Virtusa Corporation (NASDAQ:VRTU) Q1 2018 Earnings Conference Call - Final Transcript

Aug 08, 2017 • 08:00 am ET

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Virtusa Corporation (NASDAQ:VRTU) Q1 2018 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And we will take our first question from Joseph Foresi with Cantor Fitzgerald.

Analyst
Joseph Foresi

Hi. I was wondering could we get --

Executive
Ranjan Kalia

Hi, Joe.

Analyst
Joseph Foresi

Hi, how are you? Can we break out of the core organic growth rate versus the contribution from Polaris? And maybe, you can just update us on progress with Polaris from a cross-selling sort of cost takeout standpoint?

Executive
Ranjan Kalia

So Joe, I mean, we look at both the businesses together. Obviously, one of the reasons for the strong growth in Q1 as well as for the full year is really our banking segment. A major piece of the banking segment actually does flow through Polaris and that's why you really see that the Polaris growth is strong and also that is impacting the minority interest. So from a combined point, we really look at the businesses together versus really looking at them separate Polaris and Virtusa.

Executive
Kris Canekeratne

So, Joe, second, just to build on what Ranjan said. So clearly, the synergies between the combined Virtusa offerings in banking and financial services combined with the Polaris industry expertise has been differentiating for us. And we are clearly starting to see the synergies that we expected when we did the Polaris acquisition.

We are very pleased with the progress that has been made. We believe that we are intersecting digital transformation opportunities head on in the market. We are gaining recognition. We have a leadership position when it comes to digital execution. And beyond that, clearly, when it comes to our heritage, which has to do with helping our clients lower their cost of their IT infrastructures, we are really well positioned. And this is where we are winning and taking away market share from generation 1 providers.

Executive
Ranjan Kalia

Joe, I can also give you, from a banking segment, the sequential growth for the banking segment was 4.4%.

Analyst
Joseph Foresi

Got it. Okay. And then you now have a head of digital and everyone seems to be getting into digital. Can you talk about how big, or update us on how big digital is as a business. its growth rate, and then most importantly, what your competitive advantages in that digital offering?

Executive
Kris Canekeratne

Yes, so clearly, we've had a long heritage of digital work. As you recall, our founding was pretty clear on helping our clients move from on-premise to online, followed by online to mobile, the first generation of mobile, then mobile first, and now omnichannel digital. So clearly, we have had a very strong track record and experience in digital transformation for our clients.

From a pipeline perspective, our overall pipeline grew approximately 26% year-over-year, about 2 times that of revenue growth. But our digital pipeline actually grew well ahead of that at approximately 33% year-over-year. So we are clearly seeing a distance in terms of how fast our digital pipelines are growing. In terms of our differentiation, Joe, it's actually quite simple and straightforward. We have had a very strong heritage in digital execution. We have worked with some of the