Tech stock under pressure: Virtusa Corporation (NASDAQ: VRTU)

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Virtusa Corporation (NASDAQ: VRTU) stock fell over 5.5% on 14th May, 2020 pre-market session (as of 6:05 pm GMT-4; Source: Google finance) after the company posted lower than expected results for the fourth quarter of FY 20. The company has reported Non-GAAP net income of $13.6 million, for the fourth quarter of fiscal 2020, compared to $26.2 million, for the third quarter of fiscal 2020, and $15.6 million for the fourth quarter of fiscal 2019. The company has delivered Non-GAAP income from operations of $19.7 million for the fourth quarter of fiscal 2020, compared to $40.5 million for the third quarter of fiscal 2020 and $34.0 million for the fourth quarter of fiscal 2019. The Company ended fiscal year 2020 with $300.6 million of cash, cash equivalents, and short-term and long-term investments, that included approximately $84 million drawn down by Virtusa in March 2020 from its credit facility as a proactive measure in light of the uncertain COVID-19 environment. The company has generated cash flow from operations of $5.4 million for the fiscal fourth quarter and $79.9 million for fiscal year 2020. Due to the uncertainties surrounding COVID-19, the company has temporarily suspended the financial guidance for fiscal year 2021. For fiscal 2020, the company has reported Non-GAAP net income of $71.9 million for fiscal year 2020, compared to $71.3 million for fiscal year 2019.

VRTU in the fourth quarter of FY 20 has reported the adjusted earnings per share of 41 cents, missing the analysts’ estimates for the adjusted earnings per share of 59 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 0.6 percent to $325.65 million in the fourth quarter of FY 20, missing the analysts’ estimates for revenue by 0.10%.

Meanwhile, due to COVID-19 pandemic, the company had enacted a Work-From-Home policy starting from March 9, 2020. Currently, 98% of Virtusa’s global billable team members were enabled to work from home. There are daily sessions between Virtusa’s Crisis Management and Business Continuity teams to ensure employee safety and consistent client delivery. The company had proactively launched a series of new services and solutions tailored to help clients address the challenges created by COVID-19, including Hyper Distributed Agile Services, Agile Squads, and Release Assurance. The company had implemented a comprehensive cost reduction and efficiency plan across delivery, shared services and professional services. The company has proactively increased readily available cash by drawing down $84 million under its credit facility and moving $25 million from its India entity to the U.S. without tax implications.

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