Virtusa Announces First Quarter Fiscal 2010 Financial Results

-- First quarter fiscal 2010 revenue of $37.4 million decreased 12%
year-over-year and 7% in constant currency.

-- First quarter fiscal 2010 EPS was $0.11 compared to $0.03 in the year ago
period.

-- Cash, cash equivalents, short-term investments and long-term investments of
$116.7 million, an increase of 9% over the fourth quarter of fiscal 2009.
WESTBOROUGH, Mass.--(Business Wire)--
Virtusa Corporation (NASDAQ: VRTU), a global information technology (IT)
services company that provides IT consulting, technology implementation and
application outsourcing services through an enhanced global delivery model,
today reported financial results for the first quarter fiscal year 2010, ended
June 30, 2009.

First Quarter Fiscal 2010 Financial Results

Revenue for the first quarter of fiscal 2010 was $37.4 million, a decrease of
12% year-over-year and 10% sequentially. On a constant currency basis (1) first
quarter revenue decreased 7% year-over-year and 12% sequentially.

Virtusa reported income from operations of $3.1 million for the first quarter of
fiscal 2010, compared to $11 thousand for the first quarter of fiscal 2009 and
$3.9 million for the fourth quarter of fiscal 2009.

Net income for the first quarter of fiscal 2010 was $2.6 million, or $0.11 per
diluted share, compared to $0.8 million, or $0.03 per diluted share for the
first quarter of fiscal 2009 and $3.6 million, or $0.15 per diluted share, for
the fourth quarter of fiscal 2009.

The Company ended the first quarter of fiscal 2010 with $116.7 million of cash,
cash equivalents, short-term investments and long-term investments (2). The
Company generated cash from operations of $4.1 million during the first quarter
of fiscal 2010.

Kris Canekeratne, Virtusa`s Chairman and CEO, stated, "Even in a challenging
business environment, we started work with six new clients during the June
quarter, continued to execute well against newer client expansion programs, and
efficiently managed operations." Mr. Canekeratne continued, "We believe our
ability to drive successful business outcomes for our clients through our value
proposition and outstanding track-record of service excellence, combined with
our focus on operational efficiencies, positions Virtusa well for sustainable
long-term profitable growth."

Ranjan Kalia, Chief Financial Officer, said, "Consistent with our fiscal year
2010 goals, our first quarter performance demonstrates our ability to manage
profitability and continue to generate positive cash flow from operations. We
also further strengthened our balance sheet, ending the quarter with cash and
investments of $116.7 million." Mr. Kalia added, "We continue to believe
sequential growth will resume in the second half of fiscal year 2010 and remain
focused on optimizing our cost structure while making select investments in
support of growth opportunities."

Financial Outlook

Virtusa management provided the following current financial guidance:

* Second quarter 2010 revenue is expected to be in the range of $36.4 to $37.8
million, with diluted EPS of $0.08 to $0.11.
* Fiscal year 2010 revenue is expected to be in the range of $154 to $162
million, with diluted EPS of $0.46 to $0.56.

The Company`s second quarter and fiscal year 2010 diluted EPS estimates assume
an average share count of approximately 23.9 million and 24.0 million,
respectively (assuming no further exercises of stock-based awards) and assumes a
stock price of $9.12, which was derived from the average closing price of the
Company`s stock over the five trading days ended on July 24, 2009. Deviations
from this stock price may cause actual EPS to vary based on share dilution from
Virtusa`s stock options and stock appreciation rights.

Conference Call and Webcast

Virtusa will host a conference call today, July 30, 2009 at 5:00 pm Eastern time
to discuss the Company`s first quarter 2010 financial results, current financial
guidance and other corporate developments. To access this call, dial
888-211-9994 (domestic) or 913-312-0830 (international). A replay of this
conference call will be available through August 6, 2009 at 888-203-1112
(domestic) or 719-457-0820 (international). The replay passcode is 3799694. A
live webcast of this conference call will be available on the "Investors" page
of the Company`s website (www.virtusa.com), and a replay will be archived on the
website as well.

About Virtusa Corporation

Virtusa is a global information technology (IT) services company providing IT
consulting, technology implementation and application outsourcing services.
Using its enhanced global delivery model, innovative platforming approach and
industry expertise, Virtusa provides high-value services that enhance clients'
business performance, accelerate time-to-market, increase productivity and
improve customer service.

Founded in 1996 and headquartered in Massachusetts, Virtusa has offices in the
United States and the United Kingdom, and global delivery centers in India and
Sri Lanka.

"Virtusa" is a registered trademark of Virtusa Corporation.

(1) To determine year-over-year constant currency revenue for the Company`s
first quarter of fiscal 2010, revenue from entities reporting in U.K. pound
sterling was converted into U.S. dollars at the average exchange rate in effect
for the three months ended June 30, 2008 of 1.97 U.S. dollars to U.K. pounds
sterling, rather than the actual exchange rate in effect for the three months
ended June 30, 2009 of 1.56 U.S. dollars to U.K. pounds sterling. To determine
sequential revenue change in constant currency for the Company`s first quarter
of fiscal 2010, revenue from entities reporting in U.K. pounds sterling was
converted into U.S. dollars at the average exchange rate in effect for the three
months ended March 31, 2009 of 1.43 U.S. dollars to U.K. pounds sterling, rather
than the actual exchange rate in effect for the three months ended June 30, 2009
of 1.56 U.S. dollars to U.K. pounds sterling.

(2) The Company considers the measure of cash, cash equivalents, short-term and
long-term investments to be the most meaningful indicator of the Company`s
liquidity. All of the Company`s investments, other than certain auction-rate
securities, are classified as available-for-sale, including the Company's
long-term investments which consist of fixed income securities including
government agency bonds and municipal and corporate bonds, which meet the credit
rating and diversification requirements of the Company`s investment policy as
approved by the Company`s audit committee and board of directors.

Non-GAAP Financial Information

This press release includes certain non-GAAP financial information as defined by
Regulation G by the Securities and Exchange Commission. Virtusa presents
constant currency revenue to provide insights into, and a framework for
assessing, how Virtusa`s revenue performed excluding the effect of foreign
currency rate fluctuations (see footnote (1) above for further detail). Virtusa
also presents a reconciliation of its cash, cash equivalents, short term and
long term investments which it believes provides insight into its cash position
and overall liquidity (see footnote (2) above for further detail). While
Virtusa`s management believes that these non-GAAP revenue measures and cash
reconciliation presentations are useful in evaluating Virtusa`s revenue and cash
position and overall liquidity, this information should be considered as
supplemental in nature and not as a substitute for the related financial
information prepared in accordance with GAAP.

Forward-Looking Statements

Certain statements made in this press release that are not based on historical
information are forward-looking statements which are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. This
press release contains express or implied forward-looking statements relating
to, among other things, Virtusa's expectations concerning management's forecast
of financial performance, the acquisition of new clients and growth of business,
and management's plans, objectives, and strategies. These statements are neither
promises nor guarantees, but are subject to a variety of risks and
uncertainties, many of which are beyond Virtusa`s control, which could cause
actual results to differ materially from those contemplated in these
forward-looking statements. In particular, the risks and uncertainties include,
among other things: Virtusa`s dependence on a limited number of clients as well
as clients located principally in the United States and United Kingdom and in
concentrated industries; Virtusa`s ability to expand its business or effectively
manage growth; restrictions on immigration or changes in immigration laws; the
loss of any key member of Virtusa`s senior management team, increasing
competition in the IT services outsourcing industry; Virtusa`s ability to hire
and retain enough sufficiently trained IT professionals to support its
operations; quarterly fluctuations in Virtusa`s earnings; client terminations or
contracting delays, or delays in revenue recognition in any reporting period,
Virtusa`s ability to attract and retain clients and meet their expectations;
Virtusa`s ability to sustain profitability or maintain profitable engagements;
Virtusa`s ability to successfully manage its billing and utilization rates and
its targeted on-site to offshore delivery mix; technological innovation;
Virtusa`s ability to effectively manage its facility, infrastructure and
capacity needs; regulatory, legislative and judicial developments in Virtusa`s
operations areas; political or economic instability in India or Sri Lanka; any
reduction or withdrawal of tax benefits provided to Virtusa by the governments
of India and Sri Lanka, or new legislation by such governments which could be
harmful to Virtusa; wage inflation and increases in government mandated benefits
in India and Sri Lanka; telecommunications or technology disruptions; worldwide
economic and business conditions; currency exchange rate fluctuations of the
Indian and Sri Lankan rupee, the US dollar and the U.K. pound sterling; and the
volatility of the market price of Virtusa`s common stock. Existing and
prospective investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Virtusa
undertakes no obligation to update or revise the information contained in this
press release, whether as a result of new information, future events or
circumstances or otherwise. For additional disclosure regarding these and other
risks faced by Virtusa, see the disclosure contained in Virtusa`s public filings
with the Securities and Exchange Commission, including Virtusa`s Annual Report
on Form 10-K for the fiscal year ending March 31, 2009, and subsequent Quarterly
Reports on Form 10-Q, as filed with the Securities and Exchange Commission.

Virtusa Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, unaudited)

June 30, 2009 March 31, 2009
Assets:
Cash and cash equivalents $63,523 $55,698
Short-term investments 21,828 23,333
Accounts receivable, net 26,861 28,244
Unbilled accounts receivable 3,810 4,005
Prepaid expenses 4,996 5,050
Deferred income taxes 2,686 4,139
Other current assets 5,127 5,668
Total current assets 128,831 126,137

Property and equipment, net 20,125 19,680
Long-term investments 31,321 28,054
Restricted cash 855 3,489
Deferred income taxes 4,354 5,040
Other long-term assets 4,660 4,623
Total assets $190,146 $187,023

Liabilities:
Accounts payable $4,204 $5,499
Accrued employee compensation and benefits 8,532 9,520
Accrued expenses - other 10,732 15,128
Deferred revenue 587 1,016
Income taxes payable 658 151
Total current liabilities 24,713 31,314
Long-term liabilities 2,050 3,123
Total liabilities 26,763 34,437

Stockholders' equity 163,383 152,586
Total liabilities and stockholders' equity $190,146 $187,023

Virtusa Corporation and Subsidiaries
Consolidated Statements of Income
(In thousands except per share amounts, unaudited)

Three Months Ended
June 30,
2009 2008

Revenue $37,368 $42,543
Costs of revenue 20,871 28,068
Gross profit 16,497 14,475
Total operating expenses 13,401 14,464

Income from operations 3,096 11

Other income (expense)
Interest income, net 421 757
Foreign currency transaction gains (losses) (652) 16
Other, net 104 7
Total other income (expense) (127) 780

Income before income tax expense (benefit) 2,969 791
Income tax expense (benefit) 340 (54)

Net income $2,629 $845

Net income per share of common stock:
Basic $ 0.11 $ 0.04
Diluted $ 0.11 $ 0.03

Weighted average number of
common shares outstanding
Basic 22,918,858 23,051,812
Diluted 23,741,889 24,731,081

Virtusa Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands, unaudited)

Three Months Ended
June 30,
2009 2008
Cash flows provided by (used for) operating activities:
Net income $ 2,629 $ 845
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization 1,206 1,028
Share-based compensation expense 864 1,064
Gain on disposal of property and equipment - (18)
Deferred income taxes, net (164) (410)
Foreign currency (gains) losses, net 652 (16)
Net changes in operating assets and liabilities:
Accounts receivable, net 3,519 2,154
Prepaid expenses and other current assets 1,125 (569)
Other long-term assets (413) (259)
Accounts payable (2,666) (127)
Accrued employee compensation and benefits (1,089) (3,092)
Accrued expenses-other (1,452) (1,091)
Deferred revenue (470) 27
Income taxes payable 629 (174)
Excess tax benefits from stock option exercises (45) -
Other long-term liabilities (189) (6)
Net cash provided by (used for) operating activities 4,136 (644)
Cash flows provided by (used for) investing activities:
Purchase of short-term investments (926) (7,025)
Proceeds from sale or maturity of short-term investments 8,400 14,932
Purchase of long-term investments (10,626) (9,603)
Proceeds from sale or maturity of long-term investments 2,000 2,737
Purchase of property and equipment (668) (3,754)
Proceeds from sale of property and equipment - 12
Decrease in restricted cash 2,699 285
Net cash provided by (used for) investing activities 879 (2,416)
Cash flows provided by financing activities:
Proceeds from sale of common stock - 255
Proceeds from exercise of common stock options 1,206 -
Excess tax benefits from stock option exercises 45 -
Principal payments on capital lease obligation (4) -
Net cash provided by financing activities 1,247 255
Effect of exchange rate changes on cash and cash equivalents 1,563 (249)
Net increase (decrease) in cash and cash equivalents 7,825 (3,054)
Cash and cash equivalents, beginning of period 55,698 41,047
Cash and cash equivalents, end of period $ 63,523 $ 37,993

Supplemental Non-GAAP Financial Information as of June 30, 2009 and 2008

Reconciliation to total cash and cash equivalents, short-term investments and long term investments:

Cash and cash equivalents, end of period $ 63,523 $ 37,993

Short-term investments 21,828 34,685
Long-term investments 31,321 22,089
Total short-term and long-term investments, end of period 53,149 56,774

Total cash and cash equivalents, short-term investments and long-term investments $ 116,672 $ 94,767

Media Contact:
ICR
Brian Ruby, 203-682-8268
Brian.ruby@icrinc.com
or
Investor Contact:
ICR
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staci.mortenson@icrinc.com
or
Kori Doherty, 617-956-6730
kori.doherty@icrinc.com

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