Virtusa (VRTU) Tops Q1 EPS by 6c, Revenues Beat; Offers 2Q EPS/Revenue Guidance Above Consensus

Virtusa (NASDAQ: VRTU) reported Q1 EPS of $0.20, $0.06 better than the analyst estimate of $0.14. Revenue for the quarter came in at $301.1 million versus the consensus estimate of $286.92 million.

• First quarter fiscal 2021 revenue of $301.1 million decreased 8.7% sequentially and 5.6% year-over-year.
• First quarter fiscal 2021 GAAP operating income of $7.2 million. Non-GAAP operating income of $14.0 million.
• First quarter fiscal 2021 GAAP diluted EPS of $(0.01). Non-GAAP diluted EPS of $0.20.
• First quarter fiscal 2021 cash flow from operations of $56.0 million and ending cash, cash equivalents, and short-term and long-term investments of $289.3 million.

Management Commentary

Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “We are pleased with our better than expected financial results and strong execution in the fiscal first quarter. COVID-19, despite its challenges, has created new opportunities for us to strengthen our position as a leading digital transformation provider to Global 2000 enterprises. The improving trends in our business will generate stronger financial performance in our fiscal Q2 and second half of 2021. We also will continue to execute against our Three- Pillar strategy, which will help us achieve our long-term objectives of better than industry revenue growth and EPS accretion faster than revenue.”

Ranjan Kalia, Chief Financial Officer, said, “We delivered fiscal first quarter revenue, non-GAAP operating margin and EPS above our expectations. While COVID-19 continues to impact client spending, our increased momentum and revenue visibility are leading us to reintroduce in-quarter financial guidance. Our guided Q2 revenue, margin and EPS are all better than our previous expectations. We believe our first quarter outperformance and Q2 momentum position us well for stronger than previously expected full year 2021 financial results. Finally, our financial flexibility remains strong. We generated solid operating cash flow in fiscal Q1 of $56 million, enabling us to reduce our debt while also maintaining ample available cash.”

GUIDANCE:

Virtusa sees Q2 2021 EPS of $0.50-$0.56, versus the consensus of $0.34. Virtusa sees Q2 2021 revenue of $311-319 million, versus the consensus of $301.8 million.

We experienced better than expected results in the first quarter of fiscal 2021 and see continued momentum in the second quarter of fiscal 2021. While we believe we are in a strong financial position to weather the impact to our business from COVID-19, many of our customers and prospects are now operating under challenging circumstances and may reduce or re-evaluate their spend. As such, we are reinstating our quarterly guidance but are continuing the suspension of our annual fiscal 2021 guidance. In our second quarter guidance, we factor in the expected impacts of COVID‑19 on our business and results of operations based on information available to us today. Significant variation from these assumptions could cause us to raise, lower or modify our expectations and our guidance, and we undertake no obligation to update our assumptions, expectations or our guidance. These statements are forward-looking, and actual results may differ materially, as further discussed below under the heading

For earnings history and earnings-related data on Virtusa (VRTU) click here.

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