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Virtusa Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 2, 2012 05:33AM

Virtusa Corp. (VRTU) filed Quarterly Report for the period ended 2012-09-30. Virtusa Corporation has a market cap of $437.9 million; its shares were traded at around $17.29 with a P/E ratio of 19.8 and P/S ratio of 1.6.



Highlight of Business Operations:

We derive our revenue from two types of service offerings; application outsourcing, which is recurring in nature, and consulting, including technology implementation, which is non-recurring in nature. For the three months ended September 30, 2012, our application outsourcing and consulting revenue represented 57% and 43%, respectively, of our total revenue as compared to 52% and 48%, respectively, for the three months ended September 30, 2011. For the six months ended September 30, 2012, our application outsourcing and consulting revenue represented 57% and 43%, respectively, of our total revenue as compared to 53% and 47%, respectively, for the six months ended September 30, 2011.

In the three months ended September 30, 2012, our European revenue increased by 21%, or $2.4 million, to $13.8 million, or 17% of total revenue, from $11.3 million, or 16% of total revenue in the three months ended September 30, 2011. In the six months ended September 30, 2012, our European revenue increased by 18%, or $4.2 million, to $27.2 million, or 17% of total revenue, from $23.0 million, or 18% of total revenue, in the six months ended September 30, 2011.

Our gross profit increased by $2.7 million to $27.6 million for the three months ended September 30, 2012, as compared to $24.9 million in the three months ended September 30, 2011. Our gross profit increased by $6.3 million to $54.3 million for the six months ended September 30, 2012 as compared to $48.0 million in the six months ended September 30, 2011. The increase in gross profit during the three and six months ended September 30, 2012, as compared to the three and six months ended September 30, 2011, was primarily due to higher revenue, partially offset by increased cost of revenue, which includes increases in the number of IT professionals, annual compensation increases, higher costs related to an increased percentage of onsite work, an increased use of subcontractors, as well as foreign currency transaction losses related to our hedging program. As a percentage of revenue, gross margin was 34.3% and 35.4% in the three months ended September 30, 2012 and 2011, respectively. During the six months ended September 30, 2012 and 2011, gross margin, as a percentage of revenue, was 34.6% and 36.5%, respectively. The decrease in gross margin for the three and six months ended September 30, 2012 was primarily due to higher costs related to an increased percentage of onsite work, an increased use of subcontractors, as well as foreign currency transaction losses related to our hedging program.

Operating expenses increased from $19.4 million in the three months ended September 30, 2011 to $20.2 million in the three months ended September 30, 2012, an increase of $0.8 million, or 3.9%. The increase in our operating expenses in the three months ended September 30, 2012 was primarily due to an increase of $0.8 million in hedging losses, $0.3 million in travel expenses and a $0.1 million increase in professional services, partially offset by a $0.4 million decrease in facility expenses. As a percentage of revenue, our operating expenses decreased to 25.1% in the three months ended September 30, 2012 as compared to 27.7% in the three months ended September 30, 2011. This decrease was primarily due to increased operating efficiencies leveraged over a larger revenue base.

Costs of revenue increased from $83.4 million in the six months ended September 30, 2011 to $102.5 million in the six months ended September 30, 2012, an increase of $19.1 million, or 22.9%. The increase in costs of revenue was primarily driven by an increase of $8.8 million in compensation costs for our IT professionals, including annual compensation increases, as compared to the six months ended September 30, 2011. At September 30, 2012, we had 5,571 IT professionals as compared to 5,113 IT professionals at September 30, 2011. In addition, there were increased travel costs of $1.4 million and increased subcontractor costs of $4.8 million in the six months ended September 30, 2012 as compared to the six months ended September 30, 2011 primarily due to an increase in onsite work. We also incurred hedging losses of $2.7 million during the six months ended September 30, 2012 compared to a hedging gain of $0.6 million during the six months ended September 30, 2011. As a percentage of revenue, cost of revenue increased from 63.5% for the six months ended September 30, 2011 to 65.4% for six months ended September 30, 2012.

Read the The complete Report



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