The following discussion and analysis of our financial condition and results of
our operations should be read together with our consolidated financial
statements and related notes to consolidated financial statements included
elsewhere in this Annual Report on Form 10-K. The following discussion contains
forward-looking statements. Actual results may differ significantly from those
projected in the forward-looking statements. Factors that might cause future
results to differ materially from those projected in the forward-looking
statements include, but are not limited to, those discussed in "Risk Factors"
and elsewhere in this Annual Report.

For a discussion of our results of operations for the fiscal year ended March
31, 2019, including a year-to-year comparison between fiscal year ended March
31, 2019 and 2018 refer to Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our Annual Report
Form 10-K for the fiscal year ended March 31, 2019.

Business overview

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 its clients. We support Forbes
Global 2000 clients across large, consumer-facing industries like banking,
financial services, insurance, healthcare, communications, technology, 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
consulting, to technology and user experience ("UX") design, development of IT
applications, systems integration, digital engineering, testing and business
assurance, and maintenance and support services, including cloud, 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 help organizations realize the
benefits of digital transformation ("DT") and cloud transformation ("CT") by
bringing together digital infrastructure, analytics and intelligence and
customer experience by engineering the digital enterprise of tomorrow on the
cloud. We deliver cost effective solutions through a global delivery model,
applying advanced methods such as Agile, an industry standard technique designed
to accelerate application development. We use our Digital Transformation Studio
(DTS), which is built by Virtusa's engineering teams that have decades of
industry knowledge and experience. These teams are certified and leverage
Virtusa's industry leading tools and assets, providing speed and transparency.
DTS engineering tools drive software development lifecycle (SDLC) automation to
improve quality, enabling speed and increasing productivity.

Headquartered in Massachusetts, we have offices throughout the Americas, Europe,
Middle East and Asia, with global delivery centers in the United States, India,
Sri Lanka, Hungary, Singapore, Poland, Mexico and Malaysia. We also have many
employees who work with our clients either onsite or virtually, which offers
flexibility for both clients and employees. At March 31, 2020, we had 22,830
employees, or team members.

In fiscal year 2020, we initiated a multi-year strategy to increase our revenue
growth, operating margin accretion, and earnings per share growth. Our strategy
focuses on three fundamental pillars:  increasing profitable revenue growth by
targeting large digital and cloud transformation engagements, achieving greater
revenue diversification, categorized by geography, industry and client, and
increasing gross and operating margins through pyramid efficiencies, project
profitability and general and administrative ("G&A") expense leverage.

While we began to implement these three pillars in fiscal year 2020, we faced
significant headwinds, which masked our progress. These headwinds were primarily
related to a decline in revenue from a large European banking client, negotiated
productivity savings which affected growth at our largest client, and adverse
impacts on our clients' spend in the fiscal fourth quarter of 2020 due to the
onset of the COVID-19 pandemic and related negative impact on our client budgets
and the economy as a whole.

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The significant negative impact of COVID-19 on the global economy has created
near-term challenges for us and the entire IT services industry. Simultaneously,
the global pandemic has revealed unique opportunities for us to strengthen and
advance our three-pillar plan. As a result, in late fiscal year 2020 and early
fiscal year 2021, we launched several new initiatives under our three-pillar
strategy designed to enable us to navigate the pandemic's near-term economic
impacts, and strengthen our overall market, financial and operational
positioning going forward.

Our fiscal year 2021 plan builds on and strengthens our three-pillar strategy of
increased profitable revenue growth, revenue and client diversification, and
margin expansion. On the first pillar, we are increasing our efforts to capture
new opportunities created by a change in Global 2000 enterprises' buying
behaviors during the COVID-19 pandemic. For example, in late fiscal year 2020,
we launched several go-to-market campaigns targeting remote workforce
enablement, cost reduction and efficiency programs, and end-to-end deep digital
transformation. In addition to our COVID-19 specific actions, we are also
sharpening our sales and marketing efforts in fiscal year 2021 to target an
increasing number of large, recurring, high-margin, and faster growing digital
and cloud transformation engagements.

On the second pillar of revenue and client diversification, our efforts to
increase our geographic diversification were strengthened in fiscal year 2020
when we realigned our senior executives to improve regional supervision, and
made key local leadership hires in Europe and the Middle East.  We expect these,
and other changes being formulated, will help to expand our EMEA client base and
enable closer client relationships, resulting in stronger revenue growth in
EMEA.  With respect to industry group diversification, our increased investments
in attractive high-growth verticals, and strategic M&A, resulted in 46%
year-over-year growth in healthcare client revenue and 25% growth in
Communications and Technology (C&T) industry group revenue in fiscal year 2020.
In fiscal year 2020, our C&T industry group represented 34% of our revenue, up
from 29% in fiscal year 2019, while Banking, Financial Services and Insurance
(BFSI) revenue declined from 62% to 58% over the same time. Given the
significant opportunity we have to continue expanding our presence in
high-growth sectors such as High-Tech and Healthcare, in fiscal year 2021 we
will increase our investments in our domain expertise, skills, and sales and
marketing programs in these sectors. We believe our actions will enable us to
grow our revenue in these attractive industries faster than the company average,
and simultaneously reduce our concentration in the Banking and Financial
services segment.

Regarding client level diversification, we recognize the importance over the
long-term to reduce revenue concentration at our largest accounts and capture
increasing organic growth opportunities across the remainder of our account
base. To do so, in fiscal year 2021, we will direct more of our sales and
marketing efforts toward smaller accounts that have the ability to expand
significantly with us. We have had success with this strategy at our strategic
clients.  We will apply these same techniques to grow high potential accounts
faster than our total company in order to accelerate account diversification.

Finally, with respect to Virtusa's third pillar, margin expansion, our fiscal
year 2021 plan also includes several strategies underway to improve our gross
and operating margins by reducing our costs and creating operating efficiencies.
Specifically, our fiscal year 2021 plan will include actions to improve pyramid
efficiencies, reduce the use of sub-contractors, increase utilization, and
reduce general and administrative expenses as a percentage of revenue.

Recent developments



On March 3, 2016, our Indian subsidiary, Virtusa Consulting Services Private
Limited ("Virtusa India") acquired approximately 51.7% of the fully diluted
shares of Polaris Consulting & Services Limited ("Polaris") for approximately
$168.3 million in cash (the "Polaris Transaction") pursuant to a share purchase
agreement dated as of November 5, 2015, by and among Virtusa India, Polaris and
the promoter sellers named therein. Through a series of transactions, Virtusa
increased its ownership to 100% for an additional aggregate consideration for
$289.4 million, with $21.2 million being paid during the fiscal year ended March
31, 2020. During the three months ended March 31, 2020, Polaris merged with and
into Virtusa India, with Virtusa India being the surviving entity.

In connection with the Polaris Transaction, we entered into an amendment with
Citigroup Technology, Inc. ("Citi"), which became effective upon the closing of
the Polaris Transaction, pursuant to which Virtusa was added as a party to the
master services agreement with Citi and was appointed as a preferred vendor.

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On December 31, 2019, in connection with a request for proposal ("RFP") and
vendor consolidation process conducted by Citi, and as part of the Company being
one of the vendors selected to continue preferred vendor status at Citi and have
the opportunity to compete for additional vendor consolidation work, the Company
and Citi entered into Amendment No. 5 to the Master Professional Services
Agreement, by and between the Company and Citi, dated as of July 1, 2015, as
amended (the "Amendment"). Pursuant to the Amendment, (i) Citi agreed to
maintain the Company as a preferred vendor under the Resource Management
Organization ("RMO") for the provision of IT services to Citi on an enterprise
wide basis, (ii) the Company agreed to provide certain savings to Citi for the
period from April 1, 2020 to December 31, 2020 ("Savings Period"), which savings
can be achieved through productivity and efficiency measures and associated
reduced spend; provided that if these productivity and efficiency measures do
not achieve the projected savings amounts, the Company is required to provide
certain discounts to Citi for the Savings Period to achieve the savings
commitments; and (iii) to the extent that Citi awards the Company additional or
new work in addition to the services covered by the RFP, the Company agreed to
provide Citi with a certain percentage of savings (whether achieved through
productivity measures, efficiencies, discounts or otherwise) as a condition to
performing such services.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation
commonly referred to as the Tax Cuts and Jobs Acts (the "Tax Act"). The Tax Act
contains several key tax provisions that impacted the Company, including the
reduction of the corporate income tax rate to 21% effective January 1, 2018. The
Tax Act also includes a variety of other changes, such as a one-time
repatriation tax on accumulated foreign earnings, a limitation on the tax
deductibility of interest expense, acceleration of business asset expensing, and
reduction in the amount of executive pay that could qualify as a tax deduction,
among others. During the fiscal year ended March 31, 2019, the Company elected
to treat several foreign entities as disregarded entities. The earnings of these
subsidiaries will be subject to US taxation as well as local taxation with a
corresponding foreign tax credit. (See Note 17 to the consolidated financial
statements for further information).

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act") was enacted on March 27, 2020 in the U.S. The Act
includes both tax and nontax measures.  The act restores the five-year net
operating loss (NOL) carryback for losses arising in any taxable year beginning
after 2017, but before 2021. Employers can defer payment for the employer
portion of payroll taxes incurred between the date the CARES Act is enacted
through December 31, 2020. The CARES Act increases the interest deduction
limitation from 30% to 50% of adjusted taxable income (ATI) for tax years
beginning in 2019 or 2020. (See Note 17 to the consolidated financial statements
for further information).

COVID-19 and factors impacting our business and operating results



During the fourth quarter of fiscal 2020, the global pandemic related to
COVID-19 presented significant challenges and adversely impacted our business
and operating results. Our fiscal fourth quarter results were impacted by
pandemic-related business interruptions and project delays, as well as elongated
client decision making cycles. We are unable at this time to predict the full
impact of COVID-19 on our operations, liquidity and financial results, and,
depending on the magnitude and duration of the COVID-19 pandemic, such impact
may be material. We expect to see an adverse impact to our revenue, earnings and
cash flows due to the COVID-19 pandemic in the first quarter of fiscal 2021,
which may also continue into the second quarter or beyond. Accordingly, current
results and financial condition discussed herein may not be indicative of future
operating results and trends. Refer to "Risk Factors" for further discussion of
the impact of the COVID-19 pandemic on our business.

In response to the COVID-19 pandemic, Virtusa quickly initiated a rigorous plan
to protect the health and safety of its global team members, while continuing to
serve clients in a safe and sustainable manner. As the world faces unprecedented
challenges caused by COVID-19, Virtusa is committed to doing everything possible
to help our team members and clients manage through these turbulent times.
Recent actions include:

? Enacted a Work-From-Home policy starting March 9, 2020. Today, 98% of Virtusa's

global billable team members are enabled to work from home.

? Daily sessions between Virtusa's Crisis Management and Business Continuity


   teams to ensure employee safety and consistent client delivery.


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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.

? Implemented a comprehensive cost reduction and efficiency plan across delivery,


   shared services and professional services.



Proactively increased readily available cash by drawing down $84.0 million

? under its credit facility and moving $25.0 million from its India entity to the

U.S. without tax implications.



For the fiscal year ending March 31, 2021, we expect the following factors, among others, to affect our business and our operating results:

? Demand from our clients, particularly for our digital transformation (DT) and

cloud transformational (CT) solutions and outsourcing services

Demand from our clients for solutions and services that drive cost efficiencies

? including cloud transformation, intelligent automation, and offshoring

development.

? Ability to leverage our deep domain expertise to provide digital

transformational solutions across our industry groups

? Adverse impacts on our clients' IT services spend from the economic impact of

COVID-19

? Discretionary spending by our clients may be negatively affected by COVID-19

and related macroeconomic factors

? Uncertainty regarding regulatory changes, including potential regulatory

changes with respect to immigration and taxes;

? Foreign currency volatility

? Impact of the COVID-19 pandemic and related economic conditions on our business

and operations

For the fiscal year ending March 31, 2021, we plan to:

? Execute our three-pillar plan for increased profitable revenue growth, revenue


   and client diversification, and gross and operating margin expansion

? Invest in and develop intellectual property-based solutions to provide to our

clients and increase non-linear revenue

? Continued revenue diversification by focusing on vertical, geographical and

client portfolio diversification

? Align our practices to provide digital transformation services across our core

industry groups such as BFSI, C&T and Media, Information and others ("M&I")

? Leverage our core engineering and domain expertise to delivery digital and

cloud solutions to our clients

Invest in domain led digital and cloud transformational solutions within core

? verticals like banking, healthcare, high-tech, insurance, media and

telecommunications

? Continue our focus on client acquisition and expansion of revenue gained from

existing clients, particularly with high-potential accounts

Deepen our domain expertise in our service offerings related to enterprise

? mobile applications, social media, gamification, big data analytics, robotics

process automation, and cloud computing

Continue to invest in our talent base, including new onsite campus recruitment


 ? programs, training and talent engagement programs, with a focus on re-skilling
   and digital technologies


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Implement efficiency initiatives focused on improving pyramid efficiencies;

? reducing use of sub-contractors; increasing utilization; enhancing project

profitability; and G&A cost leverage

Deepen our solution and service offerings across the software development

? lifecycle, including application support and maintenance and independent

software quality-assurance

? Focus on growing our business in Europe and Asia Pacific where we believe there

are opportunities to gain market share

? Pursue opportunistic acquisitions that would improve or broaden our overall

service delivery capabilities, domain expertise, and/or service offerings




Historically, we have also supplemented organic revenue growth with
acquisitions. These acquisitions have focused on adding domain expertise,
augmenting our geographic footprint, expanding our professional services teams
and expanding our client base. For instance, during fiscal year ended March 31,
2020, we completed several tuck-in asset and business acquisitions, which
expanded our relationship with our existing clients or supplemented existing
service offerings. During the fiscal year ended March 31, 2018, we completed the
acquisition of eTouch, which expands our digital solution offerings. During the
fiscal year ended March 31, 2016, we acquired Polaris, which expanded our
banking and financial services offerings and domain expertise as described
above.

Financial overview



At March 31, 2020, we had 22,830 employees, or team members, an increase from
21,745 at March 31, 2019. For the fiscal year ended March 31, 2020, we had
revenue of $1,312.3 million, and income from operations of $80.2 million. In our
fiscal year ended March 31, 2020, our revenue increased by $64.4 million, or
5.2%, to $1,312.3 million, as compared to $1,247.9 million in our fiscal year
ended March 31, 2019. Our net income increased from $11.8 million in our
fiscal year ended March 31, 2019 to $43.6 million in our fiscal year ended March
31, 2020.

The key drivers of the increase in revenue in our fiscal year ended March 31, 2020, as compared to our fiscal year ended March 31, 2019, were as follows:

? Growth, led by several of our top ten clients, primarily in our C&T industry

group, including revenue from several tuck-in asset and business acquisitions

? Revenue growth in North America

partially offset by:

? Decline in revenue from Europe, primarily driven by one of our large European

banking clients

? Decrease in revenue in our banking and insurance industry group

The key drivers of our increase in net income in our fiscal year ended March 31, 2020, as compared to our fiscal year ended March 31, 2019, were as follows:

Higher revenue, particularly in our top ten clients, primarily in our C&T

? industry group, including revenue from several tuck-in asset and business

acquisitions

? Decrease in operating expense as a percentage of revenue, reflecting a larger

revenue base and cost reduction initiatives

? Decrease in impairment related to land in India held for sale




 ? Significant non-recurring tax benefit related to our merger of Polaris with and
   into Virtusa


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partially offset by:

Substantial increase in foreign currency transaction losses, primarily related

? to the revaluation of Indian rupee denominated intercompany note, primarily due

to substantial depreciation of the Indian rupee against the U.S. dollar.

? Increase in interest expense related to an increase in our outstanding debt

under our credit facility




High repeat business and client concentration are common in our industry. During
the fiscal year ended March 31, 2020, 2019 and 2018, 97%, 91% and 96%,
respectively, of our revenue was derived from clients who had been using our
services for more than one year, including clients acquired from eTouch Systems
Corp. in March 2018. Accordingly, our global account management and service
delivery teams focus on expanding client relationships and converting new
engagements to long-term relationships to generate repeat revenue and expand
revenue streams from existing clients. We also have a dedicated business
development team focused on generating engagements with new clients to continue
to expand our client base and, over time, reduce client concentration.



For the fiscal years ended March 31, 2020, 2019 and 2018, we generated 56%, 54%,
and 56%, respectively, of revenue from application outsourcing and 44%, 46% and
44%, respectively, of revenue from consulting services. We perform our services
under both time-and-materials and fixed-price contracts. Revenue from
fixed-price contracts remained unchanged at 41% of total revenue for the
fiscal years ended March 31, 2020, 2019 and 2018. The revenue earned from
fixed-price contracts reflects our clients' preferences.

At March 31, 2020, we had cash and cash equivalents, short-term and long-term
investments, which is a non-GAAP measure, of $300.6 million, which includes a
draw-down of $84.0 million in March 2020 from our line of credit to supplement
our liquidity and working capital. At March 31, 2019, we had cash and cash
equivalents, short-term and long-term investments, which is a non-GAAP measure,
of $223.1 million.

As an IT services company, our revenue growth has been, and will continue to be,
highly dependent on our ability to attract, develop, motivate and retain skilled
IT professionals. For the fiscal year ended March 31, 2020, we finished the
fiscal year with a total headcount of 22,830 as compared with a total headcount
of 21,745 for the fiscal year ended March 31, 2019, which reflects voluntary and
involuntary attrition. There is intense competition for IT professionals with
the skills necessary to provide the type of services we offer. We closely
monitor our overall attrition rates and patterns to ensure our people management
strategy aligns with our growth objectives. For the last twelve months ended
March 31, 2020, our attrition rate reflects voluntary attrition of 16.2% and
involuntary attrition of 9.3%. The majority of our attrition occurs in India and
Sri Lanka, and is weighted towards the more junior members of our staff. In
response to higher attrition and as part of our retention strategies, we have
experienced increases in compensation and benefit costs, which may continue in
the future. However, we try to absorb such cost increases through price
increases or cost management strategies such as managing discretionary costs,
the mix of professional staff and utilization levels and achieving other
operating efficiencies. If our attrition rate increases or is sustained at
higher levels, our growth may slow and our cost of attracting and retaining IT
professionals could increase.

We maintain an 18 month rolling and layering hedging program, which we believe
has been effective since inception at reducing the impact of fluctuations in the
Indian rupee on our operating results and there is no assurance that this
hedging program will continue to be effective. These hedges may also cause us to
forego benefits of a positive currency fluctuation, especially given the
volatility of the Indian rupee . In addition, to the extent that these hedges
cease to qualify for hedge accounting, any gains or losses associated with those
hedges would be recorded in other comprehensive income until the occurrence of
the underlying transaction and at that time the gains or losses would be
recognized in the consolidated statement of income in other income (expense).

We monitor a number of operating metrics to manage and assess our earnings, including:

Days sales outstanding ("DSO") is a measure of the number of days our accounts

receivable are outstanding based upon the last 90 days of revenue activity,

? which indicates the timeliness of our cash collection from clients and our


   overall credit terms to our clients. At March 31, 2020, our DSO was 78 days
   compared to


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76 days at March 31, 2019. As a result of the COVID-19 pandemic, our clients are

delaying payments and/or requesting longer payment terms in our fiscal year

ending March 31, 2021.

Realized billing rates are the rates we charge our clients for our services,

which reflect the value our clients place on our services, market competition

and the geographic location in which we perform our services. Our realized

billing rates have remained relatively consistent subject to foreign currency

exchange fluctuation for our fiscal year ended March 31, 2020 as compared to

? our fiscal year ended March 31, 2019. Any increase in realized billing rates is

a result of our ability to successfully preserve or increase our billing rates

with existing and/or new clients. In connection with the COVID-19 pandemic, our

clients are increasingly requesting discounts to our rates and other pricing

concessions for the fiscal year ending March 31, 2021, which may result in

lower realized billing rates in the future.

Average cost per IT professional is the sum of team member salaries, including

variable compensation, and fringe benefits, divided by the average number of IT

? professionals during the period. We experienced an increase in our average cost

per IT professional in our fiscal year ended March 31, 2020 as compared to our

fiscal year ended March 31, 2019, primarily driven by competition and mix of

resources.

Utilization rate indicates the efficiency of our billable IT resources. Our

utilization rate is defined as the number of billable hours in a given period

divided by the total number of available hours of our IT professionals in a

given period, excluding trainees. We track our utilization rates to measure

revenue potential and gross profit margins. Management's target for the

utilization rate is in the low 80% range. Our utilization rates were 81%, 83%

? and 83% for the fiscal years ended March 31, 2020, 2019 and 2018, respectively.

The utilization rate is affected by the rate of quarterly sequential revenue

growth, as well as ability to staff existing IT professionals on billable

engagements. In growth periods, utilization tends to rise as more resources are

deployed to meet rising demand. Utilization rates above the targeted range may

also indicate that there are insufficient IT professionals to staff existing or

future engagements, which may result in loss of revenue or inability to service


   client engagements.


   Attrition rate is the ratio of terminated team members during the latest

twelve months to the total number of team members at the end of such period,

which measures team member turnover. Increased voluntary attrition rates result

in increased hiring, training and on-boarding costs and productivity losses,

? which may adversely affect our revenue, gross margin and operating profit

margin. For the last twelve months ended March 31, 2020, our attrition rate was

25.5%, which reflects voluntary attrition of 16.2% and involuntary attrition of

9.3%. Our attrition rate for the fiscal year ended March 31, 2019 was 25.5%,

which reflects voluntary attrition of 16.4% and involuntary attrition of 9.1%.

Operating expense efficiency is a measure of operating expenses as a percentage

of revenue. If we continue to successfully grow our revenue, we anticipate that

? operating expenses will decrease as a percentage of revenue as such expenses

are absorbed across a larger revenue base. In the near term, however, any


   operating expense efficiency may decline if our revenue declines.


   Effective tax rate is our worldwide tax expense as a percentage of our

consolidated net income before tax, which measures the impact of income taxes

worldwide on our operations and net income. We monitor and assess our effective

tax rate to evaluate whether our tax structure is competitive as compared to

our industry. Our effective tax rate was 0.6% and 53.6% for the fiscal years

ended March 31, 2020 and 2019, respectively. Our effective tax rate decreased

? primarily due to the merger of our Indian operations. The merger permits

previous nondeductible items to be deducted in computing taxable income. As a

result of the merger, the Company filed a refund claim of $11.4 million for the

fiscal year ended March 31, 2019 and realized a benefit in the U.S. for foreign

tax credits of $14.3 million. The tax benefit is offset by an increase in the

valuation allowance and increased income from operations during the fiscal year

ended March 31, 2020. Increases in our effective tax rate or a high effective

tax rate will also have a negative effect on our earnings in future periods.




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Onsite-to-offshore mix is the measurement of hours billed by resources located

offshore to hours billed by our team members onsite over a defined period. We

strive to manage both fixed-price contracts and time-and-materials engagements

? to a targeted 30% to 70% onsite- to-offshore service delivery team mix,

although such delivery mix may be impacted by several factors including our new

and existing client delivery requirements as well as the impact of any


   acquisitions.


Sources of revenue

We generate revenue by providing IT services to our clients located primarily in
North America and Europe. We have historically earned, and believe that over the
next few fiscal years we will continue to earn a significant portion of our
revenue from a limited number of clients. For the fiscal year ended March 31,
2020, collectively, our five largest and ten largest clients accounted for 41%
and 56% of our revenue, respectively. Our largest client accounted for 16% of
our revenue for the fiscal year ended March 31, 2020. The loss of any one of our
major clients could reduce our revenue and operating profit and harm our
reputation in the industry. During the fiscal year ended March 31, 2020, 74% of
our revenue was generated in North America, 17% in Europe and 9% in rest of the
world. We provide IT services on either a time-and-materials or a fixed-price
basis. For the fiscal year ended March 31, 2020, the percentage of revenue from
time-and-materials and fixed-price contracts was 59% and 41%, respectively.

Our North America revenue for the fiscal year ended March 31, 2020 increased by
9.5%, or $84.0 million, to $968.1 million, or 74% of total revenue, from
$884.1 million, or 71% of total revenue in the fiscal year ended March 31, 2019.
The increase in North America revenue for the fiscal year ended March 31, 2020
was primarily due to the increase in revenue from clients in the C&T industry
group, including revenue from several tuck-in asset and business acquisitions.
Our European revenue for the fiscal year ended March 31, 2020 decreased by
11.8%, or $31.0 million, to $231.0 million, or 17% of total revenue, from
$262.0 million, or 21% of total revenue in the fiscal year ended March 31, 2019.
The decrease in European revenue for the fiscal year ended March 31, 2020 was
primarily due to a decline in revenue from one of our large banking clients.

Revenue from services provided on a time-and-materials basis is derived from the
number of billable hours in a period multiplied by the contractual rates at
which we bill our clients. Revenue from services provided on a fixed-price basis
is recognized as efforts are expended generally on an input method. Revenue also
includes reimbursements of travel and out-of-pocket expenses with equivalent
amounts of expense recorded in costs of revenue. Most of our client contracts,
including those that are on a fixed-price basis, can be terminated by our
clients with or without cause on 30 to 90 days prior written notice. All fees
for services provided by us through the date of cancellation are generally due
and payable under the contract terms.

Our unit pricing is driven by business need, delivery timeframes, complexity of
the engagement, operating differences (such as onsite/offshore ratio),
competitive environment and engagement size or volume. As a pricing strategy to
encourage clients to increase the volume of services that we provide to them,
we, on occasion may offer volume discounts or longer payment terms. We manage
our business carefully to protect our account margins and our overall profit
margins. We find that our clients generally purchase on the basis of total
value, rather than on minimum cost, considering all of the factors listed above.

While we are subject to the effects of overall market pricing pressure, we
believe that there is a fairly broad range of pricing offered by different
competitors for each service we provide. We believe that no one competitor, or
set of competitors, sets pricing in our industry. We find that our unit pricing,
as a result of our global delivery model, is generally competitive with other
firms who operate with a predominately offshore operating model.

The proportion of work performed at our offshore facilities and at onsite client
locations varies from period-to-period. Effort, in terms of the percentage of
hours billed to clients by onsite resources, was 28% of total hours billed in
each of the fiscal years ended March 31, 2020 and 2019, while the revenue from
resources located onsite and offshore accounted for 60% and 40% respectively in
the fiscal year ended March 31, 2020 and 59% and 41% respectively during the
fiscal year ended March 31, 2019. We charge higher rates and incur higher
compensation costs and other expenses for work performed at client locations in
the United States, the United Kingdom and Europe as compared to work performed
at our global delivery centers in Asia, particularly our largest centers in
India and Sri Lanka. Services performed

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at client locations or at our offices in the United States or the United Kingdom
generate higher revenue per-capita at lower gross margins than similar services
performed at our global delivery centers in Asia, particularly our largest
centers in India and Sri Lanka. We manage to a targeted 30% to 70%
onsite-to-offshore service delivery mix, although such delivery mix may be
impacted by several factors including our new and existing client delivery
requirements as well as the impact of any acquisitions.

Costs of revenue and gross profit



Costs of revenue consist principally of payroll and related fringe benefits,
reimbursable and non-reimbursable costs, immigration-related expenses, fees for
subcontractors working on client engagements and share-based compensation
expense for IT professionals including account management personnel. Wage costs
in India and Sri Lanka have historically been significantly lower than wage
costs in the United States, Europe and rest of the world for comparably-skilled
IT professionals. However, wages in India and Sri Lanka are increasing in local
currency, which will result in increased costs for IT professionals,
particularly project managers and other mid-level professionals. We may need to
increase the levels of our team member compensation more rapidly than in the
past to remain competitive without the ability to make corresponding increases
to our billing rates. Compensation increases may reduce our profit margins, make
us less competitive in pricing potential projects against those companies with
lower cost resources and otherwise harm our business, operating results and
financial condition. We deploy a campus hiring philosophy and encourage internal
promotions to minimize the effects of wage inflation pressure and recruiting
costs. Additionally, any material appreciation in the Indian rupee or Sri Lankan
rupee against the U.S. dollar or U.K. pound sterling could have a material
adverse impact on our cost of services.

Our revenue and gross profit are also affected by our ability to efficiently
manage and utilize our IT professionals and fluctuations in foreign currency
exchange rates. We define utilization rate as the total number of days billed in
a given period divided by the total available days of our IT professionals
during that same period, excluding trainees. We manage employee utilization by
continually monitoring project requirements and timetables to efficiently staff
our projects and meet our clients' needs. The number of IT professionals
assigned to a project will vary according to the size, complexity, duration and
demands of the project. An unanticipated termination or reduction of a
significant project could cause us to experience a higher than expected number
of unassigned IT professionals, thereby lowering our utilization rate.

Although we have adopted a cash flow hedging program to minimize the effect of
the Indian rupee movement on our financial condition, particularly our costs of
revenue, these hedges may not be effective or may cause us to forego benefits,
especially given the volatility of these currencies. In addition, to the extent
that these hedges do not qualify for hedge accounting, any gains or losses
associated with those hedges would be recorded in other comprehensive income
until the occurrence of the underlying transaction and at that time the gains or
losses would be recognized in the consolidated statement of income in other
income (expense).

Operating expenses



Operating expenses consist primarily of payroll and related fringe benefits,
commissions, selling and marketing as well as promotion, communications,
management, finance, administrative, occupancy, share-based compensation and
depreciation and amortization expenses. In the fiscal years ended March 31,
2020, 2019, and 2018, we invested in all aspects of our business, including
sales, marketing, IT infrastructure, facilities, human resources programs and
financial operations. Additionally, any material appreciation in the Indian
rupee or Sri Lankan rupee against the U.S. dollar or U.K. pound sterling could
have a material adverse impact on our cost of operating expenses.

Other income (expense)



Other income (expense) includes interest income, interest expense, investment
gains and losses, foreign currency transaction gains and losses and disposal of
fixed assets. We generate interest income by investing in time deposits, money
market instruments, short-term investments and long-term investments. We incur
interest expense primarily from our long-term debt and amortization of our debt
issuance cost. The functional currencies of our subsidiaries are their local
currencies, except for Hungary which operates in the euro and certain
Netherlands entities which operate in the U.S. dollar. Foreign currency gains
and losses are generated primarily by fluctuations of the Indian rupee, Sri

Lankan rupee, Swedish

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Krona ("SEK"), euro, U.K. pound sterling and the Singapore dollar, against the
U.S. dollar on intercompany transactions. This includes fluctuations on an
Indian rupee denominated intercompany note in a U.S. dollar functional currency
entity in the Netherlands that was put in place as part of the structuring of
the Polaris Transaction. At March 31, 2020, the approximate value of the
intercompany note was $267.3 million (Indian rupee 20,000 million). We place our
cash in liquid investments at highly-rated financial institutions, as well as in
money market funds, fixed income securities, U. S. dollar denominated corporate
bonds, agency bonds and government bonds based on our investment policy approved
by our audit committee and board of directors. We believe that our credit
policies reflect normal industry terms and business risk.

Income tax expense



Our net income is subject to income tax in those countries in which we perform
services and have operations, including the United States, the United Kingdom,
the Netherlands, India, Sri Lanka, Germany, Singapore, Austria, Hungary,
Malaysia and Sweden. In the fiscal year ended March 31, 2020, our effective tax
rate was impacted by the Tax Act, the mix of income by jurisdiction, the impact
of adopting the new tax regime offered by the Indian government and certain
deductions granted to large IT service providers in Sri Lanka and the CARES Act.
Historically, we have benefited from long-term income tax holiday arrangements
in both India and Sri Lanka that are offered to certain export-oriented IT
services firms. As a result of these tax holiday arrangements, our worldwide
profit has been subject to a relatively low effective tax rate as compared to
the statutory rates in the countries in which we generate the substantial
portion of our revenue. The effect of the income tax holidays in India and Sri
Lanka decreased our income tax expense in the fiscal years ended March 31, 2020
and 2019 by $0.1 million and $5.8 million, respectively. Our tax expense
decreased by $20.2 million in the fiscal year ended March 31, 2020 compared to
our tax expense for our fiscal year ended March 31, 2019. The decrease in the
tax expense and effective tax rate for the fiscal year ended March 31, 2020 was
primarily due to non-recurring tax benefits resulting from merger of our Indian
operations during the fiscal year ended March 31, 2020.

Our effective tax rate was 0.6% and 53.6% for each of the fiscal years ended
March 31, 2020 and 2019 respectively. Our effective tax rate in future periods
will be affected by the Tax Act, CARES Act, the geographic distribution of our
earnings and increased U.S. taxable income due to restricting activities and the
availability of foreign tax credits to offset U.S. tax expense. (See Note 17 to
the consolidated financial statements for further information).



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Results of operations

Fiscal year ended March 31, 2020 compared to fiscal year ended March 31, 2019

The following table presents an overview of our results of operations for the fiscal years ended March 31, 2020 and 2019:






                                                   Fiscal Year Ended
                                                       March 31,
                                                  2020           2019         $ Change     % Change
                                                             (Dollars in thousands)
Revenue                                        $ 1,312,283    $ 1,247,863    $   64,420         5.2 %
Costs of revenue                                   959,143        884,652        74,491         8.4 %
Gross profit                                       353,140        363,211      (10,071)       (2.8) %
Operating expenses                                 272,928        292,943      (20,015)       (6.8) %
Income from operations                              80,212         70,268         9,944        14.2 %
Other income (expense)                            (31,551)       (32,104)           553       (1.7) %

Income before income tax expense                    48,661         38,164  

     10,497        27.5 %
Income tax expense                                     309         20,473      (20,164)      (98.5) %
Net income                                          48,352         17,691        30,661       173.3 %
Less: net income attributable to
noncontrolling interests, net of tax                   450          1,545       (1,095)      (70.9) %
Net income available to Virtusa
stockholders                                        47,902         16,146        31,756       196.7 %
Less: Series A Convertible Preferred Stock
dividends and accretion                              4,350          4,350             -           - %
Net income attributable to Virtusa common
stockholders                                   $    43,552    $    11,796    $   31,756       269.2 %




Revenue

Revenue increased by 5.2%, or $64.4 million, from $1,247.9 million during the
fiscal year ended March 31, 2019 to $1,312.3 million in the fiscal year ended
March 31, 2020. The increase in revenue was primarily driven by an increase in
revenue from several of our top ten clients, including revenue from several
tuck-in asset and business acquisitions of $45.4 million, partially offset by a
decline in our banking and insurance industry, including one of our large
European banking clients. Revenue from North American clients in the fiscal year
ended March 31, 2020 increased by $84.0 million, or 9.5%, as compared to the
fiscal year ended March 31, 2019, particularly due to the increase in revenue
from clients in the C&T industry group, including revenue from several tuck-in
asset and business acquisitions. Revenue from European clients in the
fiscal year ended March 31, 2020 decreased by $31.0 million, or 11.8%, as
compared to the fiscal year ended March 31, 2019, primarily due to a decline in
revenue from one of our large banking clients. We had 221 active clients at
March 31, 2020, as compared to 216 active clients at March 31, 2019.

Costs of revenue



Costs of revenue increased from $884.7 million in the fiscal year ended
March 31, 2019 to $959.1 million in the fiscal year ended March 31, 2020, an
increase of $74.5 million, 8.4%. The increase in cost of revenue was primarily
due to an increase in the number of IT professionals and related compensation
and benefit costs of $23.8 million. The increased costs of revenue were also due
to an increase in subcontractor costs of $57.5 million partially offset by
decrease in travel costs of $8.0 million. At March 31, 2020, we had 20,606 IT
professionals as compared to 19,502 at March 31, 2019. As a percentage of
revenue, cost of revenue increased from 70.9% for the fiscal year ended March
31, 2019 to 73.1% for fiscal year ended March 31, 2020.

Gross profit


Our gross profit decreased by $10.1 million or 2.8%, to $353.1 million for the
fiscal year ended March 31, 2020 as compared to $363.2 million in the
fiscal year ended March 31, 2019, primarily due to increase in subcontractor
costs

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and higher onsite effort, partially offset by higher revenue. As a percentage of
revenue, for the fiscal year ended March 31, 2020 compared to the fiscal year
ended March 31, 2019, gross margin decreased from 29.1% to 26.9% primarily due
to higher onsite effort and subcontractor costs partially offset by higher
revenue.

Operating expenses



Operating expenses decreased from $292.9 million in the fiscal year ended
March 31, 2019 to $272.9 million in the fiscal year ended March 31, 2020, a
decrease of $20.0 million, or 6.8%. The decrease in operating expenses was
primarily due to a decrease of $23.7 million in compensation expenses, including
stock and variable compensation expense. The decrease in operating costs was
also due to a decrease in travel costs of $3.5 million. The decrease is
partially offset by increase in acquisition related expense of $3.5 million and
an increase in facilities cost of $3.1 million.  As a percentage of revenue, our
operating expenses decreased from 23.5% in the fiscal year ended March 31, 2019
to 20.8% in the fiscal year ended March 31, 2020.

Income from operations



Income from operations increased by $9.9 million or 14.2%, from $70.3 million in
the fiscal year ended March 31, 2019 to $80.2 million in the fiscal year ended
March 31, 2020. As a percentage of revenue, income from operations increased
from 5.6% in the fiscal year ended March 31, 2019 to 6.1% in the fiscal year
ended March 31, 2020, primarily due to higher revenue and decrease in operating
expense partially offset by higher onsite effort and subcontractor costs.

Other (income) expense



Other expense decreased by $0.6 million, from $32.1 million in the fiscal year
ended March 31, 2019 to $31.5 million in the fiscal year ended March 31, 2020,
primarily due to an impairment related to land in India, which was recorded in
the fiscal year ended March 31, 2019, partially offset by an increase in net
foreign currency transaction losses related to the revaluation of a $267.3
million Indian rupee denominated intercompany note, primarily due to a
substantial depreciation of the Indian rupee against the U.S. dollar and an
increase in interest expense related to our credit facility.

Income tax expense



Income tax expense decreased by $20.2 million, from $20.5 million in the fiscal
year ended March 31, 2019 to $0.3 million in the fiscal year ended March 31,
2020. Our effective tax rate decreased from 53.6% for the fiscal year ended
March 31, 2019 to 0.6% for the fiscal year ended March 31, 2020. The decrease in
tax expense and effective tax rate for the fiscal year ended March 31, 2020, was
primarily due to the merger of our Indian operations. The merger permits
previous nondeductible items to be deducted in computing taxable income. As a
result of the merger, the Company filed a refund claim of $11.4 million for the
fiscal year ended March 31, 2019 and realized a benefit in the U.S. for foreign
tax credits of $14.3 million. The tax benefit is offset by an increase in the
valuation allowance and increased income from operations during the fiscal

year
ended March 31, 2020.

Noncontrolling interests

In connection with the Polaris Consulting & Services Limited ("Polaris")
acquisition, for the fiscal year ended March 31, 2020, we recorded a
noncontrolling interest of $0.5 million representing a 2.3% share of profits of
Polaris held by parties other than Virtusa. As of March 31, 2020, we own 100% of
Polaris shares.

Net income available to Virtusa stockholders



Net income available to Virtusa stockholders increased by 196.7%, from a net
income of $16.1 million in the fiscal year ended March 31, 2019 to net income of
$47.9 million in the fiscal year ended March 31, 2020. The increase in net
income in the fiscal year ended March 31, 2020 was primarily due to higher
revenue, an increase in income from operations and a decrease in income tax

expense.

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Series A Convertible Preferred Stock dividends and accretion



In connection with the preferred stock financing transaction with the Orogen
Group, we accrued dividends and accreted issuance costs of $4.4 million at a
rate of 3.875% per annum during the fiscal year ended March 31, 2020.

Net income attributable to Virtusa common stockholders



Net income available to Virtusa common stockholders increased by 269.2%, from a
net income of $11.8 million in fiscal year ended March 31, 2019 to a net income
of $43.6 million in the fiscal year ended March 31, 2020. The increase in net
income in the fiscal year ended March 31, 2020 was primarily due to higher
revenue, an increase in income from operations and a decrease in income tax
expense.

Non-GAAP Measures



We include certain non-GAAP financial measures as defined by Regulation G by the
Securities and Exchange Commission. These non-GAAP financial measures are not
based on any comprehensive set of accounting rules or principles and should not
be considered a substitute for, or superior to, financial measures calculated in
accordance with GAAP, and may be different from non-GAAP measures used by other
companies. In addition, these non-GAAP measures should be read in conjunction
with our financial statements prepared in accordance with GAAP.



We consider the total measure of cash, cash equivalents, short-term and
long-term investments to be an important indicator of our overall liquidity. All
of our investments are classified as either equity or available-for-sale debt
securities, including our long-term investments which consist of fixed income
securities, including government agency bonds and corporate bonds, which meet
the credit rating and diversification requirements of our investment policy as
approved by our audit committee and board of directors.

The following table provides the reconciliation from cash and cash equivalents
to total cash and cash equivalents, short-term investments and long-term
investments:




                                                       At March 31,       At March 31,      At March 31,
                                                           2020               2019              2018

Cash and cash equivalents                             $       290,837    $       189,676   $      194,897
Short-term investments                                          9,785             33,138           45,900
Long-term investments                                               4                322            4,140
Total cash and cash equivalents, short-term and
long-term investments                                 $       300,626    $       223,136   $      244,937

We believe the following financial measures will provide additional insights to measure the operational performance of our business.

We present consolidated statements of income measures that exclude, when

applicable, stock-based compensation expense, acquisition-related charges,

restructuring charges, foreign currency transaction gains and losses,

impairment of investments, impairment of long-lived assets, non-recurring third

? party financing costs, the tax impact of dividends received from foreign

subsidiaries, the initial impact of our election to treat certain subsidiaries

as disregarded entities for U.S. tax purposes, the impact from the U.S.

government enacted comprehensive tax legislation ("Tax Act") and other

non-recurring tax items to provide further insights into the comparison of our


   operating results among periods.


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The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the years ended March 31:







                                                            Fiscal Year Ended March 31,
                                                          2020          2019          2018
                                                           (in thousands, except share and
                                                                  per share amounts)
GAAP income from operations                            $   80,212    $   70,268    $   46,387
Add: Stock-based compensation expense                      15,716        29,056        27,411
Add: Acquisition-related charges and
restructuring charges (1)                                  17,915        23,904        13,278
Non-GAAP income from operations                        $  113,843    $  123,228    $   87,076
GAAP operating margin                                         6.1 %         5.6 %         4.5 %
Effect of above adjustments to income from
operations                                                    2.6 %         4.3 %         4.0 %
Non­GAAP operating margin                                     8.7 %         9.9 %         8.5 %
GAAP net income (loss) available to Virtusa
common stockholders                                    $   43,552    $   11,796    $  (2,709)
Add: Stock-based compensation expense                      15,716        29,056        27,411
Add: Acquisition-related charges and
restructuring charges (1)                                  18,182        25,710        13,346
Add: Non-recurring third party financing costs
(9)                                                             -             -           701
Add: Impairment of investment (10)                            184         1,411             -
Add: Other impairment charge (11)                               -         3,955             -
Add: Foreign currency transaction losses (2)               15,999        13,130         3,543
Add: Impact from the Tax Act (8)                                -       (1,628)        22,724
Tax adjustments (3)                                      (26,080)      (16,365)      (14,037)
Less: Noncontrolling interest, net of taxes (4)              (44)          (68)       (1,469)
Non-GAAP net income available to Virtusa common
stockholders                                           $   67,509    $   66,997    $   49,510
GAAP diluted earnings (loss) per share (6)             $     1.42    $     0.38    $   (0.09)
Effect of stock-based compensation expense (7)               0.47          0.86          0.85
Effect of acquisition-related charges and
restructuring charges (1) (7)                                0.54          0.77          0.41
Effect of non-recurring third party financing
costs (9) (7)                                                   -             -          0.02
Effect of impairment of investment (10) (7)                     -          0.04             -
Effect of other impairment charge (11) (7)                      -          0.12             -
Effect of foreign currency transaction losses (2)
(7)                                                          0.48          0.39          0.11
Effect of impact from the Tax Act (7) (8)                       -        (0.05)          0.70
Tax adjustments (3) (7)                                    (0.77)        (0.49)        (0.43)
Effect of noncontrolling interest (4) (7)                       -             -        (0.05)
Effect of dividend on Series A Convertible
Preferred Stock (6) (7)                                      0.13          0.13          0.10
Effect of change in dilutive shares for non-GAAP
(6)                                                        (0.13)        (0.03)          0.01
Non-GAAP diluted earnings per share (5) (7)            $     2.14    $    

2.12 $ 1.63

Acquisition-related charges include, when applicable, amortization of

purchased intangibles, external deal costs, transaction-related professional

fees, acquisition-related retention bonuses, changes in the fair value of

contingent consideration liabilities, accreted interest related to deferred

acquisition payments, charges for impairment of acquired intangible assets (1) and other acquisition-related costs including integration expenses consisting

of outside professional and consulting services and direct and incremental

travel costs. Restructuring charges, when applicable, include termination

benefits, facility exit costs as well as certain professional fees related to


    restructuring. The following table provides the details of the
    acquisition-related charges and restructuring charges:


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                                                         Fiscal Year Ended March 31,
                                                         2020          2019 

2018


Amortization of intangible assets                     $   14,675     $ 11,394    $ 10,089
Acquisition and integration costs                          3,240       12,101       1,821
Restructuring charges                                          -          409       1,368
Acquisition-related charges included in costs of
revenue and operating expense                             17,915       23,904      13,278
Accreted interest related to deferred acquisition
payments                                                     267        1,806          68
Total acquisition-related charges and restructuring
charges                                               $   18,182     $ 25,710    $ 13,346

Foreign currency transaction gains and losses are inclusive of gains and (2) losses on related foreign exchange forward contracts not designated as

hedging instruments for accounting purposes.

Tax adjustments reflect the tax effect of the non-GAAP adjustments using the

tax rates at which these adjustments are expected to be realized for the (3) respective periods, excluding the initial impact of our election to treat

certain subsidiaries as disregarded entities for U.S. tax purposes. Tax

adjustments also assumes application of foreign tax credit benefits in the

United States.

(4) Noncontrolling interest represents the minority shareholders interest of

Polaris.

(5) Non-GAAP diluted earnings per share is subject to rounding.

During the fiscal year ended March 31, 2020 and 2019, all of the 3,000,000 (6) shares of Series A Convertible Preferred Stock were excluded from the

calculations of GAAP diluted earnings per share as their effect would have

been anti-dilutive using the if-converted method.




The following table provides the non-GAAP net income available to Virtusa common
stockholders and non-GAAP dilutive weighted average shares outstanding using
if-converted method to calculate the non-GAAP diluted earnings per share for the
fiscal year ended March 31, 2020, 2019 and 2018:





                                                            Fiscal Year Ended March 31,
                                                        2020            2019            2018
Non-GAAP net income available to Virtusa common
stockholders                                        $     67,509    $     66,997    $     49,510
Add: Dividends and accretion on Series A
Convertible Preferred Stock                                4,350           4,350           3,262
Non-GAAP net income available to Virtusa common
stockholders and assumed conversion                 $     71,859    $     71,347    $     52,772
GAAP dilutive weighted average shares outstanding     30,654,527      30,659,654      29,397,350
Add: Incremental dilutive effect of employee
stock options and unvested restricted stock
awards and restricted stock units                              -               -         728,820
Add: Incremental effect of Series A Convertible
Preferred Stock as converted                           3,000,000       3,000,000       2,250,000
Non-GAAP dilutive weighted average shares
outstanding                                           33,654,527      33,659,654      32,376,170



To the extent the Series A Convertible Preferred Stock is dilutive using the (7) if-converted method, the Series A Convertible Preferred Stock is included in

the weighted average shares outstanding to determine non-GAAP diluted

earnings per share.

(8) Impact from the U.S. government enacted comprehensive tax legislation ("Tax

Act").

(9) Non-recurring third party financing costs related to the new credit facility.




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(10) Other-than-temporary impairment of available-for-sale securities recognized

in earnings.

(11) Impairment related to a long-lived asset

Liquidity and capital resources

We have financed our operations primarily from sales of shares of common stock, cash from operations, debt financing and from sales of shares of Series A Convertible Preferred Stock. Our ability to expand and grow our business to execute our strategic objectives will depend on many factors, including our willingness to make opportunistic acquisitions, strategic investments and partnerships.





In response to the COVID-19 outbreak, which had and is having a negative
business impact on our operations, in March 2020, we drew down approximately
$84.0 million dollars from our revolving credit facility to supplement our
liquidity and working capital in light of the impact of the COVID-19 pandemic on
our clients and our results of operations. For additional liquidity, on May 27,
2020, we entered into Amendment No. 3 to Amended and Restated Credit Agreement
with JPMorgan Chase Bank, N.A. (the " Administrative Agent" ) and the lenders
party thereto (the " Third Credit Agreement Amendment" ), which amends the
Company's Amended and Restated Credit Agreement, dated as of February 6, 2018,
with such parties (as amended, "Credit Agreement" ) to, among other things, (i)
provide for $62.5 million in incremental 364-day delayed draw term loans (the
"New Delayed Draw Term Loans" ), which can be drawn down up to three times on or
before September 27, 2020 and (ii) extend out the debt to EBITDA ratio covenant
step down by two quarters such that the leverage covenant remains at 3.25:1.00
through December 31, 2020. The Company can use the proceeds of the New Delayed
Draw Term Loans to fund general working capital and refinance existing
indebtedness under the credit facility. On May 27, 2020, the Company prepaid
$55.0 million on its existing revolving facility as a condition to closing the
Third Credit Agreement Amendment.



At March 31, 2020, we had approximately $300.6 million of cash, cash
equivalents, short term investments and long term investments, of which we hold
approximately $194.8 million of cash, cash equivalents, short term investments
and long-term investments in non-U.S. locations, particularly in India, Sri
Lanka and the United Kingdom. Cash in these non-U.S. locations may not otherwise
be available for potential investments or operations in the United States or
certain other geographies where needed, as we have stated that this cash is
indefinitely reinvested in these non-U.S. locations. If our intent were to
change and we elected to repatriate this cash back to the United States, or this
cash was deemed no longer permanently invested, this cash could be subject to
additional taxes and the change in such intent could have an adverse effect on
our cash balances as well as our overall statement of income. Notwithstanding
these limitations, in April 2020, we were able to move $25.0 million of cash
from our India entity to our U.S. entity, without tax implication, to support
our U.S. legal entity's liquidity needs. Due to various methods by which cash
could be repatriated to the United States in the future, the amount of taxes
attributable to the cash is dependent on circumstances existing if and when
remittance occurs. In addition, some countries could have restrictions on the
movement and exchange of foreign currencies which could further limit our
ability to use such funds for global operations or capital or other strategic
investments. Due to the various methods by which such earnings could be
repatriated in the future, it is not practicable to determine the amount of
applicable taxes that would result from such repatriation.

We believe that our sources of funding will be sufficient to satisfy our
currently anticipated cash requirements including capital expenditures, working
capital requirements, potential acquisitions, strategic investments and other
liquidity requirements through at least the next 12 months.



To the extent that existing cash from operations is insufficient to fund our
working capital needs and other cash obligations, we may raise additional funds
through debt or equity financing.  We cannot give any assurance that additional
financing, if required, will be available on favorable terms or at all.

We do not believe the deemed repatriation tax on accumulated foreign earnings
related to the Tax Act will have a significant impact on our cash flows in any
individual fiscal year.

During the fiscal year ended March 31, 2020, we completed multiple tuck-in asset
and business acquisitions for an aggregate purchase price consideration of $49.6
million, with an additional earn-out consideration of $38.7 million,

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which, if earned, would be payable over the next two fiscal years. During the
fiscal year ended March 31, 2020, we paid $38.7 million in purchase price and
$3.8 million in earn-out consideration related to these tuck-in acquisitions.

On October 15, 2019, we entered into Amendment No. 2 to Amended and Restated
Credit Agreement with JPMorgan Chase Bank, N.A. (the "Administrative Agent") and
the lenders party thereto (the "Second Credit Agreement Amendment"), which
amends the Company's Amended and Restated Credit Agreement, dated as of February
6, 2018, with such parties (as amended the "Credit Agreement") to, among other
things, increase the revolving commitments available to us under the Credit
Agreement from $200.0 million to $275.0 million, reduce the interest rate
margins applicable to term loans and revolving loans outstanding under the
Credit Agreement from time to time and reduce the commitment fee payable by us
to the lenders in respect of unused revolving commitments under the Credit
Agreement. We executed the Second Credit Agreement Amendment to provide
additional lending capacity which we used to fund the completion of the Polaris
delisting transaction, as well as to provide excess lending capacity in the
event of future opportunistic, strategic, investment opportunities. The Second
Credit Agreement Amendment contains customary terms for amendments of this type,
including representations, warranties and covenants. Interest under the credit
facility accrues at a rate per annum of LIBOR plus 2.75%, subject to step-downs
based on the Company's ratio of debt to EBITDA. For the fiscal year ending March
31, 2021, the Company is required to make principal payments of $4.3 million per
quarter. The term of the Credit Agreement is five years ending February 6, 2023.
During the fiscal year ended March 31, 2020, the Company drew down $145.0
million from the credit facility, inclusive of $84.0 million drawn in the three
months ended March 31, 2020 to supplement our liquidity and working capital in
light of the uncertainty resulting from the COVID-19 pandemic. Earlier draws in
the fiscal year March 31, 2020 were used to fund the eTouch 18-month anniversary
payment of $17.5 million and to fund opportunistic, strategic, investment
opportunities. As of March 31, 2020, the total outstanding amount under the
Credit Agreement was $500.0 million. At March 31, 2020, the weighted average
interest rate on the term loan and revolving line of credit was 3.18%.

The Credit Facility is secured by substantially all of the Company's assets,
including all intellectual property and all securities in domestic subsidiaries
(other than certain domestic subsidiaries where the material assets of such
subsidiaries are equity in foreign subsidiaries), subject to customary
exceptions and exclusions from the collateral. All obligations under the Credit
Agreement are unconditionally guaranteed by substantially all of the Company's
material direct and indirect domestic subsidiaries, with certain exceptions.
These guarantees are secured by substantially all of the present and future
property and assets of the guarantors, with certain exclusions.

At March 31, 2020, we were in compliance with all covenants set forth in our
Credit Agreement.  Based upon our current plans, we expect our operating cash
flows, together with our cash and short-term investment balances, to be
sufficient to meet our operating requirements and service our debt for the
foreseeable future. However, given the dynamic nature of the COVID-19 pandemic,
there can be no assurances that its future impact will not have a material
adverse effect on our ongoing business, results of operations, liquidity needs,
debt covenant compliance or overall financial performance.



On August 5, 2019, our board of directors authorized a share repurchase program
of up to $30.0 million of our common stock over 12 months from the approval
date, subject to certain price and other trading restrictions as established by
the Company. During the fiscal year ended March 31, 2020, we repurchased 505,565
shares of the Company's common stock at a weighted average price of $36.93 per
share for an aggregate purchase price of $18.7 million. As of March 31, 2020,
the share repurchase program has been suspended due to the COVID-19 pandemic.

To strengthen our digital engineering capabilities and establish a solid base in
Silicon Valley, on March 12, 2018, we acquired all of the outstanding shares of
eTouch Systems Corp ("eTouch US"), and its Indian subsidiary, eTouch Systems
(India) Pvt. Ltd ("eTouch India," together with eTouch US, "eTouch") for
approximately $140.0 million in cash, subject to certain adjustments. As part of
the acquisition, we set aside up to an additional $15.0 million for retention
bonuses to be paid to eTouch management and key employees, in equal installments
on the first and second anniversary of the transaction. We agreed to pay the
purchase price in three tranches, with $80.0 million paid at closing,
$42.5 million on the 12-month anniversary of the close of the transaction, and
$17.5 million on the 18-month anniversary of the close of the transaction,
subject in each case to certain adjustments. During the three months ended March
31, 2019, we paid the 12-month anniversary purchase price payment of $42.5
million and the retention bonus amount of $7.0 million to the eTouch management
and key employees. During the fiscal year ended March 31, 2020, we paid the
18-month anniversary purchase price payment of $17.5 million and the remaining
retention bonus related to the employees.

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On March 3, 2016, our Indian subsidiary, Virtusa Consulting Services Private
Limited ("Virtusa India") acquired approximately 51.7% of the fully diluted
shares of Polaris Consulting & Services Limited ("Polaris") for approximately
$168.3 million in cash (the "Polaris Transaction") pursuant to a share purchase
agreement dated as of November 5, 2015, by and among Virtusa India, Polaris and
the promoter sellers named therein. Through a series of transactions, Virtusa
increased its ownership to 100% for an additional aggregate consideration of
$289.4 million, with $21.2 million being paid to former shareholders of Polaris
during the fiscal year ended March 31, 2020. During the three months ended March
31, 2020, Polaris merged with and into Virtusa India, with Virtusa India being
the surviving entity.

In connection with the Polaris Transaction, we entered into an amendment with
Citigroup Technology, Inc. ("Citi"), which became effective upon the closing of
the Polaris Transaction, pursuant to which Virtusa was added as a party to the
master services agreement with Citi and was appointed as a preferred vendor.

On December 31, 2019, in connection with a request for proposal ("RFP") and
vendor consolidation process conducted by Citi, and as part of the Company being
one of the vendors selected to continue preferred vendor status at Citi and have
the opportunity to compete for additional vendor consolidation work, the Company
and Citi entered into Amendment No. 5 to the Master Professional Services
Agreement, by and between the Company and Citi, dated as of July 1, 2015, as
amended (the "Amendment"). Pursuant to the Amendment, (i) Citi agreed to
maintain the Company as a preferred vendor under the Resource Management
Organization ("RMO") for the provision of IT services to Citi on an enterprise
wide basis, (ii) the Company agreed to provide certain savings to Citi for the
period from April 1, 2020 to December 31, 2020 ("Savings Period"), which savings
can be achieved through productivity and efficiency measures and associated
reduced spend; provided that if these productivity and efficiency measures do
not achieve the projected savings amounts, the Company is required to provide
certain discounts to Citi for the Savings Period to achieve the savings
commitments; and (iii) to the extent that Citi awards the Company additional or
new work in addition to the services covered by the RFP, the Company agreed to
provide Citi with a certain percentage of savings (whether achieved through
productivity measures, efficiencies, discounts or otherwise) as a condition to
performing such services.

On May 3, 2017, we entered into an investment agreement with The Orogen Group
("Orogen") pursuant to which Orogen purchased 108,000 shares of the Company's
newly issued Series A Convertible Preferred Stock, initially convertible into
3,000,000 shares of common stock, for an aggregate purchase price of
$108.0 million with an initial conversion price of $36.00 (the "Orogen Preferred
Stock Financing"). In connection with the investment, Vikram S. Pandit, the
former CEO of Citigroup, was appointed to Virtusa's Board of Directors. Orogen
is an operating company that was created by Vikram Pandit and Atairos
Group, Inc., an independent private company focused on supporting
growth-oriented businesses, to leverage the opportunities created by the
evolution of the financial services landscape and to identify and invest in
financial services companies and related businesses with proven business models.

Under the terms of the investment, the Series A Convertible Preferred Stock has
a 3.875% dividend per annum, payable quarterly in additional shares of common
stock and/or cash at our option. If any shares of Series A Convertible Preferred
Stock have not been converted into common stock prior to May 3, 2024, the
Company will be required to repurchase such shares at a repurchase price equal
to the liquidation preference of the repurchased shares plus the amount of
accumulated and unpaid dividends thereon. If we fail to effect such repurchase,
the dividend rate on the Series A Convertible Preferred Stock will increase by
1% per annum and an additional 1% per annum on each anniversary of May 3, 2024
during the period in which such failure to effect the repurchase is continuing,
except that the dividend rate will not increase to more than 6.875% per annum.
During the fiscal year ended March 31, 2020, the Company has $4.2 million as a
cash dividend on its Series A Convertible Preferred Stock.

The Company also uses interest rate swaps to mitigate the Company's interest
rate risk on the Company's variable rate debt. The Company's objective is to
limit the variability of cash flows associated with changes in LIBOR interest
rate payments due on the Credit Agreement (See Note 14 to the consolidated
financial statements), by using pay-fixed, receive-variable interest rate swaps
to offset the future variable rate interest payments. The Company purchased
interest rate swaps in July 2016 with an effective date of July 2017 and
November 2018.  The July 2016 interest rate swaps are at a blended weighted
average of 1.025% and the Company will receive 1-month LIBOR on the same
notional amounts.  The November 2018 interest rate swaps are at a fixed rate of
2.85% and are designed to maintain a 50% coverage of our LIBOR debt, therefore
the notional amount changes over the life of the swap to retain the 50% coverage
target.

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The counterparties to the Interest Rate Swap Agreements could demand an early
termination of the June 2016 and November 2018 Swap Agreements if we are in
default under the Credit Agreement, or any agreement that amends or replaces the
Credit Agreement in which the counterparty is a member, and we are unable to
cure the default. An event of default under the Credit Agreement includes
customary events of default and failure to comply with financial covenants,
including a maximum consolidated leverage ratio commencing on December 31, 2018,
of not more than 3.50 to 1.00 for periods ending prior to March 31, 2020, of not
more than 3.25 to 1.00 commencing March 31, 2020 and for periods ending prior to
September 30, 2020, and 3.00 to 1.00 thereafter and a minimum consolidated fixed
charge coverage ratio of 1.25 to 1.00. As of March 31, 2020, we were in
compliance with these covenants. The net unrealized loss associated with
Interest Rate Swap Agreement was $11.1 million as of March 31, 2020, which
represents the estimated amount that we would pay to the counterparties in the
event of an early termination.

From time to time, the Company enters into arrangements to deliver IT services
that include upfront payments to our clients. As of March 31, 2020, the total
unamortized upfront payments related to these services were $32.2 million and
are expected to be amortized as a reduction to revenue over a benefit period of
5 years.

Beginning in fiscal 2009, our U.K. subsidiary entered into an agreement with an
unrelated financial institution to sell, without recourse, certain of its
Europe-based accounts receivable balances from one client to the financial
institution. During the fiscal year ended March 31, 2020, we sold $30.7 million
of receivables under the terms of the financing agreement. Fees paid pursuant to
this agreement were not material during the fiscal year ended March 31, 2020. No
amounts were due under the financing agreement at March 31, 2020, but we may
elect to use this program again in future periods. However, we cannot provide
any assurances that this or any other financing facilities will be available or
utilized in the future.



During the three months ended March 31, 2019, we recorded an impairment loss of
$4.0 million relating to the reclassification of land acquired in the Polaris
Transaction to held for sale. The decision to sell this land was made during the
three months ended March 31, 2019 as part of our annual planning process where
we evaluated strategic alternatives to maximize return on our cash and assets.
As part of the assessment process, we considered projected headcount growth in
this region, as well as ongoing compliance costs associated with holding the
land, and concluded that our cash, including cash from the sale of this asset,
would generate a higher return elsewhere. The reclassification to held for sale
triggered a reduction in value to $8.3 million, which represents the lower of
net book value and market value at March 31, 2020.  We are actively marketing
this land for sale and expect to complete a transaction over the next 12 months.

On February 28, 2019, the Supreme Court of India issued a ruling interpreting
certain statutory defined contribution obligations of employees and employers,
which altered historical understandings of such obligations, extending them to
cover additional portions of employee income. As a result, contributions by our
employees and the Company will increase in future periods. There is uncertainty
as to whether the Indian government will apply the Supreme Court's ruling on a
retroactive basis and if so, how this liability should be calculated as it is
impacted by multiple variables, including the period of assessment, the
application with respect to certain current and former employees and whether
interest and penalties may be assessed. As such, the ultimate amount of our
obligation is difficult to quantify. If the Indian Government were to apply the
Supreme Court ruling retroactively, without assessing interest and penalties,
the impact would be a charge of approximately $7.5 million to our income from
operations and cash flows.

We expect capital expenditures made in the normal course of business during the fiscal year ended March 31, 2021, without regarding to any past or future acquisitions, to be consistent with our historical capital expenditures.



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Cash flows

The following table summarizes our cash flows for the periods presented:






                                                               Fiscal Year Ended March 31,
                                                             2020          2019          2018
                                                                      (In thousands)

Net cash provided by operating activities                 $   79,894    $   68,619    $   62,699
Net cash used in investing activities                       (47,019)      (74,708)      (52,669)
Net cash provided by financing activities                     75,383        14,749        37,442
Effect of exchange rate changes on cash, cash
equivalents and restricted cash                              (6,770)      

(13,782) 2,677 Net increase (decrease) in cash and cash equivalents and restricted cash

                                          101,488       

(5,122) 50,149 Cash, cash equivalents and restricted cash, beginning of year

                                                      190,113       195,235       145,086
Cash, cash equivalents and restricted cash, end of
year                                                      $  291,601    $  190,113    $  195,235

Net cash provided by operating activities



Net cash provided by operating activities increased in the fiscal year ended
March 31, 2020 compared to the fiscal year ended March 31, 2019, primarily due
to an increase in the net income adjusted for non-cash expenses, primarily
related to a decrease in stock-based compensation as a result of performance
stock awards and partially offset by an increase in long-term liabilities and
income tax payable during the fiscal year ended March 31, 2020.

Net cash provided by operating activities increased in the fiscal year ended
March 31, 2019 compared to the fiscal year ended March 31, 2018, primarily due
to an increase in the net income adjusted for non-cash expenses and a decrease
in the working capital, partially offset by a decrease in long-term assets and
long-term liabilities during the fiscal year ended March 31, 2019.

Net cash used for investing activities



Net cash used in investing activities decreased in the fiscal year ended March
31, 2020 compared to fiscal year ended March 31, 2019. The decrease in net cash
used in investing activities is primarily due to decrease in payment for
deferred consideration related to the acquisition of eTouch, decrease in the
purchase of property and equipment and a net decrease in the purchase of
investments partially offset by payments for business combination and asset
acquisitions.

Net cash used in investing activities increased in the fiscal year ended March
31, 2019 compared to fiscal year ended March 31, 2018. The increase in net cash
used in investing activities is primarily due to the increase in the purchase of
property and equipment and a net decrease in the proceeds from sale of
investments during the fiscal year ended March 31, 2019 offset by a decrease in
business acquisition payments.

Net cash provided by financing activities



Net cash provided by financing activities increased in the fiscal year ended
March 31, 2020 compared to fiscal year ended March 31, 2019. The increase in net
cash provided by financing activities in the fiscal year ended March 31, 2020
was primarily due to an increase in proceeds from debt and a decrease in payment
of noncontrolling interest, partially offset by repurchases of common stock.

Net cash provided by financing activities decreased in the fiscal year ended
March 31, 2019 compared to fiscal year ended March 31, 2018. The decrease in net
cash provided by financing activities during the fiscal year ended March 31,
2019 is primarily due to a net decrease in the proceeds from the credit
facility, an increase in payment of withholding taxes related to net share
settlements of restricted stock, and an increase in payment of dividend on
Series A Convertible Preferred Stock, partially offset by a net decrease in the
acquisition of a noncontrolling interest.

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Contractual obligations

The following table sets forth our future contractual obligations and commercial commitments at March 31, 2020.






                                                                    Payments Due by Period
                                                          Less Than
                                              Total        1 Year        1 - 3 Years      3 - 5 Years     5+ Years
                                                                        (In thousands)

Long­term debt obligation (1)               $ 499,969    $    17,344    $     482,625    $           -    $       -
Interest on long­term debt (2)                 53,274         19,472           33,802                -            -
Operating lease obligations (3)                64,415         15,103           24,905           12,176       12,231
Defined benefit plans (4)                      26,472          2,047            3,707            5,319       15,399
Capital and other purchase commitments
(5)                                            31,758         10,324           10,115           11,319            -
Cumulative preferred stock dividends (6)          686            686                -                -            -
Deferred acquisition payments and
contingent consideration (7)                   39,276         29,523       

    9,753                -            -
Total                                       $ 715,850    $    94,499    $     564,907    $      28,814    $  27,630

(1) Our obligations towards repayments of our long-term debt, please see Note 14

to the consolidated financial statements for further information.

(2) Interest on long-term debt of 3.18% was calculated using weighted average of

interest rates effective as of March 31, 2020.

(3) Our obligations under our operating leases consist of future payments

primarily related to our real estate leases.

We accrue and contribute to benefit funds covering our employees in India and

Sri Lanka. The amounts in the table represent the expected benefits to be (4) paid out over the next ten years. We are not able to quantify expected

benefit payments beyond ten years with any certainty. We make periodic

contributions to the plans such that the unfunded amounts are immaterial.

(5) Relates to build-out of various facilities in India, software license

subscriptions and other purchase commitments, net of advances.

(6) Relates to our Series A Convertible Preferred Stock, which is payable

quarterly.

(7) Relates to deferred acquisition payments and contingent consideration of

asset and business acquisitions during the fiscal year 2020.




At March 31, 2020, we had $6.6 million of unrecognized tax benefits. This
represents the tax benefits associated with tax positions on our domestic and
international tax returns that have not been recognized on our financial
statements due to uncertainty regarding their resolution. Resolution of the
related tax positions with the relevant tax authorities may take years to
complete, since such timing is not entirely within our control. It is reasonably
possible that within the next 12 months certain positions will be resolved,
which could result in a decrease in unrecognized tax benefits. These decreases
may be offset by increases to unrecognized tax benefits if new positions are
identified. The resolution or settlement of positions with the relevant taxing
authorities is at various stages and therefore it is not practical to estimate
the eventual cash flows by period that may be required to settle these matters.

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Commitments and Contingencies

See Note 23 to our consolidated financial statements for additional information.

Application of critical accounting estimates and risks


Our consolidated financial statements have been prepared in accordance with
United States generally accepted accounting principles, or U.S. GAAP.
Preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amount of revenue and expenses, assets and
liabilities and the disclosure of contingent assets and liabilities. We consider
an accounting estimate to be critical to the preparation of our consolidated
financial statements when both of the following are present:

? the estimate is complex in nature or requires a high degree of judgment; and

? the use of different estimates and assumptions could have a material impact on

the consolidated financial statements.

We have discussed the development and selection of our critical accounting estimates and related disclosures with the audit committee of our board of directors. Those estimates critical to the preparation of our consolidated financial statements are listed below.

Revenue recognition

We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Revenues are recognized when control of the promised services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services.





We generally recognize revenue for services over time as our performance creates
or enhances an asset that the customer controls from fixed price contracts
related to complex design, development and customization. For these contracts,
we measures the progress and recognize revenue using effort-based input methods,
as we perform, based on actual efforts spent compared to the total expected
efforts for the contract. The use of the effort based input method requires
significant judgment relative to estimating total efforts, including assumptions
relative to the length of time to complete the project and the nature and
complexity of the work to be performed. Estimates of total efforts are
continuously monitored during the term of the contract and are subject to
revision as the contract progresses. When revisions in estimated contract
revenue and efforts are determined, such adjustments are recorded in the period
in which they are first identified. An input method is used to recognize revenue
as the value of services provided to the customer is best represented by the
hours expended to deliver those services.



We generally recognize revenue for services over time where the Company
performance does not create an asset with an alternative use to the Company and
the Company has an enforceable right to payment for performance completed to
date for fixed-price contracts related to consulting or other IT services. For
these contracts, we measure the progress and recognize revenue using
effort-based input methods as we perform based on actual efforts spent compared
to the total expected efforts for the contract. The cumulative impact of any
change in estimates of the contract revenue is reflected in the period in which
the changes become known.



We generally recognize revenue for time and material contracts over time as the
customer simultaneously receives and consumes the benefits as the Company
performs services. We either apply the as-invoiced practical expedient to
recognize revenues for services rendered on time and material basis, or a method
that is otherwise consistent with the way in which value is delivered to the
customer.



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We generally recognize revenue from fixed-price applications management,
maintenance, or support engagements over time as customers receive and consume
the benefits of such services and have applied the as-invoiced practical
expedient to recognize revenue for services we render to customers based on the
amount we have a right to invoice, which is representative of the value being
delivered. If our invoicing is not consistent with value delivered, revenues are
recognized on a straight-line basis unless revenues are earned and obligations
are fulfilled in a different pattern.



Contracts are often modified to account for changes in contract specification
and requirements. We consider a contract modification when the modification
either creates new or changes the existing enforceable rights and obligations.
The accounting for modifications involves assessing whether the services added
to an existing contract are distinct and whether the pricing is at the
standalone selling price. Services added that are not distinct are accounted for
on a cumulative catch up basis, while those that are distinct are accounted for
prospectively, either as a separate contract if the additional services are
priced at the standalone selling price, or as a termination of the existing
contract and creation of a new contract if not priced at the standalone selling
price.



Certain customers may receive discounts, incentive payments or service level
credits. A portion of the revenues relating to such arrangements are accounted
for as variable consideration when the amount of revenue to be recognized can be
estimated to the extent that it is probable that a significant reversal of any
revenue will not occur. We estimate these amounts based on the expected amount
to be provided to customers and adjusts revenues recognized. We estimate the
amount of variable consideration and determination of whether to include
estimated amounts in the transaction price may involve judgment and are based
largely on an assessment of our anticipated performance and all information that
is reasonably available to us.



From time to time, we may enter into contracts with customers that include
multiple performance obligations. For such arrangements, we allocate revenue to
each performance obligation based on its relative standalone selling price. We
generally determine standalone selling prices based on an expected cost plus a
margin approach.


Our warranties generally provide a customer with assurance that the related deliverable will function as the parties intended because it complies with agreed-upon specifications and is therefore not considered as an additional performance obligation in the contract.





When we receive consideration from a customer prior to transferring services to
the customer under the terms of a contract, we record deferred revenue, which
represents a contract liability. We recognize deferred revenue as revenue after
we have transferred control of the services to the customer and all revenue
recognition criteria are met.



Our payment terms vary by the type and location of its customers. The term
between invoicing and when payment is due is not significant. As a practical
expedient, we have not assessed the existence of a significant financing
component when the difference between payment and transfer of deliverables

is
one year or less.


We report gross reimbursable "out-of-pocket" expenses incurred as both revenues and cost of revenues.

Any tax assessed by a governmental authority that is incurred as a result of a revenue transaction (e.g. sales tax) is excluded from our assessment of transaction prices.

Leases



Our leased assets primarily consist of operating leases for office space,
equipment and vehicles. At the inception of a contract, we determine whether a
contract contains a lease, and if a lease is identified, whether it is an
operating or finance lease. In determining whether a contract contains a lease,
we consider whether (1) it has the right to obtain substantially all of the
economic benefits from the use of the asset throughout the term of the contract,
(2) it has the right to direct how and for what purpose the asset is used
throughout the term of the contract and (3) it has the right to operate the
asset throughout the term of the contract without the lessor having the right to
change the terms of the contract.  We lease vehicles in certain locations
primarily as an employee benefit and these leases are classified as either
operating or finance leases. We do not have finance leases that are material to
our consolidated financial statements. Some of our lease

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agreements contain both lease and non-lease components. We separate lease
components from non-lease components for all our lease assets. The consideration
in the lease contract is allocated to the lease and non-lease components based
on the estimated standalone prices. Our lease agreements, mainly for office
space, may include options to extend or terminate the lease before the
expiration date. We include such options when determining the lease term when it
is reasonably certain that we will exercise that option.



A portion of the leases for office space contain certain charges for additional
rent expenses that are variable. Due to this variability, the cash flows
associated with these charges are not included in the minimum lease payments
used in determining the right-of-use ("ROU") lease assets and associated lease
liabilities.



Our ROU lease assets represent our right to use an underlying asset for the
lease term and may include any advance lease payments made and any initial
direct costs and exclude lease incentives. Our lease liabilities represent our
obligation to make lease payments arising from the contractual terms of the
lease. ROU lease assets and lease liabilities are recognized at the commencement
of the lease and are calculated using the present value of lease payments over
the lease term. Our operating lease agreements do not provide enough information
to arrive at an implicit interest rate. Therefore, we use our estimated
incremental borrowing rate based on information available at the commencement
date of the lease to calculate the present value of the lease payments. We
determine the incremental borrowing rate on a lease-by-lease basis by developing
an estimated borrowing rate of the Company for a fully collateralized obligation
with a term similar to the lease term, and adjusts the rate to reflect the
incremental risk associated with the currency in which the lease is denominated.

Derivative instruments and hedging activities



We enter into forward foreign exchange contracts to mitigate the risk of changes
in foreign exchange rates on forecasted transactions denominated in foreign
currencies. The Company also enters into interest rate swaps to mitigate
interest rate risk on the Company's variable rate debt. Certain of these
transactions meet the criteria for hedge accounting as cash flow hedges under
accounting standards codification. Changes in the fair values of these hedges
are deferred and recorded as a component of accumulated other comprehensive
income (loss), net of tax, until the hedged transactions occur and are then
recognized in the consolidated statements of income in the same line item as the
item being hedged. The Company measures the effectiveness of these hedges at the
time of inception, as well as on an ongoing basis. If any portion of the hedges
is deemed ineffective, the respective portion is recorded in accumulated other
comprehensive income until the occurrence of the hedged transaction and at that
time, the gains or losses are recognized in the consolidated statement of income
in other income (expense). For derivative contracts that are not designated as
cash flow hedges, at maturity changes in the fair value, if any, are recognized
in the same line item as the underlying exposure being hedged in the statements
of income. We value our derivatives based on market observable inputs including
both forward and spot prices for currencies. Any significant change in the
forward or spot prices for currencies would have a significant impact on the
value of our derivatives.

Goodwill and other intangible assets



We account for our business combinations under the acquisition method of
accounting. We allocate the cost of an acquired entity to the assets acquired
and liabilities assumed, including any contingent consideration based on their
estimated fair values at the date of acquisition. The excess of the purchase
price for acquisitions over the fair value of the net assets acquired, including
other intangible assets, is recorded as goodwill. Goodwill is not amortized but
is tested for impairment at the reporting unit level, defined at the Company
level, in the fourth quarter of each fiscal year or more frequently when events
or circumstances occur that indicate that it is more likely than not that an
impairment has occurred. In assessing goodwill for impairment, an entity has the
option to assess qualitative factors to determine whether events or
circumstances indicate that it is not more likely than not that fair value of a
reporting unit is less than its carry amount. If this is the case, then
performing the quantitative two-step goodwill impairment test is unnecessary. An
entity can choose not to perform a qualitative assessment for any or all of its
reporting units, and proceed directly to the use of the two-step impairment
test. The two-step process begins with an estimation of the fair value of a
reporting unit. Goodwill impairment exists when a reporting unit's carrying
value of goodwill exceeds its implied fair value. Significant judgment is
applied when goodwill is assessed for impairment.

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For our goodwill impairment analysis, we operate under one reporting unit. Any
impairment would be measured based upon the fair value of the related assets. In
performing the first step of the goodwill impairment testing and measurement
process, we compare our entity-wide estimated fair value to net book value to
identify potential impairment. Management estimates the entity-wide fair value
utilizing our market capitalization, plus an appropriate control premium. Market
capitalization is determined by multiplying the shares outstanding on the
assessment date by the market price of our common stock. If the fair value of
the reporting unit is less than the book value, the second step is performed to
determine if goodwill is impaired. If we determine through the impairment
evaluation process that goodwill has been impaired, an impairment charge would
be recorded in the consolidated statement of income. We completed the annual
impairment test required during the fourth quarter of the fiscal year ended
March 31, 2020 and determined that there was no impairment. We continue to
closely monitor our market capitalization. If our market capitalization, plus an
estimated control premium, is below its carrying value for a period considered
to be other- than-temporary, it is possible that we may be required to record an
impairment of goodwill either as a result of the annual assessment that we
conduct in the fourth quarter of each fiscal year, or in a future quarter if an
indication of potential impairment is evident. The estimated fair value of the
reporting unit on the assessment date significantly exceeded the carrying book
value.

Other intangible assets acquired in a business combination are recognized at
fair value using generally accepted valuation methods appropriate for the type
of intangible asset and reported separately from goodwill. Intangible assets
with definite lives are amortized over the estimated useful lives and tested for
impairment when events or circumstances occur that indicate that it is more
likely than not that an impairment has occurred. We test other intangible assets
with definite lives for impairment by comparing the carrying amount to the sum
of the net undiscounted cash flows expected to be generated by the asset
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. If the carrying amount of the asset exceeds
its net undiscounted cash flows, then an impairment loss is recognized for the
amount by which the carrying amount exceeds its fair value.

Income taxes


The calculation of our tax liabilities involves dealing with uncertainties in
the application of complex tax regulations in multiple jurisdictions where we
have operations. We record liabilities for estimated tax obligations in the
United States and other tax jurisdictions. Determining the consolidated
provision for income tax expense, tax reserves, deferred tax assets and
liabilities and related valuation allowance, if any, involves judgment. We
calculate and provide for income taxes in each of the jurisdictions in which we
operate, and these calculations and determinations can involve complex issues
which require an extended time to resolve. In the fiscal year of any such
resolution, additional adjustments may need to be recorded that result in
increases or decreases to income. Our overall effective tax rate fluctuates due
to a variety of factors, including arm's-length prices for our intercompany
transactions, changes in the geographic mix, as well as newly enacted tax
legislation in each of the jurisdictions in which we operate. Applicable
transfer pricing regulations require that transactions between and among our
subsidiaries be conducted at an arm's-length price. On an ongoing basis, we
estimate appropriate arm's-length prices and use such estimates for our
intercompany transactions.

At each financial statement date, we evaluate whether a valuation allowance is
needed to reduce our deferred tax assets to the amount that is more likely than
not to be realized. This evaluation considers the weight of all available
evidence, including both future taxable income and ongoing prudent and feasible
tax planning strategies. In the event that we determine that we will not be able
to realize a recognized deferred tax asset in the future, an adjustment to the
valuation allowance would be made, resulting in a decrease in income (or equity
in the case of excess stock option tax benefits) in the period such
determination was made. Likewise, should we determine that we will be able to
realize all or part of an unrecognized deferred tax asset in the future, an
adjustment to the valuation allowance would be made, resulting in an increase to
income (or equity in the case of excess stock option tax benefits). We currently
have net operating loss carry forwards in the U.S., Sweden and the United
Kingdom, some of which realization of benefits is no longer considered more
likely than not of materializing. A valuation allowance has been recorded in
current period results to reflect this.  The CARES Act provided for NOLs arising
in tax years beginning after December 31, 2017, and before January 1, 2021, may
be carried back to each of the five tax years preceding the tax year of such
loss. The CARES Act also provided a correction to the Tax Act providing a
two-year carryback for our NOL in the fiscal year ended March 31, 2018. The
Company intends to file an immediate carry back claim in the U.S. Net operating
losses have an unlimited carry forward period, although there are annual
limitations on their use suspended for certain years as result of CARES Act.

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On September 20, 2019, the Indian government issued Ordinance 2019 making
certain amendments in the Income-tax Act 1961, which substantially reduces tax
rates. The effective rate of tax on India-based companies was reduced from 34.9%
to 25.17%, effective for fiscal years beginning April 1, 2019. We adopted the
new ordinance for the fiscal year beginning April 1, 2019. The new rates require
the surrendering of any tax holidays and other attributes of which the Company
historically was taking advantage of and favorably impacting our tax rate.

In the past, we have benefited from long-term income tax holiday arrangements in
both India and Sri Lanka. We have located development centers in areas
designated as Special Economic Zones ("SEZ") to secure tax exemptions for these
operations for a period of ten years, which extend to 15 years if we meet
certain reinvestment requirements. During the fiscal year ended March 31, 2013,
we elected the tax holiday for our SEZ Co-developer located in Hyderabad, India
for a period of 10 years. Our India profits ineligible for SEZ benefits were
subject to corporate income tax at the current rate of 34.94%. Our Sri Lanka
subsidiary has been granted an income tax holiday by the Sri Lanka Board of
Investment ("BOI") which expired on March 31, 2019. The tax holiday is
contingent upon a certain level of job creation by us during a given timetable.
Although we believe we have met the job creation requirements, if the BOI
concludes otherwise, this would jeopardize the maximum benefits from this
holiday arrangement. As a result of these tax holiday arrangements, our
worldwide profit has been subject to a relatively low effective tax rate. It is
our intent to reinvest all accumulated earnings from foreign operations back
into their respective businesses to fund growth. As a component of this
strategy, we do not accrue incremental taxes on foreign earnings as these
earnings are considered to be indefinitely reinvested outside of the United
States. If such earnings were to be repatriated in the future or are no longer
deemed to be indefinitely reinvested, we will accrue the applicable amount of
taxes associated with such earnings, which would increase our overall effective
tax rate.

Off-balance sheet arrangements

We do not have any investments in special purpose entities or undisclosed borrowings or debt.



We have entered into foreign currency derivative contracts with the objective of
limiting our exposure to changes in the Indian rupee, the U.K. pound sterling,
the euro, the Canadian dollar, the Australian dollar and the Swedish Krona as
described below and in "Quantitative and Qualitative Disclosures about Market
Risk."

We maintain a foreign currency cash flow hedging program designed to further
mitigate the risks of volatility in the Indian rupee against the U.S. dollar and
U.K. pound sterling as described below in "Quantitative and Qualitative
Disclosures about Market Risk." From time to time, we may also purchase multiple
foreign currency forward contracts designed to hedge fluctuation in foreign
currencies, such as the U.K. pound sterling, euro, the Canadian dollar, the
Australian dollar and Swedish Krona against the U.S. dollar to minimize the
impact of foreign currency fluctuations on foreign currency denominated revenue
and expenses. Other than these foreign currency derivative contracts, we have
not entered into off-balance sheet transactions, arrangements or other
relationships with unconsolidated entities or other persons that are likely to
affect liquidity or the availability of or requirements for capital resources.



Recent accounting pronouncements

See Note 2 to our consolidated financial statements for additional information.

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