net Carrying Amount | 127 | |
Trademark | ||
Intangible Assets | ||
Weighted Average Useful Life | 1 year | |
Gross Carrying Amount | 63 | |
Accumulated Amortization | 63 | |
Backlog | ||
Intangible Assets | ||
Weighted Average Useful Life | 1 year | |
Gross Carrying Amount | 1,259 | |
Accumulated Amortization | $1,259 |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 |
Income Taxes | |||||
Effective tax rate (as a percent) | 26.30% | 24.50% | 25.90% | 24.70% | |
Decrease in contingent consideration | $1,833 | ||||
Total liability for unrecognized tax benefits which would impact the annual effective rate, if realized | 406 | 406 | 410 | ||
Decrease in unrecognized tax benefits | 4 | 3,873 | |||
Unremitted earnings from foreign subsidiaries | 184,273 | 184,273 | |||
Cash and short-term investments available for distribution if not indefinitely reinvested | $94,144 | $94,144 | |||
India | |||||
Income Taxes | |||||
Number of subsidiaries which is export oriented | 1 | ||||
Statutory tax rate (as a percent) | 34.00% | 34.00% | 34.00% | 34.00% | |
India | Indian operations in areas designated as a SEZ | |||||
Income Taxes | |||||
Income tax exemption period | 15 years | ||||
Number of subsidiaries eligible for tax holiday on export income | 2 | ||||
India | Virtusa India | |||||
Income Taxes | |||||
Income tax exemption period | 10 years | ||||
Number of STPs operated | 2 | ||||
India | Virtusa India | Chennai | |||||
Income Taxes | |||||
Number of STPs operated | 1 | ||||
India | Virtusa India | Hyderabad | |||||
Income Taxes | |||||
Number of STPs operated | 1 | ||||
Sri Lanka | Virtusa (Private) Limited | |||||
Income Taxes | |||||
Income tax exemption period | 12 years | 12 years |
Concentration_of_Revenue_and_A2
Concentration of Revenue and Assets (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 |
Concentration of Revenue and Assets | |||||
Consolidated revenue | $122,996 | $101,043 | $352,969 | $285,833 | |
Consolidated long-lived assets, net | 110,791 | 110,791 | 117,455 | ||
North America | |||||
Concentration of Revenue and Assets | |||||
Consolidated revenue | 83,324 | 70,510 | 232,773 | 205,547 | |
Europe | |||||
Concentration of Revenue and Assets | |||||
Consolidated revenue | 31,658 | 24,895 | 98,141 | 64,686 | |
Consolidated long-lived assets, net | 19,832 | 19,832 | 23,658 | ||
Rest of world | |||||
Concentration of Revenue and Assets | |||||
Consolidated revenue | 8,014 | 5,638 | 22,055 | 15,600 | |
United States | |||||
Concentration of Revenue and Assets | |||||
Consolidated long-lived assets, net | 59,916 | 59,916 | 61,562 | ||
Asia | |||||
Concentration of Revenue and Assets | |||||
Consolidated long-lived assets, net | $31,043 | $31,043 | $32,235 |
Concentration_of_Revenue_and_A3
Concentration of Revenue and Assets (Details 2) (Sales revenue) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Customer 1 | ||||
Concentration of Revenue and Assets | ||||
Revenue from significant clients as a percentage of consolidated revenue | 11.90% | 13.30% | 12.50% | 12.40% |
Customer 2 | ||||
Concentration of Revenue and Assets | ||||
Revenue from significant clients as a percentage of consolidated revenue | 11.10% | 13.10% | 10.00% | 13.40% |
Debt_Details
Debt (Details) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 |
Debt | ||
Receivables sold under the terms of the financing agreement | $22,744 | |
Amounts due related to a financing agreement to sell certain accounts receivable balances | 0 | |
Prior secured revolving credit agreement | ||
Debt | ||
Maximum borrowing capacity under the credit agreement | 3,000 | |
Prior secured revolving credit agreement | Maximum | ||
Debt | ||
Debt to Adjusted EBITDA Ratio | 2 | |
Fixed Charge Coverage Ratio | 2.5 | |
Line of credit agreement | ||
Debt | ||
Maximum borrowing capacity under the credit agreement | 25,000 | |
Term of credit facility | 5 years | |
Amount outstanding under the credit facility | 0 | |
Line of credit agreement | LIBOR | ||
Debt | ||
Variable rate basis | LIBOR | |
Line of credit agreement | LIBOR | Minimum | ||
Debt | ||
Interest rate added to the base rate (as a percent) | 1.50% | |
Line of credit agreement | LIBOR | Maximum | ||
Debt | ||
Interest rate added to the base rate (as a percent) | 1.75% | |
Prior amended and restated line of credit agreement | ||
Debt | ||
Maximum borrowing capacity under the credit agreement | $3,000 |
Recovered_Sheet1
Pensions and Post-retirement Benefits (Details) (Pension benefits, USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Pension benefits | ||||
Pensions and post-retirement benefits | ||||
Service cost | $154 | $129 | $425 | $397 |
Interest cost | 58 | 56 | 175 | 160 |
Expected return on plan assets | -53 | -58 | -162 | -164 |
Amortization past service cost | 2 | 2 | 7 | 8 |
Amortization of actuarial loss | 38 | 22 | 87 | 68 |
Net periodic pension cost | 199 | 151 | 532 | 469 |
Expected cash contributions to the plans in current fiscal period | 508 | |||
Cash contributions to the plan for the current fiscal year | $332 |
Accumulated_Other_Comprehensiv2
Accumulated Other Comprehensive Loss (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 |
Changes in accumulated other comprehensive income (loss) | |||||
Balance at the beginning of the period | ($27,714) | ||||
Reclassifications from OCI to: | |||||
Balance at the end of the period | -35,656 | -35,112 | -35,656 | -35,112 | -27,714 |
Investment securities. | |||||
Changes in accumulated other comprehensive income (loss) | |||||
Balance at the beginning of the period | -95 | -54 | -3 | ||
Other comprehensive income (loss) before reclassifications net of tax | 5 | 9 | -36 | 12 | |
Other comprehensive income (loss) (OCI) before reclassifications, tax effect | 0 | 0 | 0 | 0 | |
Reclassifications from OCI to: | |||||
Other income, net of tax | -1 | -1 | |||
Comprehensive income (loss), net of tax | 4 | 9 | -37 | 12 | |
Comprehensive income (loss), tax effect | 0 | 0 | 0 | 0 | |
Balance at the end of the period | -91 | 9 | -91 | 9 | |
Investment securities. | Reclassification out of accumulated other comprehensive income | |||||
Reclassifications from OCI to: | |||||
Other income, tax effect | 0 | 0 | 0 | 0 | |
Currency Translation Adjustments | |||||
Changes in accumulated other comprehensive income (loss) | |||||
Balance at the beginning of the period | -28,703 | -27,846 | -23,253 | -16,918 | |
Other comprehensive income (loss) before reclassifications net of tax | -5,388 | 2,099 | -10,838 | -8,829 | |
Reclassifications from OCI to: | |||||
Balance at the end of the period | -34,091 | -25,747 | -34,091 | -25,747 | |
Cash Flow Hedges | |||||
Changes in accumulated other comprehensive income (loss) | |||||
Balance at the beginning of the period | -1,358 | -10,305 | -3,829 | -1,013 | |
Other comprehensive income (loss) before reclassifications net of tax | 573 | 680 | 1,727 | -10,751 | |
Other comprehensive income (loss) (OCI) before reclassifications, tax effect | 21 | -488 | -340 | 5,046 | |
Reclassifications from OCI to: | |||||
Comprehensive income (loss), net of tax | 621 | 1,555 | 3,092 | -7,737 | |
Comprehensive income (loss), tax effect | -26 | -864 | -906 | 3,461 | |
Balance at the end of the period | -737 | -8,750 | -737 | -8,750 | |
Cash Flow Hedges | Reclassification out of accumulated other comprehensive income | |||||
Reclassifications from OCI to: | |||||
Costs of revenue, net of tax | 30 | 557 | 867 | 1,860 | |
Costs of revenue, tax effect | -31 | -223 | -360 | -978 | |
Selling, general and administrative expenses, net of tax | 18 | 318 | 498 | 1,154 | |
Selling, general and administrative expenses, tax effect | -16 | -153 | -206 | -607 | |
Benefit plans | |||||
Changes in accumulated other comprehensive income (loss) | |||||
Balance at the beginning of the period | -565 | -637 | -578 | -780 | |
Other comprehensive income (loss) before reclassifications net of tax | -216 | -216 | |||
Other comprehensive income (loss) (OCI) before reclassifications, tax effect | 0 | 0 | 0 | 0 | |
Reclassifications from OCI to: | |||||
Other adjustments | 3 | -12 | -37 | 79 | |
Comprehensive income (loss), net of tax | -172 | 13 | -159 | 156 | |
Comprehensive income (loss), tax effect | 0 | 0 | 0 | 0 | |
Balance at the end of the period | -737 | -624 | -737 | -624 | |
Benefit plans, prior service credit (cost) | Reclassification out of accumulated other comprehensive income | |||||
Reclassifications from OCI to: | |||||
Costs of revenue, net of tax | 2 | 2 | 6 | 6 | |
Costs of revenue, tax effect | 0 | 0 | 0 | 0 | |
Selling, general and administrative expenses, net of tax | 1 | 1 | 2 | ||
Selling, general and administrative expenses, tax effect | 0 | 0 | 0 | 0 | |
Benefit plans, net actuarial gain (loss) | Reclassification out of accumulated other comprehensive income | |||||
Reclassifications from OCI to: | |||||
Costs of revenue, net of tax | 23 | 18 | 52 | 53 | |
Costs of revenue, tax effect | 0 | 0 | 0 | 0 | |
Selling, general and administrative expenses, net of tax | 15 | 5 | 35 | 16 | |
Selling, general and administrative expenses, tax effect | $0 | $0 | $0 | $0 |
Subsequent_Events_Details
Subsequent Events (Details) (Subsequent event, Derivatives designated as hedging instruments, Foreign currency forward contracts) | Jan. 08, 2015 | Jan. 08, 2015 | Jan. 08, 2015 | Jan. 08, 2015 | Jan. 08, 2015 | Jan. 08, 2015 |
In Thousands, unless otherwise specified | U.S. Dollar and U.K. Pound Sterling Forward Contract | U.S. Dollar and U.K. Pound Sterling Forward Contract | U.S. dollar and Swedish Krona ("SEK") Forward Contract | U.S. dollar and Swedish Krona ("SEK") Forward Contract | U.S. Dollar and Euro Forward Contract | U.S. Dollar and Euro Forward Contract |
USD ($) | GBP (£) | USD ($) | SEK | USD ($) | EUR (€) | |
Subsequent Events | ||||||
Aggregate notional amount of foreign currency forward contracts | $10,493 | £ 6,982 | $914 | 7,301 | $441 | € 376 |
Weighted average settlement rate | 1.5 | 0.13 | 1.17 |