Company Quick10K Filing
Quick10K
Virtusa
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$52.65 30 $1,580
10-Q 2019-06-30 Quarter: 2019-06-30
10-K 2019-03-31 Annual: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-K 2018-03-31 Annual: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-K 2017-03-31 Annual: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-K 2016-03-31 Annual: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-K 2015-03-31 Annual: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-K 2014-03-31 Annual: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-08-08 Earnings, Exhibits
8-K 2019-05-15 Earnings, Exhibits
8-K 2019-02-07 Earnings, Exhibits
8-K 2018-11-29 Officers, Regulation FD, Exhibits
8-K 2018-11-08 Earnings, Exhibits
8-K 2018-09-06 Shareholder Vote
8-K 2018-08-08 Earnings, Exhibits
8-K 2018-07-25 Officers, Exhibits
8-K 2018-06-05 Off-BS Arrangement
8-K 2018-05-15 Earnings, Exhibits
8-K 2018-03-12 M&A, Exhibits
8-K 2018-02-23 Off-BS Arrangement
T AT&T 221,710
XLNX Xilinx 29,540
CAAP Corporacion America Airports 1,310
CORT Corcept Therapeutics 1,310
MTP Midatech Pharma 393
FXNC First National 102
AHPI Allied Healthcare Products 7
AFSI Amtrust Financial Services 0
VAPA Vaparia 0
PHLD Phillips Edison & Company 0
VRTU 2019-06-30
Part I. Financial Information
Item 1. Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
Item 6. Exhibits.
EX-31.1 vrtu-20190630ex3119198c9.htm
EX-31.2 vrtu-20190630ex3123c3ff7.htm
EX-32.1 vrtu-20190630ex321a941d4.htm
EX-32.2 vrtu-20190630ex3225b7895.htm

Virtusa Earnings 2019-06-30

VRTU 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

  Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2019

  Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from             to             

Commission File Number 001-33625

VIRTUSA CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware

    

    

04-3512883

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

Identification Number)

132 Turnpike Rd

Southborough, Massachusetts 01772

(Address of principal executive office)

(508389-7300

(Address, Including Zip Code, and Telephone Number,

Including Area Code, of Registrant’s Principal Executive Offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, $0.01 par value per share

Trading Symbol(s)

VRTU

Name of each exchange on which registered
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer 

    

Accelerated Filer 

Non-Accelerated Filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of August 6, 2019:

Class

    

Number of Shares

Common Stock, par value $.01 per share

30,246,947

Table of Contents

Virtusa Corporation and Subsidiaries

Page

PART I. FINANCIAL INFORMATION

3

Item 1.

Consolidated Financial Statements (Unaudited)

3

Consolidated Balance Sheets at June 30, 2019 and March 31, 2019

3

Consolidated Statements of Income (Loss) for the Three Months Ended June 30, 2019 and 2018

4

Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended June 30, 2019 and 2018

5

Consolidated Statements of Stockholder’s Equity for the Three Months Ended June 30, 2019 and 2018

6

Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2019 and 2018

7

Notes to Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

41

PART II. OTHER INFORMATION

42

Item 1.

Legal Proceedings

42

Item 1A.

Risk Factors

42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 6.

Exhibits

43

SIGNATURES

44

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

Virtusa Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

    

June 30, 2019

    

March 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

190,007

$

189,676

Short-term investments

 

17,912

 

33,138

Accounts receivable, net of allowance of $2,141 and $2,253 at June 30, 2019 and March 31, 2019, respectively

 

149,652

 

162,396

Unbilled accounts receivable

 

116,722

 

113,431

Prepaid expenses

 

46,586

 

42,314

Restricted cash

 

336

 

351

Asset held for sale

9,042

8,978

Other current assets

 

33,715

 

29,967

Total current assets

 

563,972

 

580,251

Property and equipment, net

 

120,225

 

119,865

Operating lease right-of-use assets

54,222

Investments accounted for using equity method

1,523

1,446

Long-term investments

 

366

 

322

Deferred income taxes

 

29,125

 

28,770

Goodwill

 

280,501

 

279,543

Intangible assets, net

 

97,689

 

92,440

Other long-term assets

 

35,780

 

29,836

Total assets

$

1,183,403

$

1,132,473

Liabilities, Series A Convertible Preferred Stock, Redeemable noncontrolling interest
and Stockholders’ equity

Current liabilities:

 

 

Accounts payable

$

41,802

$

46,471

Accrued employee compensation and benefits

 

61,561

 

74,801

Deferred revenue

7,074

6,421

Accrued expenses and other

 

77,334

 

70,050

Current portion of long-term debt

13,657

11,407

Operating lease liabilities

11,011

Income taxes payable

 

5,917

 

4,844

Total current liabilities

 

218,356

 

213,994

Deferred income taxes

15,713

15,824

Operating lease liabilities, noncurrent

47,708

Long-term debt, less current portion

348,469

351,320

Long-term liabilities

 

28,102

 

29,824

Total liabilities

 

658,348

 

610,962

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 June 30, 2019 and March 31, 2019; redemption amount and liquidation preference of $108,000 at June 30, 2019 and March 31, 2019

107,202

107,161

Redeemable noncontrolling interest

18,651

23,576

Stockholders’ equity:

Undesignated preferred stock, $0.01 par value; Authorized 5,000,000 shares at June 30, 2019 and March 31, 2019; zero shares issued and outstanding at June 30, 2019 and March 31, 2019, respectively

 

 

Common stock, $0.01 par value; Authorized 120,000,000 shares at June 30, 2019 and March 31, 2019; issued 33,122,954 and 33,012,775 shares at June 30, 2019 and March 31, 2019, respectively; outstanding 30,242,955 and 30,132,776 shares at June 30, 2019 and March 31, 2019, respectively

 

331

 

330

Treasury stock, 2,879,999 common shares, at cost, at June 30, 2019 and March 31, 2019

 

(39,652)

 

(39,652)

Additional paid-in capital

 

244,078

 

239,204

Retained earnings

 

255,026

 

250,279

Accumulated other comprehensive loss

 

(60,581)

 

(59,387)

Total Virtusa stockholders’ equity

 

399,202

 

390,774

Noncontrolling interest in subsidiaries

Total Stockholders' equity

399,202

390,774

Total liabilities, Series A convertible preferred stock, redeemable noncontrolling
interest and stockholders’ equity

$

1,183,403

$

1,132,473

See accompanying notes to unaudited consolidated financial statement

3

Table of Contents

Virtusa Corporation and Subsidiaries

Consolidated Statements of Income (Loss)

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

June 30, 

    

2019

    

2018

Revenue

$

319,024

$

300,031

Costs of revenue

 

234,735

 

216,481

Gross profit

 

84,289

 

83,550

Operating expenses:

Selling, general and administrative expenses

 

70,861

 

69,626

Income from operations

 

13,428

 

13,924

Other income (expense):

Interest income

 

673

 

1,292

Interest expense

(4,908)

(4,254)

Foreign currency transaction gains (losses), net

 

1,202

 

(10,758)

Other, net

 

364

 

95

Total other expense

 

(2,669)

 

(13,625)

Income before income tax expense

 

10,759

 

299

Income tax expense

 

4,739

 

5,864

Net income (loss)

6,020

(5,565)

Less: net income attributable to noncontrolling interests, net of tax

186

731

Net income (loss) available to Virtusa stockholders

5,834

(6,296)

Less: Series A Convertible Preferred Stock dividends and accretion

1,087

1,087

Net income (loss) available to Virtusa common stockholders

$

4,747

$

(7,383)

Basic earnings (loss) per share available to Virtusa
common stockholders

$

0.16

$

(0.25)

Diluted earnings (loss) per share available to Virtusa
common stockholders

$

0.15

$

(0.25)

See accompanying notes to unaudited consolidated financial statements

4

Table of Contents

Virtusa Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands)

Three Months Ended

June 30, 

    

2019

    

2018

Net income (loss)

$

6,020

$

(5,565)

Other comprehensive income (loss):

Foreign currency translation adjustment

 

(381)

 

(10,653)

Pension plan adjustment

 

162

 

(209)

Unrealized gain on available-for-sale debt securities, net of tax effect

 

3

 

137

Unrealized loss on effective cash flow hedges, net of tax effect

 

(834)

 

(3,801)

Other comprehensive income (loss)

$

(1,050)

$

(14,526)

Comprehensive income (loss)

4,970

(20,091)

Less: comprehensive income attributable to noncontrolling interest, net of tax

330

2,197

Comprehensive income (loss) available to Virtusa stockholders

$

4,640

$

(22,288)

See accompanying notes to unaudited consolidated financial statements

5

Table of Contents

Virtusa Corporation and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the Three Months Ended June 30, 2019 and 2018

(Unaudited)

(In thousands, except share amounts)

Accumulated

Total

Additional

Other

Virtusa

Redeemable

Common Stock

Treasury Stock

Paid-in

Retained

Comprehensive

Stockholders’

Noncontrolling

  

Shares

Amount

Shares

Amount

Capital

Earnings

Loss

Equity

Interest

Balance at March 31, 2019

 

33,012,775

$

330

 

(2,879,999)

$

(39,652)

$

239,204

$

250,279

$

(59,387)

$

390,774

$

23,576

Proceeds from the exercise of stock options

 

13,416

 

 

194

194

8

Proceeds from the exercise of subsidiary stock options

Restricted stock awards vested

96,763

 

1

 

(1)

Restricted stock awards withheld for tax

 

 

 

(2,011)

(2,011)

Share-based compensation

 

 

 

6,674

6,674

Adjustments of redeemable noncontrolling interest to redemption value

18

18

170

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)

Other comprehensive income (loss)

(1,194)

(1,194)

144

Net income (loss)

 

 

 

5,834

5,834

186

Balance at June 30, 2019

 

33,122,954

331

 

(2,879,999)

(39,652)

244,078

255,026

(60,581)

399,202

18,651

Accumulated

Total

Additional

Other

Virtusa

Non-

Total

Common Stock

Treasury Stock

Paid-in

Retained

Comprehensive

Stockholders’

controlling

Stockholders'

  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

  

Earnings

  

Loss

  

Equity

  

interest

  

equity

Balance at March 31, 2018

 

32,469,092

$

325

 

(2,879,999)

$

(39,652)

$

260,612

$

238,019

$

(40,681)

$

418,623

$

17,460

$

436,083

Proceeds from the exercise of stock options

 

33,173

 

 

294

294

294

Proceeds from the exercise of subsidiary stock options

196

196

196

Restricted stock awards vested

 

95,432

 

1

 

(1)

Restricted stock awards withheld for tax

(2,450)

(2,450)

(2,450)

Share-based compensation

 

 

 

7,908

7,908

7,908

Subsidiary share-based compensation

30

30

30

Cumulative effect of adopting ASC Topic 606, net of tax

464

464

464

Series A Convertible Preferred Stock dividends and accretion

(1,087)

(1,087)

(1,087)

Other comprehensive income (loss)

(13,060)

(13,060)

(1,466)

(14,526)

Net income (loss)

 

 

 

(6,296)

(6,296)

731

(5,565)

Balance at June 30, 2018

 

32,597,697

326

 

(2,879,999)

(39,652)

266,589

231,100

(53,741)

404,622

16,725

421,347

See accompanying notes to unaudited consolidated financial statements

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Virtusa Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Three Months Ended

June 30, 

    

2019

    

2018

    

Cash flows from operating activities:

Net income (loss)

$

6,020

$

(5,565)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

 

7,765

 

7,273

Share-based compensation expense

 

6,676

 

7,938

Provision (recovery) for doubtful accounts

 

(64)

 

(206)

Loss (gain) on disposal of property and equipment

 

42

 

(8)

Foreign currency transaction (gains) losses, net

(1,202)

10,758

Amortization of discounts and premiums on investments

(4)

51

Amortization of debt issuance cost

273

273

Deferred income taxes, net

 

(72)

 

(3,594)

Net changes in operating assets and liabilities

Accounts receivable and unbilled receivable

 

7,203

 

(12,750)

Prepaid expenses and other current assets

 

(6,015)

 

(7,519)

Other long-term assets

 

(7,730)

 

(4,150)

Accounts payable

 

(4,479)

 

1,218

Accrued employee compensation and benefits

 

(15,632)

 

(14,855)

Accrued expenses and other current liabilities

 

10,454

 

6,562

Operating lease liabilities

125

Income taxes payable

 

2,620

 

6,412

Other long-term liabilities

 

(3,744)

 

1,432

Net cash provided by (used in) operating activities

 

2,236

 

(6,730)

Cash flows from investing activities:

Proceeds from sale of property and equipment

 

19

 

186

Purchase of short-term investments

 

(4,622)

 

(38,008)

Proceeds from sale or maturity of short-term investments

 

19,817

 

29,292

Payment for asset acquisition

 

(4,251)

 

Purchase of property and equipment

 

(4,775)

 

(13,461)

Net cash provided by (used in) investing activities

 

6,188

 

(21,991)

Cash flows from financing activities:

Proceeds from exercise of common stock options

 

194

 

294

Proceeds from exercise of subsidiary stock options

52

196

Payment of debt

(875)

(875)

Payments of withholding taxes related to net share settlements of restricted stock

(2,011)

(2,450)

Purchase of redeemable noncontrolling interest related to Polaris

(5,549)

Principal payments on capital lease obligation

(18)

(22)

Payment of dividend on Series A Convertible Preferred Stock

 

(1,046)

 

(1,046)

Net cash used in financing activities

 

(9,253)

 

(3,903)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

1,145

 

(7,279)

Net increase (decrease) in cash and cash equivalents and restricted cash

 

316

 

(39,903)

Cash, cash equivalents and restricted cash, beginning of year

 

190,113

 

195,236

Cash, cash equivalents and restricted cash, end of period

$

190,429

$

155,333

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Virtusa Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets:

    

June 30, 2019

    

March 31, 2019

Balance sheet classification

Cash and cash equivalents

$

190,007

$

189,676

Restricted cash in current assets

 

336

 

351

Restricted cash in other long-term assets

 

86

 

86

Total restricted cash

 

$

422

 

$

437

Total cash, cash equivalents and restricted cash

 

$

190,429

 

$

190,113

See accompanying notes to unaudited consolidated financial statements

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Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

(1) Nature of the Business

Virtusa Corporation (the “Company”, “Virtusa”, “we”, “us” or “our”) is a global provider of digital engineering and information technology (“IT”) outsourcing services that accelerate business outcomes for our clients. We support Forbes Global 2000 clients across large, consumer facing industries like banking, financial services, insurance, healthcare, communications, and media and entertainment, as these clients seek to improve their business performance through accelerating revenue growth, delivering compelling consumer experiences, improving operational efficiencies, and lowering overall IT costs. We provide services across the entire spectrum of the IT services lifecycle, from strategy and consulting to technology and user experience (“UX”) design, development of IT applications, systems integration, testing and business assurance, and maintenance and support services, including infrastructure and managed services. We help our clients solve critical business problems by leveraging a combination of our distinctive consulting approach, unique platforming methodology, and deep domain and technology expertise.

Our services enable our clients to accelerate business outcomes by consolidating, rationalizing and modernizing their core customer-facing processes into one or more core systems. We deliver cost-effective solutions through a global delivery model, applying advanced delivery methods such as Agile, an industry standard technique designed to accelerate application development. We also use our consulting methodology, which we refer to as Accelerated Solution Design (“ASD”), which is a collaborative decision-making and design process performed with the client to ensure our solutions meet the client’s specifications and requirements. Our industry leading business transformational solutions combine deep domain expertise with our strengths in software engineering and business consulting to support our clients’ business-imperative initiatives across business growth and IT operations.

Headquartered in Massachusetts, we have offices in the United States, Canada, the United Kingdom, the Netherlands, Germany, Switzerland, Sweden, Austria, the United Arab Emirates, Hong Kong, Japan, Qatar, Mexico, Australia and New Zealand, with global delivery centers in India, Sri Lanka, Hungary, Singapore and Malaysia, as well as near shore delivery centers in the United States.

(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, 2019 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 24, 2019. 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

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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, income taxes, including reserves for uncertain tax positions, deferred taxes and liabilities, intangible assets, 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 June 30, 2019 and March 31, 2019, the carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, unbilled accounts receivable, restricted cash, accounts payable, accrued employee compensation and benefits, other accrued expenses and long-term debt, approximate their fair values due to the nature of the items. See Note 5 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 February 2016, the FASB issued an update (ASU 2016-02) to the standard on leases to increase transparency and comparability among organizations. The FASB subsequently issued ASU 2018-10 and ASU 2018-11 in July 2018, ASU 2018-20 in December 2018 and ASU 2019-01 in March 2019, which provide clarifications and improvements to this new standard. ASU 2018-11 also provides the optional transition method which allows companies to apply the new lease standard at the adoption date instead of at the earliest comparative period presented. The new standard replaces the existing guidance on leases and requires the lessee to recognize a right-of-use asset (“ROU”) and a lease liability for all leases with lease terms equal to or greater than twelve months. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize total lease expense on a straight-line basis. For public business entities this standard is effective for the annual periods beginning after December 15, 2018, and interim periods within those annual periods. The standard permits the use of either retrospective to each prior reporting period presented with the cumulative effect of adoption recognized at the beginning of the earliest period presented or retrospective to the beginning of the period of adoption through a cumulative-effect adjustment (the "Modified Retrospective Effective Date Method").

The Company adopted this standard, (“ASC Topic 842”), effective April 1, 2019, using a Modified Retrospective Effective Date Method. The Company has elected the package of practical expedients which permits the Company to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. The Company did not elect the use of hindsight practical expedient to reevaluate the lease term of existing contracts. Prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting policies. The impact of adoption primarily relates to the recognition of right-of-use operating lease assets and operating lease liabilities on the Company’s unaudited consolidated balance sheets for all operating leases with a term greater than twelve months. The adoption of this standard on April 1, 2019 resulted in the recognition of ROU assets for operating leases of $54,762 and operating lease liabilities of $59,157. The Company’s accounting for finance leases (formerly capital leases) remains substantially unchanged. The adoption of this standard did not have an impact on the consolidated statement of income

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(loss) and comprehensive income (loss), consolidated statement of changes in stockholders’ equity or the consolidated statement of cash flows.

See Note 7 “Leases” for additional information regarding leases.

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 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 ASU 2019-04 in April 2019 and ASU 2019-05 in May 2019, which provide clarifications and improvements to this new standard. This standard update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect of this new standard will have on its consolidated financial statements and related disclosures.

(3) Earnings (Loss) per Share

Basic earnings (loss) per share available to Virtusa common stockholders (“EPS”) is computed by dividing net income (loss), less any dividends and accretion of issuance cost on the Series A Convertible Preferred Stock by the weighted average number of shares of common stock outstanding for the period. In computing diluted EPS, the Company adjusts the numerator used in the basic EPS computation, subject to anti-dilution requirements, to add back the dividends (declared or cumulative undeclared) applicable to the Series A Convertible Preferred Stock. Such add-back would also include any adjustments to equity in the period to accrete the Series A Convertible Preferred Stock to its redemption price. The Company adjusts the denominator used in the basic EPS computation, subject to anti-dilution requirements, to include the dilution from potential shares resulting from the issuance of restricted stock units, unvested restricted stock and stock options along with the conversion of the Series A Convertible Preferred Stock to common stock. The following table sets forth the computation of basic and diluted EPS for the periods set forth below:

The components of basic earnings (loss) per share are as follows:

Three Months Ended

June 30, 

    

2019

    

2018

Numerators:

  

 

  

Net income (loss) available to Virtusa stockholders

$

5,834

$

(6,296)

Less: Series A Convertible Preferred Stock dividends and accretion

 

(1,087)

 

(1,087)

Net income (loss) available to Virtusa common stockholders

$

4,747

$

(7,383)

Denominators:

 

  

 

  

Basic weighted average common shares outstanding

 

30,167,910

 

29,633,026

Basic earnings (loss) per share available to Virtusa common stockholders

$

0.16

$

(0.25)

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The components of diluted earnings (loss) per share are as follows:

Three Months Ended

June 30, 

    

2019

    

2018

Numerators:

Net income (loss) available to Virtusa common stockholders

$

4,747

$

(7,383)

Add : Series A Convertible Preferred Stock dividends and accretion

Net income (loss) available to Virtusa common stockholders and assumed conversion

$

4,747

$

(7,383)

Denominators:

Basic weighted average common shares outstanding

 

30,167,910

 

29,633,026

Dilutive effect of Series A Convertible Preferred Stock if converted

Dilutive effect of employee stock options and unvested restricted stock awards and restricted stock units

 

766,501

 

Weighted average shares—diluted

 

30,934,411

 

29,633,026

Diluted earnings (loss) per share available to Virtusa common stockholders

$

0.15

$

(0.25)

During the three months ended June 30, 2019 and 2018, unvested restricted stock awards and unvested restricted stock units issuable for, and options to purchase zero shares and 1,798,429 shares of common stock, respectively, were excluded from the calculations of diluted earnings (loss) per share as their effect would have been anti-dilutive.  For the three months ended June 30, 2019 and 2018, all of the 3,000,000 shares of Series A Convertible Preferred Stock were excluded from the diluted earnings (loss) per share as their effect would have been anti-dilutive using the if-converted method.

(4) Investment Securities

At June 30, 2019 and March 31, 2019, all of the Company’s investment securities were classified as 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 5 for a discussion of the fair value of the Company’s other financial instruments).

The following is a summary of investment securities at June 30, 2019:

Gross

Gross

Amortized

Unrealized

Unrealized

    

Cost

    

Gains

    

Losses

    

Fair Value

Available-for-sale debt securities:

Corporate bonds:

Current

$

479

$

1

$

$

480

Non-current

 

 

 

 

Preference shares:

Non-current

189

189

Agency and short-term notes:

Current

1,496

2

1,498

Time Deposits:

Current

5,133

5,133

Equity securities:

Mutual funds:

Current

10,688

113

10,801

Equity Shares/ Options:

Non-current

8

169

177

Total available-for-sale debt securities and equity securities

$

17,993

$

285

$

$

18,278

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The following is a summary of investment securities at March 31, 2019:

Gross

Gross

Amortized

Unrealized

Unrealized

    

Cost

    

Gains

    

Losses

    

Fair Value

Available-for-sale debt securities:

Corporate bonds:

Current

$

2,779

$

1

$

(2)

$

2,778

Non-current

 

Preference shares: