Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Dec. 31, 2020 | Feb. 04, 2021 | |
Document and Entity Information | ||
Entity Registrant Name | VIRTUSA CORP | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Central Index Key | 0001207074 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2020 | |
Trading Symbol | VRTU | |
Amendment Flag | false | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 04-3512883 | |
Current Fiscal Year End Date | --03-31 | |
Entity Address, Address Line One | 132 Turnpike Rd | |
Entity Address, City or Town | Southborough | |
Entity Address, Postal Zip Code | 01772 | |
Entity Address, State or Province | MA | |
City Area Code | 508 | |
Local Phone Number | 389-7300 | |
Entity File Number | 001-33625 | |
Title of 12(b) Security | Common Stock | |
Entity Current Reporting Status | Yes | |
Security Exchange Name | NASDAQ | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 30,340,986 | |
Entity Shell Company | false | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q3 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2020 | Mar. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 347,173 | $ 290,837 |
Short-term investments | 2,633 | 9,785 |
Accounts receivable, net of allowance of $1,085 and $1,541 at December 31, 2020 and March 31, 2020, respectively | 140,012 | 148,950 |
Unbilled accounts receivable | 79,681 | 137,839 |
Prepaid expenses | 54,155 | 55,574 |
Restricted cash | 5,786 | 659 |
Assets held for sale | 8,334 | |
Other current assets | 33,338 | 29,214 |
Total current assets | 662,778 | 681,192 |
Property and equipment, net | 97,614 | 101,250 |
Operating lease right-of-use assets | 40,750 | 48,684 |
Investments accounted for using equity method | 1,336 | |
Long-term investments | 22 | 4 |
Deferred income taxes | 29,715 | 30,225 |
Goodwill | 295,591 | 296,493 |
Intangible assets, net | 119,202 | 130,903 |
Other long-term assets | 34,421 | 46,980 |
Total assets | 1,280,093 | 1,337,067 |
Current liabilities: | ||
Accounts payable | 25,253 | 38,537 |
Accrued employee compensation and benefits | 97,364 | 79,373 |
Deferred revenue | 15,484 | 8,054 |
Accrued expenses and other | 82,733 | 95,124 |
Current portion of long-term debt | 20,083 | 16,043 |
Operating lease liabilities | 11,552 | 11,543 |
Income taxes payable | 11,530 | 3,233 |
Total current liabilities | 263,999 | 251,907 |
Deferred income taxes | 15,239 | 16,067 |
Operating lease liabilities, noncurrent | 34,468 | 41,697 |
Long-term debt, less current portion | 358,441 | 480,154 |
Long-term liabilities | 42,007 | 42,475 |
Total liabilities | 714,154 | 832,300 |
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, 2020 and March 31, 2020; redemption amount and liquidation preference of $108,000 at December 31, 2020 and March 31, 2020 | 107,450 | 107,326 |
Stockholders' equity: | ||
Undesignated preferred stock, $0.01 par value; Authorized 5,000,000 shares at December 31, 2020 and March 31, 2020 | ||
Common stock, $0.01 par value; Authorized 120,000,000 shares at December 31, 2020 and March 31, 2020; issued 33,717,535 and 33,518,389 shares at December 31, 2020 and March 31, 2020, respectively; outstanding 30,331,971 and 30,132,825 shares at December 31, 2020 and March 31, 2020, respectively | 337 | 335 |
Treasury stock, 3,385,564 common shares, at cost, at December 31, 2020 and March 31, 2020cember 31, 2020 and March 31, 2020 | (58,332) | (58,332) |
Additional paid-in capital | 257,187 | 246,862 |
Retained earnings | 325,679 | 293,831 |
Accumulated other comprehensive loss | (66,382) | (85,255) |
Total Stockholders' equity | 458,489 | 397,441 |
Total liabilities, Series A convertible preferred stock, and stockholders' equity | $ 1,280,093 | $ 1,337,067 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2020 | Mar. 31, 2020 |
Consolidated Balance Sheets | ||
Accounts receivable, allowance (in dollars) | $ 1,085 | $ 1,541 |
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 |
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 | 33,717,535 | 33,518,389 |
Common stock, shares outstanding | 30,331,971 | 30,132,825 |
Treasury stock, common shares | 3,385,564 | 3,385,564 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Consolidated Statements of Income | ||||
Revenue | $ 346,100 | $ 335,107 | $ 964,352 | $ 982,632 |
Costs of revenue | 232,142 | 236,427 | 697,772 | 709,746 |
Gross profit | 113,958 | 98,680 | 266,580 | 272,886 |
Operating expenses: | ||||
Selling, general and administrative expenses | 72,507 | 68,270 | 205,248 | 209,813 |
Income from operations | 41,451 | 30,410 | 61,332 | 63,073 |
Other income (expense): | ||||
Interest income | 230 | 520 | 698 | 1,744 |
Interest expense | (5,187) | (4,873) | (16,222) | (14,616) |
Foreign currency transaction gains (losses), net | 1,126 | (3,065) | 3,983 | (5,300) |
Other, net | (397) | 209 | 1,145 | 1,137 |
Total other expense | (4,228) | (7,209) | (10,396) | (17,035) |
Income before income tax expense | 37,223 | 23,201 | 50,936 | 46,038 |
Income tax expense | 11,776 | 10,363 | 15,826 | 19,932 |
Net income | 25,447 | 12,838 | 35,110 | 26,106 |
Less: net income attributable to noncontrolling interests, net of tax | 118 | 450 | ||
Net income available to Virtusa stockholders | 25,447 | 12,720 | 35,110 | 25,656 |
Less: Series A Convertible Preferred Stock dividends and accretion | 1,087 | 1,087 | 3,262 | 3,262 |
Net income available to Virtusa common stockholders | $ 24,360 | $ 11,633 | $ 31,848 | $ 22,394 |
Basic earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.80 | $ 0.39 | $ 1.05 | $ 0.75 |
Diluted earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.75 | $ 0.38 | $ 1.04 | $ 0.73 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Consolidated Statements of Comprehensive Income (Loss) | ||||
Net income | $ 25,447 | $ 12,838 | $ 35,110 | $ 26,106 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | 5,933 | 4,630 | 13,618 | (2,106) |
Pension plan adjustment, net of tax effect | 114 | 79 | 285 | (606) |
Unrealized gain (loss) on effective cash flow hedges, net of tax effect | 762 | (2,817) | 4,970 | (5,031) |
Other comprehensive income (loss) | 6,809 | 18,873 | ||
Other comprehensive income (loss) | 1,892 | (7,743) | ||
Comprehensive income | 32,256 | 14,730 | 53,983 | 18,363 |
Less: comprehensive income attributable to noncontrolling interest, net of tax | 484 | 849 | ||
Comprehensive income available to Virtusa stockholders | $ 32,256 | $ 14,246 | $ 53,983 | $ 17,514 |
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 (Loss) | Non-controlling interest | Redeemable Noncontrolling Interest | Total |
Balance at Mar. 31, 2019 | $ 390,774 | $ 330 | $ (39,652) | $ 239,204 | $ 250,279 | $ (59,387) | $ 23,576 | $ 390,774 | |
Balance (in shares) at Mar. 31, 2019 | 33,012,775 | (2,879,999) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Proceeds from the exercise of stock options | 194 | 194 | 8 | 194 | |||||
Proceeds from the exercise of stock options (in shares) | 13,416 | ||||||||
Restricted stock awards vested | $ 1 | (1) | |||||||
Restricted stock awards vested (in shares) | 96,763 | ||||||||
Restricted stock awards withheld for tax | (2,011) | (2,011) | (2,011) | ||||||
Share-based compensation | 6,674 | 6,674 | 6,674 | ||||||
Adjustments of redeemable noncontrolling interest to redemption value | 18 | 18 | 170 | 18 | |||||
Purchase of redeemable noncontrolling interest related to Polaris | 5,549 | ||||||||
Foreign currency translation on redeemable noncontrolling interest | 116 | ||||||||
Series A Convertible Preferred Stock dividends and accretion | (1,087) | (1,087) | (1,087) | ||||||
Other comprehensive income (loss) | (1,194) | ||||||||
Other comprehensive income (loss) | (1,194) | 144 | (1,194) | ||||||
Net income | 5,834 | 5,834 | 186 | ||||||
Net income | 5,834 | ||||||||
Balance at Jun. 30, 2019 | 399,202 | $ 331 | $ (39,652) | 244,078 | 255,026 | (60,581) | 18,651 | 399,202 | |
Balance (in shares) at Jun. 30, 2019 | 33,122,954 | (2,879,999) | |||||||
Balance at Mar. 31, 2019 | 390,774 | $ 330 | $ (39,652) | 239,204 | 250,279 | (59,387) | 23,576 | 390,774 | |
Balance (in shares) at Mar. 31, 2019 | 33,012,775 | (2,879,999) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Purchase of redeemable noncontrolling interest related to Polaris | 8,675 | ||||||||
Net income | 25,656 | ||||||||
Net income | (450) | ||||||||
Balance at Dec. 31, 2019 | $ 332 | $ (58,332) | 256,152 | 272,673 | (67,529) | 403,296 | |||
Balance (in shares) at Dec. 31, 2019 | 33,246,073 | (3,385,564) | |||||||
Balance at Jun. 30, 2019 | 399,202 | $ 331 | $ (39,652) | 244,078 | 255,026 | (60,581) | 18,651 | 399,202 | |
Balance (in shares) at Jun. 30, 2019 | 33,122,954 | (2,879,999) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Restricted stock awards vested | $ 1 | (1) | |||||||
Restricted stock awards vested (in shares) | 101,178 | ||||||||
Restricted stock awards withheld for tax | (1,647) | (1,647) | (1,647) | ||||||
Share-based compensation | 5,829 | 5,829 | 5,829 | ||||||
Repurchase of common stock | (18,680) | $ (18,680) | (18,680) | ||||||
Repurchase of common stock (in shares) | (505,565) | ||||||||
Adjustments of redeemable noncontrolling interest to redemption value | 25 | 25 | 101 | 25 | |||||
Purchase of redeemable noncontrolling interest related to Polaris | 3,126 | ||||||||
Reclassification of noncontrolling interest from temporary equity to permanent equity | $ 15,093 | (15,093) | 15,093 | ||||||
Foreign currency translation on redeemable noncontrolling interest | $ (533) | ||||||||
Series A Convertible Preferred Stock dividends and accretion | (1,088) | (1,088) | (1,088) | ||||||
Other comprehensive income (loss) | (8,474) | (8,474) | (111) | ||||||
Other comprehensive income (loss) | (8,585) | ||||||||
Net income | 7,102 | 7,102 | |||||||
Net income | 146 | ||||||||
Net income | 7,248 | ||||||||
Balance at Sep. 30, 2019 | 382,269 | $ 332 | $ (58,332) | 248,284 | 261,040 | (69,055) | 15,128 | 397,397 | |
Balance (in shares) at Sep. 30, 2019 | 33,224,132 | (3,385,564) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Proceeds from the exercise of stock options | 233 | 233 | 233 | ||||||
Proceeds from the exercise of stock options (in shares) | 15,914 | ||||||||
Restricted stock awards vested (in shares) | 6,027 | ||||||||
Restricted stock awards withheld for tax | (126) | (126) | (126) | ||||||
Share-based compensation | 5,750 | 5,750 | 5,750 | ||||||
Reclassification of noncontrolling interest from permanent equity to liability. | (13,564) | (13,564) | |||||||
Adjustments for reclassification of noncontrolling interest | 2,011 | 2,011 | (2,048) | (37) | |||||
Series A Convertible Preferred Stock dividends and accretion | (1,087) | (1,087) | (1,087) | ||||||
Other comprehensive income (loss) | 1,526 | ||||||||
Other comprehensive income (loss) | 1,526 | 366 | 1,892 | ||||||
Net income | 12,720 | 12,720 | 12,720 | ||||||
Net income | $ 118 | (118) | |||||||
Net income | 12,838 | ||||||||
Balance at Dec. 31, 2019 | $ 332 | $ (58,332) | 256,152 | 272,673 | (67,529) | 403,296 | |||
Balance (in shares) at Dec. 31, 2019 | 33,246,073 | (3,385,564) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Total Stockholders' equity | $ 403,296 | ||||||||
Total Stockholders' equity | 397,441 | ||||||||
Balance at Mar. 31, 2020 | $ 335 | $ (58,332) | 246,862 | 293,831 | (85,255) | $ 397,441 | |||
Balance (in shares) at Mar. 31, 2020 | 33,518,389 | (3,385,564) | 30,132,825 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Proceeds from the exercise of stock options | 92 | $ 92 | |||||||
Proceeds from the exercise of stock options (in shares) | 5,741 | ||||||||
Restricted stock awards vested | $ 1 | (1) | |||||||
Restricted stock awards vested (in shares) | 108,414 | ||||||||
Restricted stock awards withheld for tax | (1,914) | (1,914) | |||||||
Share-based compensation | 3,592 | 3,592 | |||||||
Series A Convertible Preferred Stock dividends and accretion | (1,087) | (1,087) | |||||||
Other comprehensive income (loss) | 4,281 | 4,281 | |||||||
Net income | 894 | 894 | |||||||
Balance at Jun. 30, 2020 | $ 336 | $ (58,332) | 248,631 | 293,638 | (80,974) | ||||
Balance (in shares) at Jun. 30, 2020 | 33,632,544 | (3,385,564) | |||||||
Balance at Mar. 31, 2020 | $ 335 | $ (58,332) | 246,862 | 293,831 | (85,255) | $ 397,441 | |||
Balance (in shares) at Mar. 31, 2020 | 33,518,389 | (3,385,564) | 30,132,825 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Other comprehensive income (loss) | $ 18,873 | ||||||||
Net income | $ 35,110 | ||||||||
Balance at Dec. 31, 2020 | $ 337 | $ (58,332) | 257,187 | 325,679 | (66,382) | ||||
Balance (in shares) at Dec. 31, 2020 | 33,717,535 | (3,385,564) | 30,331,971 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Total Stockholders' equity | $ 403,299 | ||||||||
Balance at Jun. 30, 2020 | $ 336 | $ (58,332) | 248,631 | 293,638 | (80,974) | ||||
Balance (in shares) at Jun. 30, 2020 | 33,632,544 | (3,385,564) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Proceeds from the exercise of stock options | 472 | 472 | |||||||
Proceeds from the exercise of stock options (in shares) | 24,868 | ||||||||
Restricted stock awards vested | $ 1 | (1) | |||||||
Restricted stock awards vested (in shares) | 37,661 | ||||||||
Restricted stock awards withheld for tax | (167) | (167) | |||||||
Share-based compensation | 4,078 | 4,078 | |||||||
Series A Convertible Preferred Stock dividends and accretion | (1,088) | (1,088) | |||||||
Other comprehensive income (loss) | 7,783 | 7,783 | |||||||
Net income | 8,769 | 8,769 | |||||||
Balance at Sep. 30, 2020 | $ 337 | $ (58,332) | 253,013 | 301,319 | (73,191) | ||||
Balance (in shares) at Sep. 30, 2020 | 33,695,073 | (3,385,564) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Total Stockholders' equity | 423,146 | ||||||||
Proceeds from the exercise of stock options | 257 | 257 | |||||||
Proceeds from the exercise of stock options (in shares) | 15,037 | ||||||||
Restricted stock awards vested (in shares) | 7,425 | ||||||||
Restricted stock awards withheld for tax | (110) | (110) | |||||||
Share-based compensation | 4,027 | 4,027 | |||||||
Series A Convertible Preferred Stock dividends and accretion | (1,087) | (1,087) | |||||||
Other comprehensive income (loss) | 6,809 | 6,809 | |||||||
Net income | 25,447 | $ 25,447 | |||||||
Balance at Dec. 31, 2020 | $ 337 | $ (58,332) | $ 257,187 | $ 325,679 | $ (66,382) | ||||
Balance (in shares) at Dec. 31, 2020 | 33,717,535 | (3,385,564) | 30,331,971 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Total Stockholders' equity | $ 458,489 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 35,110 | $ 26,106 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 25,930 | 23,672 |
Share-based compensation expense | 11,697 | 18,285 |
Gain on redemption of equity method investment | (1,179) | |
Provision (recovery) for doubtful accounts | (22) | 26 |
Loss (gain) on disposal of property and equipment | 543 | (403) |
Impairment of investment | 184 | |
Foreign currency transaction (gains) losses, net | (3,983) | 5,300 |
Amortization of discounts and premiums on investments | (6) | |
Impairment of operating lease right-of-use asset | 1,413 | |
Amortization of debt issuance cost | 1,148 | 863 |
Deferred income taxes, net | 39 | (970) |
Net changes in operating assets and liabilities | ||
Accounts receivable and unbilled receivable | 80,130 | 19,129 |
Prepaid expenses and other current assets | 7,178 | (1,258) |
Other long-term assets | 2,152 | (11,239) |
Accounts payable | (14,870) | (12,730) |
Accrued employee compensation and benefits | 8,861 | 4,611 |
Accrued expenses and other current liabilities | 8,828 | 1,895 |
Operating lease liabilities | (715) | 172 |
Income taxes payable | 5,676 | 2,537 |
Other long-term liabilities | 3,480 | (1,720) |
Net cash provided by operating activities | 171,416 | 74,454 |
Cash flows from investing activities: | ||
Proceeds from sale of property and equipment | 11,902 | 825 |
Purchase of short-term investments | (42) | (34,969) |
Proceeds from sale or maturity of short-term investments | 7,217 | 47,716 |
Payment for asset acquisitions | (27) | (9,192) |
Payment of contingent consideration of asset acquisition | (942) | |
Payment of deferred consideration related to business acquisitions | (10,313) | (17,500) |
Purchase of property and equipment | (5,865) | (10,865) |
Net cash provided by (used in) investing activities | 2,872 | (24,927) |
Cash flows from financing activities: | ||
Payment of debt issuance costs | (813) | (808) |
Proceeds from revolving credit facility | 36,000 | |
Payment of debt | (13,008) | (9,141) |
Repurchase of common stock | (18,680) | |
Payments of withholding taxes related to net share settlements of restricted stock | (2,191) | (3,783) |
Purchase of redeemable noncontrolling interest related to Polaris | (8,675) | |
Payment of noncontrolling interest | (12,534) | |
Principal payments on capital lease obligation | (36) | |
Payment of dividend on Series A Convertible Preferred Stock | (3,138) | (3,138) |
Payment of revolving credit facility | (105,000) | |
Payment of contingent consideration related to acquisitions | (5,767) | |
Net cash used in financing activities | (129,096) | (20,275) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 16,269 | (131) |
Net increase in cash and cash equivalents and restricted cash | 61,461 | 29,121 |
Cash, cash equivalents and restricted cash, beginning of year | 291,601 | 190,113 |
Cash, cash equivalents and restricted cash, end of period | 353,062 | 219,234 |
Parent | ||
Cash flows from financing activities: | ||
Proceeds from exercise of stock options | $ 821 | 427 |
Subsidiaries | ||
Cash flows from financing activities: | ||
Proceeds from exercise of stock options | $ 93 |
Consolidated Statements of Ca_2
Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2020 | Mar. 31, 2020 |
Balance sheet classification | ||
Cash and cash equivalents | $ 347,173 | $ 290,837 |
Restricted cash in current assets | 5,786 | 659 |
Restricted cash in other long-term assets | 103 | 105 |
Total restricted cash | 5,889 | 764 |
Total cash, cash equivalents and restricted cash | $ 353,062 | $ 291,601 |
Nature of the Business
Nature of the Business | 9 Months Ended |
Dec. 31, 2020 | |
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 business strategy, digital engineering and information technology (“IT”) services and solutions that help clients change, disrupt, and unlock new value through innovation engineering. We support Global 2000 clients across key industries including banking, financial services, insurance, healthcare, communications, technology, and media and entertainment. We help improve 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 consulting, to technology and user experience (“UX”) design, development of IT applications, systems integration, digital engineering, testing and business assurance, and maintenance and support services, including cloud, infrastructure and managed services. We help our clients solve critical business problems by leveraging a combination of our distinctive consulting approach, end-to-end digital engineering capabilities, unique platforming methodology, and deep domain and technology expertise. Virtusa helps clients grow their business with innovative services that create operational efficiency using digital labor, future-proof operational and IT platforms, and rationalization and modernization of IT applications infrastructure. We help organizations realize the benefits of digital transformation and cloud transformation by bringing together digital infrastructure, analytics and intelligence and customer experience by engineering the digital enterprise of tomorrow on the cloud. We deliver cost effective solutions through a global delivery model, applying advanced methods such as Agile, an industry standard technique designed to accelerate application development. We use our Digital Transformation Studio (“DTS”) engineering tools to drive software development lifecycle automation to improve quality, enabling speed and increasing productivity. Our proprietary DTS was built by Virtusa’s engineering teams that have decades of industry knowledge and experience. These teams are certified and leverage Virtusa’s industry leading tools and assets, providing increased speed and transparency. Headquartered in Massachusetts, we have offices throughout the Americas, Europe, Middle East and Asia, with significant global delivery centers in the United States, India, Sri Lanka, Hungary, Singapore and Malaysia. |
Unaudited Interim Financial Inf
Unaudited Interim Financial Information | 9 Months Ended |
Dec. 31, 2020 | |
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, 2020 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 28, 2020. 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 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, 2020 and March 31, 2020, 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 7 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 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. The FASB subsequently issued guidance which provide clarifications and improvements to this new standard. The amendments in this update changed how companies measure and recognize credit impairment for many financial assets. The new credit loss model requires companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including accounts receivables) that are in the scope of the update. The standard update also made amendments to the current impairment model for available-for-sale debt securities. This 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 public entities from fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this standard (“ASC Topic 326”) effective April 1, 2020 using a modified retrospective approach. Prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting policies. 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. See Note 9, “Revenues and Accounts Receivable” for additional information regarding credit losses. 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 December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, ownership changes in investments, and interim-period accounting for enacted changes in tax law. The standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on the consolidated financial statements. |
Earnings per Share
Earnings per Share | 9 Months Ended |
Dec. 31, 2020 | |
Earnings per Share | |
Earnings per Share | (3) Earnings per Share Basic earnings per share available to Virtusa common stockholders (“EPS”) is computed by dividing net income, 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 per share are as follows: Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Numerators: Net income available to Virtusa stockholders $ 25,447 $ 12,720 $ 35,110 $ 25,656 Less: Series A Convertible Preferred Stock dividends and accretion (1,087) (1,087) (3,262) (3,262) Net income available to Virtusa common stockholders $ 24,360 $ 11,633 $ 31,848 $ 22,394 Denominators: Basic weighted average common shares outstanding 30,319,615 29,849,368 30,252,264 30,041,740 Basic earnings per share available to Virtusa common stockholders $ 0.80 $ 0.39 $ 1.05 $ 0.75 The components of diluted earnings per share are as follows: Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Numerators: Net income available to Virtusa common stockholders $ 24,360 $ 11,633 $ 31,848 $ 22,394 Add : Series A Convertible Preferred Stock dividends and accretion 1,087 1,087 — — Net income available to Virtusa common stockholders and assumed conversion $ 25,447 $ 12,720 $ 31,848 $ 22,394 Denominators: Basic weighted average common shares outstanding 30,319,615 29,849,368 30,252,264 30,041,740 Dilutive effect of Series A Convertible Preferred Stock if converted 3,000,000 3,000,000 — — Dilutive effect of employee stock options and unvested restricted stock awards and restricted stock units 577,981 608,863 412,878 658,529 Weighted average shares—diluted 33,897,596 33,458,231 30,665,142 30,700,269 Diluted earnings per share available to Virtusa common stockholders $ 0.75 $ 0.38 $ 1.04 $ 0.73 During the three months ended December 31, 2020 and 2019, unvested restricted stock awards and unvested restricted stock units issuable for, and options to purchase 823 and 24,037 shares of common stock, respectively, were excluded from the calculations of diluted earnings per share as their effect would have been anti-dilutive. For the three months ended December 31, 2020 and 2019 all of the 3,000,000 shares of Series A Convertible Preferred Stock were included in the calculations of diluted earnings per share as their effect would have been anti-dilutive. During the nine months ended December 31, 2020 and 2019, unvested restricted stock awards and unvested restricted stock units issuable for, and options to purchase 127,504 and 100,434 shares of common stock, respectively, were excluded from the calculations of diluted earnings per share as their effect would have been anti-dilutive. For the nine months ended December 31, 2020 and 2019, all of the 3,000,000 shares of Series A Convertible Preferred Stock were excluded in the calculations of diluted earnings per share as their effect would have been anti-dilutive. |
Proposed Merger with Austin Hol
Proposed Merger with Austin HoldCo Inc., an entity wholly owned by funds affiliated with Baring Private Equity Asia | 9 Months Ended |
Dec. 31, 2020 | |
Proposed Merger with Austin HoldCo Inc., an entity wholly owned by funds affiliated with Baring Private Equity Asia. | |
Proposed Merger with Austin HoldCo Inc., an entity wholly owned by funds affiliated with Baring Private Equity Asia | (4) Proposed Merger with Austin HoldCo Inc., an entity wholly-owned by funds affiliated with Baring Private Equity Asia On September 9, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Austin HoldCo Inc., an entity wholly-owned by funds affiliated with Baring Private Equity Asia (“Parent”), and Austin BidCo Inc., a wholly-owned subsidiary of Parent (“Sub”), with respect to the acquisition of the Company by Parent for $51.35 in cash for each share of Virtusa common stock. Pursuant to the Merger Agreement, Sub will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent. Consummation of the Merger is subject to various conditions, including, among others, customary conditions relating to the approval of the Merger Agreement by the requisite vote of the Company’s stockholders, the receipt of certain foreign regulatory approvals and the approval or other clearance of the Committee on Foreign Investments in the United States (“CFIUS”). The applicable waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), with respect to the transactions contemplated by the Merger Agreement expired on October 23, 2020 without any review. Consummation of the Merger is not subject to any financing condition, and is expected to occur in the first half of calendar year 2021. On December 21, 2020, the Company received written notice from the Committee on Foreign Investment in the United States (“CFIUS”) that it had concluded its review under Section 721 of the Defense Production Act of 1950, as amended, of the Merger. CFIUS determined that there are no unresolved national security concerns with respect to the Merger. Receipt of the CFIUS clearance satisfies a certain condition to the closing of the Merger. On November 20, 2020, via a special meeting of stockholders, the stockholders of the Company approved and adopted the Merger Agreement. On January 11, 2021, the Competition Commission of India (“CCI”) approved the Merger. The closing of the Merger remains subject to the satisfaction or waiver of the remaining conditions to the Merger set forth in the Merger Agreement. The Company expects to incur significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger. During the nine months ended December 31, 2020, the Company incurred approximately $6,367 as transaction costs in connection with the Merger. If the Merger Agreement is terminated under specified circumstances, the Company may be required to pay a termination fee of $54,330 to Austin HoldCo Inc. |
Business Combinations
Business Combinations | 9 Months Ended |
Dec. 31, 2020 | |
Business Combinations | |
Business Combinations | (5) Business Combinations During the fiscal year ended March 31, 2020, the Company acquired three individually immaterial businesses with an aggregate purchase price of $29,624 being paid at closing and a deferred consideration of $10,313 payable within a one-year period. The purchase price is also subject to adjustment after the closing of up to an additional $28,853 in contingent consideration, in the aggregate, upon the achievement of certain revenue and operating margin targets. The performance period for these targets are ranging from 12 months to 24 months from the respective acquisition date. These acquisitions enhanced the breadth and depth of digital offerings and expanded the Company’s relationship with certain existing customers. Under the purchase method of accounting, assets acquired are recorded at their estimated fair values. During the nine months ended December 31, 2020, the Company completed its purchase price allocation for all of the three acquired businesses. During the nine months ended December 31, 2020, the Company paid $10,313 in deferred consideration and $4,051 in contingent consideration related to these acquisitions. During the nine months ended December 31, 2020, the Company recorded $5,942 as a reduction of goodwill related to updating the fair value assessment of contingent consideration of $4,178 , customer relationships of $1,513 and other adjustments of $251 . The following table shows the aggregate purchase price allocation for these acquisitions: Amount Useful Life Consideration Transferred: Cash paid at closing $ 29,624 Deferred consideration payable 10,313 Fair value of contingent consideration 20,786 Fair value of consideration 60,723 Less: Cash acquired (477) Total purchase price, net of cash acquired $ 60,246 Assets and Liabilities: Cash and cash equivalents 477 Goodwill 21,374 Customer relationships 39,319 5 - 7 years Other net (447) Total purchase price $ 60,723 The primary items that generated goodwill for these acquisitions are the value of the acquired assembled workforce and other benefits expected to result from combining the acquired operations with those of the Company, neither of which qualify as a separate intangible asset. During the nine months ended December 31, 2020, the Company recorded $453 in the Company’s consolidated statements income as fair value changes to the contingent consideration r elated to events that occurred in the current period. As of December 31, 2020, the fair value of contingent consideration for these acquisitions is $16,405 . |
Investment Securities
Investment Securities | 9 Months Ended |
Dec. 31, 2020 | |
Investment Securities. | |
Investment Securities | (6) Investment Securities At December 31, 2020 and March 31, 2020, all of the Company’s investment securities were classified as time deposits, available-for-sale debt 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 7 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, 2020: Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value Time Deposits: Current $ 1,851 $ — $ — $ 1,851 Equity securities: Mutual funds: Current 652 130 — 782 Equity Shares/ Options: Non-current 1 21 — 22 Total investment securities $ 2,504 $ 151 $ — $ 2,655 The following is a summary of investment securities at March 31, 2020: Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value Time deposits: Current $ 3,927 $ — $ — $ 3,927 Equity securities: Mutual funds: Current 5,623 235 — 5,858 Equity Shares/ Options: Non-current 1 3 — 4 Total investment securities $ 9,551 $ 238 $ — $ 9,789 The Company evaluates available-for-sale debt securities with unrealized losses to determine whether a credit loss exists. The estimate of credit loss is determined by considering available information relevant to the collectability of the security and information about past events, current conditions, and reasonable and supportable forecasts. The allowance for credit loss is recorded as a charge to other income (expense), not to exceed the amount of the unrealized loss. Any excess unrealized loss greater than the credit loss is recognized in accumulated other comprehensive income ("AOCI"). We assess expected credit losses at the end of each reporting period and adjust the allowance through other income (expense). The Company does not hold any available-for-sale debt securities as of December 31, 2020 and March 31, 2020. Proceeds from sales of available-for-sale debt 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, 2020 2019 2020 2019 Proceeds from sales or maturities of available-for-sale $ 649 $ 9,476 $ 7,217 $ 47,716 Gross gains $ — $ 123 $ 176 $ 563 Gross losses — — — — Net realized gains on sales of available-for-sale debt $ — $ 123 $ 176 $ 563 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Dec. 31, 2020 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | (7) Fair Value of Financial Instruments The Company carries certain assets and liabilities at fair value on a recurring basis on its consolidated balance sheets. The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2020 Level 1 Level 2 Level 3 Total Assets: Investments: Time deposits—current $ — $ 1,851 — $ 1,851 Equity securities—current — 782 — 782 Equity securities—non-current — 22 — 22 Derivative financial instruments: Foreign currency derivative contracts—current — 1,759 — 1,759 Foreign currency derivative contracts—non-current — — — — Interest rate swap contracts — — — — Total assets $ — $ 4,414 $ — $ 4,414 Liabilities: Foreign currency derivative contracts—current — 1,186 — 1,186 Foreign currency derivative contracts—non-current — — — — Interest rate swap contracts—non-current — 8,884 — 8,884 Contingent consideration — — 16,405 16,405 Total liabilities $ — $ 10,070 $ 16,405 $ 26,475 The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2020: Level 1 Level 2 Level 3 Total Assets: Investments: Time deposits—current $ — $ 3,927 — $ 3,927 Equity securities—current — 5,858 — 5,858 Equity securities—non-current — 4 — 4 Derivative financial instruments: Foreign currency derivative contracts—current — 103 — 103 Foreign currency derivative contracts—non-current — 56 — 56 Interest rate swap contracts — — — — Total assets $ — $ 9,948 $ — $ 9,948 Liabilities: Foreign currency derivative contracts—current $ — 3,689 $ — 3,689 Foreign currency derivative contracts—non-current — 364 $ — 364 Interest rate swap contracts—non-current — 11,128 — 11,128 Contingent consideration — — 25,012 25,012 Total liabilities $ — $ 15,181 $ 25,012 $ 40,193 The Company estimates the fair value of our contingent consideration associated with our business combinations utilizing one or more significant inputs that are unobservable. The Company calculates the fair value of the contingent consideration based on the probability-weighted expected performance of the acquired business against the target performance metric, discounted to present value when appropriate. The following table shows a reconciliation of the beginning and ending balances of Level 3 contingent consideration liabilities associated with our business combinations: December 31, 2020 Beginning balance $ 25,012 Purchase price adjustments (4,178) Payments made during the period (4,051) Contingent consideration recognized in earnings (453) Foreign currency translation adjustments 75 Ending balance $ 16,405 |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Dec. 31, 2020 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | (8) 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, consolidated 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 $87,693 and $128,728, respectively, at December 31, 2020 and March 31, 2020. Unrealized net gains related to these contracts which are expected to be reclassified from AOCI to earnings during the next 12 months are $573 at December 31, 2020. At December 31, 2020, the maximum outstanding term of any derivative instrument was 12 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 14 to the consolidated financial statements), by using pay-fixed, receive-variable interest rate swaps to offset the future variable rate interest payments. The Company will recognize these transactions in accordance with ASC 815 "Derivatives and Hedging," and have designated the interest rate swaps as cash flow hedges. The Company purchased interest rate swaps in July 2016 with an effective date of July 2017 and in November 2018. The interest rate swaps purchased in July 2016 matured in July 2020. The November 2018 interest rate swap was 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 swap is at a fixed rate of 2.85% and is designed to maintain a 50% coverage of our LIBOR debt, therefore the notional amount changes over the life of the interest rate swap to retain the 50% coverage target. During the three months ended September 30, 2020 and operating as designed, the 2018 interest rate swap increased to cover the notional amount of debt that the expired interest rate swaps had been covering. In addition, the Company conducted a simultaneous de-designation and a re-designation of the hedge for this interest rate swap to align with the May 2020 debt amendment and maintain a highly effective hedge relationship given the increase of the notional amount of the interest rate swap and in consideration of the increase in interest rate floor to 1% . At December 31, 2020, the total notional amounts of the interest rate swap was $170,200 with remaining maturity of approximately 2.2 years. As of the date of de-designation and re-designation, the unrealized losses associated with the interest rate swap of $10,864 will be amortized to interest expense over the remaining interest rate swap period. The unrealized losses associated with the interest rate swap agreement was $8,884 and $11,128 at December 31, 2020 and March 31, 2020, respectively, which represents the estimated amount that the Company would pay to the counterparties in the event of an early termination. The following table sets forth the fair value of derivative instruments included in the consolidated balance sheets as of: Derivatives designated as hedging instruments December 31, 2020 March 31, 2020 Foreign currency exchange contracts: Other current assets $ 1,759 $ 103 Other long-term assets $ — $ 56 Accrued expenses and other $ 1,186 $ 3,689 Long-term liabilities $ — $ 364 December 31, 2020 March 31, 2020 Interest rate swap contracts Other long-term assets $ — $ — Long-term liabilities $ 8,884 $ 11,128 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: 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 2020 2019 2020 2019 Foreign currency exchange contracts $ (338) $ (3,158) $ 2,707 $ 148 Interest rate swaps $ (11) $ 782 $ (747) $ (3,054) Location of Gain or (Loss) Reclassified Amount of Gain or (Loss) Reclassified from AOCI into Income from AOCI into Income (loss) (Effective Three Months Ended December 31, Nine Months Ended December 31, Portion) 2020 2019 2020 2019 Revenue $ — $ — $ — $ (18) Costs of revenue $ (199) $ 827 $ (1,276) $ 2,351 Operating expenses $ (72) $ 337 $ (484) $ 1,020 Interest Expenses $ (1,191) $ (100) $ (2,991) $ 209 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 (loss) on Derivatives 2020 2019 2020 2019 Foreign currency exchange contracts Revenue $ (543) $ (1,449) $ (1,534) $ (205) Costs of revenue $ 334 $ 1,105 $ 1,055 $ 380 Selling, general and administrative expenses $ 33 $ 114 $ 93 $ 29 |
Revenues and Accounts Receivabl
Revenues and Accounts Receivable | 9 Months Ended |
Dec. 31, 2020 | |
Revenues and Accounts Receivable | |
Revenue and Accounts Receivable | (9) Revenues and Accounts Receivable 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 December 31, December 31, Revenue by geography: 2020 2019 2020 2019 North America $ 256,536 $ 251,229 $ 713,868 $ 724,005 Europe 59,182 55,154 163,740 175,258 Rest of World 30,382 28,724 86,744 83,369 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 Three Months Ended Nine Months Ended December 31, December 31, Revenue by customer’s industry groups (1) 2020 2019 2020 2019 Banking Financial Services and Insurance $ 190,288 $ 180,070 $ 528,579 $ 548,977 Communications and Technology 77,155 82,848 227,481 226,944 Media & Information and Other 26,232 23,107 75,165 63,830 Healthcare 52,425 49,082 133,127 142,881 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 (1) Prior year amounts have been reclassified to conform to the current period presentation Three Months Ended Nine Months Ended December 31, December 31, Revenue by service offerings 2020 2019 2020 2019 Application outsourcing $ 195,941 $ 183,777 $ 536,105 $ 547,303 Consulting 150,159 151,330 428,247 435,329 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 Three Months Ended Nine Months Ended December 31, December 31, Revenue by contract type 2020 2019 2020 2019 Time-and-materials $ 173,097 $ 190,423 $ 528,207 $ 579,657 Fixed-price* 173,003 144,684 436,145 402,975 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 *Fixed-price includes both retainer-billing basis and fixed-price progress towards completion 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. Contract 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 the movements in contract assets during the nine months ended: December 31, 2020 December 31, 2019 Beginning balance $ 14,241 $ 18,538 Revenues recognized during the period but not yet billed 66,293 67,594 Amounts billed (66,888) (68,314) Other 52 (20) Ending balance $ 13,698 $ 17,798 Contract liabilities comprise of 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 movements in the deferred revenue during the nine months ended: December 31, 2020 December 31, 2019 Beginning balance $ 8,054 $ 6,421 Amounts billed but not yet recognized as revenues 14,204 5,342 Revenues recognized related to the opening balance of deferred revenue (6,782) (5,017) Other 8 (154) Ending balance $ 15,484 $ 6,592 Remaining performance obligation ASC Topic 606 - Revenue from Contracts with Customers 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, 2020. This disclosure is not required for: (1) contracts with an original duration of one year or less, including contracts that can be terminated for convenience without a substantive penalty, (2) contracts for which the Company recognizes revenues based on the right to invoice for services performed, (3) variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with ASC 606-10-25-14(b), for which the criteria in ASC 606-10-32-40 have been met, or (4) variable consideration in the form of a sales-based or usage-based royalty promised in exchange for a license of intellectual property. Many of the Company’s performance obligations meet one or more of these exemptions. As of December 31, 2020, the aggregate amount of transaction price allocated to remaining performance obligations, other than those meeting the exclusion criteria above, was $13,627 and will be recognized as revenue within 4 years . From time to time, the Company enters into arrangements to deliver IT services that include upfront payments to its clients. As of December 31, 2020, the total unamortized upfront payments related to these services were $15,735 and are recorded in prepaid expenses and other long-term assets in the consolidated balance sheet. These upfront payments are expected to be amortized as a reduction to revenue over a benefit period of 3 years . Allowance for Credit Losses on Accounts Receivable The allowance for credit losses on accounts receivable is determined using the loss-rate approach and is measured on a collective (pool) basis when similar risk characteristics exist. Where financial instruments do not share risk characteristics, they are evaluated on an individual basis. The Company calculates expected credit losses for accounts receivable based on historical credit loss rates for each aging category as adjusted for the current market conditions and forecasts about future economic conditions. The allowance is based on relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The following table presents the activity in the allowance for credit losses on accounts receivable: Nine Months Ended December 31, 2020 Balance at March 31, 2020 $ 1,541 Transition period adjustment on accounts receivable pursuant to ASC 326 — Adjusted balance at April 1, 2020 1,541 Current-period provision/ (reversal) for expected credit losses (22) Write-offs charged against the allowance (476) Foreign currency translation adjustments 42 Balance at December 31, 2020 $ 1,085 |
Series A Convertible Preferred
Series A Convertible Preferred Stock | 9 Months Ended |
Dec. 31, 2020 | |
Series A Convertible Preferred Stock. | |
Series A Convertible Preferred Stock | (10) 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, 2020 and 2019, 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, 2020 and 2019, the Company has paid $3,138 as cash dividend on Series A Convertible Preferred Stock. As of December 31, 2020 and 2019, 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, 2020 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | (11) Goodwill and Intangible Assets Goodwill: The Company has one operating segment. The following are details of the changes in goodwill balances at: December 31, 2020 March 31, 2020 Beginning balance $ 296,493 $ 279,543 Goodwill arising from acquisitions — 27,316 Purchase price adjustments (5,942) — Foreign currency translation adjustments 5,040 (10,366) Ending balance $ 295,591 $ 296,493 The acquisition costs and goodwill balance deductible for our business acquisitions for tax purposes are $286,516. The acquisition costs and goodwill balance not deductible for tax purposes are $21,979, primarily related to the Company’s TradeTech acquisition (closed on January 2, 2014), 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, 2020 Weighted Gross Net Average Useful Life Carrying Accumulated Carrying at Acquisition Amount Amortization Amount Amortizable intangible assets: Customer relationships 10.6 $ 179,966 $ 61,598 $ 118,368 Trademark 2.0 900 900 — Technology 5.0 500 500 — Other 5.0 1,214 380 834 10.5 $ 182,580 $ 63,378 $ 119,202 March 31, 2020 Weighted Gross Net Average Useful Life Carrying Accumulated Carrying at Acquisition Amount Amortization Amount Amortizable intangible assets: Customer relationships 10.6 $ 176,373 $ 46,494 $ 129,879 Trademark 2.0 900 900 — Technology 5.0 500 500 — Other 5.0 1,214 190 1,024 10.5 $ 178,987 $ 48,084 $ 130,903 The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized. During the fiscal year ended March 31, 2020, the Company acquired certain assets of three consulting companies located in the United States, which were accounted as asset acquisitions and were not material to the Company. The purchase price was approximately $9,651 in cash and an additional earn-out consideration of up to $9,853 payable within one year based on achievement of certain revenue targets. During the nine months ended December 31, 2020, the Company paid $3,572 towards earn-out consideration based on achievement of revenue targets. The remaining probable and estimable value of the contingent consideration as of December 31, 2020 is $204 . |
Income Taxes
Income Taxes | 9 Months Ended |
Dec. 31, 2020 | |
Income Taxes | |
Income Taxes | (12) 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 rates were 31.6% and 31.1% for the three and nine months ended December 31, 2020, respectively, as compared to an effective tax rates of 44.7% and 43.3% for the three and nine months ended December 31, 2019, respectively. The decrease in the effective tax rate for the three and nine months ended December 31, 2020, was primarily due to a reduction in Base Erosion and Anti-Abuse Tax (“BEAT) impact, the election of foreign tax credits, reduction of global intangible low-taxed income, lower statutory rates in India and the merger of our Indian operations, partially offset by tax expense on increased income from operations. 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. 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 $29,888, $2,152 and $76 of net deferred tax assets in the United States, the United Kingdom and Sweden, respectively, at December 31, 2020. The Company has a valuation allowance in the U.S. related to utilization of certain foreign tax credits, which are not expected to be realized. During the fiscal year ended March 31, 2020, the Company merged Polaris Consulting and Software Limited (“Polaris”) with into Virtusa Consulting Services Private Limited (“Virtusa India”). The merger of Polaris into Virtusa India is considered an entity liquidation for US income tax purposes. The earnings of this entity will be subject to US taxation as well as local taxation with a corresponding foreign tax credit or deduction, at the election of the Company. The election also makes available to the Company the benefits of future foreign tax credits. The merger makes available to the Company tax deductions under Indian Laws for interest on debt used to purchase the group as well as amortization of intangible assets. Under local Indian law, the merger was retroactive to April 1, 2018 resulting in amended tax return filing in India for the year ended March 31, 2019. The Company’s effective tax rate for the three and nine months ended December 31, 2020, reflects the merger of Polaris India into Virtusa India. The Company’s income tax provision for the three and nine months ended December 31, 2020 includes the expected impact of the Global Intangible Low-taxed Income (“GILTI”) and executive compensation limitations of the Tax Cuts and Jobs Act (the “Tax Act”) impacting the operating results. 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 Singapore and Sri Lanka in which the Company has tax holiday benefits and eligible tax exemptions respectively. During the fiscal year ended March 31, 2019, 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 or deduction, at the election of the Company. GILTI provisions and executive compensation limitations enacted in the Tax Act, enacted on December 22, 2017 by the U.S. government continue to impact the results. 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 and certain exemptions or tax holidays applicable to the Company. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provided for net operating losses arising in tax years beginning after December 31, 2017, and before January 1, 2021, may be carried back to each of the five tax years preceding the tax year of such loss. Net operating losses have an unlimited carry forward period, although there are annual limitations on their use suspended for certain years as result of CARES Act. The Company has filed an immediate carry back claim in the United States for losses generated in fiscal years ended March 31, 2018 and March 31, 2019. The income tax expense for the nine months ended December 31, 2020, On September 20, 2019, the Indian government issued Ordinance 2019 making certain amendments in the Income-tax Act 1961, which substantially reduces tax rates. The effective rate of tax on India-based companies was reduced from 34.9% to 25.17%, effective for fiscal years beginning April 1, 2019. The Company adopted the new ordinance for the fiscal year beginning April 1, 2019. The new rates require the surrendering of tax holidays and other attributes of which the Company historically was taking advantage of and favorably impacting our tax rate. In addition, the Company’s Sri Lankan subsidiary, Virtusa (Private) Limited, was operating under a 12 -year income tax holiday arrangement that expired on March 31, 2019 and required Virtusa (Private) Limited to retain certain job creation and investment criteria through the expiration of the holiday period. The Company believes it had fulfilled its hiring and investment commitments and is eligible for tax holiday through March 2019. Beginning April 1, 2019, the Company is taking advantage of certain tax exemptions offered to IT service providers in Sri Lanka. The Company has been under income tax examination in India, the U.K., Singapore and the United States. The Indian taxing authorities issued an assessment order with respect to their examination of the various tax returns for the fiscal years ended March 31, 2006 to March 31, 2017 of the Company’s Indian subsidiary, Virtusa (India) Private Ltd, and Polaris Consulting & Services Limited (Polaris India) now merged with and into Virtusa Consulting Services Private Limited (collectively referred to as “Virtusa India”). At issue were several matters, the most significant of which was the redetermination of the arm’s-length profit which should be recorded by Virtusa India on the intercompany transactions with its affiliates. These matters are currently at different level of appeals beginning with the fiscal year ended March 31, 2006. In the United Kingdom, the Company is currently under examination for transfer pricing and research benefits for the years ended March 31, 2014 to March 31, 2019. In Singapore, the Inland Revenue Authority is confirming the appropriateness of the Company’s deductions for the year ended March 31, 2017. In the United States, the Internal Revenue Service has concluded an examination of fiscal years ended March 31, 2015 and March 31, 2017. These ongoing audits are not expected to have a material impact on the consolidated statements of income and consolidated statements of cash flows. Unrecognized tax benefits represent uncertain tax positions for which the Company has established reserves. At December 31, 2020 and March 31, 2020, the total liability for unrecognized tax benefits was $6,674 and $6,627, respectively. Unrecognized tax benefits may be adjusted upon the closing of the statute of limitations for income tax returns filed in various jurisdictions. The unrecognized tax benefits increased by $47 and $161 during the nine months ended December 31, 2020 and nine months ended December 31, 2019, respectively. The increase in unrecognized tax benefits in the nine months ended December 31, 2020 was predominantly due to increase in the liability related to the UK audit, certain sale proceeds in India and incremental interest accrued on existing uncertain tax positions offset by the release of certain benefits no longer considered required. 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. 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, 2020, the Company had approximately $126,648 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, 2020 | |
Concentration of Revenue and Assets | |
Concentration of Revenue and Assets | (13) Concentration of Revenue and Assets Total revenue is attributed to geographic areas based on the location of the client. Geographic information of total revenue is summarized as follows: Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Customer revenue: United States of America $ 244,004 $ 237,754 $ 676,790 $ 685,023 United Kingdom 29,304 42,902 91,916 137,795 Rest of World 72,792 54,451 195,646 159,814 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 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, 2020 2019 2020 2019 Customer A 19.6 % 16.4 % 18.5 % 15.9 % 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. The following table summarizes the geographic information of long-lived assets as of: December 31, 2020 March 31, 2020 Long-lived assets, net of accumulated depreciation and amortization: United States of America $ 272,187 $ 291,959 India 252,070 255,623 Rest of World 28,900 29,748 Consolidated long-lived assets, net $ 553,157 $ 577,330 |
Debt
Debt | 9 Months Ended |
Dec. 31, 2020 | |
Debt | |
Debt | (14) Debt On February 6, 2018, the Company entered into a credit agreement (as amended 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 provided for a $200,000 revolving credit facility, a $180,000 term loan facility, and a $70,000 delayed-draw term loan. The Company drew down $180,000 under the term loan of the Credit Agreement and $55,000 under the revolving credit facility under the Credit Agreement to repay in full the amount outstanding under the prior credit agreement and fund the Polaris delisting transaction. On March 12, 2018, we drew down the $70,000 delayed draw to fund the eTouch Systems Corp. acquisition. On October 15, 2019, the Company entered into Amendment No. 2 to Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A. (the “Administrative Agent”) and the lenders party thereto (the “Second Credit Agreement Amendment”), which Credit Agreement to, among other things, increase the revolving commitments available to the Company under the Credit Agreement from $200,000 to $275,000, reduce the interest rate margins applicable to term loans and revolving loans outstanding under the Credit Agreement from time to time and reduce the commitment fee payable by the Company to the lenders in respect of unused revolving commitments under the Credit Agreement. The Company executed the Second Credit Agreement Amendment to provide additional lending capacity which the Company used to fund the completion of the Polaris delisting transaction, as well as to provide excess lending capacity in the event of future opportunistic, strategic, investment opportunities. The Second Credit Agreement Amendment contains customary terms for amendments of this type, including representations, warranties and covenants. Interest under the credit facility accrues at a rate per annum of LIBOR plus 2.75% , subject to step-downs based on the Company’s ratio of debt to EBITDA. During the fiscal year ended March 31, 2020, the Company drew down $145,000 from the credit facility, inclusive of $84,000 drawn in the three months ended March 31, 2020 as a proactive measure in light of the uncertainty resulting from the COVID-19 pandemic. Earlier draws in the fiscal year March 31, 2020 were used to fund the eTouch 18-month anniversary payment of $17,500 and to fund opportunistic, strategic, investment opportunities. On May 27, 2020, the Company entered into Amendment No. 3 to Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A. (the “ Administrative Agent” ) and the lenders party thereto (the “ Third Credit Agreement Amendment” ), which amends the Credit Agreement to, among other things, (i) provide for $62,492 in incremental 364 -day delayed draw term loans (the “New Delayed Draw Term Loans” ), which can be drawn down up to three times on or before September 27, 2020 and (ii) extend out the debt to EBITDA ratio covenant step down by two quarters such that the leverage covenant remains at 3.25 :1.00 through December 31, 2020. The Administrative Agent increased the LIBOR floor to 1.00% from 0% as part of the Third Credit Agreement Amendment. The Company executed the Third Credit Agreement Amendment to provide additional liquidity in light of the COVID-19 pandemic which the Company could use to fund general working capital and refinance existing indebtedness under the credit facility. On May 27, 2020, the Company prepaid $55,000 on its existing revolving facility as a condition to closing the Third Credit Agreement Amendment. The Third Credit Agreement Amendment contains customary terms for amendments of this type, such as representations, warranties and covenants, including pro forma compliance with the Credit Agreement debt to EBITDA covenant as a condition to borrowing. Interest under the New Delayed Draw Term Loans accrues at a rate per annum of LIBOR plus 3.50% . The New Delayed Draw Term Loans mature on May 26, 2021 and do not amortize. The Company did not elect to draw down on the New Delayed Draw Term Loans. For the fiscal year ending March 31, 2021, the Company is required to make principal payments of $4,336 per quarter . The term of the Credit Agreement is five years ending February 6, 2023. During the nine months ended December 31, 2020, the Company paid $13,008 and $105,000 towards the term loan and revolving credit facility, respectively. At December 31, 2020, the total outstanding amount under the Credit Agreement was $381,961 and the weighted average interest rate on the term loan and revolving line of credit was 3.50% . The credit facility is secured by substantially all of the Company’s assets, including all intellectual property and all securities in domestic subsidiaries (other than certain domestic subsidiaries where the material assets of such subsidiaries are equity in foreign subsidiaries), subject to customary exceptions and exclusions from the collateral. All obligations under the Credit Agreement are unconditionally guaranteed by substantially all of the Company’s material direct and indirect domestic subsidiaries, with certain exceptions. These guarantees are secured by substantially all of the present and future property and assets of the guarantors, with certain exclusions. Current portion of long-term debt The following summarizes our short-term debt balances as of: December 31, 2020 March 31, 2020 Term loan- current maturities 21,680 17,344 Less: deferred financing costs, current (1,597) (1,301) Total $ 20,083 $ 16,043 Long-term debt, less current portion The following summarizes our long-term debt balance as of: December 31, 2020 March 31, 2020 Term loan $ 212,461 $ 225,469 Borrowings under revolving credit facility 169,500 274,500 Less: Current maturities (21,680) (17,344) Deferred financing costs, long-term (1,840) (2,471) Total $ 358,441 $ 480,154 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, 2020, $42,630 of receivables were sold under the terms of the financing agreement. Fees paid pursuant to this agreement were immaterial during the nine months ended December 31, 2020. No amounts were due as of December 31, 2020, 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. |
Stock Based Compensation Plans
Stock Based Compensation Plans | 9 Months Ended |
Dec. 31, 2020 | |
Stock-Based Compensation Plans | |
Stock-Based Compensation Plans | (15) Stock-Based Compensation Plans In May 2015, the Company adopted the 2015 Stock Option and Incentive Plan (“2015 Plan”) which was also approved by the Company’s stockholders on September 1, 2015. The 2015 Plan permits the granting of incentive stock options, non-qualified stock options, restricted stock awards, restricted stock units, unrestricted stock awards, performance share awards, performance-based awards to covered employees, cash-based awards and dividend equivalent rights. Stock options, restricted stock and restricted stock units generally vest over four years . Performance share awards and performance-based awards generally vest over three years . Under the 2015 Plan, the Company grants both service condition awards and performance condition awards. Performance awards are contingent upon meeting various departmental or company-wide performance goals in addition to service conditions. Stock compensation is recognized over the vesting period based on the probability of achievement of the performance condition. In May 2020, the Company issued 250,075 performance shares to its executive officers with a three-year performance measurement period. As of December 31, 2020, the Company had not yet established the significant terms of the performance shares relevant to vesting ( three-year cumulative target) for the three-year performance measurement period. Therefore, as of December 31, 2020, a grant date for financial accounting purposes had not occurred and the Company did not record any stock compensation related to these performance shares during the nine months ended December 31, 2020. Upon the grant date, the Company will recognize the stock compensation expense over the remaining future requisite service period from the grant date. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Dec. 31, 2020 | |
Accumulated Other Comprehensive Loss. | |
Accumulated Other Comprehensive Loss | (16) Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive income (loss) by component were as follows: Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Investment securities Beginning balance $ 12 $ 12 $ 12 $ 12 Other comprehensive income (loss) (OCI) before reclassifications, net of tax of $0 for all periods — — — — Reclassifications from OCI to other income, net of tax of $0 for all periods — — — — Less: Noncontrolling interests, net of tax of $0 for all periods — — — — Comprehensive income (loss) on investment securities, net of tax of $0 for all periods — — — — Closing balance $ 12 $ 12 $ 12 $ 12 Currency translation adjustments Beginning balance $ (63,522) $ (64,116) $ (71,207) $ (57,354) OCI before reclassifications 5,933 4,630 13,618 (2,106) Less: Noncontrolling interests — (363) — (389) Comprehensive income (loss) on currency translation adjustments 5,933 4,267 13,618 (2,495) Closing balance $ (57,589) $ (59,849) $ (57,589) $ (59,849) Cash flow hedges Beginning balance $ (7,610) $ (2,175) $ (11,818) $ 39 OCI before reclassifications net of tax of $8, $(386), $614 and $(666) (358) (1,993) 1,346 (2,240) Reclassifications from OCI to —Revenue, net of tax of $0, $0, $0 and $7 — — — 11 —Costs of revenue, net of tax of $28, $(188), $260 and $(504) 171 (639) 1,016 (1,847) —Selling, general and administrative expenses, net of tax of $10, $(77), $100 and $(220) 62 (260) 384 (800) —Interest expenses, net of tax of $304, $26, $767 and $(54) 887 75 2,224 (155) Less: Noncontrolling interests, net of tax of $0 for all periods — — — — Comprehensive income (loss) on cash flow hedges, net of tax of $350, $(625), $1,741 and $(1,437) 762 (2,817) 4,970 (5,031) Closing balance $ (6,848) $ (4,992) $ (6,848) $ (4,992) Benefit plans Beginning balance $ (2,071) $ (2,776) $ (2,242) $ (2,084) OCI before reclassifications net of tax of $0 for all periods — — 11 (911) Reclassifications from OCI for prior service credit (cost) to: Other income (expense), net of tax of $0 for all periods 10 6 30 19 Reclassifications from net actuarial gain (loss) amortization to: Other income (expense), net of tax of 95 70 286 210 Other adjustments, net of tax of $0 for all periods 9 3 (42) 76 (Less): Noncontrolling interests, net of tax $0 for all periods — (3) — (10) Comprehensive income (loss) on benefit plans, net of tax of $0 for all periods 114 76 285 (616) Closing balance (1,957) $ (2,700) (1,957) $ (2,700) Accumulated other comprehensive loss $ (66,382) $ (67,529) $ (66,382) $ (67,529) |
Commitments and Contingencies a
Commitments and Contingencies and Guarantees | 9 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies and Guarantees | |
Commitments and Contingencies and Guarantees | (17) Commitments, Contingencies and Guarantees. The Company indemnifies its officers and directors for certain events or occurrences under its charter or by-laws and under indemnification agreements while the officer or director is, or was, serving at its request in a defined capacity. The term of the indemnification period is with respect to the period that such person was an officer or director of the Company. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited. The costs incurred to defend lawsuits or settle claims related to these indemnification obligations have not been material. As a result, the Company believes that its estimated exposure on these obligations is minimal. Accordingly, the Company had no liabilities recorded for these obligations as of December 31, 2020. The Company is insured against any actual or alleged act, error, omission, neglect, misstatement or misleading statement or breach of duty by any current or former officer, director or employee while rendering information technology services. The Company believes that its financial exposure from such actual or alleged actions, should they arise, is minimal and no liability was recorded at December 31, 2020. From time to time the Company is involved in legal proceedings, claims and litigation related to employee claims, contractual disputes and taxes in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. Although the Company cannot predict the outcome of such matters, the Company has no reason to believe the disposition of any current matter, other than the specific matters described below, could reasonably be expected to have a material adverse impact on the Company’s balance sheets, income of operations and cash flows or the ability to carry on any of its business activities. This assessment is based on our current understanding of relevant facts and circumstances. As such, our view of these matters is subject to inherent uncertainties and may change in the future. One of the Company’s larger clients made a demand for damages related to a project in which the Company was performing services. The client alleged breach of certain representations and warranties regarding the Company’s performance and sought indemnification for damages from those alleged breaches. During the three months ended December 31, 2020, the parties agreed to a commercial settlement whereby each party provided a full release of all claims provided that Virtusa make certain cash payments (which were subject to reimbursement under the terms of Virtusa’s insurance policies) and provide certain service credits with respect to the execution of future work. On February 28, 2019, the Supreme Court of India issued a ruling interpreting certain statutory defined contribution obligations of employees and employers, which altered historical understandings of such obligations, extending them to cover additional portions of employee income. As a result, contributions by our employees and the Company will increase in future periods. There is uncertainty as to whether the Indian government will apply the Supreme Court's ruling on a retroactive basis and if so, how this liability should be calculated as it is impacted by multiple variables, including the period of assessment, the application with respect to certain current and former employees and whether interest and penalties may be assessed. As such, the ultimate amount of our obligation is difficult to quantify. If the Indian government were to apply the Supreme Court ruling retroactively, without assessing interest and penalties, the impact would be a charge of approximately $7,500 to the Company’s income from operations and cash flows. In connection with the proposed acquisition of the Company by certain investments funds affiliated with Baring Private Equity Asia, pursuant to the Merger Agreement, several lawsuits were filed by stockholders of the Company against the Company. The Company believes that the claims asserted against them are without merit and intend to vigorously defend against these lawsuits. If the Merger is not completed within the expected time frame or at all, we may be subject to a number of material risks. The price of our common stock may decline to the extent that current market prices reflect a market assumption that the Merger will be completed. We could be required to reimburse certain expenses of Parent or pay Parent a termination fee of $54,330 if the Merger Agreement is terminated under specific circumstances described in the Merger Agreement. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Dec. 31, 2020 | |
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, 2020 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 28, 2020. 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 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, 2020 and March 31, 2020, 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 7 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 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. The FASB subsequently issued guidance which provide clarifications and improvements to this new standard. The amendments in this update changed how companies measure and recognize credit impairment for many financial assets. The new credit loss model requires companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including accounts receivables) that are in the scope of the update. The standard update also made amendments to the current impairment model for available-for-sale debt securities. This 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 public entities from fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this standard (“ASC Topic 326”) effective April 1, 2020 using a modified retrospective approach. Prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting policies. 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. See Note 9, “Revenues and Accounts Receivable” for additional information regarding credit losses. 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 December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, ownership changes in investments, and interim-period accounting for enacted changes in tax law. The standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on the consolidated financial statements. |
Earnings per Share (Tables)
Earnings per Share (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Earnings per Share | |
Schedule of components of basic earnings per share | Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Numerators: Net income available to Virtusa stockholders $ 25,447 $ 12,720 $ 35,110 $ 25,656 Less: Series A Convertible Preferred Stock dividends and accretion (1,087) (1,087) (3,262) (3,262) Net income available to Virtusa common stockholders $ 24,360 $ 11,633 $ 31,848 $ 22,394 Denominators: Basic weighted average common shares outstanding 30,319,615 29,849,368 30,252,264 30,041,740 Basic earnings per share available to Virtusa common stockholders $ 0.80 $ 0.39 $ 1.05 $ 0.75 |
Schedule of components of diluted earnings per share | Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Numerators: Net income available to Virtusa common stockholders $ 24,360 $ 11,633 $ 31,848 $ 22,394 Add : Series A Convertible Preferred Stock dividends and accretion 1,087 1,087 — — Net income available to Virtusa common stockholders and assumed conversion $ 25,447 $ 12,720 $ 31,848 $ 22,394 Denominators: Basic weighted average common shares outstanding 30,319,615 29,849,368 30,252,264 30,041,740 Dilutive effect of Series A Convertible Preferred Stock if converted 3,000,000 3,000,000 — — Dilutive effect of employee stock options and unvested restricted stock awards and restricted stock units 577,981 608,863 412,878 658,529 Weighted average shares—diluted 33,897,596 33,458,231 30,665,142 30,700,269 Diluted earnings per share available to Virtusa common stockholders $ 0.75 $ 0.38 $ 1.04 $ 0.73 |
Business Combinations (Tables)
Business Combinations (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Business Combinations | |
Summary of aggregate purchase price allocation | Amount Useful Life Consideration Transferred: Cash paid at closing $ 29,624 Deferred consideration payable 10,313 Fair value of contingent consideration 20,786 Fair value of consideration 60,723 Less: Cash acquired (477) Total purchase price, net of cash acquired $ 60,246 Assets and Liabilities: Cash and cash equivalents 477 Goodwill 21,374 Customer relationships 39,319 5 - 7 years Other net (447) Total purchase price $ 60,723 |
Investment Securities (Tables)
Investment Securities (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Investment Securities. | |
Summary of investment securities | The following is a summary of investment securities at December 31, 2020: Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value Time Deposits: Current $ 1,851 $ — $ — $ 1,851 Equity securities: Mutual funds: Current 652 130 — 782 Equity Shares/ Options: Non-current 1 21 — 22 Total investment securities $ 2,504 $ 151 $ — $ 2,655 The following is a summary of investment securities at March 31, 2020: Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value Time deposits: Current $ 3,927 $ — $ — $ 3,927 Equity securities: Mutual funds: Current 5,623 235 — 5,858 Equity Shares/ Options: Non-current 1 3 — 4 Total investment securities $ 9,551 $ 238 $ — $ 9,789 |
Schedule of proceeds from sales of available-for-sale debt and equity securities and the gross gains and losses included in earnings as a result | Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Proceeds from sales or maturities of available-for-sale $ 649 $ 9,476 $ 7,217 $ 47,716 Gross gains $ — $ 123 $ 176 $ 563 Gross losses — — — — Net realized gains on sales of available-for-sale debt $ — $ 123 $ 176 $ 563 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Fair Value of Financial Instruments | |
Schedule of financial assets and liabilities measured at fair value on a recurring basis | Level 1 Level 2 Level 3 Total Assets: Investments: Time deposits—current $ — $ 1,851 — $ 1,851 Equity securities—current — 782 — 782 Equity securities—non-current — 22 — 22 Derivative financial instruments: Foreign currency derivative contracts—current — 1,759 — 1,759 Foreign currency derivative contracts—non-current — — — — Interest rate swap contracts — — — — Total assets $ — $ 4,414 $ — $ 4,414 Liabilities: Foreign currency derivative contracts—current — 1,186 — 1,186 Foreign currency derivative contracts—non-current — — — — Interest rate swap contracts—non-current — 8,884 — 8,884 Contingent consideration — — 16,405 16,405 Total liabilities $ — $ 10,070 $ 16,405 $ 26,475 The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2020: Level 1 Level 2 Level 3 Total Assets: Investments: Time deposits—current $ — $ 3,927 — $ 3,927 Equity securities—current — 5,858 — 5,858 Equity securities—non-current — 4 — 4 Derivative financial instruments: Foreign currency derivative contracts—current — 103 — 103 Foreign currency derivative contracts—non-current — 56 — 56 Interest rate swap contracts — — — — Total assets $ — $ 9,948 $ — $ 9,948 Liabilities: Foreign currency derivative contracts—current $ — 3,689 $ — 3,689 Foreign currency derivative contracts—non-current — 364 $ — 364 Interest rate swap contracts—non-current — 11,128 — 11,128 Contingent consideration — — 25,012 25,012 Total liabilities $ — $ 15,181 $ 25,012 $ 40,193 |
Reconciliation of the beginning and ending balances of Level 3 contingent consideration liabilities associated with our business combinations | The following table shows a reconciliation of the beginning and ending balances of Level 3 contingent consideration liabilities associated with our business combinations: December 31, 2020 Beginning balance $ 25,012 Purchase price adjustments (4,178) Payments made during the period (4,051) Contingent consideration recognized in earnings (453) Foreign currency translation adjustments 75 Ending balance $ 16,405 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Derivative Financial Instruments | |
Schedule of fair value of derivative instruments included in the consolidated balance sheets | Derivatives designated as hedging instruments December 31, 2020 March 31, 2020 Foreign currency exchange contracts: Other current assets $ 1,759 $ 103 Other long-term assets $ — $ 56 Accrued expenses and other $ 1,186 $ 3,689 Long-term liabilities $ — $ 364 December 31, 2020 March 31, 2020 Interest rate swap contracts Other long-term assets $ — $ — Long-term liabilities $ 8,884 $ 11,128 |
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 2020 2019 2020 2019 Foreign currency exchange contracts $ (338) $ (3,158) $ 2,707 $ 148 Interest rate swaps $ (11) $ 782 $ (747) $ (3,054) Location of Gain or (Loss) Reclassified Amount of Gain or (Loss) Reclassified from AOCI into Income from AOCI into Income (loss) (Effective Three Months Ended December 31, Nine Months Ended December 31, Portion) 2020 2019 2020 2019 Revenue $ — $ — $ — $ (18) Costs of revenue $ (199) $ 827 $ (1,276) $ 2,351 Operating expenses $ (72) $ 337 $ (484) $ 1,020 Interest Expenses $ (1,191) $ (100) $ (2,991) $ 209 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 (loss) on Derivatives 2020 2019 2020 2019 Foreign currency exchange contracts Revenue $ (543) $ (1,449) $ (1,534) $ (205) Costs of revenue $ 334 $ 1,105 $ 1,055 $ 380 Selling, general and administrative expenses $ 33 $ 114 $ 93 $ 29 |
Revenues and Accounts Receiva_2
Revenues and Accounts Receivable (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Revenues and Accounts Receivable | |
Schedule of disaggregation of revenue | Three Months Ended Nine Months Ended December 31, December 31, Revenue by geography: 2020 2019 2020 2019 North America $ 256,536 $ 251,229 $ 713,868 $ 724,005 Europe 59,182 55,154 163,740 175,258 Rest of World 30,382 28,724 86,744 83,369 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 Three Months Ended Nine Months Ended December 31, December 31, Revenue by customer’s industry groups (1) 2020 2019 2020 2019 Banking Financial Services and Insurance $ 190,288 $ 180,070 $ 528,579 $ 548,977 Communications and Technology 77,155 82,848 227,481 226,944 Media & Information and Other 26,232 23,107 75,165 63,830 Healthcare 52,425 49,082 133,127 142,881 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 (1) Prior year amounts have been reclassified to conform to the current period presentation Three Months Ended Nine Months Ended December 31, December 31, Revenue by service offerings 2020 2019 2020 2019 Application outsourcing $ 195,941 $ 183,777 $ 536,105 $ 547,303 Consulting 150,159 151,330 428,247 435,329 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 Three Months Ended Nine Months Ended December 31, December 31, Revenue by contract type 2020 2019 2020 2019 Time-and-materials $ 173,097 $ 190,423 $ 528,207 $ 579,657 Fixed-price* 173,003 144,684 436,145 402,975 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 *Fixed-price includes both retainer-billing basis and fixed-price progress towards completion |
Schedule of movements in contract assets and deferred revenue balances | The table below shows the movements in contract assets during the nine months ended: December 31, 2020 December 31, 2019 Beginning balance $ 14,241 $ 18,538 Revenues recognized during the period but not yet billed 66,293 67,594 Amounts billed (66,888) (68,314) Other 52 (20) Ending balance $ 13,698 $ 17,798 Contract liabilities comprise of 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 movements in the deferred revenue during the nine months ended: December 31, 2020 December 31, 2019 Beginning balance $ 8,054 $ 6,421 Amounts billed but not yet recognized as revenues 14,204 5,342 Revenues recognized related to the opening balance of deferred revenue (6,782) (5,017) Other 8 (154) Ending balance $ 15,484 $ 6,592 |
Schedule of activity in the allowance for credit losses on accounts receivable | Nine Months Ended December 31, 2020 Balance at March 31, 2020 $ 1,541 Transition period adjustment on accounts receivable pursuant to ASC 326 — Adjusted balance at April 1, 2020 1,541 Current-period provision/ (reversal) for expected credit losses (22) Write-offs charged against the allowance (476) Foreign currency translation adjustments 42 Balance at December 31, 2020 $ 1,085 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets | |
Schedule of changes in goodwill balances | December 31, 2020 March 31, 2020 Beginning balance $ 296,493 $ 279,543 Goodwill arising from acquisitions — 27,316 Purchase price adjustments (5,942) — Foreign currency translation adjustments 5,040 (10,366) Ending balance $ 295,591 $ 296,493 |
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, 2020 Weighted Gross Net Average Useful Life Carrying Accumulated Carrying at Acquisition Amount Amortization Amount Amortizable intangible assets: Customer relationships 10.6 $ 179,966 $ 61,598 $ 118,368 Trademark 2.0 900 900 — Technology 5.0 500 500 — Other 5.0 1,214 380 834 10.5 $ 182,580 $ 63,378 $ 119,202 March 31, 2020 Weighted Gross Net Average Useful Life Carrying Accumulated Carrying at Acquisition Amount Amortization Amount Amortizable intangible assets: Customer relationships 10.6 $ 176,373 $ 46,494 $ 129,879 Trademark 2.0 900 900 — Technology 5.0 500 500 — Other 5.0 1,214 190 1,024 10.5 $ 178,987 $ 48,084 $ 130,903 |
Concentration of Revenue and _2
Concentration of Revenue and Assets (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Concentration of Revenue and Assets | |
Schedule of geographic information of total revenue | Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Customer revenue: United States of America $ 244,004 $ 237,754 $ 676,790 $ 685,023 United Kingdom 29,304 42,902 91,916 137,795 Rest of World 72,792 54,451 195,646 159,814 Consolidated revenue $ 346,100 $ 335,107 $ 964,352 $ 982,632 |
Schedule of revenue from significant clients as a percentage of Company's consolidated revenue | Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Customer A 19.6 % 16.4 % 18.5 % 15.9 % |
Schedule of long-lived assets, net of accumulated depreciation and amortization, attributed to geographic areas based on location of assets | December 31, 2020 March 31, 2020 Long-lived assets, net of accumulated depreciation and amortization: United States of America $ 272,187 $ 291,959 India 252,070 255,623 Rest of World 28,900 29,748 Consolidated long-lived assets, net $ 553,157 $ 577,330 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Debt | |
Summary of short-term debt balances | December 31, 2020 March 31, 2020 Term loan- current maturities 21,680 17,344 Less: deferred financing costs, current (1,597) (1,301) Total $ 20,083 $ 16,043 |
Summary of long-term debt balances | December 31, 2020 March 31, 2020 Term loan $ 212,461 $ 225,469 Borrowings under revolving credit facility 169,500 274,500 Less: Current maturities (21,680) (17,344) Deferred financing costs, long-term (1,840) (2,471) Total $ 358,441 $ 480,154 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Dec. 31, 2020 | |
Accumulated Other Comprehensive Loss. | |
Schedule of changes in accumulated other comprehensive loss by component | Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Investment securities Beginning balance $ 12 $ 12 $ 12 $ 12 Other comprehensive income (loss) (OCI) before reclassifications, net of tax of $0 for all periods — — — — Reclassifications from OCI to other income, net of tax of $0 for all periods — — — — Less: Noncontrolling interests, net of tax of $0 for all periods — — — — Comprehensive income (loss) on investment securities, net of tax of $0 for all periods — — — — Closing balance $ 12 $ 12 $ 12 $ 12 Currency translation adjustments Beginning balance $ (63,522) $ (64,116) $ (71,207) $ (57,354) OCI before reclassifications 5,933 4,630 13,618 (2,106) Less: Noncontrolling interests — (363) — (389) Comprehensive income (loss) on currency translation adjustments 5,933 4,267 13,618 (2,495) Closing balance $ (57,589) $ (59,849) $ (57,589) $ (59,849) Cash flow hedges Beginning balance $ (7,610) $ (2,175) $ (11,818) $ 39 OCI before reclassifications net of tax of $8, $(386), $614 and $(666) (358) (1,993) 1,346 (2,240) Reclassifications from OCI to —Revenue, net of tax of $0, $0, $0 and $7 — — — 11 —Costs of revenue, net of tax of $28, $(188), $260 and $(504) 171 (639) 1,016 (1,847) —Selling, general and administrative expenses, net of tax of $10, $(77), $100 and $(220) 62 (260) 384 (800) —Interest expenses, net of tax of $304, $26, $767 and $(54) 887 75 2,224 (155) Less: Noncontrolling interests, net of tax of $0 for all periods — — — — Comprehensive income (loss) on cash flow hedges, net of tax of $350, $(625), $1,741 and $(1,437) 762 (2,817) 4,970 (5,031) Closing balance $ (6,848) $ (4,992) $ (6,848) $ (4,992) Benefit plans Beginning balance $ (2,071) $ (2,776) $ (2,242) $ (2,084) OCI before reclassifications net of tax of $0 for all periods — — 11 (911) Reclassifications from OCI for prior service credit (cost) to: Other income (expense), net of tax of $0 for all periods 10 6 30 19 Reclassifications from net actuarial gain (loss) amortization to: Other income (expense), net of tax of 95 70 286 210 Other adjustments, net of tax of $0 for all periods 9 3 (42) 76 (Less): Noncontrolling interests, net of tax $0 for all periods — (3) — (10) Comprehensive income (loss) on benefit plans, net of tax of $0 for all periods 114 76 285 (616) Closing balance (1,957) $ (2,700) (1,957) $ (2,700) Accumulated other comprehensive loss $ (66,382) $ (67,529) $ (66,382) $ (67,529) |
Earnings per Share - Basic earn
Earnings per Share - Basic earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Numerator: | ||||||
Net income available to Virtusa stockholders | $ 25,447 | $ 8,769 | $ 894 | $ 12,720 | $ 35,110 | $ 25,656 |
Less: Series A Convertible Preferred Stock dividends and accretion | (1,087) | (1,087) | (3,262) | (3,262) | ||
Net income available to Virtusa common stockholders | $ 24,360 | $ 11,633 | $ 31,848 | $ 22,394 | ||
Denominator: | ||||||
Basic weighted average common shares outstanding (in shares) | 30,319,615 | 29,849,368 | 30,252,264 | 30,041,740 | ||
Basic earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.80 | $ 0.39 | $ 1.05 | $ 0.75 |
Earnings per Share - Diluted ea
Earnings per Share - Diluted earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Numerator: | ||||
Net income available to Virtusa common stockholders | $ 24,360 | $ 11,633 | $ 31,848 | $ 22,394 |
Add: Series A Convertible Preferred Stock dividends and accretion | 1,087 | 1,087 | ||
Net income available to Virtusa common stockholders and assumed conversion | $ 25,447 | $ 12,720 | $ 31,848 | $ 22,394 |
Denominator: | ||||
Basic weighted average common shares outstanding (in shares) | 30,319,615 | 29,849,368 | 30,252,264 | 30,041,740 |
Dilutive effect of Series A Convertible Preferred Stock if converted | 3,000,000 | 3,000,000 | ||
Dilutive effect of employee stock options and unvested restricted stock awards and restricted stock units | 577,981 | 608,863 | 412,878 | 658,529 |
Weighted average shares-diluted (in shares) | 33,897,596 | 33,458,231 | 30,665,142 | 30,700,269 |
Diluted earnings per share available to Virtusa common stockholders (in dollars per share) | $ 0.75 | $ 0.38 | $ 1.04 | $ 0.73 |
Earnings per Share - Anti-dilut
Earnings per Share - Anti-dilutive securities (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Unvested restricted stock awards, unvested restricted stock units and options to purchase | ||||
Anti-dilutive securities | ||||
Shares excluded from computation of earnings (loss) per share | 823 | 24,037 | 127,504 | 100,434 |
Series A Convertible Preferred Stock | ||||
Anti-dilutive securities | ||||
Shares excluded from computation of earnings (loss) per share | 3,000,000 | 3,000,000 | 3,000,000 | 3,000,000 |
Proposed Merger with Austin H_2
Proposed Merger with Austin HoldCo Inc., an entity wholly owned by funds affiliated with Baring Private Equity Asia (Details) - Austin HoldCo Inc. - Merger Agreement - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | |
Dec. 31, 2020 | Sep. 09, 2020 | |
Cash paid per share | $ 51.35 | |
Amount of transaction costs | $ 6,367 | |
Termination fees | $ 54,330 |
Business Combinations - Transac
Business Combinations - Transaction details (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Mar. 31, 2020USD ($)item | |
Acquisitions | |||
Payment of deferred consideration related to business acquisition | $ 10,313 | $ 17,500 | |
Goodwill fair value adjustment | (5,942) | ||
Change in fair value of contingent consideration | 453 | ||
Fair value of contingent consideration | 16,405 | ||
Fiscal 2020 acquisitions | |||
Acquisitions | |||
Number of business acquired | item | 3 | ||
Aggregate purchase price | $ 29,624 | ||
Deferred consideration payable | $ 10,313 | ||
Deferred consideration payment term | 1 year | ||
Payment of deferred consideration related to business acquisition | 10,313 | ||
Payment of contingent consideration related to business acquisitions | 4,051 | ||
Goodwill fair value adjustment | 5,942 | ||
Fair value assessment of contingent consideration | 4,178 | ||
Fair value of contingent consideration | $ 20,786 | ||
Fiscal 2020 acquisitions | Minimum | |||
Acquisitions | |||
Target performance period | 12 months | ||
Fiscal 2020 acquisitions | Maximum | |||
Acquisitions | |||
Target performance period | 24 months | ||
Fair value of contingent consideration | $ 28,853 | ||
Fiscal 2020 acquisitions | Customer Relationships | |||
Acquisitions | |||
Goodwill fair value adjustment | 1,513 | ||
Fiscal 2020 acquisitions | Other Adjustments | |||
Acquisitions | |||
Goodwill fair value adjustment | $ 251 |
Business Combinations - Purchas
Business Combinations - Purchase price allocation (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | |
Consideration Transferred | |||
Fair value of contingent consideration | $ 16,405 | ||
Assets and Liabilities: | |||
Goodwill | $ 295,591 | $ 296,493 | $ 279,543 |
Weighted Average Useful Life at Aquisition | 10 years 6 months | 10 years 6 months | |
Customer Relationships | |||
Assets and Liabilities: | |||
Weighted Average Useful Life at Aquisition | 10 years 7 months 6 days | 10 years 7 months 6 days | |
Customer Relationships | Maximum | |||
Assets and Liabilities: | |||
Weighted Average Useful Life at Aquisition | 7 years | ||
Fiscal 2020 acquisitions | |||
Consideration Transferred | |||
Cash paid at closing | $ 29,624 | ||
Deferred consideration payable | 10,313 | ||
Fair value of contingent consideration | 20,786 | ||
Fair value of consideration | 60,723 | ||
Less: Cash acquired | (477) | ||
Total purchase price, net of cash acquired | 60,246 | ||
Assets and Liabilities: | |||
Cash and cash equivalents | 477 | ||
Goodwill | 21,374 | ||
Other net | (447) | ||
Total purchase price | 60,723 | ||
Fiscal 2020 acquisitions | Maximum | |||
Consideration Transferred | |||
Fair value of contingent consideration | 28,853 | ||
Fiscal 2020 acquisitions | Customer Relationships | |||
Assets and Liabilities: | |||
Intangible assets | $ 39,319 | ||
Fiscal 2020 acquisitions | Customer Relationships | Minimum | |||
Assets and Liabilities: | |||
Weighted Average Useful Life at Aquisition | 5 years |
Investment Securities (Details)
Investment Securities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2020 | |
Total investment securities | |||||
Amortized Cost | $ 2,504 | $ 2,504 | $ 9,551 | ||
Gross Unrealized Gains | 151 | 151 | 238 | ||
Fair Value | 2,655 | 2,655 | 9,789 | ||
Proceeds from sales or maturities of available-for-sale investment and equity securities | |||||
Proceeds from sales or maturities of available-for-sale debt securities and equity securities | 649 | $ 9,476 | 7,217 | $ 47,716 | |
Gross gains | 123 | 176 | 563 | ||
Net realized gains on sales of available-for-sale debt securities and equity securities | $ 123 | 176 | $ 563 | ||
Time deposits. | Current | |||||
Time Deposits | |||||
Time deposits: | 1,851 | 1,851 | 3,927 | ||
Time deposits-current | 1,851 | 1,851 | 3,927 | ||
Mutual funds | Current | |||||
Equity securities: | |||||
Amortized Cost | 652 | 652 | 5,623 | ||
Gross Unrealized Gains | 130 | 130 | 235 | ||
Fair Value | 782 | 782 | 5,858 | ||
Equity shares/ options | Noncurrent | |||||
Equity securities: | |||||
Amortized Cost | 1 | 1 | 1 | ||
Gross Unrealized Gains | 21 | 21 | 3 | ||
Fair Value | $ 22 | $ 22 | $ 4 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments - Financial assets and liabilities measured at fair value on a recurring basis (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Mar. 31, 2020 |
Liabilities: | ||
Contingent consideration | $ 16,405 | |
Fair Value Measurements Recurring | ||
Investments: | ||
Time deposits-current | 1,851 | $ 3,927 |
Equity securities - current | 782 | 5,858 |
Equity securities - non-current | 22 | 4 |
Derivative financial instruments: | ||
Foreign currency derivative contracts-current | 1,759 | 103 |
Foreign currency derivative contracts-non-current | 56 | |
Total assets | 4,414 | 9,948 |
Liabilities: | ||
Foreign currency derivative contracts-current | 1,186 | 3,689 |
Foreign currency derivative contracts-non-current | 364 | |
Interest rate swap contracts - non-current | 8,884 | 11,128 |
Contingent consideration | 16,405 | 25,012 |
Total liabilities | 26,475 | 40,193 |
Fair Value Measurements Recurring | Fair Value Inputs Level2 | ||
Investments: | ||
Time deposits-current | 1,851 | 3,927 |
Equity securities - current | 782 | 5,858 |
Equity securities - non-current | 22 | 4 |
Derivative financial instruments: | ||
Foreign currency derivative contracts-current | 1,759 | 103 |
Foreign currency derivative contracts-non-current | 56 | |
Total assets | 4,414 | 9,948 |
Liabilities: | ||
Foreign currency derivative contracts-current | 1,186 | 3,689 |
Foreign currency derivative contracts-non-current | 364 | |
Interest rate swap contracts - non-current | 8,884 | 11,128 |
Total liabilities | 10,070 | 15,181 |
Fair Value Measurements Recurring | Fair Value Inputs Level 3 | ||
Liabilities: | ||
Contingent consideration | 16,405 | 25,012 |
Total liabilities | $ 16,405 | $ 25,012 |
Fair Value of Financial Instr_4
Fair Value of Financial Instruments - Level 3 financial liabilities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Changes in fair value of the Company's Level 3 financial liabilities | ||||
Contingent consideration recognized in earnings | $ (453) | |||
Foreign currency translation adjustment | $ 5,933 | $ 4,630 | 13,618 | $ (2,106) |
Fair Value Inputs Level 3 | ||||
Changes in fair value of the Company's Level 3 financial liabilities | ||||
Beginning balance | 25,012 | |||
Purchase price adjustments | (4,178) | (4,178) | ||
Payments made during the period | (4,051) | |||
Contingent consideration recognized in earnings | (453) | |||
Foreign currency translation adjustment | 75 | |||
Ending balance | $ 16,405 | $ 16,405 |
Derivative Financial Instrume_3
Derivative Financial Instruments - (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Dec. 31, 2020 | Mar. 31, 2020 | |
Interest rate swaps | ||
Derivative Financial Instruments | ||
Notional value of outstanding contracts | $ 170,200 | |
Increase in interest rate floor | 1.00% | |
Outstanding term of derivative instruments | 2 years 2 months 12 days | |
Unrealized loss on derivative | $ 10,864 | |
Unrealized loss on derivative | $ 8,884 | $ 11,128 |
Interest rate swap 2018 | ||
Derivative Financial Instruments | ||
Fixed interest rate | 2.85% | |
Percentage of coverage target retain | 50.00% | |
Interest rate swap 2018 | London Interbank Offered Rate L I B O R | ||
Derivative Financial Instruments | ||
Percentage of coverage on debt | 50.00% | |
Designated As Hedging Instrument | Foreign Exchange Contract | ||
Derivative Financial Instruments | ||
Notional value of outstanding contracts | $ 87,693 | $ 128,728 |
Unrealized net gains expected to be reclassified from AOCI to earnings during the next 12 months | $ 573 | |
Designated As Hedging Instrument | Foreign Exchange Contract | Maximum | ||
Derivative Financial Instruments | ||
Outstanding term of derivative instruments | 12 months |
Derivatives designated as hedgi
Derivatives designated as hedging instruments - Derivatives designated as hedging instruments (Details) - Designated As Hedging Instrument - USD ($) $ in Thousands | Dec. 31, 2020 | Mar. 31, 2020 |
Foreign Exchange Contract | ||
Foreign currency exchange and interest rate swap contracts | ||
Other current assets | $ 1,759 | $ 103 |
Other long-term assets | 56 | |
Accrued expenses and other | 1,186 | 3,689 |
Long-term liabilities | 364 | |
Interest rate swaps | ||
Foreign currency exchange and interest rate swap contracts | ||
Long-term liabilities | $ 8,884 | $ 11,128 |
Derivatives designated as hed_2
Derivatives designated as hedging instruments - Effect of foreign currency exchange and interest rate swap contracts (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Designated As Hedging Instrument | Cash flow hedges. | Revenue | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (loss) | $ (18) | |||
Designated As Hedging Instrument | Cash flow hedges. | Costs of revenue | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (loss) | $ (199) | $ 827 | $ (1,276) | 2,351 |
Designated As Hedging Instrument | Cash flow hedges. | Operating Expense | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (loss) | (72) | 337 | (484) | 1,020 |
Designated As Hedging Instrument | Cash flow hedges. | Interest expenses | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Income (loss) | (1,191) | (100) | (2,991) | 209 |
Designated As Hedging Instrument | Cash flow hedges. | Foreign Exchange Contract | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in AOCI on Derivatives | (338) | (3,158) | 2,707 | 148 |
Designated As Hedging Instrument | Cash flow hedges. | Interest rate swaps | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in AOCI on Derivatives | (11) | 782 | (747) | (3,054) |
Nondesignated | Foreign Exchange Contract | Revenue | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income (loss) on Derivatives | (543) | (1,449) | (1,534) | (205) |
Nondesignated | Foreign Exchange Contract | Costs of revenue | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income (loss) on Derivatives | 334 | 1,105 | 1,055 | 380 |
Nondesignated | Foreign Exchange Contract | Selling General And Administrative Expenses | ||||
Derivative Financial Instruments | ||||
Amount of Gain or (Loss) Recognized in Income (loss) on Derivatives | $ 33 | $ 114 | $ 93 | $ 29 |
Revenues and Accounts Receiva_3
Revenues and Accounts Receivable - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Disaggregation of Revenue | ||||
Revenue | $ 346,100 | $ 335,107 | $ 964,352 | $ 982,632 |
Time-and-materials | ||||
Disaggregation of Revenue | ||||
Revenue | 173,097 | 190,423 | 528,207 | 579,657 |
Fixed-price | ||||
Disaggregation of Revenue | ||||
Revenue | 173,003 | 144,684 | 436,145 | 402,975 |
Application outsourcing | ||||
Disaggregation of Revenue | ||||
Revenue | 195,941 | 183,777 | 536,105 | 547,303 |
Consulting | ||||
Disaggregation of Revenue | ||||
Revenue | 150,159 | 151,330 | 428,247 | 435,329 |
Banking Financial Services and Insurance | ||||
Disaggregation of Revenue | ||||
Revenue | 190,288 | 180,070 | 528,579 | 548,977 |
Communications and Technology | ||||
Disaggregation of Revenue | ||||
Revenue | 77,155 | 82,848 | 227,481 | 226,944 |
Media & Information and Other | ||||
Disaggregation of Revenue | ||||
Revenue | 26,232 | 23,107 | 75,165 | 63,830 |
Healthcare | ||||
Disaggregation of Revenue | ||||
Revenue | 52,425 | 49,082 | 133,127 | 142,881 |
North America | ||||
Disaggregation of Revenue | ||||
Revenue | 256,536 | 251,229 | 713,868 | 724,005 |
Europe | ||||
Disaggregation of Revenue | ||||
Revenue | 59,182 | 55,154 | 163,740 | 175,258 |
Rest Of World | ||||
Disaggregation of Revenue | ||||
Revenue | $ 30,382 | $ 28,724 | $ 86,744 | $ 83,369 |
Revenues and Accounts Receiva_4
Revenues and Accounts Receivable - Receivable and Contract Balances (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Significant movements in contract assets | ||
Beginning balance | $ 14,241 | $ 18,538 |
Revenues recognized during the period but not yet billed | 66,293 | 67,594 |
Amounts billed | (66,888) | (68,314) |
Other | 52 | (20) |
Ending balance | 13,698 | 17,798 |
Significant movements in deferred revenue balances | ||
Beginning balance | 8,054 | 6,421 |
Amounts billed but not yet recognized as revenues | 14,204 | 5,342 |
Revenues recognized related to the opening balance of deferred revenue | (6,782) | (5,017) |
Other | 8 | (154) |
Ending balance | $ 15,484 | $ 6,592 |
Revenues and Accounts Receiva_5
Revenues and Accounts Receivable - Remaining performance obligation (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2020USD ($) | |
Remaining performance obligation | |
Aggregate amount of transaction price allocated to remaining performance obligations | $ 13,627 |
Upfront payments | |
Unamortized upfront payments for services | $ 15,735 |
Amortization period for upfront payments for services | 3 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-12-31 | |
Remaining performance obligation | |
Remaining performance obligation, expected period of recognition | 4 years |
Revenues and Accounts Receiva_6
Revenues and Accounts Receivable - Allowance for credit losses on accounts receivables (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended |
Apr. 30, 2020 | Dec. 31, 2020 | |
Revenues and Accounts Receivable | ||
Balance at March 31, 2020 | $ 1,541 | $ 1,541 |
Adjusted balance at April 1, 2020 | $ 1,541 | |
Current period provision/(reversal) for expected credit losses | (22) | |
Write-offs charged against the allowance | (476) | |
Foreign currency translation adjustments | 42 | |
Balance at December 31, 2020 | $ 1,085 |
Series A Convertible Preferre_2
Series A Convertible Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands | May 03, 2017 | Dec. 31, 2020 | Dec. 31, 2019 |
Series A Convertible Preferred Stock | |||
Cash dividends paid | $ 3,138 | $ 3,138 | |
Series A Convertible Preferred Stock | |||
Series A Convertible Preferred Stock | |||
Direct and incremental expenses incurred | $ 1,154 | ||
Cash dividends paid | 3,138 | 3,138 | |
Declared and accrued dividends | $ 686 | $ 686 | |
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 | |||
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 - (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2020USD ($)segment | Dec. 31, 2019USD ($) | Mar. 31, 2020USD ($) | |
Goodwill: | |||
Number of operating segments | segment | 1 | ||
Changes in goodwill | |||
Beginning balance | $ 296,493 | $ 279,543 | $ 279,543 |
Goodwill arising from acquisitions | 27,316 | ||
Purchase price adjustments | (5,942) | ||
Foreign currency translation adjustments | 5,040 | (10,366) | |
Ending balance | 295,591 | 296,493 | |
Acquisition costs and goodwill deductible for tax purposes | 286,516 | ||
Acquisition costs and goodwill not deductible for tax purposes | 21,979 | ||
Acquired certain assets of a small consulting company purchase price | |||
Amount paid towards earn-out consideration | $ 942 | ||
Fiscal 2020 acquisitions | |||
Changes in goodwill | |||
Beginning balance | 21,374 | ||
Purchase price adjustments | 5,942 | ||
Ending balance | 21,374 | ||
Acquired certain assets of a small consulting company purchase price | |||
Cash paid at closing | 9,651 | ||
Additional earn-out consideration | $ 9,853 | ||
Amount paid towards earn-out consideration | 3,572 | ||
Probable and estimable value of the contingent consideration | $ 204 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Intangible assets (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Dec. 31, 2020 | Mar. 31, 2020 | |
Intangible Assets | ||
Weighted Average Useful Life at Aquisition | 10 years 6 months | 10 years 6 months |
Gross Carrying Amount | $ 182,580 | $ 178,987 |
Accumulated Amortization | 63,378 | 48,084 |
Net Carrying Amount | $ 119,202 | $ 130,903 |
Customer Relationships | ||
Intangible Assets | ||
Weighted Average Useful Life at Aquisition | 10 years 7 months 6 days | 10 years 7 months 6 days |
Gross Carrying Amount | $ 179,966 | $ 176,373 |
Accumulated Amortization | 61,598 | 46,494 |
Net Carrying Amount | $ 118,368 | $ 129,879 |
Trademarks | ||
Intangible Assets | ||
Weighted Average Useful Life at Aquisition | 2 years | 2 years |
Gross Carrying Amount | $ 900 | $ 900 |
Accumulated Amortization | $ 900 | $ 900 |
Technology | ||
Intangible Assets | ||
Weighted Average Useful Life at Aquisition | 5 years | 5 years |
Gross Carrying Amount | $ 500 | $ 500 |
Accumulated Amortization | $ 500 | $ 500 |
Other | ||
Intangible Assets | ||
Weighted Average Useful Life at Aquisition | 5 years | 5 years |
Gross Carrying Amount | $ 1,214 | $ 1,214 |
Accumulated Amortization | 380 | 190 |
Net Carrying Amount | $ 834 | $ 1,024 |
Income Taxes - Tax Act (Details
Income Taxes - Tax Act (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Taxes | ||||
Effective tax rate (as a percent) | 31.60% | 44.70% | 31.10% | 43.30% |
United States of America | ||||
Income Taxes | ||||
Deferred tax charge for disregarded entity election | $ 29,888 | |||
United Kingdom | ||||
Income Taxes | ||||
Deferred tax charge for disregarded entity election | 2,152 | |||
Sweden | ||||
Income Taxes | ||||
Deferred tax charge for disregarded entity election | $ 76 |
Income Taxes - Income tax holid
Income Taxes - Income tax holiday (Details) | Apr. 01, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 |
Income Taxes | ||||||
Effective tax rate (as a percent) | 31.60% | 44.70% | 31.10% | 43.30% | ||
India | ||||||
Income Taxes | ||||||
Effective tax rate (as a percent) | 25.17% | 34.90% | ||||
L [K] | Virtusa Private Limited | ||||||
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, 2020 | Mar. 31, 2020 | |
Income Taxes | ||
Total liability for unrecognized tax benefits | $ 6,674 | $ 6,627 |
Increase (decrease) in unrecognized tax benefits | 47 | |
Cash, cash equivalents, short-term investments and long-term investments available for distribution if not indefinitely reinvested | $ 126,648 |
Concentration of Revenue and _3
Concentration of Revenue and Assets - Geographic concentration (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2020 | |
Concentration of Revenue and Assets | |||||
Revenue | $ 346,100 | $ 335,107 | $ 964,352 | $ 982,632 | |
Long-lived assets, net | 553,157 | 553,157 | $ 577,330 | ||
United States of America | |||||
Concentration of Revenue and Assets | |||||
Revenue | 244,004 | 237,754 | 676,790 | 685,023 | |
Long-lived assets, net | 272,187 | 272,187 | 291,959 | ||
United Kingdom | |||||
Concentration of Revenue and Assets | |||||
Revenue | 29,304 | 42,902 | 91,916 | 137,795 | |
India | |||||
Concentration of Revenue and Assets | |||||
Long-lived assets, net | 252,070 | 252,070 | 255,623 | ||
Rest Of World | |||||
Concentration of Revenue and Assets | |||||
Revenue | 72,792 | $ 54,451 | 195,646 | $ 159,814 | |
Long-lived assets, net | $ 28,900 | $ 28,900 | $ 29,748 |
Concentration of Revenue and _4
Concentration of Revenue and Assets - Revenue percentage (Details) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Customer Concentration Risk | Sales Revenue Net | Customer A | ||||
Concentration of Revenue and Assets | ||||
Revenue from significant clients as a percentage of consolidated revenue | 19.60% | 16.40% | 18.50% | 15.90% |
Debt - Credit Agreement (Detail
Debt - Credit Agreement (Details) $ in Thousands | May 27, 2020USD ($)item | Oct. 15, 2019USD ($) | Mar. 12, 2018USD ($) | Feb. 06, 2018USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Mar. 31, 2020USD ($) | May 26, 2020 | Oct. 14, 2019USD ($) | Feb. 05, 2018USD ($) |
Debt | |||||||||||
Amount drawn down on credit facility | $ 36,000 | ||||||||||
Payment of revolving credit facility | $ 105,000 | ||||||||||
eTouch | |||||||||||
Debt | |||||||||||
Anniversary payment term | 18 months | ||||||||||
Anniversary payment of eTouch | $ 17,500 | ||||||||||
Debt Instrument, From May 27, 2020 And Not More Than Period Ending Prior To December 31, 2020 | |||||||||||
Debt | |||||||||||
Maximum leverage ratio for next nine months | 3.25 | ||||||||||
Credit Agreement | JPM | London Interbank Offered Rate L I B O R | |||||||||||
Debt | |||||||||||
Interest rate (as a percent) | 2.75% | ||||||||||
Credit Agreement | JPM | Revolving credit facility | |||||||||||
Debt | |||||||||||
Maximum borrowing capacity under the credit agreement | $ 200,000 | ||||||||||
Amount drawn down on credit facility | 55,000 | $ 145,000 | |||||||||
Payment of revolving credit facility | 105,000 | ||||||||||
Credit Agreement | JPM | Delayed-draw term loan | |||||||||||
Debt | |||||||||||
Maximum borrowing capacity under the credit agreement | 70,000 | ||||||||||
Amount drawn down on credit facility | $ 70,000 | ||||||||||
Credit Agreement | JPM | Term loan facility | |||||||||||
Debt | |||||||||||
Maximum borrowing capacity under the credit agreement | 180,000 | ||||||||||
Amount drawn down on credit facility | $ 180,000 | ||||||||||
Payment of term loan | $ 13,008 | ||||||||||
Term of credit facility | 5 years | ||||||||||
Required principal payments per quarter | $ 4,336 | ||||||||||
Frequency of required principal payments | Quarterly | ||||||||||
Weighted average interest rate | 3.50% | ||||||||||
Credit Agreement | JPM | COVID-19 | |||||||||||
Debt | |||||||||||
Amount drawn down on credit facility | $ 84,000 | ||||||||||
Prior Credit Agreement | JPM | |||||||||||
Debt | |||||||||||
Maximum borrowing capacity under the credit agreement | $ 300,000 | ||||||||||
Credit Agreement Amendment | JPM | Revolving credit facility | |||||||||||
Debt | |||||||||||
Maximum borrowing capacity under the credit agreement | $ 275,000 | $ 200,000 | |||||||||
Third Credit Agreement Amendment | Delayed-draw term loan | |||||||||||
Debt | |||||||||||
Amount under term loan | $ 62,492 | ||||||||||
Term of credit facility | 364 days | ||||||||||
Amount prepaid | $ 55,000 | ||||||||||
Third Credit Agreement Amendment | Delayed-draw term loan | London Interbank Offered Rate L I B O R | |||||||||||
Debt | |||||||||||
Interest rate (as a percent) | 3.50% | ||||||||||
Third Credit Agreement Amendment | Minimum | Delayed-draw term loan | |||||||||||
Debt | |||||||||||
LIBOR floor interest rate | 1.00% | 0.00% | |||||||||
Third Credit Agreement Amendment | Maximum | Delayed-draw term loan | |||||||||||
Debt | |||||||||||
Number of draw downs before September 24,2020 | item | 3 | ||||||||||
Third Credit Agreement Amendment | JPM | |||||||||||
Debt | |||||||||||
Total amount outstanding under the credit agreement | $ 381,961 |
Debt - Current portion of long-
Debt - Current portion of long-term debt (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Mar. 31, 2020 |
Current portion of long-term debt | ||
Total | $ 20,083 | $ 16,043 |
JPM | ||
Current portion of long-term debt | ||
Term loan - current maturities | 21,680 | 17,344 |
Less: deferred financing costs, current | (1,597) | (1,301) |
Total | $ 20,083 | $ 16,043 |
Debt - Long-term debt, less cur
Debt - Long-term debt, less current portion (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Mar. 31, 2020 |
Less: | ||
Total | $ 358,441 | $ 480,154 |
JPM | ||
Less: | ||
Current maturities | (21,680) | (17,344) |
Deferred financing costs, long-term | (1,840) | (2,471) |
Total | 358,441 | 480,154 |
Delayed-draw term loan | JPM | ||
Long-term debt, less current portion | ||
Term loan and borrowings under revolving credit facility | 212,461 | 225,469 |
Revolving credit facility | JPM | ||
Long-term debt, less current portion | ||
Term loan and borrowings under revolving credit facility | $ 169,500 | $ 274,500 |
Debt - Sale of accounts receiva
Debt - Sale of accounts receivable (Details) - U.K. Subsidiary $ in Thousands | 9 Months Ended |
Dec. 31, 2020USD ($) | |
Debt | |
Receivables sold under the terms of the financing agreement | $ 42,630 |
Amounts due related to a financing agreement to sell certain accounts receivable balances | $ 0 |
Stock-Based Compensation Plans
Stock-Based Compensation Plans (Details) - shares | 1 Months Ended | 9 Months Ended |
May 31, 2020 | Dec. 31, 2020 | |
Performance-based awards | ||
Stock Options, Restricted Stock Awards and Stock Appreciation Rights | ||
Vesting period | 3 years | |
Number of Options to Purchase Common Shares | ||
Granted (in shares) | 250,075 | |
2015 Plan | Stock options, restricted stock and restricted stock units | ||
Stock Options, Restricted Stock Awards and Stock Appreciation Rights | ||
Vesting period | 4 years | |
2015 Plan | Performance-based awards | ||
Stock Options, Restricted Stock Awards and Stock Appreciation Rights | ||
Vesting period | 3 years |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | $ 397,397 | $ 397,441 | $ 390,774 | |
Reclassifications from OCI to: | ||||
Other income | $ 397 | (209) | (1,145) | (1,137) |
Revenue | (346,100) | (335,107) | (964,352) | (982,632) |
Costs of revenue | 232,142 | 236,427 | 697,772 | 709,746 |
Selling, general and administrative expenses | 72,507 | 68,270 | 205,248 | 209,813 |
Interest expense | 5,187 | 4,873 | 16,222 | 14,616 |
Less: comprehensive income attributable to noncontrolling interest, net of tax | 484 | 849 | ||
Other income (expense), net of tax | 4,228 | 7,209 | 10,396 | 17,035 |
Balance | 403,296 | 403,296 | ||
Investment securities, including noncontrolling interests | ||||
Other Comprehensive Income (Loss), Tax | ||||
OCI before reclassifications, Tax | 0 | 0 | 0 | 0 |
Investment securities, including noncontrolling interests | Other income (expense) | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 0 | 0 | 0 | 0 |
Investment securities, noncontrolling interests | ||||
Other Comprehensive Income (Loss), Tax | ||||
Noncontrolling interests, Tax | 0 | 0 | 0 | 0 |
Accumulated Net Unrealized Investment Gain Loss | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | 12 | 12 | 12 | 12 |
Reclassifications from OCI to: | ||||
Balance | 12 | 12 | 12 | 12 |
Other Comprehensive Income (Loss), Tax | ||||
Comprehensive income (loss), Tax | 0 | 0 | 0 | 0 |
Currency Translation Adjustments, including noncontrolling interests | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
OCI before reclassifications net of tax | 5,933 | 4,630 | 13,618 | (2,106) |
Foreign currency translation noncontrolling interests | ||||
Reclassifications from OCI to: | ||||
Less : Noncontrolling interests, net of tax | (363) | (389) | ||
Accumulated Translation Adjustment | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | (63,522) | (64,116) | (71,207) | (57,354) |
Reclassifications from OCI to: | ||||
Comprehensive income (loss) | 5,933 | 4,267 | 13,618 | (2,495) |
Balance | (57,589) | (59,849) | (57,589) | (59,849) |
Cash Flow Hedges, including noncontrolling interests. | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
OCI before reclassifications net of tax | (358) | (1,993) | 1,346 | (2,240) |
Other Comprehensive Income (Loss), Tax | ||||
OCI before reclassifications, Tax | 8 | (386) | 614 | (666) |
Cash Flow Hedges, including noncontrolling interests. | Reclassification Out Of Accumulated Other Comprehensive Income | ||||
Reclassifications from OCI to: | ||||
Revenue | 11 | |||
Costs of revenue | 171 | (639) | 1,016 | (1,847) |
Selling, general and administrative expenses | 62 | (260) | 384 | (800) |
Interest expense | 887 | 75 | 2,224 | (155) |
Cash Flow Hedges, noncontrolling interests. | ||||
Other Comprehensive Income (Loss), Tax | ||||
Noncontrolling interests, Tax | 0 | 0 | 0 | 0 |
Accumulated Net Gain Loss From Designated Or Qualifying Cash Flow Hedges. | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | (7,610) | (2,175) | (11,818) | 39 |
Reclassifications from OCI to: | ||||
Comprehensive income (loss) | 762 | (2,817) | 4,970 | (5,031) |
Balance | (6,848) | (4,992) | (6,848) | (4,992) |
Other Comprehensive Income (Loss), Tax | ||||
Comprehensive income (loss), Tax | 350 | (625) | 1,741 | (1,437) |
Accumulated Net Gain Loss From Designated Or Qualifying Cash Flow Hedges. | Revenue | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 0 | 0 | 0 | 7 |
Accumulated Net Gain Loss From Designated Or Qualifying Cash Flow Hedges. | Costs of revenue | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 28 | (188) | 260 | (504) |
Accumulated Net Gain Loss From Designated Or Qualifying Cash Flow Hedges. | Selling General And Administrative Expenses | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 10 | (77) | 100 | (220) |
Accumulated Net Gain Loss From Designated Or Qualifying Cash Flow Hedges. | Interest expenses | ||||
Other Comprehensive Income (Loss), Tax | ||||
Reclassifications from OCI, Tax | 304 | 26 | 767 | (54) |
Benefit plans, including noncontrolling interests | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
OCI before reclassifications net of tax | 11 | (911) | ||
Reclassifications from OCI to: | ||||
Other adjustments | 9 | 3 | (42) | 76 |
Other Comprehensive Income (Loss), Tax | ||||
OCI before reclassifications, 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: | ||||
Other income (expense), net of tax | 10 | 6 | 30 | 19 |
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 | Other adjustments | ||||
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: | ||||
Other income (expense), net of tax | 95 | 70 | 286 | 210 |
Benefit plans, noncontrolling interests | ||||
Reclassifications from OCI to: | ||||
Less : Noncontrolling interests, net of tax | (3) | (10) | ||
Other Comprehensive Income (Loss), Tax | ||||
Noncontrolling interests, Tax | 0 | 0 | 0 | 0 |
Accumulated Defined Benefit Plans Adjustment | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | (2,071) | (2,776) | (2,242) | (2,084) |
Reclassifications from OCI to: | ||||
Comprehensive income (loss) | 114 | 76 | 285 | (616) |
Balance | (1,957) | (2,700) | (1,957) | (2,700) |
Other Comprehensive Income (Loss), Tax | ||||
Comprehensive income (loss), Tax | 0 | 0 | 0 | 0 |
Accumulated Other Comprehensive Income (Loss) | ||||
Changes in the components of accumulated other comprehensive income (loss) | ||||
Balance | (73,191) | (69,055) | (85,255) | (59,387) |
Reclassifications from OCI to: | ||||
Balance | $ (66,382) | $ (67,529) | $ (66,382) | $ (67,529) |
Commitments, Contingencies and
Commitments, Contingencies and Guarantees - Loss contingencies (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Dec. 31, 2020 | Feb. 28, 2019 | |
Loss contingencies | ||
Impact on income from operations and cash flows | $ 7,500 | |
Indemnification Guarantee | ||
Loss contingencies | ||
Liability recorded | $ 0 | |
Acts Under Information Technology Services | ||
Loss contingencies | ||
Liability recorded | 0 | |
Merger Agreement | Austin HoldCo Inc. | ||
Loss contingencies | ||
Termination fees | $ 54,330 |