Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Dec. 31, 2018 | Feb. 05, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | VIRTUSA CORP | |
Entity Central Index Key | 1,207,074 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 29,920,680 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q3 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2018 | Mar. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 210,579 | $ 194,897 |
Short-term investments | 41,641 | 45,900 |
Accounts receivable, net of allowance of $2,627 and $3,328 at December 31, 2018 and March 31, 2018, respectively | 153,467 | 151,455 |
Unbilled accounts receivable | 94,111 | 103,829 |
Prepaid expenses | 39,522 | 31,724 |
Restricted cash | 413 | 301 |
Other current assets | 26,978 | 21,229 |
Total current assets | 566,711 | 549,335 |
Property and equipment, net | 124,917 | 121,565 |
Investments accounted for using equity method | 1,455 | 1,588 |
Long-term investments | 862 | 4,140 |
Deferred income taxes | 24,220 | 31,528 |
Goodwill | 281,353 | 297,251 |
Intangible assets, net | 92,326 | 96,001 |
Other long-term assets | 22,201 | 11,772 |
Total assets | 1,114,045 | 1,113,180 |
Current liabilities: | ||
Accounts payable | 40,195 | 29,541 |
Accrued employee compensation and benefits | 59,922 | 71,500 |
Deferred revenue | 6,120 | 7,908 |
Accrued expenses and other | 121,083 | 91,306 |
Current portion of long-term debt | 11,407 | 11,407 |
Income taxes payable | 2,109 | 5,038 |
Total current liabilities | 240,836 | 216,700 |
Deferred income taxes | 18,326 | 21,341 |
Long-term debt, less current portion | 311,672 | 288,227 |
Long-term liabilities | 30,353 | 43,833 |
Total liabilities | 601,187 | 570,101 |
Commitments and contingencies | ||
Series A Convertible Preferred Stock: par value $0.01 per share, 108,000 shares authorized, 108,000 shares issued and outstanding at December 31, 2018 and March 31, 2018; redemption amount and liquidation preference of $108,000 at December 31, 2018 and March 31, 2018 | 107,120 | 106,996 |
Redeemable noncontrolling interest | 24,924 | |
Stockholders' equity: | ||
Undesignated preferred stock, $0.01 par value; Authorized 5,000,000 shares at December 31, 2018 and March 31, 2018; zero shares issued and outstanding at December 31, 2018 and March 31, 2018, respectively | ||
Common stock, $0.01 par value; Authorized 120,000,000 shares at December 31, 2018 and March 31, 2018; issued 32,781,374 and 32,469,092 shares at December 31, 2018 and March 31, 2018, respectively; outstanding 29,901,375 and 29,589,093 shares at December 31, 2018 and March 31, 2018, respectively | 328 | 325 |
Treasury stock, 2,879,999 common shares, at cost, at December 31, 2018 and March 31, 2018 | (39,652) | (39,652) |
Additional paid-in capital | 237,887 | 260,612 |
Retained earnings | 243,006 | 238,019 |
Accumulated other comprehensive loss | (60,755) | (40,681) |
Total Virtusa stockholders’ equity | 380,814 | 418,623 |
Noncontrolling interest in subsidiaries | 17,460 | |
Total Stockholders' equity | 380,814 | 436,083 |
Total liabilities, Series A convertible preferred stock, redeemable noncontrolling interest and stockholders’ equity | $ 1,114,045 | $ 1,113,180 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2018 | Mar. 31, 2018 |
Consolidated Balance Sheets | ||
Accounts receivable, allowance (in dollars) | $ 2,627 | $ 3,328 |
Series A convertible preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Series A convertible preferred stock, shares authorized | 108,000 | 108,000 |
Series A convertible preferred stock, shares issued | 108,000 | 108,000 |
Series A convertible preferred stock, shares outstanding | 108,000 | 108,000 |
Series A convertible preferred stock, redemption amount | $ 108,000 | $ 108,000 |
Series A convertible preferred stock, liquidation preference | $ 108,000 | $ 108,000 |
Undesignated preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Undesignated preferred stock, shares authorized | 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, shares authorized | 120,000,000 | 120,000,000 |
Common stock, shares issued | 32,781,374 | 32,469,092 |
Common stock, shares outstanding | 29,901,375 | 29,589,093 |
Treasury stock, common shares | 2,879,999 | 2,879,999 |
Consolidated Statements of Inco
Consolidated Statements of Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Consolidated Statements of Income (Loss) | ||||
Revenue | $ 314,681 | $ 263,809 | $ 920,232 | $ 739,328 |
Costs of revenue | 221,461 | 183,420 | 654,288 | 528,103 |
Gross profit | 93,220 | 80,389 | 265,944 | 211,225 |
Operating expenses: | ||||
Selling, general and administrative expenses | 73,935 | 66,726 | 218,716 | 181,213 |
Income from operations | 19,285 | 13,663 | 47,228 | 30,012 |
Other income (expense): | ||||
Interest income | 634 | 1,080 | 1,988 | 3,012 |
Interest expense | (4,597) | (1,305) | (13,365) | (4,376) |
Foreign currency transaction gains (losses), net | 8,319 | 2,576 | (11,794) | 1,019 |
Other, net | (444) | 492 | 998 | 1,376 |
Total other income (expense) | 3,912 | 2,843 | (22,173) | 1,031 |
Income before income tax expense | 23,197 | 16,506 | 25,055 | 31,043 |
Income tax expense | 10,400 | 24,427 | 15,863 | 26,725 |
Net income (loss) | 12,797 | (7,921) | 9,192 | 4,318 |
Less: net income attributable to noncontrolling interests, net of tax | 221 | 2,134 | 1,407 | 5,947 |
Net income (loss) available to Virtusa stockholders | 12,576 | (10,055) | 7,785 | (1,629) |
Less: Series A Convertible Preferred Stock dividends and accretion | 1,087 | 1,087 | 3,262 | 2,875 |
Net income (loss) available to Virtusa common stockholders | $ 11,489 | $ (11,142) | $ 4,523 | $ (4,504) |
Basic earnings (loss) per share available to Virtusa common stockholders (in dollars per share) | $ 0.38 | $ (0.38) | $ 0.15 | $ (0.15) |
Diluted earnings (loss) per share available to Virtusa common stockholders (in dollars per share) | $ 0.37 | $ (0.38) | $ 0.15 | $ (0.15) |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Consolidated Statements of Comprehensive Income (Loss) | ||||
Net income | $ 12,797 | $ (7,921) | $ 9,192 | $ 4,318 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | (2,477) | 4,641 | (20,201) | 9,068 |
Pension plan adjustment | 73 | 31 | (23) | 123 |
Unrealized gain (loss) on available-for-sale securities, net of tax | 263 | 8 | (51) | 212 |
Unrealized gain (loss) on effective cash flow hedges, net of tax | 6,067 | (106) | (1,072) | (8,314) |
Other Comprehensive Income (Loss) | 3,926 | 4,574 | (21,347) | 1,089 |
Comprehensive income (loss) | 16,723 | (3,347) | (12,155) | 5,407 |
Less: comprehensive income attributable to noncontrolling interest, net of tax | 669 | 3,930 | 134 | 7,238 |
Comprehensive income (loss) available to Virtusa stockholders | $ 16,054 | $ (7,277) | $ (12,289) | $ (1,831) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Total Virtusa Stockholders’ Equity | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Non-controlling interest | Redeemable Noncontrolling Interest | Total |
Balance at Mar. 31, 2017 | $ 497,032 | $ 318 | $ (9,652) | $ 305,387 | $ 240,728 | $ (39,749) | $ 87,984 | $ 585,016 | |
Balance (in shares) at Mar. 31, 2017 | 31,762,214 | (1,856,703) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Proceeds from the exercise of stock options | 1,629 | $ 1 | 1,628 | 1,629 | |||||
Proceeds from the exercise of stock options (in shares) | 117,094 | ||||||||
Proceeds from the exercise of subsidiary stock options | 142 | 142 | 142 | ||||||
Restricted stock awards vested | $ 1 | (1) | |||||||
Restricted stock awards vested (in shares) | 94,831 | ||||||||
Restricted stock awards withheld for tax | (1,416) | (1,416) | (1,416) | ||||||
Repurchase of common stock | (27,319) | $ (27,319) | (27,319) | ||||||
Repurchase of common stock (in shares) | (947,706) | ||||||||
Share-based compensation | 4,731 | 4,731 | 4,731 | ||||||
Subsidiary share based compensation | 57 | 57 | 57 | ||||||
Series A Convertible Preferred Stock dividends and accretion | (701) | (701) | (701) | ||||||
Other comprehensive income (loss) | (379) | (379) | 273 | (106) | |||||
Net income (loss) | 3,658 | 3,658 | |||||||
Net income (loss) | 989 | ||||||||
Net income (loss) | 4,647 | ||||||||
Balance at Jun. 30, 2017 | 477,434 | $ 320 | $ (36,971) | 310,528 | 243,685 | (40,128) | 89,246 | 566,680 | |
Balance (in shares) at Jun. 30, 2017 | 31,974,139 | (2,804,409) | |||||||
Balance at Mar. 31, 2017 | 497,032 | $ 318 | $ (9,652) | 305,387 | 240,728 | (39,749) | 87,984 | 585,016 | |
Balance (in shares) at Mar. 31, 2017 | 31,762,214 | (1,856,703) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income (loss) | (1,629) | ||||||||
Net income (loss) | 5,947 | ||||||||
Balance at Dec. 31, 2017 | 483,606 | $ 322 | $ (39,652) | 326,663 | 236,224 | (39,951) | 95,222 | 578,828 | |
Balance (in shares) at Dec. 31, 2017 | 32,223,386 | (2,879,999) | |||||||
Balance at Jun. 30, 2017 | 477,434 | $ 320 | $ (36,971) | 310,528 | 243,685 | (40,128) | 89,246 | 566,680 | |
Balance (in shares) at Jun. 30, 2017 | 31,974,139 | (2,804,409) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Proceeds from the exercise of stock options | 1,088 | $ 1 | 1,087 | 1,088 | |||||
Proceeds from the exercise of stock options (in shares) | 90,555 | ||||||||
Proceeds from the exercise of subsidiary stock options | 54 | 54 | 54 | ||||||
Restricted stock awards vested | $ 1 | (1) | |||||||
Restricted stock awards vested (in shares) | 86,399 | ||||||||
Restricted stock awards withheld for tax | (1,015) | (1,015) | (1,015) | ||||||
Repurchase of common stock | (2,681) | $ (2,681) | (2,681) | ||||||
Repurchase of common stock (in shares) | (75,590) | ||||||||
Share-based compensation | 6,090 | 6,090 | 6,090 | ||||||
Subsidiary share based compensation | 52 | 52 | 52 | ||||||
Series A Convertible Preferred Stock dividends and accretion | (1,087) | (1,087) | (1,087) | ||||||
Other comprehensive income (loss) | (2,600) | (2,600) | (779) | (3,379) | |||||
Net income (loss) | 4,768 | 4,768 | |||||||
Net income (loss) | 2,824 | ||||||||
Net income (loss) | 7,592 | ||||||||
Balance at Sep. 30, 2017 | 482,103 | $ 322 | $ (39,652) | 316,795 | 247,366 | (42,728) | 91,291 | 573,394 | |
Balance (in shares) at Sep. 30, 2017 | 32,151,093 | (2,879,999) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Proceeds from the exercise of stock options | 632 | 632 | 632 | ||||||
Proceeds from the exercise of stock options (in shares) | 54,474 | ||||||||
Proceeds from the exercise of subsidiary stock options | 440 | 440 | 440 | ||||||
Restricted stock awards vested (in shares) | 17,819 | ||||||||
Restricted stock awards withheld for tax | (322) | (322) | (322) | ||||||
Share-based compensation | 9,091 | 9,091 | 9,091 | ||||||
Subsidiary share based compensation | 27 | 27 | 27 | ||||||
Series A Convertible Preferred Stock dividends and accretion | (1,087) | (1,087) | (1,087) | ||||||
Other comprehensive income (loss) | 2,777 | 2,777 | 1,797 | 4,574 | |||||
Net income (loss) | (10,055) | (10,055) | (10,055) | ||||||
Net income (loss) | 2,134 | 2,134 | |||||||
Net income (loss) | (7,921) | ||||||||
Balance at Dec. 31, 2017 | 483,606 | $ 322 | $ (39,652) | 326,663 | 236,224 | (39,951) | 95,222 | 578,828 | |
Balance (in shares) at Dec. 31, 2017 | 32,223,386 | (2,879,999) | |||||||
Balance at Mar. 31, 2018 | 418,623 | $ 325 | $ (39,652) | 260,612 | 238,019 | (40,681) | 17,460 | $ 436,083 | |
Balance (in shares) at Mar. 31, 2018 | 32,469,092 | (2,879,999) | 29,589,093 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Proceeds from the exercise of stock options | 294 | 294 | $ 294 | ||||||
Proceeds from the exercise of stock options (in shares) | 33,173 | ||||||||
Proceeds from the exercise of subsidiary stock options | 196 | 196 | 196 | ||||||
Restricted stock awards vested | $ 1 | (1) | |||||||
Restricted stock awards vested (in shares) | 95,432 | ||||||||
Restricted stock awards withheld for tax | (2,450) | (2,450) | (2,450) | ||||||
Share-based compensation | 7,908 | 7,908 | 7,908 | ||||||
Subsidiary share based compensation | 30 | 30 | 30 | ||||||
Cumulative effect of adopting ASC Topic 606, net of tax | 464 | 464 | 464 | ||||||
Series A Convertible Preferred Stock dividends and accretion | (1,087) | (1,087) | (1,087) | ||||||
Other comprehensive income (loss) | (13,060) | (13,060) | (1,466) | (14,526) | |||||
Net income (loss) | (6,296) | (6,296) | |||||||
Net income (loss) | 731 | ||||||||
Net income (loss) | (5,565) | ||||||||
Balance at Jun. 30, 2018 | 404,622 | $ 326 | $ (39,652) | 266,589 | 231,100 | (53,741) | 16,725 | 421,347 | |
Balance (in shares) at Jun. 30, 2018 | 32,597,697 | (2,879,999) | |||||||
Balance at Mar. 31, 2018 | 418,623 | $ 325 | $ (39,652) | 260,612 | 238,019 | (40,681) | 17,460 | $ 436,083 | |
Balance (in shares) at Mar. 31, 2018 | 32,469,092 | (2,879,999) | 29,589,093 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Payment of redeemable noncontrolling interest related to Polaris | $ 30,387 | ||||||||
Net income (loss) | 7,785 | ||||||||
Net income (loss) | 1,407 | ||||||||
Balance at Dec. 31, 2018 | 380,814 | $ 328 | $ (39,652) | 237,887 | 243,006 | (60,755) | $ 24,924 | $ 380,814 | |
Balance (in shares) at Dec. 31, 2018 | 32,781,374 | (2,879,999) | 29,901,375 | ||||||
Balance at Jun. 30, 2018 | 404,622 | $ 326 | $ (39,652) | 266,589 | 231,100 | (53,741) | 16,725 | $ 421,347 | |
Balance (in shares) at Jun. 30, 2018 | 32,597,697 | (2,879,999) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Proceeds from the exercise of stock options | 134 | 134 | 134 | ||||||
Proceeds from the exercise of stock options (in shares) | 9,918 | ||||||||
Proceeds from the exercise of subsidiary stock options | 64 | 64 | 3 | 64 | |||||
Restricted stock awards vested | $ 2 | (2) | |||||||
Restricted stock awards vested (in shares) | 162,090 | ||||||||
Restricted stock awards withheld for tax | (5,152) | (5,152) | (5,152) | ||||||
Share-based compensation | 8,022 | 8,022 | 8,022 | ||||||
Reclassification of previously recognized stock compensation related to liabilities classified awards for Polaris to liabilities | (617) | (617) | (617) | ||||||
Payment of redeemable noncontrolling interest related to Polaris | (28,395) | ||||||||
Foreign currency translation on redeemable noncontrolling interest | (2,045) | ||||||||
Series A Convertible Preferred Stock dividends and accretion | (1,088) | (1,088) | (1,088) | ||||||
Other comprehensive income (loss) | (10,492) | (10,492) | (255) | (10,492) | |||||
Net income (loss) | 1,505 | 1,505 | 456 | ||||||
Net income (loss) | 1,505 | ||||||||
Balance at Sep. 30, 2018 | 359,156 | $ 328 | $ (39,652) | 231,196 | 231,517 | (64,233) | 275 | 24,614 | 359,431 |
Balance (in shares) at Sep. 30, 2018 | 32,769,705 | (2,879,999) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Adjustments of redeemable noncontrolling interest to redemption value | (37,842) | (37,842) | (16,450) | 54,850 | (54,292) | ||||
Proceeds from the exercise of subsidiary stock options | 50 | ||||||||
Restricted stock awards vested (in shares) | 11,669 | ||||||||
Restricted stock awards withheld for tax | (226) | (226) | (226) | ||||||
Share-based compensation | 6,993 | 6,993 | 6,993 | ||||||
Subsidiary share based compensation | 6 | 6 | 6 | ||||||
Other | (115) | (115) | (290) | (405) | |||||
Payment of redeemable noncontrolling interest related to Polaris | (1,992) | ||||||||
Foreign currency translation on redeemable noncontrolling interest | 995 | ||||||||
Series A Convertible Preferred Stock dividends and accretion | (1,087) | (1,087) | (1,087) | ||||||
Other comprehensive income (loss) | 3,478 | 3,478 | 448 | 3,478 | |||||
Net income (loss) | 12,576 | 12,576 | 206 | 12,576 | |||||
Net income (loss) | $ 15 | 221 | |||||||
Net income (loss) | 12,591 | ||||||||
Balance at Dec. 31, 2018 | 380,814 | $ 328 | $ (39,652) | 237,887 | $ 243,006 | $ (60,755) | 24,924 | $ 380,814 | |
Balance (in shares) at Dec. 31, 2018 | 32,781,374 | (2,879,999) | 29,901,375 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Adjustments of redeemable noncontrolling interest to redemption value | $ 33 | $ 33 | $ 603 | $ 33 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 9,192 | $ 4,318 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 21,696 | 20,711 |
Share-based compensation expense | 24,104 | 20,048 |
Provision (recovery) for doubtful accounts | (549) | 1,025 |
Gain on disposal of property and equipment | (115) | (40) |
Impairment of investment | 885 | |
Foreign currency transaction losses (gains), net | 11,794 | (1,019) |
Amortization of discounts and premiums on investments | 84 | 258 |
Amortization of debt issuance cost | 819 | 847 |
Deferred income taxes, net | (6,225) | 5,219 |
Net changes in operating assets and liabilities | ||
Accounts receivable and unbilled receivable | 4,780 | (6,754) |
Prepaid expenses and other current assets | (7,729) | (3,860) |
Other long-term assets | (11,702) | (2,760) |
Accounts payable | 12,014 | (352) |
Accrued employee compensation and benefits | (9,041) | 2,167 |
Accrued expenses and other current liabilities | 13,135 | 6,855 |
Income taxes payable | 2,975 | (4,300) |
Other long-term liabilities | 3,705 | 11,818 |
Net cash provided by operating activities | 69,822 | 54,181 |
Cash flows from investing activities: | ||
Proceeds from sale of property and equipment | 568 | 217 |
Purchase of short-term investments | (84,185) | (88,033) |
Proceeds from sale or maturity of short-term investments | 88,204 | 118,614 |
Purchase of long-term investments | (16,772) | |
Proceeds from sale or maturity of long-term investments | 1,606 | |
Business acquisitions, net of cash acquired | (1,919) | (600) |
Purchase of property and equipment | (24,715) | (11,242) |
Net cash (used in) provided by investing activities | (22,047) | 3,790 |
Cash flows from financing activities: | ||
Proceeds from revolving credit facility | 32,000 | 25,000 |
Payment of debt | (9,375) | (81,000) |
Payment of other noncontrolling interest | (373) | |
Payments of withholding taxes related to net share settlements of restricted stock | (7,828) | (2,753) |
Series A Convertible Preferred Stock proceeds, net of issuance costs of $1,154 | 106,846 | |
Repurchase of common stock | (30,000) | |
Principal payments on capital lease obligation | (65) | (161) |
Payment of contingent consideration related to acquisitions | (100) | |
Payment of redeemable noncontrolling interest related to Polaris | (30,387) | |
Payment of dividend on Series A Convertible Preferred Stock | (3,138) | (2,081) |
Net cash (used in) provided by financing activities | (18,307) | 19,838 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (13,530) | 4,123 |
Net increase in cash and cash equivalents and restricted cash | 15,938 | 81,932 |
Cash, cash equivalents and restricted cash, beginning of period | 195,236 | 145,086 |
Cash, cash equivalents and restricted cash, end of period | 211,174 | 227,018 |
Parent | ||
Cash flows from financing activities: | ||
Proceeds from exercise of common stock options | 428 | 3,351 |
Subsidiaries | ||
Cash flows from financing activities: | ||
Proceeds from exercise of common stock options | $ 531 | $ 636 |
Consolidated Statements of Ca_2
Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands | 9 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2018 | Mar. 31, 2018 | |
Balance sheet classification | |||
Cash and cash equivalents | $ 210,579 | $ 194,897 | |
Restricted cash in current assets | 413 | 301 | |
Restricted cash in other long-term assets | $ 182 | $ 38 | |
Restricted cash in other long-term assets, balance sheet location | us-gaap:OtherAssetsNoncurrent | us-gaap:OtherAssetsNoncurrent | |
Total restricted cash | $ 595 | $ 339 | |
Total cash, cash equivalents and restricted cash | $ 227,018 | $ 211,174 | $ 195,236 |
Series A Convertible Preferred Stock | |||
Issuance costs | $ 1,154 |
Nature of the Business
Nature of the Business | 9 Months Ended |
Dec. 31, 2018 | |
Nature of the Business | |
Nature of the Business | (1) Nature of the Business Virtusa Corporation (the “Company”, “Virtusa”, “we”, “us” or “our”) is a global provider of digital engineering and information technology (“IT”) outsourcing services that accelerate business outcomes for our clients. We support Forbes Global 2000 clients across large, consumer facing industries like banking, financial services, insurance, healthcare, communications, and media and entertainment, as these clients seek to improve their business performance through accelerating revenue growth, delivering compelling consumer experiences, improving operational efficiencies, and lowering overall IT costs. We provide services across the entire spectrum of the IT services lifecycle, from strategy and consulting to technology and user experience (“UX”) design, development of IT applications, systems integration, testing and business assurance, and maintenance and support services, including infrastructure and managed services. We help our clients solve critical business problems by leveraging a combination of our distinctive consulting approach, unique platforming methodology, and deep domain and technology expertise. Our services enable our clients to accelerate business outcomes by consolidating, rationalizing and modernizing their core customer-facing processes into one or more core systems. We deliver cost-effective solutions through a global delivery model, applying advanced delivery methods such as Agile, an industry standard technique designed to accelerate application development. We also use our consulting methodology, which we refer to as Accelerated Solution Design (“ASD”), which is a collaborative decision-making and design process performed with the client to ensure our solutions meet the client’s specifications and requirements. Our industry leading business transformational solutions combine deep domain expertise with our strengths in software engineering and business consulting to support our clients’ business-imperative initiatives across business growth and IT operations. Headquartered in Massachusetts, we have offices in the United States, Canada, the United Kingdom, the Netherlands, Germany, Switzerland, Sweden, Austria, the United Arab Emirates, Hong Kong, Japan, Australia and New Zealand, with global delivery centers in India, Sri Lanka, Hungary, Singapore and Malaysia, as well as near shore delivery centers in the United States. |
Unaudited Interim Financial Inf
Unaudited Interim Financial Information | 9 Months Ended |
Dec. 31, 2018 | |
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, 2018 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 25, 2018. 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 accompanying financial statements have been prepared on a consolidated basis and reflect the financial statements of Virtusa Corporation and all of its subsidiaries that are directly or indirectly more than 50% owned or controlled. When the Company does not have a controlling interest in an entity, but exerts a significant influence on the entity, the Company applies the equity method of accounting. For those majority-owned subsidiaries that are not 100% owned by the Company, the interests of the minority owners are accounted for as noncontrolling interests. 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 re-evaluates 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, 2018 and March 31, 2018, 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, other accrued expenses and long-term debt, approximate their fair values due to the nature of the items. See Note 5 of the notes to our consolidated financial statements for a discussion of the fair value of the Company’s other financial instruments. Recent accounting pronouncements Recently Adopted Accounting Pronouncements Unless otherwise discussed below, the adoption of new accounting standards did not have an impact on the consolidated financial statements. In May 2014, the FASB issued an Accounting Standard Update (“ASU” ) No. 2014-09, Revenue from Contracts with Customers (“Accounting Standard Codification (“ASC”) Topic 606”) as well as other clarifications and technical guidance related to this new revenue standard, including ASC Topic 340-40, Other Assets and Deferred Costs — Contracts with Customers (“ASC 340-40”). ASC Topic 606 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In March, April and May 2016, the FASB issued updates to the new revenue standard to clarify the implementation guidance on principal versus agent considerations for reporting revenue gross versus net, identifying performance obligations, accounting for licenses of intellectual property, transition, contract modifications, collectability, non-cash consideration and presentation of sales and other similar taxes with the same effective date. The standard permits the use of either the retrospective or modified retrospective method. The Company adopted the standard effective April 1, 2018 using the modified retrospective method applied to those contracts which were not completed as of that date. Upon adoption of ASC Topic 606 on April 1, 2018, the Company recorded a net increase to opening retained earnings of approximately $464, after a tax impact of $142. The impact of adoption primarily relates to the longer period of amortization for costs to fulfill a contract compared to the amortization period prior to adoption. The following table summarizes the cumulative effect of adopting ASC Topic 606 using the modified retrospective method of adoption as of April 1, 2018: Balance as of ASC Topic 606 Balance as of March 31, 2018 Adjustments April 1, 2018 Balance Sheet : Assets Other current assets $ 21,229 $ (62) $ 21,167 Deferred income taxes 31,528 (142) 31,386 Other long-term assets 11,772 668 12,440 Stockholders’ equity Retained earnings $ 238,019 $ 464 $ 238,483 See Note 8 “Revenues” in the consolidated financial statements for additional information regarding revenues. In January 2016, the FASB issued an update (ASU 2016-01) to the standard on financial instruments. The update significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The update also amends certain disclosure requirements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Upon adoption, entities will be required to make a cumulative-effect adjustment to the statement of financial position as of the beginning of the first reporting period in which the guidance is effective. However, the specific guidance on equity securities without readily determinable fair value will apply prospectively to all equity investments that exist as of the date of adoption. The Company adopted this guidance on April 1, 2018. The adoption of this guidance did not have a material impact on the consolidated financial statements, therefore, the Company did not record any cumulative adjustments to the opening retained earnings in the consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Restricted Cash (Topic 230), which is intended to reduce diversity in practice on how changes in restricted cash are classified and presented in the statement of cash flows. This ASU requires amounts generally described as restricted cash to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The amendments in this update should be applied using a retrospective transition method to each period presented. The Company adopted the standard effective April 1, 2018 using the retrospective method. As a result of the adoption, the Company restated its consolidated statement of cash flows for all of the prior periods presented. The following table summarizes the impact of this standard on the Company’s consolidated cash flows for the nine months ended December 31, 2017: As Reported Restated Effect Cash flows from investing activities: Increase in restricted cash $ (119) $ — $ 119 Net cash provided by investing activities 3,671 3,790 119 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 4,120 4,123 3 Net increase in cash, cash equivalents and restricted cash 81,810 81,932 122 Cash, cash equivalents and restricted cash, beginning of period 144,908 145,086 178 Cash, cash equivalents and restricted cash, end of period $ 226,718 $ 227,018 $ 300 In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715), “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, a guidance on presentation of net periodic pension cost and net periodic postretirement benefit cost. The new standard requires that an employer disaggregate the service costs components of net benefit cost. The employer is required to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component, such as in other income and expense. The guidance is effective for fiscal years beginning after December 15, 2017. The Company adopted this guidance effective April 1, 2018. Upon adoption, the Company presented the service cost component in costs of revenue and selling, general and administrative expenses. The other components of net periodic pension cost are presented within other (income) expense in the Consolidated Statements of Income (Loss). The adoption of this guidance did not have a material impact on the consolidated financial statements, therefore, the Company did not retrospectively change the presentation of the financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation — Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. The new standard is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. The guidance is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted but no earlier than an entity’s adoption date of Topic 606. The Company early adopted this guidance effective April 1, 2018. The adoption of this guidance did not have an impact on the consolidated financial statements. New Accounting Pronouncements Unless otherwise discussed below, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial statements. In February 2016, the FASB issued an update (ASU 2016-02) to the standard on leases to increase transparency and comparability among organizations. The FASB subsequently issued ASU 2018-10, ASU 2018-11 in July 2018 and ASU 2018-20 in December 2018, which provide clarifications and improvements to this new standard. ASU 2018-11 also provides the optional transition method which allows companies to apply the new lease standard at the adoption date instead of at the earliest comparative period presented. The new standard replaces the existing guidance on leases and requires the lessee to recognize a right-of-use asset and a lease liability for all leases with lease terms equal to or greater than twelve months. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize total lease expense on a straight-line basis. For public business entities this standard is effective for the annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption of this new standard is permitted. Entities will be required to use a modified retrospective transition which provides for certain practical expedients. The Company has developed a transition plan, which includes evaluating its population of leased assets to assess the impact of the ASU on its lease portfolio, and designing and implementing new processes and controls. The Company is currently planning to elect the package of practical expedients which permits the Company to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. While the Company continues to assess the potential impact of this ASU, it does anticipate this ASU will have a material impact on its consolidated balance sheets primarily due to recognizing a right-to-use-asset and a lease liability for operating leases. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Measurement of Credit Losses on Financial Instruments, which modifies the measurement of expected credit losses of certain financial instruments. This standard update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect of this new standard will have on its consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this Update also require certain disclosures about stranded tax effects. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company is currently evaluating the effect of this new standard will have on its consolidated financial statements and related disclosures. |
Earnings (Loss) per Share
Earnings (Loss) per Share | 9 Months Ended |
Dec. 31, 2018 | |
Earnings (Loss) per Share | |
Earnings (Loss) per Share | (3) Earnings (Loss) per Share Basic earnings (loss) per share available to Virtusa common stockholders (“EPS”) is computed by dividing net income (loss), less any dividends and accretion of issuance cost on the Series A Convertible Preferred Stock by the weighted average number of shares of common stock outstanding for the period. In computing diluted EPS, the Company adjusts the numerator used in the basic EPS computation, subject to anti-dilution requirements, to add back the dividends (declared or cumulative undeclared) applicable to the Series A Convertible Preferred Stock. Such add-back would also include any adjustments to equity in the period to accrete the Series A Convertible Preferred Stock to its redemption price. The Company adjusts the denominator used in the basic EPS computation, subject to anti-dilution requirements, to include the dilution from potential shares resulting from the issuance of restricted stock units, unvested restricted stock and stock options along with the conversion of the Series A Convertible Preferred Stock to common stock. The following table sets forth the computation of basic and diluted EPS for the periods set forth below: The components of basic earnings (loss) per share are as follows: Three Months Ended Nine Months Ended December 31, December 31, 2018 2017 2018 2017 Numerators: Net income (loss) available to Virtusa stockholders $ 12,576 $ (10,055) $ 7,785 $ (1,629) Less: Series A Convertible Preferred Stock dividends and accretion 1,087 1,087 3,262 2,875 Net income (loss) available to Virtusa common stockholders $ 11,489 $ (11,142) $ 4,523 $ (4,504) Denominators: Basic weighted average common shares outstanding 29,893,220 29,295,730 29,764,507 29,387,977 Basic earnings (loss) per share available to Virtusa common stockholders $ 0.38 $ (0.38) $ 0.15 $ (0.15) The components of diluted earnings (loss) per share are as follows: Three Months Ended Nine Months Ended December 31, December 31, 2018 2017 2018 2017 Numerators: Net income (loss) available to Virtusa common stockholders $ 11,489 $ (11,142) $ 4,523 $ (4,504) Add : Series A Convertible Preferred Stock dividends and accretion 1,087 — — — Net income (loss) available to Virtusa common stockholders and assumed conversion $ 12,576 $ (11,142) $ 4,523 $ (4,504) Denominators: Basic weighted average common shares outstanding 29,893,220 29,295,730 29,764,507 29,387,977 Dilutive effect of Series A Convertible Preferred Stock if converted 3,000,000 — — — Dilutive effect of employee stock options and unvested restricted stock awards and restricted stock units 768,508 — 833,607 — Weighted average shares—diluted 33,661,728 29,295,730 30,598,114 29,387,977 Diluted earnings (loss) per share available to Virtusa common stockholders $ 0.37 $ (0.38) $ 0.15 $ (0.15) During the three months ended December 31, 2018 and 2017, unvested restricted stock awards and unvested restricted stock units issuable for, and options to purchase, 20,617 and 1,366,212 shares of common stock, respectively, were excluded from the calculations of diluted earnings (loss) per share as their effect would have been anti-dilutive. For the three months ended December 31, 2018 and 2017, the weighted average shares of Series A Convertible Preferred Stock of 0 and 3,000,000, respectively, were excluded from the diluted earnings (loss) per share as their effect would have been anti-dilutive using the if-converted method. During the nine months ended December 31, 2018 and 2017, unvested restricted stock awards and unvested restricted stock units issuable for, and options to purchase, 13,745 and 1,598,783 shares of common stock, respectively, were excluded from the calculations of diluted earnings (loss) per share as their effect would have been anti-dilutive. For the nine months ended December 31, 2018 and 2017, the weighted average shares of Series A Convertible Preferred Stock of 3,000,000 and 2,637,363, respectively, were excluded from the diluted earnings (loss) per share as their effect would have been anti-dilutive using the if-converted method. |
Investment Securities
Investment Securities | 9 Months Ended |
Dec. 31, 2018 | |
Investment Securities | |
Investment Securities | (4) Investment Securities At December 31, 2018 and March 31, 2018, all of the Company’s investment securities were classified as available-for-sale securities and equity securities. These 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 of the notes to our consolidated financial statements for a discussion of the fair value of the Company’s other financial instruments). The following is a summary of investment securities at December 31, 2018: Gross Gross Other-than temporary Amortized Unrealized Unrealized impairment Cost Gains Losses recognized in earnings Fair Value Available-for-sale securities: Corporate bonds: Current $ 8,800 $ — $ (21) $ — $ 8,779 Preference shares: 1,599 — — (885) 714 Time Deposits: Current 18,109 — — — 18,109 Equity securities: Mutual funds: Current 14,564 189 — — 14,753 Equity Shares/ Options: Non-current 7 141 — — 148 Total available-for-sale securities and equity securities $ 43,079 $ 330 $ (21) $ (885) $ 42,503 The following is a summary of investment securities at March 31, 2018: Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value Available-for-sale securities: Corporate bonds: Current $ 25,397 $ — $ (126) $ 25,271 Non-current 2,293 — (22) 2,271 Preference shares: Non-current 1,726 — (70) 1,656 Agency and short-term notes: Current 800 — (1) 799 Mutual funds: Current 1,540 11 — 1,551 Equity Shares/ Options: Non-current 15 198 — 213 Time deposits: Current 18,279 — — 18,279 Total available-for-sale securities $ 50,050 $ 209 $ (219) $ 50,040 The Company evaluates investments with unrealized losses to determine if the losses are other than 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 that the Company will not be required to sell such investments prior to the recovery of their carrying value. During the three months ending December 31, 2018, the issuer of the Company’s investment in preference shares began showing signs of financial distress. This included down-grades to its credit rating and a decrease in trading activity and market pricing for this security. Due to the uncertainty in recovering the amortized cost of this security, the Company has determined the unrealized losses are other-than-temporary and recorded the impairment in earnings. The Company has determined that other unrealized losses at December 31, 2018 and March 31, 2018 are temporary. The following is a summary of other-than-temporary impairment unrealized losses recognized during the three months ended December 31, 2018: Three Months Ended December 31, 2018 Unrealized losses recognized in other comprehensive loss as of September 30, 2018 $ 242 Add: unrealized losses recognized 643 Less: Other-than-temporary impairment recognized in earnings (885) Unrealized losses in other comprehensive loss as of December 31, 2018 $ — Proceeds from sales of available-for-sale investment securities and equity securities and the gross gains and losses that have been included in earnings as a result of those sales were as follows: Three Months Ended Nine Months Ended December 31, December 31, 2018 2017 2018 2017 Proceeds from sales or maturities of available-for-sale $ 27,633 $ 57,391 $ 88,204 $ 120,220 Gross gains $ 253 $ 241 $ 639 $ 916 Gross losses — (36) (32) (127) Net realized gains on sales of available-for-sale investment $ 253 $ 205 $ 607 $ 789 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Dec. 31, 2018 | |
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, 2018: Level 1 Level 2 Level 3 Total Assets: Investments: Available-for-sales securities—current $ — $ 26,888 — $ 26,888 Equity securities—current — 14,753 — 14,753 Available-for-sales securities—non-current — 714 — 714 Equity securities—non-current — 148 — 148 Derivative financial instruments: Foreign currency derivative contracts — 3,774 — 3,774 Interest Rate Swap Contracts — 1,779 — 1,779 Total assets $ — $ 48,056 $ — $ 48,056 Liabilities: Foreign currency derivative contracts — 1,439 $ — 1,439 Interest Rate Swap Contracts — 2,333 — 2,333 Total liabilities $ — $ 3,772 $ — $ 3,772 The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2018: Level 1 Level 2 Level 3 Total Assets: Investments: Available-for-sales securities—current $ — $ 45,900 — $ 45,900 Available-for-sales securities—non-current — 4,140 — 4,140 Foreign currency derivative contracts — 2,122 — 2,122 Interest Rate Swap Contracts — 2,486 — 2,486 Total assets $ — $ 54,648 $ — $ 54,648 Liabilities: Foreign currency derivative contracts $ — 1,023 $ — 1,023 Interest Rate Swap Contracts — — — — Contingent consideration — — 100 100 Total liabilities $ — $ 1,023 $ 100 $ 1,123 |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Dec. 31, 2018 | |
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 and Indian 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. There is no margin required, no cash collateral posted or received by us related to our foreign exchange forward contracts. The U.S. dollar notional value of all outstanding foreign currency derivative contracts was $158,881 and $140,347 at December 31, 2018 and March 31, 2018, respectively. Unrealized net gains related to these contracts which are expected to be reclassified from AOCI to earnings during the next 12 months are $1,548 at December 31, 2018. At December 31, 2018, the maximum outstanding term of any derivative instrument was 18 months. The Company also uses interest rate swaps to mitigate the Company’s interest rate risk on the Company’s variable rate debt. The Company’s objective is to limit the variability of cash flows associated with changes in LIBOR interest rate payments due on the Credit Agreement (See Note 13 to the consolidated financial statements), by using pay-fixed, receive-variable interest rate swaps to offset the future variable rate interest payments. The Company purchased interest rate swaps in July 2016 with an effective date of July 2017 and in November 2018. The July 2016 interest rate swaps are at a blended weighted average of 1.025% and the Company will receive 1-month LIBOR on the same notional amounts. The November 2018 interest rate swaps were entered into to mitigate the interest rate risk associated with the Credit Agreement executed in February 2018 and subsequent additional borrowings. The November 2018 interest rate swaps are at a fixed rate of 2.85% and are designed to maintain a 50% coverage of our LIBOR debt, therefore the notional amount changes over the life of the swap to retain the 50% coverage target. At December 31, 2018, the total notional amounts of the interest rate swaps were $163,812 with remaining maturity of approximately 4 years. The following table sets forth the fair value of derivative instruments included in the consolidated balance sheets at December 31, 2018 and March 31, 2018: Derivatives designated as hedging instruments December 31, 2018 March 31, 2018 Foreign currency exchange contracts: Other current assets $ 2,987 $ 2,109 Other long-term assets $ 787 $ 13 Accrued expenses and other $ 1,439 $ 1,023 Long-term liabilities $ — $ — December 31, 2018 March 31, 2018 Interest rate swap contracts : Other long-term assets $ 1,779 $ 2,486 Long-term liabilities $ 2,333 $ — The following tables set forth the effect of the Company’s foreign currency exchange contracts and interest rate swap contracts on the consolidated financial statements of the Company for the three and nine months ended December 31, 2018 and 2017: Amount of Gain or (Loss) Recognized in AOCI on Derivatives Derivatives Designated as Three Months Ended December 31, Nine Months Ended December 31, Cash Flow Hedging Relationships 2018 2017 2018 2017 Foreign currency exchange contracts $ 9,398 $ 4,211 $ (2,203) $ 4,811 Interest rate swaps $ (2,776) $ 518 $ (2,310) $ 281 Amount of Gain or (Loss) Reclassified from AOCI into Income Location of Gain or (Loss) Reclassified Three Months Ended December 31, Nine Months Ended December 31, from AOCI into Income 2018 2017 2018 2017 Revenue $ (510) $ 2,334 $ (1,673) $ 7,846 Costs of revenue $ (846) $ 1,432 $ (1,187) $ 5,484 Operating expenses $ (405) $ 750 $ (578) $ 3,060 Interest Expenses $ 288 59 $ 731 93 Amount of Gain or (Loss) Recognized in Income (loss) on Derivatives Three Months Ended Nine Months Ended Derivatives not Designated Location of Gain Or (Loss) December 31, December 31, as Hedging Instruments Recognized in Income on Derivatives 2018 2017 2018 2017 Foreign currency exchange contracts Foreign currency transaction gains (losses) $ — $ — $ — $ — Revenue $ 1,131 $ 216 $ 2,237 $ (120) Costs of revenue $ (784) $ (177) $ (1,537) $ 55 Selling, general and administrative expenses $ (75) $ (94) $ (93) $ (41) |
Acquisitions
Acquisitions | 9 Months Ended |
Dec. 31, 2018 | |
Acquisitions | |
Acquisitions | (7) Acquisitions On March 12, 2018, (i) the Company entered into an equity purchase agreement by and among the Company, eTouch Systems Corp. (“eTouch US”) and each of the equity holders of eTouch US to acquire all of the outstanding shares of eTouch US, and (ii) certain of the Company’s Indian subsidiaries entered into a share purchase agreement by and among those Company subsidiaries, eTouch Systems (India) Pvt. Ltd (“eTouch India,” together with eTouch US, “eTouch”) and the equity holders of eTouch India to acquire all of the outstanding shares of eTouch India (together with the acquisition of eTouch US, the “Acquisition”). The Acquisition strengthens our digital engineering capabilities, and establishes a solid base in Silicon Valley. Under the terms of the equity purchase agreement and the share purchase agreement, on March 12, 2018, the Company acquired all of the outstanding shares of eTouch US and eTouch India for approximately $140,000 in cash, subject to certain adjustments, with up to an additional $15,000 set aside for retention bonuses to be paid to eTouch management and key employees, in equal installments on the first and second anniversary of the transaction. The purchase price is being paid in three tranches with $80,000 paid at closing, $42,500 on the 12-month anniversary of the close of the transaction, and $17,500 on the 18-month anniversary of the close of the transaction, subject in each case to certain adjustments. The Company utilized the net cash proceeds of a $70,000 delayed draw term loan funded pursuant to the Credit Agreement (as defined in Note 13 to the consolidated financial statements) and $10,000 of cash on hand to make the payments due at the closing of the Acquisition. The Company paid an amount equal to $66,000 to the equity holders of eTouch US, and an amount equal to $14,000 to the equity holders of eTouch India, which together comprise the first of three tranches of the purchase price to be paid in connection with the closing of the Acquisition. The purchase price is subject to adjustment after the closing in the event the working capital associated with eTouch deviates from a threshold amount and other contractual adjustments. Under the purchase method of accounting, assets acquired and liabilities assumed are recorded at their estimated fair values. The Company may continue to adjust the preliminary estimated fair values after obtaining more information regarding asset valuations, liabilities assumed, and revision of preliminary estimates. During the nine months ended December 31, 2018, the Company recorded $7,100 as a reduction of goodwill related to updating the fair value assessment of customer relationships and trademark, $1,104 as an increase in goodwill related to a tax liability payable to the equity holders of eTouch US and $126 as an increase in goodwill related to other adjustments. The following are the preliminary fair values of assets and liabilities based on information available as of December 31, 2018 and may be subject to change during the measurement period. A summary of the fair values for eTouch is as follows: Amount Useful Life Consideration Transferred: Cash paid at closing $ 80,000 Fair value of the future payments 57,858 Tax related liability 10,417 Fair value of consideration 148,275 Less: Cash acquired 2,241 Total purchase price, net of cash acquired $ 146,034 Assets and Liabilities: Cash and cash equivalents 2,241 Accounts receivable 15,522 Unbilled receivables 2,986 Prepaid expenses 815 Other current assets 375 Property and equipment 2,798 Other long-term assets 98 Goodwill 79,747 Trademark 900 2 years Customer relationships 53,000 10 - 15 years Accounts payable (3,267) Deferred revenue (852) Accrued expenses and other current liabilities (721) Accrued employee compensation and benefits (4,197) Income taxes payable (250) Deferred income taxes (368) Other long-term liabilities (552) Total purchase price $ 148,275 Acquisition costs are recorded in selling, general and administrative expenses. The primary items that generated goodwill are the value of the acquired assembled workforces and synergies between eTouch and the Company, neither of which qualify as an amortizable intangible asset. |
Revenues
Revenues | 9 Months Ended |
Dec. 31, 2018 | |
Revenues | |
Revenues | (8) Revenues Effective April 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”) as amended. The Company adopted the new guidance using the modified retrospective method by recognizing the cumulative effect of adoption as an adjustment to retained earnings as of April 1, 2018. Results for reporting periods beginning after April 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with Revenue Recognition (“Topic 605”). The impact of adoption of the new guidance on the Company’s consolidated financial statements as of April 1, 2018 is presented in Note 2 to the Company’s consolidated financial statements. Revenue recognition The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenues are recognized when control of the promised services is transferred to its customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company generally recognizes revenue for services over time as the Company’s performance creates or enhances an asset that the customer controls from fixed price contracts related to complex design, development and customization. For these contracts, the Company measures the progress and recognizes revenue using effort-based input methods, as the Company performs, based on actual efforts spent compared to the total expected efforts for the contract. The use of the effort based input method requires significant judgment relative to estimating total efforts, including assumptions relative to the length of time to complete the project and the nature and complexity of the work to be performed. Estimates of total efforts are continuously monitored during the term of the contract and are subject to revision as the contract progresses. When revisions in estimated contract revenue and efforts are determined, such adjustments are recorded in the period in which they are first identified. An input method is used to recognize revenue as the value of services provided to the customer is best represented by the hours expended to deliver those services. The Company generally recognizes revenue for services over time as the customer simultaneously receives and consumes the benefits as the Company performs for fixed-price contracts related to consulting or other IT services. For these contracts, the Company measures the progress and recognizes revenue using effort-based input methods as the Company performs based on actual efforts spent compared to the total expected efforts for the contract. The cumulative impact of any change in estimates of the contract revenue is reflected in the period in which the changes become known. The Company has applied the as-invoiced practical expedient to recognize revenues for services the Company renders to customers on time and material basis contracts. The Company generally recognizes revenue from fixed-price applications management, maintenance, or support engagements over time as customers receive and consume the benefits of such services and have applied the as-invoiced practical expedient to recognize revenue for services the Company renders to customers based on the amount the Company has a right to invoice, which is representative of the value being delivered. Contracts are often modified to account for changes in contract specification and requirements. The Company considers a contract modification when the modification either creates new or changes the existing enforceable rights and obligations. The accounting for modifications involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price. Certain customers may receive discounts, incentive payments or service level credits. A portion of the revenues relating to such arrangements are accounted for as variable consideration when the amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any revenue will not occur. The Company estimates these amounts based on the expected amount to be provided to customers and adjusts revenues recognized. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price may involve judgment and are based largely on an assessment of the Company’s anticipated performance and all information that is reasonably available to us. From time to time, the Company may enter into contracts with customers that include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on an expected cost plus a margin approach. The Company’s warranties generally provide a customer with assurance that the related deliverable will function as the parties intended because it complies with agreed-upon specifications and is therefore not considered as an additional performance obligation in the contract. When the Company receives consideration from a customer prior to transferring services to the customer under the terms of a contract, the Company records deferred revenue, which represents a contract liability. The Company recognizes deferred revenue as revenue after the Company has transferred control of the services to the customer and all revenue recognition criteria are met. The Company’s payment terms vary by the type and location of its customers. The term between invoicing and when payment is due is not significant. As a practical expedient, the Company does not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is one year or less. The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues. Any tax assessed by a governmental authority that is incurred as a result of a revenue transaction (e.g. sales tax) is excluded from the Company’s assessment of transaction prices. Costs to obtain and fulfill The Company’s costs to obtain contracts are generally expensed as incurred, as the liability is not solely a result of obtaining the contract. The costs to obtain contracts are triggered by multiple conditions such as being contingent on future performance, including continued employment and revenue recognized associated with the contract. The Company’s recurring operating costs for contracts with customers are recognized as expense as incurred. Certain eligible costs incurred in the initial phases of the Company’s application maintenance, business process outsourcing and infrastructure services contracts (i.e. set-up or transition costs) are capitalized when such costs (1) relate directly to the contract, (2) generate or enhance resources of the Company that will be used in satisfying the performance obligation in the future, and (3) are expected to be recovered. These costs are expensed ratably over the estimated life of the customer relationship, including expected renewals. In determining the estimated life of the customer relationship, the Company evaluates the contract term, the expected life of the enhanced assets as well as the rate of technological and industry change. Capitalized amounts are monitored regularly for impairment. Impairment losses are recorded when projected remaining undiscounted operating cash flows are not sufficient to recover the carrying amount of the capitalized costs to fulfill. The following table presents information related to the capitalized costs to fulfill, such as set-up or transition activities, for the nine months ended December 31, 2018: Costs to Fulfill Balance at April 1, 2018 $ 4,278 Costs capitalized 2,155 Amortization expense (1,656) Foreign currency translation adjustments (174) Balance at December 31, 2018 $ 4,603 Costs to fulfill are recorded in “Other current assets” and “Other long-term assets” in the consolidated balance sheets. The following table summarizes the impacts of changes in accounting policies after adoption of ASC 606 on the Company’s consolidated financial statements as of and for the three and nine months ended December 31, 2018: As of December 31, 2018 Impacts of the New As reported Pro-forma Amounts Revenue standard Balance Sheet : Assets Other current assets (1) $ 26,978 $ 26,447 $ 531 Total current assets 531 Deferred income taxes (3) 24,220 24,527 (307) Other long-term assets (1) 22,201 22,244 (43) Total Assets $ 181 Liabilities, Series A Convertible Preferred Stock, Redeemable noncontrolling interest and Stockholders’ equity Deferred revenue (2) 6,120 7,051 (931) Total current liabilities (931) Stockholders’ equity: Retained earnings 243,006 241,894 1,112 Total liabilities, Series A convertible preferred stock, redeemable noncontrolling interest and stockholders’ equity $ 181 Three Months ended Nine Months ended December 31, 2018 December 31, 2018 Impact from Impact from Pro-forma New Revenue Pro-forma New Revenue As reported Amounts Standard As reported Amounts Standard Revenue (2) $ 314,681 $ 314,017 $ 664 $ 920,232 $ 919,301 $ 931 Costs of revenue (1) 221,461 221,560 (99) 654,288 654,776 (488) Gross profit 93,220 92,457 763 265,944 264,525 1,419 Operating expenses: Selling, general and administrative expenses 73,935 73,935 — 218,716 218,716 — Income from operations 19,285 18,522 763 47,228 45,809 1,419 Other income (expense) 3,912 3,912 - (22,173) (22,173) - Income before income tax expense 23,197 22,434 763 25,055 23,636 1,419 Income tax expense (3) 10,400 10,264 136 15,863 15,556 307 Net income $ 12,797 $ 12,170 $ 627 $ 9,192 8,080 $ 1,112 Less: net income attributable to noncontrolling interests, net of tax 221 221 — 1,407 1,407 — Net income available to Virtusa stockholders $ 12,576 $ 11,949 $ 627 $ 7,785 6,673 $ 1,112 Less: Series A Convertible Preferred Stock dividends and accretion 1,087 1,087 — 3,262 3,262 — Net income available to Virtusa common stockholders 11,489 10,862 627 4,523 3,411 1,112 Basic earnings per share available to Virtusa common stockholders $ 0.38 $ 0.36 $ 0.02 $ 0.15 0.11 $ 0.04 Diluted earnings per share available to Virtusa common stockholders $ 0.37 $ 0.35 $ 0.02 $ 0.15 0.11 $ 0.04 Notes (1) Reflects the impact of a longer period of amortization for costs to fulfill a contract. (2) Reflects the impact of changes in timing of revenue recognition on our software licenses and certain fixed-price application maintenance contracts. (3) Reflects the income tax impact of the above items. Receivables and Contract Balances The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). The Company presents such receivables in accounts receivable or unbilled accounts receivable, in its consolidated statements of financial position at their net estimated realizable value. Contract assets included in unbilled accounts receivable are recorded when services have been provided but the Company does not have an unconditional right to receive consideration. Contracts assets are primarily related to unbilled amounts on fixed-price contracts utilizing the input method of revenue recognition. The timing between services rendered and timing of payment is less than one year. The Company recognizes an impairment loss when the contract carrying amount is greater than the remaining consideration receivable, less directly related costs to be incurred. The table below shows significant movements during the nine months ended December 31, 2018 in contract assets: Contract Assets Balance at April 1, 2018 $ 15,998 Revenues recognized during the period but not yet billed 92,564 Amounts billed (95,457) Other (507) Balance at December 31, 2018 $ 12,598 Contract liabilities comprise amounts billed to customers for revenues not yet earned. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. The table below shows significant movements in the deferred revenue balances during the nine months ended December 31, 2018: Contract Liabilities Balance at April 1, 2018 $ 7,908 Amounts billed but not yet recognized as revenues 5,310 Revenues recognized related to the opening balance of deferred revenue (6,761) Other (337) Balance at December 31, 2018 $ 6,120 Remaining performance obligation ASC 606 requires that the Company discloses the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of December 31, 2018. This disclosure is not required for: (1) (2) (3) (4) Many of the Company’s performance obligations meet one or more of these exemptions. As of December 31, 2018, the aggregate amount of transaction price allocated to remaining performance obligations, other than those meeting the exclusion criteria above, was $50,363 and will be recognized as revenue within 4 years. Disaggregation of Revenue The table below presents disaggregated revenues from the Company’s contracts with customers by geography, industry groups, service offerings and contract-type. The Company believes this disaggregation best depicts how the nature, amount, timing and uncertainty of its revenues and cash flows are affected by industry, market and other economic factors. Three Months Ended Nine Months Ended Revenue by geography: December 31, 2018 December 31, 2018 North America $ 224,143 $ 652,076 Europe 65,046 192,175 Rest of World 25,492 75,981 Consolidated revenue $ 314,681 $ 920,232 Three Months Ended Nine Months Ended Revenue by Customer’s Industry Groups December 31, 2018 December 31, 2018 Banking financial services insurance $ 197,329 $ 578,138 Communications and Technology 89,159 257,527 Media & Information and Other 28,193 84,567 Consolidated revenue $ 314,681 $ 920,232 Three Months Ended Nine Months Ended Revenue by service offerings December 31, 2018 December 31, 2018 Application outsourcing $ 165,986 $ 488,584 Consulting 148,695 431,648 Consolidated revenue $ 314,681 $ 920,232 Three Months Ended Nine Months Ended Revenue by contract type December 31, 2018 December 31, 2018 Time-and-materials $ 189,134 $ 552,530 Fixed-price* 125,547 367,702 Consolidated revenue $ 314,681 $ 920,232 * Fixed-price includes both retainer-billing basis and fixed-price progress towards completion |
Series A Convertible Preferred
Series A Convertible Preferred Stock | 9 Months Ended |
Dec. 31, 2018 | |
Series A Convertible Preferred Stock. | |
Series A Convertible Preferred Stock | (9) Series A Convertible Preferred Stock On May 3, 2017, the Company entered into an investment agreement with The Orogen Group (‘‘Orogen’’) pursuant to which Orogen purchased 108,000 shares of the Company’s newly issued Series A Convertible Preferred Stock, initially convertible into 3,000,000 shares of common stock, for an aggregate purchase price of $108,000 with an initial conversion price of $36.00 (the ‘‘Orogen Preferred Stock Financing’’). Under the terms of the investment, the Series A Convertible Preferred Stock has a 3.875% dividend per annum, payable quarterly in additional shares of common stock and/or cash at the Company’s option. If any shares of Series A Convertible Preferred Stock have not been converted into common stock prior to May 3, 2024, the Company will be required to repurchase such shares at a repurchase price equal to the liquidation preference of the repurchased shares plus the amount of accumulated and unpaid dividends thereon. If the Company fails to effect such repurchase, the dividend rate on the Series A Convertible Preferred Stock will increase by 1% per annum and an additional 1% per annum on each anniversary of May 3, 2024 during the period in which such failure to effect the repurchase is continuing, except that the dividend rate will not increase to more than 6.875% per annum. In connection with the issuance of the Series A Convertible Preferred Stock, the Company incurred direct and incremental expenses of $1,154, including financial advisory fees, closing costs, legal expenses and other offering-related expenses. These issuance costs are recorded as a reduction to the proceeds received from issuance of Series A Convertible Preferred Stock. These direct and incremental expenses reduced the Series A Convertible Preferred Stock, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, May 3, 2024. During the three and nine months ended December 31, 2018 and 2017, the Company recorded accretions to the Series A Convertible Preferred Stock related to its issuance cost. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 3.875% per annum, payable quarterly in arrears. During the nine months ended December 31, 2018 and 2017, the Company has paid $3,138 and $2,081, respectively, as cash dividend on Series A Convertible Preferred Stock. As of December 31, 2018, the Company had declared and accrued dividends of $686 associated with the Series A Convertible Preferred Stock. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | (10) Goodwill and Intangible Assets Goodwill: The Company has one operating segment. The following are details of the changes in goodwill balance at December 31, 2018: Amount Balance at April 1, 2018 $ 297,251 Preliminary fair value adjustment (5,870) Foreign currency translation adjustments (10,028) Balance at December 31, 2018 $ 281,353 The acquisition costs and goodwill balance deductible for our business acquisitions for tax purposes are $147,216 The acquisition costs and goodwill balance not deductible for tax purposes are $147,041 and relate to the Company’s TradeTech acquisition (closed on January 2, 2014), the Polaris acquisition and the eTouch India acquisition. Intangible Assets: The following are details of the Company’s intangible asset carrying amounts acquired and amortization at December 31, 2018. Weighted Gross Net Average Carrying Accumulated Carrying Useful Life Amount Amortization Amount Amortizable intangible assets: Customer relationships 12.2 $ 133,484 $ 41,899 $ 91,585 Trademark 2.1 3,693 3,111 582 Technology 5.0 500 341 159 12.0 $ 137,677 $ 45,351 $ 92,326 The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized. |
Income Taxes
Income Taxes | 9 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Income Taxes | (11) Income Taxes The Company applies an estimated annual effective tax rate to its year-to-date operating results to determine the interim provision (benefit) for income tax expense. The Company’s effective tax rate was 44.8% and 63.3% for the three and nine months ended December 31, 2018, as compared to an effective tax rate of 148.0% and 86.1% for the three and nine months ended December 31, 2017. The Company’s effective tax rate for the three and nine months ended December 31, 2018 was significantly impacted by electing disregarded entity treatment for certain foreign subsidiaries, Global Intangible Low—taxed Income (“GILTI”) provisions and executive compensation limitations enacted in the Tax Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017 by the U.S. government. The Company’s reported effective tax rate is also impacted by jurisdictional mix of profits and losses in which the Company operates, foreign statutory tax rates in effect, unusual or infrequent discrete items requiring a provision during the period and certain exemptions or tax holidays applicable to the Company. During the three and nine months ended December 31, 2018, the Company elected to treat several foreign entities as disregarded entities. The earnings of these subsidiaries will be subject to US taxation as well as local taxation with a corresponding foreign tax credit, at the election of the Company. The election resulted in a deferred tax charge of $6,288 during the nine months ended December 31, 2018. The election also makes available to the Company benefits of foreign tax credits. The Company’s income tax provision for the three and nine months ended December 31, 2018 includes the expected impact of GILTI and executive compensation limitations of the Tax Act impacting our operating results for the Company’s 2019 fiscal year ended March 31, 2019. The Company’s aggregate income tax rate in foreign jurisdictions is comparable to its income tax rate in the United States, as a result of the Tax Act, other than in jurisdictions in which the Company has tax holiday benefits. The Tax Act contains several key tax provisions that have impacted the Company, including the reduction of the corporate income tax rate to 21% effective January 1, 2018. The Tax Act also includes a variety of other changes, such as a deemed repatriation tax on accumulated foreign earnings, a limitation on the tax deductibility of interest expense, acceleration of business asset expensing, and reduction in the amount of executive pay that could qualify as a tax deduction, among others. The lower corporate income tax rate required the Company to remeasure its U.S. deferred tax assets and liabilities as well as reassess the realizability of its deferred tax assets and liabilities. ASC Topic 740, Income Taxes, requires the Company to recognize the effect of the tax law changes in the period of enactment. The Securities and Exchange Commission has issued Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Job Act (“SAB 118”), which allows the Company to record provisional amounts during a measurement period of up to one year after the enactment of the Tax Act to finalize the recording of the related tax impacts. During the fiscal year ended March 31, 2018, the Company recorded a provisional charge of $17,834 for deemed repatriation of unremitted earnings and a provisional charge of $4,890 primarily to remeasure the Company’s opening U.S. deferred tax assets to reflect the lower statutory rate at which they will be realized. The Company has elected to pay the During the three months ended December 31, 2018, the Company made a final assessment of the deemed repatriation tax on unremitted earnings and the remeasurement of the Company’s opening U.S. deferred tax assets to reflect the lower statutory rate by the Tax Act as required by SAB 118. During the three months ended December 31, 2018, the Company recognized a $1,628 reduction to income tax expense related to the deemed repatriation of unremitted earnings as the Company finalized its provisional calculation related to the enactment of the Tax Act. The total impact from the Tax Act was $21,096. At December 31, 2018, the remaining deemed repatriation balance is $14,779, of which $1,139 is included in income tax payable and $13,640 is included in long-term liabilities in the consolidated balance sheet. The U.S. Tax Act subjects a U.S. shareholder to GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. The Company has elected to provide for GILTI in the year incurred. The Company’s results for the nine months ended December 31, 2018 include the expected impact of GILTI. Given the complexity of the GILTI provisions, and foreign tax credit provisions, the Company continues to evaluate the effects of the GILTI provisions on its results. The Company continues to review the anticipated impacts of the base erosion anti-abuse tax (“BEAT”), and the associated safe harbor on inter-company payments, which is effective for our fiscal year ended March 31, 2019. The Company has not recorded any impact associated with BEAT in the tax rate for the nine months ended December 31, 2018 given the Company’s understanding of current guidance. A valuation allowance is required if, based on available evidence, it is more likely than not that all or some portion of the asset will not be realized due to the inability of the Company to generate sufficient taxable income in a specific jurisdiction. The Company has $19,573 and $1,726 of net deferred tax assets in the United States and the United Kingdom, respectively, at December 31, 2018. The Company has not recorded valuation allowance as management has concluded it is more likely than not to be utilized before expiration. The Company expects sufficient taxable income in future periods related to the impact of the GILTI and the election to treat several foreign entities as disregarded entities. The Company’s Indian subsidiaries operate several development centers in areas designated a special economic zone, or SEZ, under the SEZ Act of 2005. In particular, the Company was approved as an SEZ Co-developer and has built a campus on a 6.3 acre parcel of land in Hyderabad, India that has been designated as an SEZ. As an SEZ Co-developer, the Company is entitled to certain tax benefits for any consecutive period of 10 years during the 15 year period starting in fiscal year 2008. The Company has other units at various stages of tax holiday benefit. 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 required Virtusa (Private) Limited to retain certain job creation and investment criteria through the expiration of the holiday period. During the fiscal year ended March 31, 2018, the Company believes it had fulfilled its hiring and investment commitments and is eligible for tax holiday through March 2019. At December 31, 2018, the Company believes it is eligible for continued benefits for the entire 12-year tax holiday. Due to the geographical scope of the Company’s operations, the Company is subject to tax examinations in various jurisdictions. The Company’s ongoing assessments of the more-likely-than-not outcomes of these examinations and related tax positions require judgment and can increase or decrease the Company’s effective tax rate, as well as impact the Company’s operating results. The specific timing of when the resolution of each tax position will be reached is uncertain. The Company does not believe that the outcome of any ongoing examination will have a material effect on its consolidated financial statements within the next twelve months. The Company’s major taxing jurisdictions include the United States, the United Kingdom, India and Sri Lanka. In the United States, the Company remains subject to examination for all tax years ended after March 31, 2014. In the foreign jurisdictions, the Company generally remains subject to examination for tax years ended after March 31, 2005. The Company has been under income tax examination in India, the U.K. and the United States. The Company is currently appealing assessments in India for fiscal years ended March 31, 2005 through 2014. In the United Kingdom, the Company is currently under examination for transfer pricing matters for the years ended March 2014 to March 2017. In the United States, the IRS has initiated an examination of fiscal years ended March 31, 2015 to March 31, 2017. Unrecognized tax benefits represent uncertain tax positions for which the Company has established reserves. At December 31, 2018 and March 31, 2018, the total liability for unrecognized tax benefits was $7,013 and $7,544, respectively. 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, 2018 and 2017, the unrecognized tax benefits decreased by $531 and $107, respectively. The decrease in unrecognized tax benefits in the nine months period ending December 31, 2018 was predominantly due to foreign currency movements and the settlement of a prior period position offset by increases for incremental interest accrued on existing uncertain tax 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 indefinitely reinvested. The Company does not provide for U.S. income taxes on foreign currency translation or applicable withholding tax until a distribution is declared. At December 31, 2018, the Company had approximately $188,183 of cash, cash equivalents, short-term and long-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. 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 As
Concentration of Revenue and Assets | 9 Months Ended |
Dec. 31, 2018 | |
Concentration of Revenue and Assets | |
Concentration of Revenue and Assets | (12) 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, 2018 2017 2018 2017 Customer revenue: United States of America $ 213,542 $ 162,549 $ 623,224 $ 453,013 United Kingdom 52,248 49,598 154,813 139,612 Rest of World 48,891 51,662 142,195 146,703 Consolidated revenue $ 314,681 $ 263,809 $ 920,232 $ 739,328 December 31, March 31, 2018 2018 Long-lived assets, net of accumulated depreciation and amortization: United States of America $ 211,828 $ 213,024 India 262,320 276,512 Rest of World 24,448 25,281 Consolidated long-lived assets, net $ 498,596 $ 514,817 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, 2018 2017 2018 2017 Customer 1 18.0 % 20.0 % 17.7 % 19.2 % |
Debt
Debt | 9 Months Ended |
Dec. 31, 2018 | |
Debt | |
Debt | (13) Debt On February 6, 2018, the Company entered into a credit agreement (the “Credit Agreement”) dated as of February 6, 2018, by and among the Company, its guarantor subsidiaries party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint book runners and lead arrangers. The Credit Agreement replaced the prior $300,000 credit agreement with J.P. Morgan Securities and Merrill Lynch, Pierce, Fenner & Smith Incorporated and provides for a $200,000 revolving credit facility and a $250,000 term loan and delayed-draw term loan. On August 14, 2018, the Company drew down $32,000 from the credit facility to finance the Polaris Consulting & Services Limited (“Polaris”) delisting open offer. The Company is required under the terms of the Credit Agreement to make quarterly principal payments on the term loan. For the fiscal year ending March 31, 2019, the Company is required to make principal payments of $3,125 per quarter. The Credit Agreement includes customary maximum debt to EBITDA and minimum fixed charge coverage covenants. The term of the Credit Agreement is five years ending February 6, 2023. At December 31, 2018, the interest rates on the term loan and line of credit were 5.03% and 4.95%, respectively. At December 31, 2018, the Company was in compliance with its debt covenants and has provided a quarterly certification to its lenders to that effect. The Company believes that it currently meets all conditions set forth in the Credit Agreement to borrow thereunder and it is not aware of any conditions that would prevent it from borrowing part or all of the remaining available capacity under the existing revolving credit facility at December 31, 2018 and through the date of this filing. Current portion of long-term debt The following summarizes our short-term debt balances as of: December 31, 2018 March 31, 2018 Notes outstanding under the revolving credit facility $ — $ — Term loan- current maturities 12,500 12,500 Less: deferred financing costs, current (1,093) (1,093) Total $ 11,407 $ 11,407 Long-term debt, less current portion The following summarizes our long-term debt balance as of: December 31, 2018 March 31, 2018 Term loan $ 240,625 $ 250,000 Borrowings under revolving credit facility 87,000 55,000 Less: Current maturities (12,500) (12,500) Deferred financing costs, long-term (3,453) (4,273) Total $ 311,672 $ 288,227 In July 2016 and November 2018, the Company entered into interest rate swap transactions to mitigate Company’s interest rate risk on Company’s variable rate debt (See Note 6 to the consolidated financial statements). Beginning in fiscal 2009, the Company’s U.K. subsidiary entered into an agreement with an unrelated financial institution to sell, without recourse or continuing involvement, certain of its European-based accounts receivable balances from one client to such third party financial institution. During the nine months ended December 31, 2018, $18,453 of receivables were 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, 2018. No amounts were due as of December 31, 2018, but the Company may elect to use this program again in future periods. However, the Company cannot provide any assurances that this or any other financing facilities will be available or utilized in the future. |
Redeemable noncontrolling inter
Redeemable noncontrolling interest | 9 Months Ended |
Dec. 31, 2018 | |
Redeemable noncontrolling interest | |
Redeemable noncontrolling interest | (14) Redeemable noncontrolling interest In connection with the Company’s Indian Subsidiary, Virtusa Consulting Services Private Limited (“Virtusa India”) delisting offer of Polaris and subsequent stock exchange approvals, effective August 1, 2018, the Polaris common shares were delisted in accordance with SEBI Delisting Regulations. For a period of one year following the date of delisting, Virtusa India will, in compliance with SEBI Delisting Regulations, permit the public shareholders of Polaris to tender their shares for sale to Virtusa India at the exit price of INR 480 per share. In connection with the Polaris delisting offer, during the nine months ended December 31, 2018, Virtusa India purchased 4,436,342 shares, or approximately 4.3% of Polaris common stock from shareholders for an aggregate purchase price of approximately $30,387. As of December 31, 2018, the Polaris common stock held by noncontrolling interest shareholders was 3,450,896 or approximately 3.34% of Polaris’ basic shares of common stock outstanding. In accordance with ASC 480, Distinguishing Liabilities from Equity, the Company has recorded the fair value of these shares as well as comprehensive income attributable to noncontrolling interest totaling $24,924 and presented this in the mezzanine section of the consolidated balance sheet as redeemable noncontrolling interest. As of December 31, 2018, the Company had approximately $857 of Polaris stock options at fair value that were reclassified to current liabilities related to a deemed cash settlement modification resulting from the delisting offer. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Dec. 31, 2018 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | (15) 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, 2018 and 2017: Three Months Ended Nine Months Ended December 31, December 31, 2018 2017 2018 2017 Investment securities Beginning balance $ (225) $ 220 $ 69 $ 57 Other comprehensive income (loss) (OCI) before reclassifications net of tax of $0, $38, $(52) and $138 (8) 29 (176) 229 Reclassifications from OCI to other income, net of tax of $0, $(18), $12 and $(33) 271 (21) 125 (17) Less : Noncontrolling interests, net of tax $(5), $(5), $7 and $(27) (8) (10) 12 (51) Comprehensive income (loss) on investment securities, net of tax of $(5), $15, $(33) and $78 255 (2) (39) 161 Closing balance $ 30 $ 218 $ 30 $ 218 Currency translation adjustments Beginning balance $ (57,318) $ (46,135) $ (41,207) $ (50,415) OCI before reclassifications (2,477) 4,641 (20,201) 9,068 Less: Noncontrolling interests (396) (1,943) 1,217 (2,090) Comprehensive income (loss) on currency translation adjustments (2,873) 2,698 (18,984) 6,978 Closing balance $ (60,191) $ (43,437) $ (60,191) $ (43,437) Cash flow hedges Beginning balance $ (5,179) $ 4,274 $ 1,881 $ 11,789 OCI before reclassifications net of tax of $1,608, $1,263, $(1,582), and $1,671 5,014 3,467 (2,931) 3,421 Reclassifications from OCI to —Revenue, net of tax of $178, $(808), $586 and $(2,714) 332 (1,526) 1,087 (5,132) —Costs of revenue, net of tax of $214, $(129), $303 and $(1,289) 632 (1,303) 884 (4,195) —Selling, general and administrative expenses, net of tax of $102, $(53), $147 and $(719) 303 (697) 431 (2,341) — Interest expenses, net of tax of $(74), $(12), $(188) and $(26) (214) (47) (543) (67) Less: Noncontrolling interests, net of tax $(23), $83, $17 and $450 (44) 157 35 850 Comprehensive loss on cash flow hedges, net of tax of $2,005, $344, $(717) and $(2,627) 6,023 51 (1,037) (7,464) Closing balance $ 844 $ 4,325 $ 844 $ 4,325 Benefit plans Beginning balance $ (1,511) $ (1,088) $ (1,424) $ (1,180) OCI before reclassifications net of tax of $0, $0, $348 and $0 3 — (349) — Reclassifications from OCI for prior service credit (cost) to: —Costs of revenue, net of tax of $0 for all periods — 2 — 6 —Selling, general and administrative expenses, net of tax of $0 for all periods — — — 1 Other income (expense), net of tax of $0 for all periods 14 42 Reclassifications from net actuarial gain (loss) amortization to: —Costs of revenue, net of tax of $0 for all periods — 26 — 82 —Selling, general and administrative expenses, net of tax of $0 for all periods — 12 — 36 Other income (expense), net of tax of $0 for all periods 36 (9) 113 (2) Other adjustments 20 — 171 — Less: Noncontrolling interests, net of tax $0 for all periods — — 9 — Comprehensive income (loss) on benefit plans, net of tax of $0, $0, $348 and $0 73 31 (14) 123 Closing balance (1,438) $ (1,057) (1,438) $ (1,057) Accumulated other comprehensive loss $ (60,755) $ (39,951) $ (60,755) $ (39,951) |
Unaudited Interim Financial I_2
Unaudited Interim Financial Information (Policies) | 9 Months Ended |
Dec. 31, 2018 | |
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, 2018 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 25, 2018. 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 accompanying financial statements have been prepared on a consolidated basis and reflect the financial statements of Virtusa Corporation and all of its subsidiaries that are directly or indirectly more than 50% owned or controlled. When the Company does not have a controlling interest in an entity, but exerts a significant influence on the entity, the Company applies the equity method of accounting. For those majority-owned subsidiaries that are not 100% owned by the Company, the interests of the minority owners are accounted for as noncontrolling interests. |
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 re-evaluates 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, 2018 and March 31, 2018, 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, other accrued expenses and long-term debt, approximate their fair values due to the nature of the items. See Note 5 of the notes to our consolidated financial statements for a discussion of the fair value of the Company’s other financial instruments. |
Recent accounting pronouncements | Recent accounting pronouncements Recently Adopted Accounting Pronouncements Unless otherwise discussed below, the adoption of new accounting standards did not have an impact on the consolidated financial statements. In May 2014, the FASB issued an Accounting Standard Update (“ASU” ) No. 2014-09, Revenue from Contracts with Customers (“Accounting Standard Codification (“ASC”) Topic 606”) as well as other clarifications and technical guidance related to this new revenue standard, including ASC Topic 340-40, Other Assets and Deferred Costs — Contracts with Customers (“ASC 340-40”). ASC Topic 606 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In March, April and May 2016, the FASB issued updates to the new revenue standard to clarify the implementation guidance on principal versus agent considerations for reporting revenue gross versus net, identifying performance obligations, accounting for licenses of intellectual property, transition, contract modifications, collectability, non-cash consideration and presentation of sales and other similar taxes with the same effective date. The standard permits the use of either the retrospective or modified retrospective method. The Company adopted the standard effective April 1, 2018 using the modified retrospective method applied to those contracts which were not completed as of that date. Upon adoption of ASC Topic 606 on April 1, 2018, the Company recorded a net increase to opening retained earnings of approximately $464, after a tax impact of $142. The impact of adoption primarily relates to the longer period of amortization for costs to fulfill a contract compared to the amortization period prior to adoption. The following table summarizes the cumulative effect of adopting ASC Topic 606 using the modified retrospective method of adoption as of April 1, 2018: Balance as of ASC Topic 606 Balance as of March 31, 2018 Adjustments April 1, 2018 Balance Sheet : Assets Other current assets $ 21,229 $ (62) $ 21,167 Deferred income taxes 31,528 (142) 31,386 Other long-term assets 11,772 668 12,440 Stockholders’ equity Retained earnings $ 238,019 $ 464 $ 238,483 See Note 8 “Revenues” in the consolidated financial statements for additional information regarding revenues. In January 2016, the FASB issued an update (ASU 2016-01) to the standard on financial instruments. The update significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The update also amends certain disclosure requirements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Upon adoption, entities will be required to make a cumulative-effect adjustment to the statement of financial position as of the beginning of the first reporting period in which the guidance is effective. However, the specific guidance on equity securities without readily determinable fair value will apply prospectively to all equity investments that exist as of the date of adoption. The Company adopted this guidance on April 1, 2018. The adoption of this guidance did not have a material impact on the consolidated financial statements, therefore, the Company did not record any cumulative adjustments to the opening retained earnings in the consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Restricted Cash (Topic 230), which is intended to reduce diversity in practice on how changes in restricted cash are classified and presented in the statement of cash flows. This ASU requires amounts generally described as restricted cash to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The amendments in this update should be applied using a retrospective transition method to each period presented. The Company adopted the standard effective April 1, 2018 using the retrospective method. As a result of the adoption, the Company restated its consolidated statement of cash flows for all of the prior periods presented. The following table summarizes the impact of this standard on the Company’s consolidated cash flows for the nine months ended December 31, 2017: As Reported Restated Effect Cash flows from investing activities: Increase in restricted cash $ (119) $ — $ 119 Net cash provided by investing activities 3,671 3,790 119 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 4,120 4,123 3 Net increase in cash, cash equivalents and restricted cash 81,810 81,932 122 Cash, cash equivalents and restricted cash, beginning of period 144,908 145,086 178 Cash, cash equivalents and restricted cash, end of period $ 226,718 $ 227,018 $ 300 In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715), “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, a guidance on presentation of net periodic pension cost and net periodic postretirement benefit cost. The new standard requires that an employer disaggregate the service costs components of net benefit cost. The employer is required to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component, such as in other income and expense. The guidance is effective for fiscal years beginning after December 15, 2017. The Company adopted this guidance effective April 1, 2018. Upon adoption, the Company presented the service cost component in costs of revenue and selling, general and administrative expenses. The other components of net periodic pension cost are presented within other (income) expense in the Consolidated Statements of Income (Loss). The adoption of this guidance did not have a material impact on the consolidated financial statements, therefore, the Company did not retrospectively change the presentation of the financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation — Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. The new standard is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. The guidance is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted but no earlier than an entity’s adoption date of Topic 606. The Company early adopted this guidance effective April 1, 2018. The adoption of this guidance did not have an impact on the consolidated financial statements. New Accounting Pronouncements Unless otherwise discussed below, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial statements. In February 2016, the FASB issued an update (ASU 2016-02) to the standard on leases to increase transparency and comparability among organizations. The FASB subsequently issued ASU 2018-10, ASU 2018-11 in July 2018 and ASU 2018-20 in December 2018, which provide clarifications and improvements to this new standard. ASU 2018-11 also provides the optional transition method which allows companies to apply the new lease standard at the adoption date instead of at the earliest comparative period presented. The new standard replaces the existing guidance on leases and requires the lessee to recognize a right-of-use asset and a lease liability for all leases with lease terms equal to or greater than twelve months. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize total lease expense on a straight-line basis. For public business entities this standard is effective for the annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption of this new standard is permitted. Entities will be required to use a modified retrospective transition which provides for certain practical expedients. The Company has developed a transition plan, which includes evaluating its population of leased assets to assess the impact of the ASU on its lease portfolio, and designing and implementing new processes and controls. The Company is currently planning to elect the package of practical expedients which permits the Company to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. While the Company continues to assess the potential impact of this ASU, it does anticipate this ASU will have a material impact on its consolidated balance sheets primarily due to recognizing a right-to-use-asset and a lease liability for operating leases. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Measurement of Credit Losses on Financial Instruments, which modifies the measurement of expected credit losses of certain financial instruments. This standard update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect of this new standard will have on its consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this Update also require certain disclosures about stranded tax effects. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company is currently evaluating the effect of this new standard will have on its consolidated financial statements and related disclosures. |
Unaudited Interim Financial I_3
Unaudited Interim Financial Information (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Recent accounting pronouncements | |
Summary of cumulative effect of adopting ASC Topic 606 using the modified retrospective method | Balance as of ASC Topic 606 Balance as of March 31, 2018 Adjustments April 1, 2018 Balance Sheet : Assets Other current assets $ 21,229 $ (62) $ 21,167 Deferred income taxes 31,528 (142) 31,386 Other long-term assets 11,772 668 12,440 Stockholders’ equity Retained earnings $ 238,019 $ 464 $ 238,483 |
ASU 2016-18 | |
Recent accounting pronouncements | |
Summary of impact of accounting standard adoption | As Reported Restated Effect Cash flows from investing activities: Increase in restricted cash $ (119) $ — $ 119 Net cash provided by investing activities 3,671 3,790 119 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 4,120 4,123 3 Net increase in cash, cash equivalents and restricted cash 81,810 81,932 122 Cash, cash equivalents and restricted cash, beginning of period 144,908 145,086 178 Cash, cash equivalents and restricted cash, end of period $ 226,718 $ 227,018 $ 300 |
Earnings (Loss) per Share (Tabl
Earnings (Loss) per Share (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Earnings (Loss) per Share | |
Schedule of components of basic earnings (loss) per share | Three Months Ended Nine Months Ended December 31, December 31, 2018 2017 2018 2017 Numerators: Net income (loss) available to Virtusa stockholders $ 12,576 $ (10,055) $ 7,785 $ (1,629) Less: Series A Convertible Preferred Stock dividends and accretion 1,087 1,087 3,262 2,875 Net income (loss) available to Virtusa common stockholders $ 11,489 $ (11,142) $ 4,523 $ (4,504) Denominators: Basic weighted average common shares outstanding 29,893,220 29,295,730 29,764,507 29,387,977 Basic earnings (loss) per share available to Virtusa common stockholders $ 0.38 $ (0.38) $ 0.15 $ (0.15) |
Schedule of components of diluted earnings (loss) per share | Three Months Ended Nine Months Ended December 31, December 31, 2018 2017 2018 2017 Numerators: Net income (loss) available to Virtusa common stockholders $ 11,489 $ (11,142) $ 4,523 $ (4,504) Add : Series A Convertible Preferred Stock dividends and accretion 1,087 — — — Net income (loss) available to Virtusa common stockholders and assumed conversion $ 12,576 $ (11,142) $ 4,523 $ (4,504) Denominators: Basic weighted average common shares outstanding 29,893,220 29,295,730 29,764,507 29,387,977 Dilutive effect of Series A Convertible Preferred Stock if converted 3,000,000 — — — Dilutive effect of employee stock options and unvested restricted stock awards and restricted stock units 768,508 — 833,607 — Weighted average shares—diluted 33,661,728 29,295,730 30,598,114 29,387,977 Diluted earnings (loss) per share available to Virtusa common stockholders $ 0.37 $ (0.38) $ 0.15 $ (0.15) |
Investment Securities (Tables)
Investment Securities (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Investment Securities | |
Summary of investment securities | The following is a summary of investment securities at December 31, 2018: Gross Gross Other-than temporary Amortized Unrealized Unrealized impairment Cost Gains Losses recognized in earnings Fair Value Available-for-sale securities: Corporate bonds: Current $ 8,800 $ — $ (21) $ — $ 8,779 Preference shares: 1,599 — — (885) 714 Time Deposits: Current 18,109 — — — 18,109 Equity securities: Mutual funds: Current 14,564 189 — — 14,753 Equity Shares/ Options: Non-current 7 141 — — 148 Total available-for-sale securities and equity securities $ 43,079 $ 330 $ (21) $ (885) $ 42,503 The following is a summary of investment securities at March 31, 2018: Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value Available-for-sale securities: Corporate bonds: Current $ 25,397 $ — $ (126) $ 25,271 Non-current 2,293 — (22) 2,271 Preference shares: Non-current 1,726 — (70) 1,656 Agency and short-term notes: Current 800 — (1) 799 Mutual funds: Current 1,540 11 — 1,551 Equity Shares/ Options: Non-current 15 198 — 213 Time deposits: Current 18,279 — — 18,279 Total available-for-sale securities $ 50,050 $ 209 $ (219) $ 50,040 |
Summary of other-than-temporary impairment unrealized losses recognized | Three Months Ended December 31, 2018 Unrealized losses recognized in other comprehensive loss as of September 30, 2018 $ 242 Add: unrealized losses recognized 643 Less: Other-than-temporary impairment recognized in earnings (885) Unrealized losses in other comprehensive loss as of December 31, 2018 $ — |
Schedule of proceeds from sales of available-for-sale investment securities and equity securities and gross gains and losses included in earnings as a result | Three Months Ended Nine Months Ended December 31, December 31, 2018 2017 2018 2017 Proceeds from sales or maturities of available-for-sale $ 27,633 $ 57,391 $ 88,204 $ 120,220 Gross gains $ 253 $ 241 $ 639 $ 916 Gross losses — (36) (32) (127) Net realized gains on sales of available-for-sale investment $ 253 $ 205 $ 607 $ 789 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
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, 2018: Level 1 Level 2 Level 3 Total Assets: Investments: Available-for-sales securities—current $ — $ 26,888 — $ 26,888 Equity securities—current — 14,753 — 14,753 Available-for-sales securities—non-current — 714 — 714 Equity securities—non-current — 148 — 148 Derivative financial instruments: Foreign currency derivative contracts — 3,774 — 3,774 Interest Rate Swap Contracts — 1,779 — 1,779 Total assets $ — $ 48,056 $ — $ 48,056 Liabilities: Foreign currency derivative contracts — 1,439 $ — 1,439 Interest Rate Swap Contracts — 2,333 — 2,333 Total liabilities $ — $ 3,772 $ — $ 3,772 The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2018: Level 1 Level 2 Level 3 Total Assets: Investments: Available-for-sales securities—current $ — $ 45,900 — $ 45,900 Available-for-sales securities—non-current — 4,140 — 4,140 Foreign currency derivative contracts — 2,122 — 2,122 Interest Rate Swap Contracts — 2,486 — 2,486 Total assets $ — $ 54,648 $ — $ 54,648 Liabilities: Foreign currency derivative contracts $ — 1,023 $ — 1,023 Interest Rate Swap Contracts — — — — Contingent consideration — — 100 100 Total liabilities $ — $ 1,023 $ 100 $ 1,123 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Derivative Financial Instruments | |
Schedule of fair value of derivative instruments included in the consolidated balance sheets | Derivatives designated as hedging instruments December 31, 2018 March 31, 2018 Foreign currency exchange contracts: Other current assets $ 2,987 $ 2,109 Other long-term assets $ 787 $ 13 Accrued expenses and other $ 1,439 $ 1,023 Long-term liabilities $ — $ — December 31, 2018 March 31, 2018 Interest rate swap contracts : Other long-term assets $ 1,779 $ 2,486 Long-term liabilities $ 2,333 $ — |
Schedule of effect of the Company’s foreign currency exchange and interest rate swap contracts on the consolidated financial statements | Amount of Gain or (Loss) Recognized in AOCI on Derivatives Derivatives Designated as Three Months Ended December 31, Nine Months Ended December 31, Cash Flow Hedging Relationships 2018 2017 2018 2017 Foreign currency exchange contracts $ 9,398 $ 4,211 $ (2,203) $ 4,811 Interest rate swaps $ (2,776) $ 518 $ (2,310) $ 281 Amount of Gain or (Loss) Reclassified from AOCI into Income Location of Gain or (Loss) Reclassified Three Months Ended December 31, Nine Months Ended December 31, from AOCI into Income 2018 2017 2018 2017 Revenue $ (510) $ 2,334 $ (1,673) $ 7,846 Costs of revenue $ (846) $ 1,432 $ (1,187) $ 5,484 Operating expenses $ (405) $ 750 $ (578) $ 3,060 Interest Expenses $ 288 59 $ 731 93 Amount of Gain or (Loss) Recognized in Income (loss) on Derivatives Three Months Ended Nine Months Ended Derivatives not Designated Location of Gain Or (Loss) December 31, December 31, as Hedging Instruments Recognized in Income on Derivatives 2018 2017 2018 2017 Foreign currency exchange contracts Foreign currency transaction gains (losses) $ — $ — $ — $ — Revenue $ 1,131 $ 216 $ 2,237 $ (120) Costs of revenue $ (784) $ (177) $ (1,537) $ 55 Selling, general and administrative expenses $ (75) $ (94) $ (93) $ (41) |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
eTouch | |
Acquisitions | |
Summary of the purchase price allocation | Amount Useful Life Consideration Transferred: Cash paid at closing $ 80,000 Fair value of the future payments 57,858 Tax related liability 10,417 Fair value of consideration 148,275 Less: Cash acquired 2,241 Total purchase price, net of cash acquired $ 146,034 Assets and Liabilities: Cash and cash equivalents 2,241 Accounts receivable 15,522 Unbilled receivables 2,986 Prepaid expenses 815 Other current assets 375 Property and equipment 2,798 Other long-term assets 98 Goodwill 79,747 Trademark 900 2 years Customer relationships 53,000 10 - 15 years Accounts payable (3,267) Deferred revenue (852) Accrued expenses and other current liabilities (721) Accrued employee compensation and benefits (4,197) Income taxes payable (250) Deferred income taxes (368) Other long-term liabilities (552) Total purchase price $ 148,275 |
Revenues (Tables)
Revenues (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Revenues | |
Schedule of capitalized costs to fulfill | Costs to Fulfill Balance at April 1, 2018 $ 4,278 Costs capitalized 2,155 Amortization expense (1,656) Foreign currency translation adjustments (174) Balance at December 31, 2018 $ 4,603 |
Schedule of significant movements in contract assets and deferred revenue balances | The table below shows significant movements during the nine months ended December 31, 2018 in contract assets: Contract Assets Balance at April 1, 2018 $ 15,998 Revenues recognized during the period but not yet billed 92,564 Amounts billed (95,457) Other (507) Balance at December 31, 2018 $ 12,598 Contract liabilities comprise amounts billed to customers for revenues not yet earned. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. The table below shows significant movements in the deferred revenue balances during the nine months ended December 31, 2018: Contract Liabilities Balance at April 1, 2018 $ 7,908 Amounts billed but not yet recognized as revenues 5,310 Revenues recognized related to the opening balance of deferred revenue (6,761) Other (337) Balance at December 31, 2018 $ 6,120 |
Schedule of disaggregation of revenue | Three Months Ended Nine Months Ended Revenue by geography: December 31, 2018 December 31, 2018 North America $ 224,143 $ 652,076 Europe 65,046 192,175 Rest of World 25,492 75,981 Consolidated revenue $ 314,681 $ 920,232 Three Months Ended Nine Months Ended Revenue by Customer’s Industry Groups December 31, 2018 December 31, 2018 Banking financial services insurance $ 197,329 $ 578,138 Communications and Technology 89,159 257,527 Media & Information and Other 28,193 84,567 Consolidated revenue $ 314,681 $ 920,232 Three Months Ended Nine Months Ended Revenue by service offerings December 31, 2018 December 31, 2018 Application outsourcing $ 165,986 $ 488,584 Consulting 148,695 431,648 Consolidated revenue $ 314,681 $ 920,232 Three Months Ended Nine Months Ended Revenue by contract type December 31, 2018 December 31, 2018 Time-and-materials $ 189,134 $ 552,530 Fixed-price* 125,547 367,702 Consolidated revenue $ 314,681 $ 920,232 |
ASU 2014-09 | |
Revenues | |
Summary of impact of changes in accounting policies after adoption of ASC 606 | As of December 31, 2018 Impacts of the New As reported Pro-forma Amounts Revenue standard Balance Sheet : Assets Other current assets (1) $ 26,978 $ 26,447 $ 531 Total current assets 531 Deferred income taxes (3) 24,220 24,527 (307) Other long-term assets (1) 22,201 22,244 (43) Total Assets $ 181 Liabilities, Series A Convertible Preferred Stock, Redeemable noncontrolling interest and Stockholders’ equity Deferred revenue (2) 6,120 7,051 (931) Total current liabilities (931) Stockholders’ equity: Retained earnings 243,006 241,894 1,112 Total liabilities, Series A convertible preferred stock, redeemable noncontrolling interest and stockholders’ equity $ 181 Three Months ended Nine Months ended December 31, 2018 December 31, 2018 Impact from Impact from Pro-forma New Revenue Pro-forma New Revenue As reported Amounts Standard As reported Amounts Standard Revenue (2) $ 314,681 $ 314,017 $ 664 $ 920,232 $ 919,301 $ 931 Costs of revenue (1) 221,461 221,560 (99) 654,288 654,776 (488) Gross profit 93,220 92,457 763 265,944 264,525 1,419 Operating expenses: Selling, general and administrative expenses 73,935 73,935 — 218,716 218,716 — Income from operations 19,285 18,522 763 47,228 45,809 1,419 Other income (expense) 3,912 3,912 - (22,173) (22,173) - Income before income tax expense 23,197 22,434 763 25,055 23,636 1,419 Income tax expense (3) 10,400 10,264 136 15,863 15,556 307 Net income $ 12,797 $ 12,170 $ 627 $ 9,192 8,080 $ 1,112 Less: net income attributable to noncontrolling interests, net of tax 221 221 — 1,407 1,407 — Net income available to Virtusa stockholders $ 12,576 $ 11,949 $ 627 $ 7,785 6,673 $ 1,112 Less: Series A Convertible Preferred Stock dividends and accretion 1,087 1,087 — 3,262 3,262 — Net income available to Virtusa common stockholders 11,489 10,862 627 4,523 3,411 1,112 Basic earnings per share available to Virtusa common stockholders $ 0.38 $ 0.36 $ 0.02 $ 0.15 0.11 $ 0.04 Diluted earnings per share available to Virtusa common stockholders $ 0.37 $ 0.35 $ 0.02 $ 0.15 0.11 $ 0.04 Notes (1) Reflects the impact of a longer period of amortization for costs to fulfill a contract. (2) Reflects the impact of changes in timing of revenue recognition on our software licenses and certain fixed-price application maintenance contracts. (3) Reflects the income tax impact of the above items. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets | |
Schedule of changes in goodwill | Amount Balance at April 1, 2018 $ 297,251 Preliminary fair value adjustment (5,870) Foreign currency translation adjustments (10,028) Balance at December 31, 2018 $ 281,353 |
Schedule of intangible asset carrying amounts acquired and amortization | The following are details of the Company’s intangible asset carrying amounts acquired and amortization at December 31, 2018. Weighted Gross Net Average Carrying Accumulated Carrying Useful Life Amount Amortization Amount Amortizable intangible assets: Customer relationships 12.2 $ 133,484 $ 41,899 $ 91,585 Trademark 2.1 3,693 3,111 582 Technology 5.0 500 341 159 12.0 $ 137,677 $ 45,351 $ 92,326 |
Concentration of Revenue and _2
Concentration of Revenue and Assets (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
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, 2018 2017 2018 2017 Customer revenue: United States of America $ 213,542 $ 162,549 $ 623,224 $ 453,013 United Kingdom 52,248 49,598 154,813 139,612 Rest of World 48,891 51,662 142,195 146,703 Consolidated revenue $ 314,681 $ 263,809 $ 920,232 $ 739,328 |
Schedule of long-lived assets, net of accumulated depreciation and amortization, attributed to geographic areas based on location of assets | December 31, March 31, 2018 2018 Long-lived assets, net of accumulated depreciation and amortization: United States of America $ 211,828 $ 213,024 India 262,320 276,512 Rest of World 24,448 25,281 Consolidated long-lived assets, net $ 498,596 $ 514,817 |
Schedule of revenue from significant clients as a percentage of Company's consolidated revenue | Three Months Ended Nine Months Ended December 31, December 31, 2018 2017 2018 2017 Customer 1 18.0 % 20.0 % 17.7 % 19.2 % |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Debt | |
Summary of short-term debt balances | December 31, 2018 March 31, 2018 Notes outstanding under the revolving credit facility $ — $ — Term loan- current maturities 12,500 12,500 Less: deferred financing costs, current (1,093) (1,093) Total $ 11,407 $ 11,407 |
Summary of long-term debt balances | December 31, 2018 March 31, 2018 Term loan $ 240,625 $ 250,000 Borrowings under revolving credit facility 87,000 55,000 Less: Current maturities (12,500) (12,500) Deferred financing costs, long-term (3,453) (4,273) Total $ 311,672 $ 288,227 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Accumulated Other Comprehensive Loss | |
Schedule of changes in accumulated other comprehensive loss by component | Three Months Ended Nine Months Ended December 31, December 31, 2018 2017 2018 2017 Investment securities Beginning balance $ (225) $ 220 $ 69 $ 57 Other comprehensive income (loss) (OCI) before reclassifications net of tax of $0, $38, $(52) and $138 (8) 29 (176) 229 Reclassifications from OCI to other income, net of tax of $0, $(18), $12 and $(33) 271 (21) 125 (17) Less : Noncontrolling interests, net of tax $(5), $(5), $7 and $(27) (8) (10) 12 (51) Comprehensive income (loss) on investment securities, net of tax of $(5), $15, $(33) and $78 255 (2) (39) 161 Closing balance $ 30 $ 218 $ 30 $ 218 Currency translation adjustments Beginning balance $ (57,318) $ (46,135) $ (41,207) $ (50,415) OCI before reclassifications (2,477) 4,641 (20,201) 9,068 Less: Noncontrolling interests (396) (1,943) 1,217 (2,090) Comprehensive income (loss) on currency translation adjustments (2,873) 2,698 (18,984) 6,978 Closing balance $ (60,191) $ (43,437) $ (60,191) $ (43,437) Cash flow hedges Beginning balance $ (5,179) $ 4,274 $ 1,881 $ 11,789 OCI before reclassifications net of tax of $1,608, $1,263, $(1,582), and $1,671 5,014 3,467 (2,931) 3,421 Reclassifications from OCI to —Revenue, net of tax of $178, $(808), $586 and $(2,714) 332 (1,526) 1,087 (5,132) —Costs of revenue, net of tax of $214, $(129), $303 and $(1,289) 632 (1,303) 884 (4,195) —Selling, general and administrative expenses, net of tax of $102, $(53), $147 and $(719) 303 (697) 431 (2,341) — Interest expenses, net of tax of $(74), $(12), $(188) and $(26) (214) (47) (543) (67) Less: Noncontrolling interests, net of tax $(23), $83, $17 and $450 (44) 157 35 850 Comprehensive loss on cash flow hedges, net of tax of $2,005, $344, $(717) and $(2,627) 6,023 51 (1,037) (7,464) Closing balance $ 844 $ 4,325 $ 844 $ 4,325 Benefit plans Beginning balance $ (1,511) $ (1,088) $ (1,424) $ (1,180) OCI before reclassifications net of tax of $0, $0, $348 and $0 3 — (349) — Reclassifications from OCI for prior service credit (cost) to: —Costs of revenue, net of tax of $0 for all periods — 2 — 6 —Selling, general and administrative expenses, net of tax of $0 for all periods — — — 1 Other income (expense), net of tax of $0 for all periods 14 42 Reclassifications from net actuarial gain (loss) amortization to: —Costs of revenue, net of tax of $0 for all periods — 26 — 82 —Selling, general and administrative expenses, net of tax of $0 for all periods — 12 — 36 Other income (expense), net of tax of $0 for all periods 36 (9) 113 (2) Other adjustments 20 — 171 — Less: Noncontrolling interests, net of tax $0 for all periods — — 9 — Comprehensive income (loss) on benefit plans, net of tax of $0, $0, $348 and $0 73 31 (14) 123 Closing balance (1,438) $ (1,057) (1,438) $ (1,057) Accumulated other comprehensive loss $ (60,755) $ (39,951) $ (60,755) $ (39,951) |
Unaudited Interim Financial I_4
Unaudited Interim Financial Information - ASC Topic 606 (Details) - USD ($) $ in Thousands | Apr. 01, 2018 | Jun. 30, 2018 | Dec. 31, 2018 | Mar. 31, 2018 |
Recent accounting pronouncements | ||||
Net increase to opening retained earnings, after tax | $ 464 | |||
Assets | ||||
Other current assets | $ 21,167 | $ 26,978 | $ 21,229 | |
Deferred income taxes | 31,386 | 24,220 | 31,528 | |
Other long-term assets | 12,440 | 22,201 | 11,772 | |
Stockholders' equity | ||||
Retained earnings | 238,483 | 243,006 | $ 238,019 | |
ASU 2014-09 | ||||
Recent accounting pronouncements | ||||
Net increase to opening retained earnings, after tax | 464 | |||
Tax impact on opening retained earnings | 142 | |||
ASU 2014-09 | Impact from New Revenue Standard, ASC Topic 606 | ||||
Assets | ||||
Other current assets | (62) | 531 | ||
Deferred income taxes | (142) | (307) | ||
Other long-term assets | 668 | (43) | ||
Stockholders' equity | ||||
Retained earnings | $ 464 | $ 1,112 |
Unaudited Interim Financial I_5
Unaudited Interim Financial Information - Restricted Cash (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from investing activities: | ||
Net cash provided by investing activities | $ (22,047) | $ 3,790 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (13,530) | 4,123 |
Net increase in cash, cash equivalents and restricted cash | 15,938 | 81,932 |
Cash, cash equivalents and restricted cash, beginning of period | 195,236 | 145,086 |
Cash, cash equivalents and restricted cash, end of period | $ 211,174 | 227,018 |
ASU 2016-18 | As Reported | ||
Cash flows from investing activities: | ||
Increase in restricted cash | (119) | |
Net cash provided by investing activities | 3,671 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 4,120 | |
Net increase in cash, cash equivalents and restricted cash | 81,810 | |
Cash, cash equivalents and restricted cash, beginning of period | 144,908 | |
Cash, cash equivalents and restricted cash, end of period | 226,718 | |
ASU 2016-18 | Effect | ||
Cash flows from investing activities: | ||
Increase in restricted cash | 119 | |
Net cash provided by investing activities | 119 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 3 | |
Net increase in cash, cash equivalents and restricted cash | 122 | |
Cash, cash equivalents and restricted cash, beginning of period | 178 | |
Cash, cash equivalents and restricted cash, end of period | $ 300 |
Earnings (Loss) per Share - Bas
Earnings (Loss) per Share - Basic earnings (loss) per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Numerator: | ||||
Net income (loss) available to Virtusa stockholders | $ 12,576 | $ (10,055) | $ 7,785 | $ (1,629) |
Less: Series A Convertible Preferred Stock dividends and accretion | 1,087 | 1,087 | 3,262 | 2,875 |
Net income (loss) available to Virtusa common stockholders | $ 11,489 | $ (11,142) | $ 4,523 | $ (4,504) |
Denominator: | ||||
Basic weighted average common shares outstanding (in shares) | 29,893,220 | 29,295,730 | 29,764,507 | 29,387,977 |
Basic earnings (loss) per share available to Virtusa common stockholders (in dollars per share) | $ 0.38 | $ (0.38) | $ 0.15 | $ (0.15) |
Earnings (Loss) per Share - Dil
Earnings (Loss) per Share - Diluted earnings (loss) per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Numerator: | ||||
Net income (loss) available to Virtusa common stockholders | $ 11,489 | $ (11,142) | $ 4,523 | $ (4,504) |
Add: Series A Convertible Preferred Stock dividends and accretion | 1,087 | |||
Net income (loss) available to Virtusa common stockholders and assumed conversion | $ 12,576 | $ (11,142) | $ 4,523 | $ (4,504) |
Denominator: | ||||
Basic weighted average common shares outstanding (in shares) | 29,893,220 | 29,295,730 | 29,764,507 | 29,387,977 |
Dilutive effect of Series A Convertible Preferred Stock if converted | 3,000,000 | |||
Dilutive effect of employee stock options and unvested restricted stock awards and restricted stock units (in shares) | 768,508 | 833,607 | ||
Weighted average shares-diluted (in shares) | 33,661,728 | 29,295,730 | 30,598,114 | 29,387,977 |
Diluted earnings (loss) per share available to Virtusa common stockholders (in dollars per share) | $ 0.37 | $ (0.38) | $ 0.15 | $ (0.15) |
Earnings (Loss) per Share - Ant
Earnings (Loss) per Share - Anti-dilutive securities (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Employee stock options and unvested restricted stock awards and restricted stock units | ||||
Anti-dilutive securities | ||||
Shares excluded from computation of earnings (loss) per share | 20,617 | 1,366,212 | 13,745 | 1,598,783 |
Series A Convertible Preferred Stock | ||||
Anti-dilutive securities | ||||
Shares excluded from computation of earnings (loss) per share | 0 | 3,000,000 | 3,000,000 | 2,637,363 |
Investment Securities (Details)
Investment Securities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2018 | |
Total available-for-sale and equity securities | |||||
Amortized Cost | $ 43,079 | $ 43,079 | |||
Gross Unrealized Gains | 330 | 330 | |||
Gross Unrealized Losses | (21) | (21) | |||
Other-than temporary impairment recognized in earnings | (885) | (885) | |||
Fair Value | 42,503 | 42,503 | |||
Available-for-sale securities (prior guidance) | |||||
Amortized Cost | $ 50,050 | ||||
Gross Unrealized Gains | 209 | ||||
Gross Unrealized Losses | (219) | ||||
Fair Value | 50,040 | ||||
Other-than-temporary impairment losses recognized | |||||
Unrealized losses recognized in other comprehensive loss at beginning | 242 | ||||
Add: unrealized losses recognized | 643 | ||||
Less: Other than temporary impairment recognized in earnings | (885) | (885) | |||
Proceeds from sales of available-for-sale investment securities and the gross gains and losses | |||||
Proceeds from sales or maturities of available-for-sale investment securities and equity securities | 27,633 | $ 57,391 | 88,204 | $ 120,220 | |
Gross gains | 253 | 241 | 639 | 916 | |
Gross losses | (36) | (32) | (127) | ||
Net realized gains on sales of available-for-sale investment securities and equity securities | 253 | $ 205 | 607 | $ 789 | |
Corporate bonds | Current | |||||
Available-for-sale securities | |||||
Amortized Cost | 8,800 | 8,800 | |||
Gross Unrealized Losses | (21) | (21) | |||
Fair Value | 8,779 | 8,779 | |||
Available-for-sale securities (prior guidance) | |||||
Amortized Cost | 25,397 | ||||
Gross Unrealized Losses | (126) | ||||
Fair Value | 25,271 | ||||
Corporate bonds | Noncurrent | |||||
Available-for-sale securities (prior guidance) | |||||
Amortized Cost | 2,293 | ||||
Gross Unrealized Losses | (22) | ||||
Fair Value | 2,271 | ||||
Preference shares | Noncurrent | |||||
Available-for-sale securities | |||||
Amortized Cost | 1,599 | 1,599 | |||
Other-than temporary impairment recognized in earnings | (885) | ||||
Fair Value | 714 | 714 | |||
Available-for-sale securities (prior guidance) | |||||
Amortized Cost | 1,726 | ||||
Gross Unrealized Losses | (70) | ||||
Fair Value | 1,656 | ||||
Agency and short-term notes | Current | |||||
Available-for-sale securities (prior guidance) | |||||
Amortized Cost | 800 | ||||
Gross Unrealized Losses | (1) | ||||
Fair Value | 799 | ||||
Time Deposits | Current | |||||
Available-for-sale securities | |||||
Amortized Cost | 18,109 | 18,109 | |||
Fair Value | 18,109 | 18,109 | |||
Available-for-sale securities (prior guidance) | |||||
Amortized Cost | 18,279 | ||||
Fair Value | 18,279 | ||||
Mutual funds | Current | |||||
Equity securities | |||||
Amortized Cost | 14,564 | 14,564 | |||
Gross Unrealized Gains | 189 | 189 | |||
Fair Value | 14,753 | 14,753 | |||
Available-for-sale securities (prior guidance) | |||||
Amortized Cost | 1,540 | ||||
Gross Unrealized Gains | 11 | ||||
Fair Value | 1,551 | ||||
Equity Shares/ Options | Noncurrent | |||||
Equity securities | |||||
Amortized Cost | 7 | 7 | |||
Gross Unrealized Gains | 141 | 141 | |||
Fair Value | $ 148 | $ 148 | |||
Available-for-sale securities (prior guidance) | |||||
Amortized Cost | 15 | ||||
Gross Unrealized Gains | 198 | ||||
Fair Value | $ 213 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments - Financial assets and liabilities measured at fair value on a recurring basis (Details) - Fair Value Measurements Recurring - USD ($) $ in Thousands | Dec. 31, 2018 | Mar. 31, 2018 |
Investments: | ||
Available-for-sales securities - current | $ 26,888 | |
Equity securities - current | 14,753 | |
Available-for-sales securities - non-current | 714 | |
Equity securities - non-current | 148 | |
Available-for-sales securities—current (prior guidance) | $ 45,900 | |
Available-for-sales securities—non-current (prior guidance) | 4,140 | |
Derivative financial instruments: | ||
Foreign currency derivative contracts | 3,774 | 2,122 |
Interest Rate Swap Contracts | 1,779 | 2,486 |
Total assets | 48,056 | 54,648 |
Liabilities: | ||
Foreign currency derivative contracts | 1,439 | 1,023 |
Interest Rate Swap Contracts | 2,333 | |
Contingent consideration | 100 | |
Total liabilities | 3,772 | 1,123 |
Fair Value Inputs Level2 | ||
Investments: | ||
Available-for-sales securities - current | 26,888 | |
Equity securities - current | 14,753 | |
Available-for-sales securities - non-current | 714 | |
Equity securities - non-current | 148 | |
Available-for-sales securities—current (prior guidance) | 45,900 | |
Available-for-sales securities—non-current (prior guidance) | 4,140 | |
Derivative financial instruments: | ||
Foreign currency derivative contracts | 3,774 | 2,122 |
Interest Rate Swap Contracts | 1,779 | 2,486 |
Total assets | 48,056 | 54,648 |
Liabilities: | ||
Foreign currency derivative contracts | 1,439 | 1,023 |
Interest Rate Swap Contracts | 2,333 | |
Total liabilities | $ 3,772 | 1,023 |
Fair Value Inputs Level3 | ||
Liabilities: | ||
Contingent consideration | 100 | |
Total liabilities | $ 100 |
Derivative Financial Instrume_3
Derivative Financial Instruments - Foreign Currency Derivatives (Details) - Foreign currency exchange contracts - USD ($) $ in Thousands | 9 Months Ended | |
Dec. 31, 2018 | Mar. 31, 2018 | |
Derivative Financial Instruments | ||
Notional value of outstanding contracts | $ 158,881 | $ 140,347 |
Unrealized net gains related to derivative instruments expected to be reclassified from AOCI into earnings during the next 12 months | $ 1,548 | |
Maximum [Member] | ||
Derivative Financial Instruments | ||
Outstanding term of derivative instruments | 18 months |
Derivative Financial Instrume_4
Derivative Financial Instruments - Interest rate swaps (Details) $ in Thousands | 3 Months Ended |
Dec. 31, 2018USD ($) | |
Interest rate swaps | |
Interest rate cash flow hedges | |
Notional value of outstanding contracts | $ 163,812 |
Outstanding term of derivative instruments | 4 years |
2016 interest rate swaps | 1-month LIBOR | |
Interest rate cash flow hedges | |
Blended weighted average rate | 1.025% |
2018 interest rate swaps | |
Interest rate cash flow hedges | |
fixed interest rate | 2.85% |
Percentage of coverage target retain | 50.00% |
2018 interest rate swaps | LIBOR | |
Interest rate cash flow hedges | |
Percentage of coverage on debt | 50.00% |
Derivative Financial Instrume_5
Derivative Financial Instruments - Fair Value (Details) - Designated As Hedging Instrument - USD ($) $ in Thousands | Dec. 31, 2018 | Mar. 31, 2018 |
Foreign currency exchange contracts | ||
Foreign currency exchange and interest rate swap contracts | ||
Other current assets | $ 2,987 | $ 2,109 |
Other long-term assets | 787 | 13 |
Accrued expenses and other | 1,439 | 1,023 |
Interest rate swaps | ||
Foreign currency exchange and interest rate swap contracts | ||
Other long-term assets | 1,779 | $ 2,486 |
Long-term liabilities | $ 2,333 |
Derivative Financial Instrume_6
Derivative Financial Instruments - Effect of foreign currency exchange and interest rate swap contracts (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Designated As Hedging Instrument | Cash flow hedges | Revenue | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (loss) | $ (510) | $ 2,334 | $ (1,673) | $ 7,846 |
Designated As Hedging Instrument | Cash flow hedges | Cost of revenue. | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (loss) | (846) | 1,432 | (1,187) | 5,484 |
Designated As Hedging Instrument | Cash flow hedges | Operating Expense | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (loss) | (405) | 750 | (578) | 3,060 |
Designated As Hedging Instrument | Cash flow hedges | Interest expenses | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (loss) | 288 | 59 | 731 | 93 |
Designated As Hedging Instrument | Cash flow hedges | Foreign currency exchange contracts | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in AOCI on Derivatives | 9,398 | 4,211 | (2,203) | 4,811 |
Designated As Hedging Instrument | Cash flow hedges | Interest rate swaps | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in AOCI on Derivatives | (2,776) | 518 | (2,310) | 281 |
Nondesignated | Foreign currency exchange contracts | Revenue | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income (loss) on Derivatives | 1,131 | 216 | 2,237 | (120) |
Nondesignated | Foreign currency exchange contracts | Cost of revenue. | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income (loss) on Derivatives | (784) | (177) | (1,537) | 55 |
Nondesignated | Foreign currency exchange contracts | Selling, general and administrative expenses | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income (loss) on Derivatives | $ (75) | $ (94) | $ (93) | $ (41) |
Acquisitions - eTouch - Transac
Acquisitions - eTouch - Transaction details (Details) $ in Thousands | Sep. 12, 2019USD ($) | Mar. 12, 2019USD ($) | Mar. 12, 2018USD ($)tranche | Dec. 31, 2018USD ($) |
Acquisitions | ||||
Increase (reduction) in goodwill related to fair value assessment | $ (5,870) | |||
Tax liability payable | ||||
Acquisitions | ||||
Increase (reduction) in goodwill related to fair value assessment | 1,104 | |||
Customer relationships and trademark | ||||
Acquisitions | ||||
Increase (reduction) in goodwill related to fair value assessment | (7,100) | |||
Other adjustments | ||||
Acquisitions | ||||
Increase (reduction) in goodwill related to fair value assessment | $ 126 | |||
eTouch | ||||
Acquisitions | ||||
Cash purchase price | $ 140,000 | |||
Maximum additional amount set aside for retention bonuses | $ 15,000 | |||
Number of tranches for payment of purchase price | tranche | 3 | |||
Cash payments for acquisition | $ 80,000 | |||
Consideration paid at closing, from cash on hand | 10,000 | |||
eTouch | Scenario Forecast | ||||
Acquisitions | ||||
Cash payments for acquisition | $ 17,500 | $ 42,500 | ||
eTouch | Term loan and delayed-draw term loan | Credit Agreement | JPM | ||||
Acquisitions | ||||
Consideration paid at closing, from cash proceeds under credit agreement | 70,000 | |||
eTouch US | ||||
Acquisitions | ||||
Cash payments for acquisition | 66,000 | |||
eTouch India | ||||
Acquisitions | ||||
Cash payments for acquisition | $ 14,000 |
Acquisitions - eTouch - Purchas
Acquisitions - eTouch - Purchase price allocation (Details) - USD ($) $ in Thousands | Mar. 12, 2018 | Dec. 31, 2018 | Mar. 31, 2018 |
Assets and Liabilities: | |||
Goodwill | $ 281,353 | $ 297,251 | |
Weighted Average Useful Life | 12 years | ||
Trademarks | |||
Assets and Liabilities: | |||
Weighted Average Useful Life | 2 years 1 month 6 days | ||
Customer relationships | |||
Assets and Liabilities: | |||
Weighted Average Useful Life | 12 years 2 months 12 days | ||
eTouch | |||
Consideration Transferred: | |||
Cash paid at closing | $ 80,000 | ||
Fair value of the future payments | 57,858 | ||
Tax related liability | 10,417 | ||
Fair value of consideration | 148,275 | ||
Less: Cash acquired | 2,241 | ||
Total purchase price, net of cash acquired | 146,034 | ||
Assets and Liabilities: | |||
Cash and cash equivalents | 2,241 | ||
Accounts receivable | 15,522 | ||
Unbilled receivables | 2,986 | ||
Prepaid expenses | 815 | ||
Other current assets | 375 | ||
Property and equipment | 2,798 | ||
Other long-term assets | 98 | ||
Goodwill | 79,747 | ||
Accounts payable | (3,267) | ||
Deferred revenue | (852) | ||
Accrued expenses and other current liabilities | (721) | ||
Accrued employee compensation and benefits | (4,197) | ||
Income taxes payable | (250) | ||
Deferred income taxes | (368) | ||
Other long-term liabilities | (552) | ||
Total purchase price | 148,275 | ||
eTouch | Trademarks | |||
Assets and Liabilities: | |||
Intangible assets | $ 900 | ||
Weighted Average Useful Life | 2 years | ||
eTouch | Customer relationships | |||
Assets and Liabilities: | |||
Intangible assets | $ 53,000 | ||
eTouch | Customer relationships | Minimum [Member] | |||
Assets and Liabilities: | |||
Weighted Average Useful Life | 10 years | ||
eTouch | Customer relationships | Maximum [Member] | |||
Assets and Liabilities: | |||
Weighted Average Useful Life | 15 years |
Revenues - Capitalized costs (D
Revenues - Capitalized costs (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2018USD ($) | |
Capitalized costs to fulfill | |
Balance at the beginning of the period | $ 4,278 |
Costs capitalized | 2,155 |
Amortization expense | (1,656) |
Foreign currency translation adjustments | (174) |
Balance at the end of the period | $ 4,603 |
Revenues - Impacts of changes i
Revenues - Impacts of changes in accounting policies after adoption of ASC 606 on the Company’s consolidated financial statements (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Apr. 01, 2018 | Mar. 31, 2018 | |
Assets | ||||||
Other current assets | $ 26,978 | $ 26,978 | $ 21,167 | $ 21,229 | ||
Total current assets | 566,711 | 566,711 | 549,335 | |||
Deferred income taxes | 24,220 | 24,220 | 31,386 | 31,528 | ||
Other long-term assets | 22,201 | 22,201 | 12,440 | 11,772 | ||
Total assets | 1,114,045 | 1,114,045 | 1,113,180 | |||
Liabilities, Series A convertible preferred stock, redeemable noncontrolling interest and stockholders’ equity | ||||||
Deferred revenue | 6,120 | 6,120 | 7,908 | |||
Total current liabilities | 240,836 | 240,836 | 216,700 | |||
Stockholders' equity: | ||||||
Retained earnings | 243,006 | 243,006 | 238,483 | 238,019 | ||
Total liabilities, Series A convertible preferred stock, redeemable noncontrolling interest and stockholders’ equity | 1,114,045 | 1,114,045 | $ 1,113,180 | |||
Consolidated Statements of Income | ||||||
Revenue | 314,681 | 920,232 | ||||
Costs of revenue | 221,461 | $ 183,420 | 654,288 | $ 528,103 | ||
Gross profit | 93,220 | 80,389 | 265,944 | 211,225 | ||
Operating expenses: | ||||||
Selling, general and administrative expenses | 73,935 | 66,726 | 218,716 | 181,213 | ||
Income from operations | 19,285 | 13,663 | 47,228 | 30,012 | ||
Other income (expense) | 3,912 | 2,843 | (22,173) | 1,031 | ||
Income before income tax expense | 23,197 | 16,506 | 25,055 | 31,043 | ||
Income tax expense | 10,400 | 24,427 | 15,863 | 26,725 | ||
Net income (loss) | 12,797 | (7,921) | 9,192 | 4,318 | ||
Less: net income attributable to noncontrolling interests, net of tax | 221 | 2,134 | 1,407 | 5,947 | ||
Net income (loss) available to Virtusa stockholders | 12,576 | (10,055) | 7,785 | (1,629) | ||
Less: Series A Convertible Preferred Stock dividends and accretion | 1,087 | 1,087 | 3,262 | 2,875 | ||
Net income (loss) available to Virtusa common stockholders | $ 11,489 | $ (11,142) | $ 4,523 | $ (4,504) | ||
Basic earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.38 | $ (0.38) | $ 0.15 | $ (0.15) | ||
Diluted earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.37 | $ (0.38) | $ 0.15 | $ (0.15) | ||
Pro-forma Amounts | ASU 2014-09 | ||||||
Assets | ||||||
Other current assets | $ 26,447 | $ 26,447 | ||||
Deferred income taxes | 24,527 | 24,527 | ||||
Other long-term assets | 22,244 | 22,244 | ||||
Liabilities, Series A convertible preferred stock, redeemable noncontrolling interest and stockholders’ equity | ||||||
Deferred revenue | 7,051 | 7,051 | ||||
Stockholders' equity: | ||||||
Retained earnings | 241,894 | 241,894 | ||||
Consolidated Statements of Income | ||||||
Revenue | 314,017 | 919,301 | ||||
Costs of revenue | 221,560 | 654,776 | ||||
Gross profit | 92,457 | 264,525 | ||||
Operating expenses: | ||||||
Selling, general and administrative expenses | 73,935 | 218,716 | ||||
Income from operations | 18,522 | 45,809 | ||||
Other income (expense) | 3,912 | (22,173) | ||||
Income before income tax expense | 22,434 | 23,636 | ||||
Income tax expense | 10,264 | 15,556 | ||||
Net income (loss) | 12,170 | 8,080 | ||||
Less: net income attributable to noncontrolling interests, net of tax | 221 | 1,407 | ||||
Net income (loss) available to Virtusa stockholders | 11,949 | 6,673 | ||||
Less: Series A Convertible Preferred Stock dividends and accretion | 1,087 | 3,262 | ||||
Net income (loss) available to Virtusa common stockholders | $ 10,862 | $ 3,411 | ||||
Basic earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.36 | $ 0.11 | ||||
Diluted earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.35 | $ 0.11 | ||||
Impact from New Revenue Standard, ASC Topic 606 | ASU 2014-09 | ||||||
Assets | ||||||
Other current assets | $ 531 | $ 531 | (62) | |||
Total current assets | 531 | 531 | ||||
Deferred income taxes | (307) | (307) | (142) | |||
Other long-term assets | (43) | (43) | 668 | |||
Total assets | 181 | 181 | ||||
Liabilities, Series A convertible preferred stock, redeemable noncontrolling interest and stockholders’ equity | ||||||
Deferred revenue | (931) | (931) | ||||
Total current liabilities | (931) | (931) | ||||
Stockholders' equity: | ||||||
Retained earnings | 1,112 | 1,112 | $ 464 | |||
Total liabilities, Series A convertible preferred stock, redeemable noncontrolling interest and stockholders’ equity | 181 | 181 | ||||
Consolidated Statements of Income | ||||||
Revenue | 664 | 931 | ||||
Costs of revenue | (99) | (488) | ||||
Gross profit | 763 | 1,419 | ||||
Operating expenses: | ||||||
Income from operations | 763 | 1,419 | ||||
Income before income tax expense | 763 | 1,419 | ||||
Income tax expense | 136 | 307 | ||||
Net income (loss) | 627 | 1,112 | ||||
Net income (loss) available to Virtusa stockholders | 627 | 1,112 | ||||
Net income (loss) available to Virtusa common stockholders | $ 627 | $ 1,112 | ||||
Basic earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.02 | $ 0.04 | ||||
Diluted earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.02 | $ 0.04 |
Revenues - Receivable and Contr
Revenues - Receivable and Contract Balances (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2018USD ($) | |
Significant movements in contract assets | |
Balance at the beginning of the period | $ 15,998 |
Revenues recognized during the period but not yet billed | 92,564 |
Amounts billed | (95,457) |
Other | (507) |
Balance at the end of the period | 12,598 |
Significant movements in deferred revenue balances | |
Balance at the beginning of the period | 7,908 |
Amounts billed but not yet recognized as revenues | 5,310 |
Revenues recognized related to the opening balance of deferred revenue | (6,761) |
Other | (337) |
Balance at the end of the period | 6,120 |
Aggregate amount of transaction price allocated to remaining performance obligations | $ 50,363 |
Revenues - Remaining performanc
Revenues - Remaining performance obligation (Details) | Dec. 31, 2018 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-12-31 | |
Remaining performance obligation, expected period of recognition | 4 years |
Revenues - Disaggregation of Re
Revenues - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Dec. 31, 2018 | |
Disaggregation of Revenue | ||
Consolidated revenue | $ 314,681 | $ 920,232 |
Time-and-materials | ||
Disaggregation of Revenue | ||
Consolidated revenue | 189,134 | 552,530 |
Fixed-price | ||
Disaggregation of Revenue | ||
Consolidated revenue | 125,547 | 367,702 |
Application outsourcing | ||
Disaggregation of Revenue | ||
Consolidated revenue | 165,986 | 488,584 |
Consulting | ||
Disaggregation of Revenue | ||
Consolidated revenue | 148,695 | 431,648 |
Banking financial services insurance | ||
Disaggregation of Revenue | ||
Consolidated revenue | 197,329 | 578,138 |
Communications and Technology | ||
Disaggregation of Revenue | ||
Consolidated revenue | 89,159 | 257,527 |
Media & Information and Other | ||
Disaggregation of Revenue | ||
Consolidated revenue | 28,193 | 84,567 |
North America | ||
Disaggregation of Revenue | ||
Consolidated revenue | 224,143 | 652,076 |
Europe | ||
Disaggregation of Revenue | ||
Consolidated revenue | 65,046 | 192,175 |
Rest Of World | ||
Disaggregation of Revenue | ||
Consolidated revenue | $ 25,492 | $ 75,981 |
Series A Convertible Preferre_2
Series A Convertible Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands | May 03, 2017 | Dec. 31, 2018 | Dec. 31, 2017 |
Series A Convertible Preferred Stock | |||
Cash dividends paid | $ 3,138 | $ 2,081 | |
Series A Convertible Preferred Stock | |||
Series A Convertible Preferred Stock | |||
Direct and incremental expenses incurred | $ 1,154 | ||
Declared and accrued dividends | 686 | ||
Cash dividends paid | $ 3,138 | $ 2,081 | |
Series A Convertible Preferred Stock | After May 3, 2024 | |||
Series A Convertible Preferred Stock | |||
Increase in preference dividend rate, per annum upon failure to repurchase (as a percent) | 1.00% | ||
Additional increase in preference dividend rate, per annum on each anniversary of the date that the Company is required to effect such repurchase (as a percent) | 1.00% | ||
Series A Convertible Preferred Stock | After May 3, 2024 | Maximum [Member] | |||
Series A Convertible Preferred Stock | |||
Dividend rate (as a percent) | 6.875% | ||
Series A Convertible Preferred Stock | Orogen | |||
Series A Convertible Preferred Stock | |||
Sale of convertible preferred stock (in shares) | 108,000 | ||
Shares issuable upon conversion (in shares) | 3,000,000 | ||
Aggregate purchase price | $ 108,000 | ||
Conversion price (in dollars per share) | $ 36 | ||
Dividend rate (as a percent) | 3.875% |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2018USD ($)segment | |
Goodwill and Intangible Assets | |
Number of operating segments | segment | 1 |
Changes in goodwill | |
Balance at the beginning of the period | $ 297,251 |
Preliminary fair value adjustment | (5,870) |
Foreign currency translation adjustments | (10,028) |
Balance at the end of the period | 281,353 |
Acquisition costs and goodwill deductible for tax purposes | 147,216 |
Acquisition costs and goodwill not deductible for tax purposes | $ 147,041 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Intangible assets (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Dec. 31, 2018 | Mar. 31, 2018 | |
Intangible Assets | ||
Weighted Average Useful Life | 12 years | |
Gross Carrying Amount | $ 137,677 | |
Accumulated Amortization | 45,351 | |
Net Carrying Amount | $ 92,326 | $ 96,001 |
Customer relationships | ||
Intangible Assets | ||
Weighted Average Useful Life | 12 years 2 months 12 days | |
Gross Carrying Amount | $ 133,484 | |
Accumulated Amortization | 41,899 | |
Net Carrying Amount | $ 91,585 | |
Trademarks | ||
Intangible Assets | ||
Weighted Average Useful Life | 2 years 1 month 6 days | |
Gross Carrying Amount | $ 3,693 | |
Accumulated Amortization | 3,111 | |
Net Carrying Amount | $ 582 | |
Technology | ||
Intangible Assets | ||
Weighted Average Useful Life | 5 years | |
Gross Carrying Amount | $ 500 | |
Accumulated Amortization | 341 | |
Net Carrying Amount | $ 159 |
Income Taxes - Tax Act (Details
Income Taxes - Tax Act (Details) $ in Thousands | Jan. 01, 2018 | Jul. 31, 2018USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017 | Dec. 31, 2018USD ($) | Dec. 31, 2017 | Mar. 31, 2018USD ($)installment |
Income Taxes | |||||||
Effective tax (benefit) rate (as a percent) | 44.80% | 148.00% | 63.30% | 86.10% | |||
Deferred tax charge for disregarded entity election | $ 6,288 | ||||||
Statutory tax rate (as a percent) | 21.00% | ||||||
Effect of Tax Cuts and Jobs Act | |||||||
Provisional charge for deemed repatriation of unremitted earnings | $ 17,834 | ||||||
Provisional charge for remeasurement of deferred tax assets | $ 4,890 | ||||||
Number of installments to pay deemed repatriation tax on unremitted earnings | installment | 8 | ||||||
Payment for deemed repatriation | $ 1,427 | ||||||
Reduction in income tax expense | $ (1,628) | ||||||
Total impact from the Tax Act | 21,096 | ||||||
Deemed repatriation included in income taxes payable | 1,139 | 1,139 | |||||
Deemed repatriation included in long-term liabilities | 13,640 | 13,640 | |||||
Deemed repatriation liability | 14,779 | 14,779 | |||||
United States of America | |||||||
Effect of Tax Cuts and Jobs Act | |||||||
Deferred tax asset | 19,573 | 19,573 | |||||
United Kingdom | |||||||
Effect of Tax Cuts and Jobs Act | |||||||
Deferred tax asset | $ 1,726 | $ 1,726 |
Income Taxes - Income tax holid
Income Taxes - Income tax holiday (Details) | 9 Months Ended |
Dec. 31, 2018a | |
Indian Operations In Special Economic Zone | Hyderabad, India | |
Income Taxes | |
Parcel of land (in acres) | 6.3 |
Consecutive period of income tax exemption | 10 years |
Income tax benefits total eligibility period | 15 years |
Virtusa Private Limited | L [K] | |
Income Taxes | |
Income tax exemption period | 12 years |
Income Taxes - Unrecognized tax
Income Taxes - Unrecognized tax benefits and other (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2018 | |
Income Taxes | |||
Total liability for unrecognized tax benefits | $ 7,013 | $ 7,544 | |
Decrease in unrecognized tax benefits | 531 | $ 107 | |
Cash, cash equivalents, short-term investments and long-term investments available for distribution if not indefinitely reinvested | $ 188,183 |
Concentration of Revenue and _3
Concentration of Revenue and Assets - Geographic concentration (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2018 | |
Concentration of Revenue and Assets | |||||
Revenue | $ 314,681 | $ 263,809 | $ 920,232 | $ 739,328 | |
Long-lived assets, net | 498,596 | 498,596 | $ 514,817 | ||
United States of America | |||||
Concentration of Revenue and Assets | |||||
Revenue | 213,542 | 162,549 | 623,224 | 453,013 | |
Long-lived assets, net | 211,828 | 211,828 | 213,024 | ||
United Kingdom | |||||
Concentration of Revenue and Assets | |||||
Revenue | 52,248 | 49,598 | 154,813 | 139,612 | |
India | |||||
Concentration of Revenue and Assets | |||||
Long-lived assets, net | 262,320 | 262,320 | 276,512 | ||
Rest Of World | |||||
Concentration of Revenue and Assets | |||||
Revenue | 48,891 | $ 51,662 | 142,195 | $ 146,703 | |
Long-lived assets, net | $ 24,448 | $ 24,448 | $ 25,281 |
Concentration of Revenue and _4
Concentration of Revenue and Assets - Revenue percentage (Details) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Customer Concentration Risk | Sales Revenue Net [Member] | Customer One [Member] | ||||
Concentration of Revenue and Assets | ||||
Revenue from significant clients as a percentage of consolidated revenue | 18.00% | 20.00% | 17.70% | 19.20% |
Debt - Credit Agreement (Detail
Debt - Credit Agreement (Details) - USD ($) $ in Thousands | Aug. 14, 2018 | Feb. 06, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Feb. 05, 2018 |
Debt | |||||
Amount drawn down on credit facility | $ 32,000 | $ 25,000 | |||
Credit Agreement | JPM | |||||
Debt | |||||
Term of credit facility | 5 years | ||||
Credit Agreement | JPM | Revolving credit facility | |||||
Debt | |||||
Maximum borrowing capacity under the credit agreement | $ 200,000 | ||||
Amount drawn down on credit facility | $ 32,000 | ||||
Interest rate (as a percent) | 4.95% | ||||
Credit Agreement | JPM | Term loan and delayed-draw term loan | |||||
Debt | |||||
Maximum borrowing capacity under the credit agreement | $ 250,000 | ||||
Required principal payments per quarter | $ 3,125 | ||||
Frequency of required principal payments | quarterly | ||||
Interest rate (as a percent) | 5.03% | ||||
Prior Credit Agreement | JPM | |||||
Debt | |||||
Maximum borrowing capacity under the credit agreement | $ 300,000 |
Debt - Current portion of long-
Debt - Current portion of long-term debt (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Mar. 31, 2018 |
Current portion of long-term debt | ||
Total | $ 11,407 | $ 11,407 |
JPM | ||
Current portion of long-term debt | ||
Term loan - current maturities | 12,500 | 12,500 |
Less: deferred financing costs, current | (1,093) | (1,093) |
Total | $ 11,407 | $ 11,407 |
Debt - Long-term debt, less cur
Debt - Long-term debt, less current portion (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Mar. 31, 2018 |
Less: | ||
Total | $ 311,672 | $ 288,227 |
JPM | ||
Less: | ||
Current maturities | (12,500) | (12,500) |
Deferred financing costs, long-term | (3,453) | (4,273) |
Total | 311,672 | 288,227 |
Term loan and delayed-draw term loan | JPM | ||
Long-term debt, less current portion | ||
Term loan and borrowings under revolving credit facility | 240,625 | 250,000 |
Revolving credit facility | JPM | ||
Long-term debt, less current portion | ||
Term loan and borrowings under revolving credit facility | $ 87,000 | $ 55,000 |
Debt - Sale of accounts receiva
Debt - Sale of accounts receivable (Details) - U.K. Subsidiary $ in Thousands | 9 Months Ended |
Dec. 31, 2018USD ($) | |
Debt | |
Receivables sold under the terms of the financing agreement | $ 18,453 |
Amounts due related to a financing agreement to sell certain accounts receivable balances | $ 0 |
Redeemable noncontrolling int_2
Redeemable noncontrolling interest (Details) $ in Thousands | Aug. 01, 2018₨ / shares | Dec. 31, 2018USD ($)shares |
Redeemable noncontrolling interest | ||
Aggregate purchase price of shares of delisted entity | $ 30,387 | |
Virtusa India Private Limited | Polaris | ||
Redeemable noncontrolling interest | ||
Shares held by noncontrolling interest shareholders of delisted entity (as a percent) | 3.34% | |
Virtusa India Private Limited | Polaris | ||
Redeemable noncontrolling interest | ||
Period for public shareholders to tender shares after delisting | 1 year | |
Exit price in delisting of subsidiary (in INR per share) | ₨ / shares | ₨ 480 | |
Number of shares purchased from stockholders of delisted subsidiary | shares | 4,436,342 | |
Shares purchased from stockholders of delisted subsidiary (as a percent) | 4.30% | |
Aggregate purchase price of shares of delisted entity | $ 30,387 | |
Number of shares held by noncontrolling interest shareholders of delisted entity | shares | 3,450,896 | |
Fair value of the redeemable noncontrolling interest | $ 24,924 | |
Stock options reclassified to current liabilities for deemed cash settlement resulting from the delisting offer | $ 857 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | $ 359,431 | $ 573,394 | $ 436,083 | $ 585,016 |
Reclassifications from OCI to: | ||||
Other income | 444 | (492) | (998) | (1,376) |
Revenue | (314,681) | (263,809) | (920,232) | (739,328) |
Costs of revenue | 221,461 | 183,420 | 654,288 | 528,103 |
Selling, general and administrative expenses | 73,935 | 66,726 | 218,716 | 181,213 |
Interest expense | 4,597 | 1,305 | 13,365 | 4,376 |
Other income (expense), net of tax | (3,912) | (2,843) | 22,173 | (1,031) |
Balance | 380,814 | 578,828 | 380,814 | 578,828 |
Investment securities, including noncontrolling interests | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
OCI before reclassifications net of tax | (8) | 29 | (176) | 229 |
Other Comprehensive Income (Loss), Tax | ||||
OCI before reclassifications, Tax | 0 | 38 | (52) | 138 |
Investment securities, including noncontrolling interests | Other income (expense) | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 0 | (18) | 12 | (33) |
Investment securities, including noncontrolling interests | Reclassification Out Of Accumulated Other Comprehensive Income | ||||
Reclassifications from OCI to: | ||||
Other income | 271 | (21) | 125 | (17) |
Investment securities, noncontrolling interests | ||||
Reclassifications from OCI to: | ||||
Less : Noncontrolling interests, net of tax | (8) | (10) | 12 | (51) |
Other Comprehensive Income (Loss), Tax | ||||
Noncontrolling interests, Tax | (5) | (5) | 7 | (27) |
Accumulated Net Unrealized Investment Gain Loss [Member] | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | (225) | 220 | 69 | 57 |
Reclassifications from OCI to: | ||||
Comprehensive income (loss) | 255 | (2) | (39) | 161 |
Balance | 30 | 218 | 30 | 218 |
Other Comprehensive Income (Loss), Tax | ||||
Comprehensive income (loss), Tax | (5) | 15 | (33) | 78 |
Currency Translation Adjustments, including noncontrolling interests | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
OCI before reclassifications net of tax | (2,477) | 4,641 | (20,201) | 9,068 |
Foreign currency translation noncontrolling interests | ||||
Reclassifications from OCI to: | ||||
Less : Noncontrolling interests, net of tax | (396) | (1,943) | 1,217 | (2,090) |
Accumulated Translation Adjustment [Member] | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | (57,318) | (46,135) | (41,207) | (50,415) |
Reclassifications from OCI to: | ||||
Comprehensive income (loss) | (2,873) | 2,698 | (18,984) | 6,978 |
Balance | (60,191) | (43,437) | (60,191) | (43,437) |
Cash Flow Hedges, including noncontrolling interests | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
OCI before reclassifications net of tax | 5,014 | 3,467 | (2,931) | 3,421 |
Other Comprehensive Income (Loss), Tax | ||||
OCI before reclassifications, Tax | 1,608 | 1,263 | (1,582) | 1,671 |
Cash Flow Hedges, including noncontrolling interests | Revenue | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 178 | (808) | 586 | (2,714) |
Cash Flow Hedges, including noncontrolling interests | Cost of revenue. | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 214 | (129) | 303 | (1,289) |
Cash Flow Hedges, including noncontrolling interests | Selling, general and administrative expenses | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 102 | (53) | 147 | (719) |
Cash Flow Hedges, including noncontrolling interests | Interest expenses | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | (74) | (12) | (188) | (26) |
Cash Flow Hedges, including noncontrolling interests | Reclassification Out Of Accumulated Other Comprehensive Income | ||||
Reclassifications from OCI to: | ||||
Revenue | 332 | (1,526) | 1,087 | (5,132) |
Costs of revenue | 632 | (1,303) | 884 | (4,195) |
Selling, general and administrative expenses | 303 | (697) | 431 | (2,341) |
Interest expense | (214) | (47) | (543) | (67) |
Cash Flow Hedges, noncontrolling interests | ||||
Reclassifications from OCI to: | ||||
Less : Noncontrolling interests, net of tax | (44) | 157 | 35 | 850 |
Other Comprehensive Income (Loss), Tax | ||||
Noncontrolling interests, Tax | (23) | 83 | 17 | 450 |
Accumulated Net Gain Loss From Designated Or Qualifying Cash Flow Hedges | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | (5,179) | 4,274 | 1,881 | 11,789 |
Reclassifications from OCI to: | ||||
Comprehensive income (loss) | 6,023 | 51 | (1,037) | (7,464) |
Balance | 844 | 4,325 | 844 | 4,325 |
Other Comprehensive Income (Loss), Tax | ||||
Comprehensive income (loss), Tax | 2,005 | 344 | (717) | (2,627) |
Benefit plans, including noncontrolling interests | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
OCI before reclassifications net of tax | 3 | (349) | ||
Reclassifications from OCI to: | ||||
Other adjustments | 20 | 171 | ||
Other Comprehensive Income (Loss), Tax | ||||
OCI before reclassifications, Tax | 0 | 0 | 348 | 0 |
Benefit plans, prior service credit (cost), including noncontrolling interests | Cost of revenue. | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 0 | 0 | 0 | 0 |
Benefit plans, prior service credit (cost), including noncontrolling interests | Selling, general and administrative expenses | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 0 | 0 | 0 | 0 |
Benefit plans, prior service credit (cost), including noncontrolling interests | Other income (expense) | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 0 | 0 | 0 | 0 |
Benefit plans, prior service credit (cost), including noncontrolling interests | Reclassification Out Of Accumulated Other Comprehensive Income | ||||
Reclassifications from OCI to: | ||||
Costs of revenue | 2 | 6 | ||
Selling, general and administrative expenses | 1 | |||
Other income (expense), net of tax | 14 | 42 | ||
Benefit plans, net actuarial gain (loss), including noncontrolling interest | Cost of revenue. | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 0 | 0 | 0 | 0 |
Benefit plans, net actuarial gain (loss), including noncontrolling interest | Selling, general and administrative expenses | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 0 | 0 | 0 | 0 |
Benefit plans, net actuarial gain (loss), including noncontrolling interest | Other income (expense) | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 0 | 0 | 0 | 0 |
Benefit plans, net actuarial gain (loss), including noncontrolling interest | Reclassification Out Of Accumulated Other Comprehensive Income | ||||
Reclassifications from OCI to: | ||||
Costs of revenue | 26 | 82 | ||
Selling, general and administrative expenses | 12 | 36 | ||
Other income (expense), net of tax | 36 | (9) | 113 | (2) |
Benefit plans, noncontrolling interests | ||||
Reclassifications from OCI to: | ||||
Less : Noncontrolling interests, net of tax | 9 | |||
Other Comprehensive Income (Loss), Tax | ||||
Noncontrolling interests, Tax | 0 | 0 | 0 | 0 |
Accumulated Defined Benefit Plans Adjustment [Member] | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | (1,511) | (1,088) | (1,424) | (1,180) |
Reclassifications from OCI to: | ||||
Comprehensive income (loss) | 73 | 31 | (14) | 123 |
Balance | (1,438) | (1,057) | (1,438) | (1,057) |
Other Comprehensive Income (Loss), Tax | ||||
Comprehensive income (loss), Tax | 0 | 0 | 348 | 0 |
Accumulated Other Comprehensive Income | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | (64,233) | (42,728) | (40,681) | (39,749) |
Reclassifications from OCI to: | ||||
Balance | $ (60,755) | $ (39,951) | $ (60,755) | $ (39,951) |