10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2014

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

For the transition period from             to             

Commission File Number 001-33625

VIRTUSA CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	7371	04-3512883
(State or Other Jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
Incorporation or Organization)	Classification Code Number)	Identification Number)

2000 West Park Drive

Westborough, Massachusetts 01581

(508) 389-7300

(Address, Including Zip Code, and Telephone Number,

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

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

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of February 2, 2015:

Class	Number of Shares
Common Stock, par value $.01 per share	29,602,143

Virtusa Corporation and Subsidiaries

Table of Contents

		Page
PART I. FINANCIAL INFORMATION		3
Item 1.	Consolidated Financial Statements (Unaudited)	3
	Consolidated Balance Sheets at December 31, 2014 and March 31, 2014	3
	Consolidated Statements of Income for the Three and Nine Months Ended December 31, 2014 and 2013	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended December 31, 2014 and 2013	5
	Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2014 and 2013	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29
PART II. OTHER INFORMATION		30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 6.	Exhibits	31
SIGNATURES		32
EXHIBIT INDEX		33

2

PART I.  FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements (Unaudited)

Virtusa Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	December 31, 2014			March 31, 2014
	(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	98,278		$	82,761
Short-term investments	85,923			55,888
Accounts receivable, net of allowance of $1,006 and $1,130 at December 31, 2014 and March 31, 2014, respectively	73,582			64,662
Unbilled accounts receivable	25,175			26,548
Prepaid expenses	11,651			9,036
Deferred income taxes	6,026			6,610
Restricted cash	1,792			2,662
Other current assets	12,582			11,922
Total current assets	315,009			260,089
Property and equipment, net of accumulated depreciation of $35,015 and $30,625 at December 31, 2014 and March 31, 2014, respectively	35,888			35,346
Long-term investments	40,271			62,015
Deferred income taxes	4,272			4,651
Goodwill	51,331			53,448
Intangible assets, net	23,572			28,661
Other long-term assets	5,788			5,215
Total assets	$	476,131		$	449,425
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	9,418		$	11,002
Accrued employee compensation and benefits	22,047			27,175
Accrued expenses and other current liabilities	27,784			27,299
Income taxes payable	2,478			1,294
Total current liabilities	61,727			66,770
Deferred income taxes	2,037			2,744
Long-term liabilities	5,125			5,841
Total liabilities	68,889			75,355
Commitments and guarantees	—			—
Stockholders’ equity:
Undesignated preferred stock, $0.01 par value: Authorized 5,000,000 shares at December 31, 2014 and March 31, 2014; zero shares issued and outstanding at December 31, 2014 and March 31, 2014	—			—
Common stock, $0.01 par value: Authorized 120,000,000 shares at December 31, 2014 and March 31, 2014; issued 30,805,814 and 30,263,243 shares at December 31, 2014 and March 31, 2014, respectively; outstanding 28,949,111 and 28,406,540 shares at December 31, 2014 and March 31, 2014, respectively	308			303
Treasury stock, 1,856,703 common shares, at cost, at December 31, 2014 and March 31, 2014, respectively	(9,652		)	(9,652		)
Additional paid-in capital	279,723			269,511
Retained earnings	172,519			141,622
Accumulated other comprehensive loss	(35,656		)	(27,714		)
Total stockholders’ equity	407,242			374,070
Total liabilities, undesignated preferred stock and stockholders’ equity	$	476,131		$	449,425

See accompanying notes to unaudited consolidated financial statements

3

Virtusa Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended December 31,						Nine Months Ended December 31,
(In thousands, except per share amounts)	2014			2013			2014			2013
Revenue	$	122,996		$	101,043		352,969			$	285,833
Costs of revenue	77,144			63,821			224,701			182,126
Gross profit	45,852			37,222			128,268			103,707
Operating expenses:
Selling, general and administrative expenses	31,233			26,026			90,180			73,806
Income from operations	14,619			11,196			38,088			29,901
Other income (expense):
Interest income	1,410			1,021			3,799			2,623
Foreign currency transaction (losses) gains	(132		)	138			(200		)	(434		)
Other, net	82			(4		)	16			207
Total other income	1,360			1,155			3,615			2,396
Income before income tax expense	15,979			12,351			41,703			32,297
Income tax expense	4,200			3,023			10,806			7,969
Net income	$	11,779		$	9,328		$	30,897		$	24,328
Net income per share of common stock:
Basic	$	0.41		$	0.36		$	1.08		$	0.95
Diluted	$	0.40		$	0.35		$	1.05		$	0.92

See accompanying notes to unaudited consolidated financial statements

4

Virtusa Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended December 31,					Nine Months Ended December 31,
(In thousands, except per share amounts)	2014			2013		2014			2013
Net income	$	11,779		$	9,328	$	30,897		$	24,328
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(5,388	)	$	2,099	$	(10,838	)	$	(8,829	)
Pension plan adjustment	(172		)	13		(159		)	156
Unrealized gain (loss) on available-for-sale securities, net of tax	4			9		(37		)	12
Unrealized gain (loss) on effective cash flow hedges, net of tax	621			1,555		3,092			(7,737		)
Other comprehensive (loss) income	$	(4,935	)	$	3,676	$	(7,942	)	$	(16,398	)
Comprehensive income	$	6,844		$	13,004	$	22,955		$	7,930

See accompanying notes to unaudited consolidated financial statements

5

Virtusa Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended December 31,
(In thousands)	2014			2013
Cash flows from operating activities:
Net income	$	30,897		$	24,328
Adjustments to reconcile net income to net cash used in provided by operating activities:
Depreciation and amortization	10,459			7,892
Share-based compensation expense	7,974			5,725
Reversal of contingent consideration	(1,833		)	—
Provision for doubtful accounts	(30		)	524
Loss on sale of property and equipment	40			10
Deferred income taxes	73			—
Foreign currency losses, net	200			434
Amortization of discounts and premiums on investments	962			—
Excess tax benefits from stock option exercises	(3,968		)	(2,974		)
Net change in operating assets and liabilities:
Accounts receivable and unbilled receivable	(10,655		)	6,205
Prepaid expenses and other current assets	109			(3,022		)
Other long-term assets	(705		)	(923		)
Accounts payable	(898		)	(1,171		)
Accrued employee compensation and benefits	(8,710		)	67
Accrued expenses and other current liabilities	5,840			(1,921		)
Income taxes payable	1,371			4,639
Other long-term liabilities	645			(286		)
Net cash provided by operating activities	31,771			39,527
Cash flows from investing activities:
Proceeds from sale of property and equipment	84			71
Purchase of short-term investments	(8,605		)	(12,302		)
Proceeds from sale or maturity of short-term investments	16,017			5,024
Purchase of long-term investments	(25,911		)	(7,074		)
Proceeds from sale or maturity of long-term investments	7,500			800
Decrease (increase) in restricted cash	669			(362		)
Business acquisition	(684		)	(6,156		)
Purchase of property and equipment	(9,146		)	(5,825		)
Net cash used in investing activities	(20,076		)	(25,824		)
Cash flows from financing activities:
Borrowings on revolving credit facility	—			20,000
Proceeds from exercise of common stock options	2,535			2,330
Payment of contingent consideration related to acquisitions	(441		)	—
Principal payments on capital lease obligation	(91		)	(12		)
Excess tax benefits from stock option exercises	3,968			2,974
Net cash provided by financing activities	5,971			25,292
Effect of exchange rate changes on cash and cash equivalents	(2,149		)	(2,788		)
Net increase in cash and cash equivalents	15,517			36,207
Cash and cash equivalents, beginning of period	82,761			57,199
Cash and cash equivalents, end of period	$	98,278		$	93,406

See accompanying notes to unaudited consolidated financial statements

6

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

(1) Nature of Business

Virtusa Corporation (the “Company” or “Virtusa”) is a global information technology services company. The Company uses a global delivery model to provide a broad range of information technology, or IT, services, including IT consulting, technology implementation and application outsourcing. Using its enhanced global delivery model, innovative platforming approach and industry expertise, the Company provides cost-effective services that enable its clients to accelerate time to market, improve service and enhance productivity. Headquartered in Massachusetts, Virtusa has offices in the United States, the United Kingdom, Sweden, Germany, Netherlands and Austria and global delivery centers in India, Sri Lanka, Hungary, Singapore and Malaysia, as well as a near shore center in the United States.

(2) Unaudited Interim Financial Information

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with U.S. generally accepted accounting principles and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, and should be read in conjunction with the Company’s audited consolidated financial statements (and notes thereto) for the fiscal year ended March 31, 2014 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 23, 2014. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of the accompanying unaudited consolidated financial statements have been included, and all material adjustments are of a normal and recurring nature. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire fiscal year.

Principles of Consolidation

The consolidated financial statements reflect the accounts of the Company and its direct and indirect subsidiaries, Virtusa Consulting Services Private Limited and Virtusa Software Services Private Limited, each organized and located in India, Virtusa (Private) Limited, organized and located in Sri Lanka, Virtusa UK Limited, organized and located in the United Kingdom, Virtusa Securities Corporation, a Massachusetts securities corporation, InSource LLC, a limited liability company organized in Connecticut,  Virtusa International, B.V., organized and located in the Netherlands, Virtusa Hungary Kft., incorporated and located in Hungary, Virtusa Germany GmbH, organized and located in Germany, Virtusa Singapore Private Limited, organized and located in Singapore, Virtusa Malaysia Private Limited, organized and located in Malaysia, Virtusa Austria GmbH, organized and located in Austria, Virtusa Philippines Inc., organized and located in the Philippines, TradeTech Consulting Scandinavia AB, organized and located in Sweden and Virtusa Canada, Inc., a corporation organized under the laws of British Columbia, Canada. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Management reevaluates these estimates on an ongoing basis. The most significant estimates relate to the recognition of revenue and profits based on the percentage of completion method of accounting for fixed price contracts, share based compensation, income taxes, including reserves for uncertain tax positions, deferred taxes and liabilities, intangible assets, contingent consideration and valuation of financial instruments including derivative contracts and investments. Management bases its estimates on historical experience and on various other factors and assumptions that are believed to be reasonable under the circumstances. The actual amounts may vary from the estimates used in the preparation of the accompanying consolidated financial statements.

7

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Fair Value of Financial Instruments

At December 31, 2014 and March 31, 2014, the carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, unbilled accounts receivable, restricted cash, accounts payable, accrued employee compensation and benefits and other accrued expenses, approximate their fair values due to the nature of the items. See Note 5 for a discussion of the fair value of the Company’s other financial instruments.

(3) Net Income per Share

Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period, and diluted earnings per share is computed by including the dilutive impact of common stock equivalents outstanding for the period in the denominator. Common stock equivalents include shares issuable upon the exercise of outstanding stock options, stock appreciation rights, unvested restricted stock awards and unvested restricted stock units, net of shares assumed to have been purchased with the proceeds, using the treasury stock method. The following table sets forth the computation of basic and diluted net income per share for the periods set forth below:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013
Numerators:
Net income	$	11,779	$	9,328	$	30,897	$	24,328
Denominators:
Weighted average common shares outstanding	28,871,023		25,652,538		28,681,156		25,499,625
Dilutive effect of employee stock options and unvested restricted stock	748,620		874,810		781,270		819,364
Dilutive effect of stock appreciation rights	7,978		13,334		8,663		14,731
Weighted average shares-diluted	29,627,621		26,540,682		29,471,089		26,333,720
Net income per share-basic	$	0.41	$	0.36	$	1.08	$	0.95
Net income per share-diluted	$	0.40	$	0.35	$	1.05	$	0.92

During the three and nine months ended December 31, 2014, options to purchase 19,847 and 22,564 shares of common stock, respectively, were excluded from the calculations of diluted earnings per share as their effect would have been anti-dilutive.

During the three and nine months ended December 31, 2013, options to purchase 28,613 and 100,408 shares of common stock, respectively, were excluded from the calculations of diluted earnings per share as their effect would have been anti-dilutive.

(4) Investment Securities

At December 31, 2014 and March 31, 2014, all of the Company’s investment securities were classified as available-for-sale and were carried on its balance sheet at their fair market value. A fair market value hierarchy based on three levels of inputs was used to measure each security (see Note 5).

The following is a summary of investment securities at December 31, 2014:

8

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
Corporate bonds:
Current	$	49,265	$	4	$	(52	)	$	49,217
Non-current	26,978		2		(68		)	26,912
Auction-rate securities:
Non-current	—		—		—			—
Agency and short-term notes:
Current	1,013		1		—			1,014
Non-current	13,370		—		(11		)	13,359
Commercial paper:
Current	—		—		—			—
Municipal bonds:
Current	200		—		—			200
Time deposits:
Current	35,492		—		—			35,492
Total available-for-sale securities	$	126,318	$	7	$	(131	)	$	126,194

The following is a summary of investment securities at March 31, 2014:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
Corporate bonds:
Current	$	20,255	$	9	$	(8	)	$	20,256
Non-current	50,264		5		(70		)	50,199
Auction-rate securities:
Non-current	300		—		(12		)	288
Agency and short-term notes:
Current	561		—		—			561
Non-current	11,341		1		(14		)	11,328
Commercial paper:
Current	5,497		—		—			5,497
Municipal bonds:
Non-current	200		—		—			200
Time deposits:
Current	29,574		—		—			29,574
Total available-for-sale securities	$	117,992	$	15	$	(104	)	$	117,903

The Company evaluates investments with unrealized losses to determine if the losses are other than temporary. The Company has determined that the gross unrealized losses at December 31, 2014 and March 31, 2014 are temporary. In making this determination, the Company considered the financial condition, credit ratings and near-term prospects of the issuers, the underlying collateral of the investments, and the magnitude of the losses as compared to the cost and the length of time the investments have been in an unrealized loss position. Additionally, while the Company classifies the securities as available for sale, the Company does not currently intend to sell such investments and it is more likely than not the Company will not be required to sell such investments prior to the recovery of their carrying value, except as disclosed in Note 5.

9

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(5) Fair Value of Financial Instruments

The Company uses a framework for measuring fair value under U.S. generally accepted accounting principles and enhanced disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company’s financial assets and liabilities reflected in the consolidated financial statements at carrying value include marketable securities and other financial instruments which approximate fair value. Fair value for marketable securities is determined using a market approach based on quoted market prices at period end in active markets. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

·Level 1—Quoted prices in active markets for identical assets or liabilities.

·Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

·Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Available-for-sales securities—current	$	—	$	85,923	$	—	$	85,923
Available-for-sales securities—non-current	—		40,271				40,271
Foreign currency derivative contracts	—		2,184		—		2,184
Total assets	$	—	$	128,378	$		$	128,378
Liabilities:
Foreign currency derivative contracts	$	—	$	3,576	$	—	$	3,576
Contingent consideration	—		—		4,610		4,610
Total liabilities	$	—	$	3,576	$	4,610	$	8,186

10

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

The Company determines the fair value of the contingent consideration related to the Company’s acquisition on November 1, 2013 of OSB Consulting LLC (“OSB”) and on January 2, 2014 of TradeTech Consulting Scandinavia AB (“TradeTech”) based on the probability of attaining certain revenue and profit margin targets using an appropriate discount rate to present value the liability. See Note 7 of the notes to our financial statements included herein for a description of OSB and TradeTech acquisitions and related contingent consideration targets. The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities at December 31, 2014.

	Level 3 Liabilities
Balance at April 1, 2014	$	5,925
Payment of OSB contingent consideration (See Note 7)	(500		)
Reversal of the TradeTech earn-out recognized in earnings (See Note 7)	(1,833		)
Increase of the OSB earn-out recognized in earnings (See Note 7)	1,068
Cumulative foreign currency translation adjustments	(50		)
Balance at December 31, 2014	$	4,610

(6) Derivative Financial Instruments

The Company evaluates its foreign exchange policy on an ongoing basis to assess its ability to address foreign exchange exposures on its consolidated balance sheets, statements of income and consolidated statement of cash flows from all foreign currencies, including most significantly the U.K. pound sterling, Indian rupee, Euro, Swedish krona and Sri Lankan rupee. The Company enters into hedging programs with highly rated financial institutions in accordance with its foreign exchange policy (as approved by the Company’s audit committee and board of directors) which permits hedging of material, known foreign currency exposures. Currently, the Company maintains three hedging programs, each with varying contract types, duration and purposes. The Company’s “Cash Flow Program” is designed to mitigate the impact of volatility in the U.S. dollar equivalent of the Company’s Indian rupee denominated expenses over a rolling 36 month period. The Cash Flow Program transactions currently meet the criteria for hedge accounting as cash flow hedges. The Company’s “Balance Sheet Program” involves the use of 30 day derivative instruments designed to mitigate the monthly impact of foreign exchange gains/losses on certain intercompany balances and payments. The Company’s “Economic Hedge Program” involves the purchase of derivative instruments with maturities of up to 92 days, and is designed to mitigate the impact of foreign exchange on the U.K. pound sterling, Euro and Swedish krona denominated revenue and costs with respect to the quarter for which such instruments are purchased. The Balance Sheet Program and the Economic Hedge Program are treated as economic hedges as these programs do not meet the criteria for hedge accounting and all gains and losses are recognized in consolidated statement of income under the same line item as the underlying exposure being hedged.

The Company evaluates all of its derivatives based on market observable inputs, including both forward and spot prices for currencies. Any significant change in the forward or spot prices for hedged currencies would have a significant impact on the value of

11

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

the Company’s derivatives. Changes in fair value of the designated cash flow hedges for the Company’s Cash Flow Program are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”), net of tax, until the forecasted hedged transactions occur and are then recognized in the consolidated statement of income in the same line item as the item being hedged. The Company evaluates hedge effectiveness at the time a contract is entered into, as well as on an ongoing basis. If, and when, all or part of a hedge relationship is discontinued because the forecasted transaction is deemed probable of not occurring by the end of the originally specified period or within an additional two-month period of time thereafter, the contract, or the relative amount of the contract, is deemed “ineffective” and any related derivative amounts recorded in equity are reclassified to earnings. There were no gains (losses) that were reclassified from AOCI into earnings as a result of forecasted transactions that were considered probable of not occurring for the three months and nine month periods ended December 31, 2014 and 2013.

Changes in the fair value of the derivatives purchased under the Balance Sheet Program are reflected in the Company’s consolidated statement of income and are included in foreign currency transaction gains (losses) for each period. Changes in the fair value of the derivatives purchased under the Economic Hedge Program are also reflected in the Company’s consolidated statement of income and are included in the same line item as the underlying exposure being hedged for each period.

The U.S. dollar notional equivalent market value, which consists of the notional value and net unrealized gain or loss, of all outstanding foreign currency derivative contracts, was $113,947 and $102,801, at December 31, 2014 and March 31, 2014, respectively. Unrealized net losses related to these contracts which are expected to be reclassified from AOCI to earnings during the next 12 months were $985 at December 31, 2014. At December 31, 2014, the maximum outstanding term of any derivative instrument was 33 months.

The following table sets forth the fair value of derivative instruments included in the consolidated balance sheets at December 31, 2014 and March 31, 2014:

Derivatives designated as hedging instruments

	December 31, 2014		March 31, 2014
Foreign currency exchange contracts:
Other current assets	$	1,550	$	398
Other long-term assets	$	634	$	586
Accrued expenses and other current liabilities	$	2,535	$	3,925
Long-term liabilities	$	1,041	$	2,449

The following tables set forth the effect of the Company’s foreign currency exchange contracts on the consolidated financial statements of the Company for the three and nine months ended December 31, 2014 and 2013:

	Amount of Gain or (Loss) Recognized in AOCI on Derivative(Effective Portion)
Derivatives Designated as Cash Flow	Three months ended December 31,				Nine months ended December 31,
Hedging Relationships	2014		2013		2014		2013
Foreign currency exchange contracts	$	553	$	1,167	$	2,067	$	(15,798	)

Location of Gain or (Loss) Reclassified	Amount of Gain or (Loss) Reclassified from AOCI into Income(Effective Portion)
from AOCI into Income (Effective	Three months ended December 31,						Nine months ended December 31,
Portion)	2014			2013			2014			2013
Costs of revenue	$	(61	)	$	(780	)	$	(1,227	)	$	(2,839	)
Operating expenses	$	(34	)	$	(471	)	$	(704	)	$	(1,760	)

12

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

		Amount of Gain or (Loss) Recognized in Income on Derivatives
		Three months ended						Nine months ended
Derivatives not Designated	Location of Gain or (Loss)	December 31,						December 31,
as Hedging Instrument	Recognized in Income on Derivatives	2014			2013			2014			2013
Foreign currency exchange contracts	Foreign currency transaction gains (losses)	$	(216	)	$	420		$	(299	)	$	(3,034	)
	Revenue	$	183		$	(74	)	$	319		$	(555	)
	Costs of revenue	$	(106	)	$	30		$	(187	)	$	214
	Selling, general and administrative expenses	$	(38	)	$	3		$	(51	)	$	23

(7) Acquisitions

On November 1, 2013, the Company acquired substantially all of the business and assets of OSB pursuant to an asset purchase agreement dated November 1, 2013 (the “Asset Purchase Agreement”) by and among OSB and the sole member of OSB. The acquisition of OSB extends the Company’s service offerings to include a broader set of finance transformation services in the financial services and insurance domains to existing and new clients, including service offerings targeted to enable clients to automate their finance and accounting processes, reporting capabilities, including SAP based capabilities, and regulatory compliance programs.

The purchase price was $6,840 in cash. Ten percent of the purchase price is subject to a hold back by the Company for a period of 12 months as security for the sellers’ indemnification obligations under the Asset Purchase Agreement. The purchase price is subject to adjustment after the closing of up to an additional $6,000 in earn-out consideration, in the aggregate, upon the achievement of certain revenue and operating margin targets for the five months ended March 31, 2014, the nine months ending December 31, 2014 and the twelve months ending December 31, 2015. At March 31, 2014, the Company determined that OSB had met 100% of the performance targets for the five months ending March 31, 2014. The fair value of the contingent consideration at December 31, 2014 and March 31, 2014 was $4,610 and $4,042, respectively. During the nine months ended December 31, 2014, the Company paid the $500 earn-out consideration to OSB. The change in fair value of $1,068 was recorded as a change to selling, general and administration expenses in the nine months ended December 31, 2014. In November 2014, the Company released $684 to OSB with respect to the hold back.

Under the terms of the Asset Purchase Agreement, the Company agreed to offer employment to all of the employees of OSB, including certain key employees and the sole member of OSB.

There are no material relationships between the Company or any of its affiliates and any of the parties to the Asset Purchase Agreement and related agreements, other than with respect to such agreements themselves.

On January 2, 2014, Virtusa International B.V., a wholly owned subsidiary of the Company organized and formed in the Netherlands (“Virtusa BV”), acquired all of the outstanding shares of TradeTech and its subsidiaries (together with TradeTech, the “TradeTech Group”), pursuant to a share purchase agreement dated as of January 2, 2014 (the “Share Purchase Agreement”) by and among Virtusa BV and the shareholders of TradeTech. The acquisition expands the Company’s position within the banking, financial services and insurance industries by increasing its asset management and treasury services domain and technology expertise, as well as by expanding the Company’s global presence into the Nordic countries.

Under the terms of the Share Purchase Agreement, Virtusa BV acquired all the outstanding shares of TradeTech for $19,087 in cash, reflective of a working capital adjustment as part of the Share Purchase Agreement, subject to adjustment after the closing by up to $4,080 of potential earn-out consideration contingent upon TradeTech Group’s achievement of certain revenue and EBITA targets for the 12-month period ending December 31, 2014. At June 30, 2014, the Company determined that the earn-out consideration targets would not be achieved for the 12-month period ending December 31, 2014, resulting in a reduction of $1,833 in the fair value of the recorded earn-out liability for

13

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

the nine months ended December 31, 2014.  At December 31, 2014, there is no liability recorded. The reduction of the entire fair value of the earn-out consideration of $1,833 was recorded as a reduction to selling, general and administration expenses in the nine-month period ended December 31, 2014.  Under the terms of the Share Purchase Agreement, 12.5% of the purchase price was also held back and placed into escrow by the Company for a period of 12 months as security for the indemnification obligations of the TradeTech Shareholders. The Company also agreed to issue an aggregate of up to $2,000 in deferred restricted stock awards from the Company’s stock option and incentive plan, not to exceed an aggregate of 65,000 shares, to certain of these new TradeTech Group employees. The shares will be recognized as compensation cost over the requisite employee service period. The shares will vest annually over a five year period.

(8) Goodwill and Intangible Assets

Goodwill:

The Company has one reportable segment at December 31, 2014. The following are details of the changes in goodwill balance at December 31, 2014:

	Amount
Balance at April 1, 2014	$	53,448
Cumulative foreign currency translation adjustments	(2,117		)
Balance at December 31, 2014	$	51,331

The acquisition costs and goodwill balance deductible for the Company’s business acquisitions for tax purposes are $41,834. The acquisition costs and goodwill balance not deductible for tax purposes are $10,888 and relate to the Company’s TradeTech acquisition.

The Company performed the annual assessment of its goodwill during the fourth quarter of the fiscal year ended March 31, 2014 and determined that the estimated fair value of the Company’s reporting unit exceeded its carrying value and therefore goodwill was not impaired. The Company will continue to complete goodwill impairment assessments at least annually during the fourth quarter of each ensuing fiscal year. The Company will continue to evaluate whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets, including intangible assets, may warrant revision or that the carrying value of these assets may be impaired. Any write -downs are treated as permanent reductions in the carrying amount of the assets.

Intangible Assets:

The following are details of the Company’s intangible asset carrying amounts acquired and amortization at December 31, 2014.

	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable intangible assets:
Customer relationships	9.4	$	34,814	$	11,369	$	23,445
Partner relationships	6.5	700		573		127
Trademark	1.0	63		63		—
Backlog	1.0	1,259		1,259		—
	9.0	$	36,836	$	13,264	$	23,572

14

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(9) Income Taxes

The Company’s effective tax rate was 26.3% and 25.9% for the three and nine months ended December 31, 2014, as compared to an effective tax rate of 24.5% and 24.7% for the three and nine months ended December 31, 2013. The increase in the effective tax rate for three months ended December 31, 2014 was primarily due to geographical income distribution and expiration of certain holiday benefits in India.  This was partially offset by new tax benefits generated from special economic zone (“SEZ”) tax holiday incentives located in Bangalore and Pune, India.  The increase in the effective tax rate in the nine months ended December 31, 2014 was primarily due to geographical income distribution and expiration of certain tax benefits in India. This was partially offset by a tax benefit associated with the reduction in fair value of $1.8 million in the nine months period ended December 31, 2014 related to the determination that Trade Tech would not achieve its performance targets for earn-out consideration and new tax benefits generated from SEZ tax holiday incentives located in Bangalore and Pune, India.

One of the Company’s Indian subsidiaries, Virtusa (India) Private Limited, which was merged with and into Virtusa Consulting Services Private Limited (collectively referred to as “Virtusa India”), is an export oriented company. The Indian Income Tax Act of 1961 entitles taxpayers to claim tax exemption for a period of ten consecutive years for each Software Technology Park (“STP”) that it operates.  Virtusa India operates two STPs, one in Chennai and one in Hyderabad, India. The STP tax holiday in Hyderabad, India expired on March 31, 2010 and the STP tax holiday in Chennai, India expired on March 31, 2011. For the three and nine months ended December 31, 2014 and 2013, all profits in the STPs in Hyderabad and Chennai, India were fully taxable at the Indian statutory tax rate of 34.0%. In anticipation of, and to mitigate the impact of, the phase-out of the STP tax holidays in Hyderabad and Chennai, India, the Company located new Indian operations in areas designated as an SEZ under the SEZ Act of 2005 through two operating subsidiaries, Virtusa Software Services Private Limited and Virtusa Consulting Services Private Limited. In the fiscal year ended March 31, 2014, the Company leased a facility in SEZ designated locations in Bangalore and Pune, India, each of which is eligible for tax holiday benefits that began in the fiscal year ended March 31, 2014.The Company’s profits from these SEZ operations are eligible for certain additional income tax exemptions for a period of up to 15 years based on export income.

In addition, the Company’s Sri Lankan subsidiary, Virtusa (Private) Limited, is operating under a 12 year income tax holiday arrangement that is set to expire on March 31, 2019 and which required Virtusa (Private) Limited to meet certain job creation and investment criteria by March 31, 2014. The Company is required each year to apply for certification during the 12 year holiday period. During the fiscal year ended March 31, 2014, the Company believes it fulfilled its hiring and investment commitments and is eligible for the tax holiday benefits through March 2019. The current agreement provides income tax exemption for all export business income. During the three months ended December 31, 2014, the Company submitted and received confirmation of exemption for the fiscal year ended March 31, 2014. At December 31, 2014, the Company believes it is eligible for the entire 12 year tax holiday.

The Company’s effective income tax rate is based on the composition of estimated income in different jurisdictions, including those where the Company is enjoying tax holidays, for the applicable fiscal year and adjustments, if any, in the applicable quarterly periods, for unrecognized tax benefits for uncertain income tax positions or other discrete items required to be reported during interim periods. The Company’s aggregate income tax rate in foreign jurisdictions is lower than its income tax rate in the United States due primarily to lower rates generally in jurisdictions in which the Company operates and applicable tax holiday benefits of the Company, obtained primarily in India and Sri Lanka.

Unrecognized tax benefits represent uncertain tax positions for which the Company has established reserves. At December 31, 2014 and March 31, 2014, the total liability for unrecognized tax benefits was $406 and $410, respectively, all of which would negatively impact the Company’s annual effective tax rate, if realized. Each fiscal year, unrecognized tax benefits may be adjusted upon the closing of the statute of limitations for income tax returns filed in various jurisdictions. During the nine months ended December 31, 2014 and December 31, 2013, the unrecognized tax benefits decreased by $4 and $3,873, respectively. The decrease in unrecognized tax benefits in the nine months period ending December 31, 2014 was predominantly due to a cash settlement with tax authorities, partially offset by increases for incremental interest accrued on existing uncertain tax positions.

15

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. Recently, the Internal Revenue Service (“IRS”) conducted a routine audit of the Company’s fiscal years 2008 to 2011, pursuant to which the IRS made certain assessments. In connection with the audit, during the fourth quarter of fiscal year 2013, the Company executed a settlement arrangement with the IRS for all periods under audit to close out the audit. The Company has fully accrued for all such assessments and the settlement impact on the Company’s financial statements is properly reflected at December 31, 2014.

The Company’s U.S. tax return for the fiscal year ended March 31, 2012 was recently audited by the IRS pursuant to which the IRS made certain assessments.  During the three months ended June 30, 2014, the Company executed a settlement agreement with the IRS for the fiscal year ended March 31, 2012. The Company has fully accrued for all such assessments and the settlement impact on the Company’s financial statements is properly reflected at December 31, 2014.  In addition, tax returns for various years are under examination by tax authorities of foreign jurisdictions. Currently, several issues are at various levels of appeal with the Indian and Sri Lankan tax authorities. While it is difficult to predict the final outcome, the Company believes its reserves represent the most likely outcome and continues to evaluate all tax return positions.

Undistributed Earnings of Foreign Subsidiaries

A substantial amount of the Company’s income before provision for income tax is from operations earned in its Indian and Sri Lankan subsidiaries and is subject to tax holiday. The Company intends to use accumulated and future earnings of foreign subsidiaries to expand operations outside the United States and, accordingly, undistributed income is considered to be indefinitely reinvested. The Company does not provide for U.S. income taxes on foreign earnings. At December 31, 2014, the Company had $184,273 of unremitted earnings from foreign subsidiaries and approximately $94,144 of cash and short-term investments that would otherwise be available for potential distribution, if not indefinitely reinvested. If required, such cash and investments could be repatriated to the United States. However, under current law, any repatriation would be subject to United States federal income tax less applicable foreign tax credits. Due to the various methods by which such earnings could be repatriated in the future, the amount of taxes attributable to the undistributed earnings is not practicably determinable.

(10) Concentration of Revenue and Assets

Total revenue is attributed to geographic areas based on the location of the client. Long-lived assets represent property, plant and equipment, intangible assets and goodwill, net of accumulated depreciation and amortization, and are attributed to geographic area based on their location. Geographic information is summarized as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013
Client revenue:
North America	$	83,324	$	70,510	$	232,773	$	205,547
Europe	31,658		24,895		98,141		64,686
Rest of world	8,014		5,638		22,055		15,600
Consolidated revenue	$	122,996	$	101,043	$	352,969	$	285,833

	December 31, 2014		March 31, 2014
Long-lived assets, net of accumulated depreciation and amortization:
United States	$	59,916	$	61,562
Asia	31,043		32,235
Europe	19,832		23,658
Consolidated long-lived assets, net	$	110,791	$	117,455

16

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Revenue from significant clients as a percentage of the Company’s consolidated revenue was as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013
Customer 1	11.9	%	13.3	%	12.5	%	12.4	%
Customer 2	11.1	%	13.1	%	10.0	%	13.4	%

(11) Debt

On December 31, 2013, the Company entered into an amended and restated credit agreement with JPMorgan Chase Bank, N.A. (“JPM”). The credit agreement amended and restated the Company’s $3,000 secured revolving credit agreement with JPM and provides for a $25,000 secured revolving credit facility, which shall be available to fund working capital and other corporate purposes, as well as to serve as security in support of the Company’s foreign currency hedging programs. The credit agreement contains financial covenants that require the Company to maintain a Funded Debt to Adjusted EBITDA Ratio of not more than 2.00 to 1.00 and a Fixed Charge Coverage Ratio of less than 2.50 to 1.00, each as determined for the trailing twelve month period ending on each fiscal quarter. The Company is currently in compliance with all covenants contained in the credit agreement and believes that the credit agreement provides sufficient flexibility to enable continued compliance with its terms. Interest under this credit facility accrues at a rate between LIBOR plus 1.5% and LIBOR plus 1.75% based on the Company’s ratio of indebtedness to Adjusted EBITDA. The term of the credit facility is five years, ending December 31, 2018. This facility replaced the Company’s prior $3,000 line of credit with JPM. At December 31, 2014, there were no borrowings outstanding under the credit facility.

Beginning in fiscal 2009, the Company’s U.K. subsidiary entered into an agreement with a financial institution to sell, without recourse, certain of its Europe-based accounts receivable balances to the financial institution. During the nine months ended December 31, 2014, $22,744 of receivables was sold under the terms of the financing agreement. Fees paid pursuant to this agreement were immaterial during the three and nine months ended December 31, 2014. No amounts were outstanding under the financing agreement at December 31, 2014.

(12) Pensions and post-retirement benefits

The Company has noncontributory defined benefit plans covering its employees in India and Sri Lanka as mandated by the Indian and Sri Lankan governments. The following tables provide information regarding pension expense recognized:

	Three Months Ended December 31,						Nine Months Ended December 31,
	2014			2013			2014			2013
Components of net periodic pension cost
Service cost	$	154		$	129		$	425		$	397
Interest cost	58			56			175			160
Expected return on plan assets	(53		)	(58		)	(162		)	(164		)
Amortization past service cost	2			2			7			8
Amortization of actuarial loss	38			22			87			68
Net periodic pension cost	$	199		$	151		532			$	469

The Company expects to contribute approximately $508 in cash to the pension plans during the fiscal year ending March 31, 2015. The Company made cash contributions of $332 to the plans during the nine months ended December 31, 2014.

17

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(13) Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive income (loss) by component were as follows for the three and nine months ended December 31, 2014 and 2013:

Accumulated Other Comprehensive Income (Loss)	Three Months Ended December 31,						Nine Months Ended December 31,
(In thousands, except per share amounts)	2014			2013			2014			2013
Investment securities
Beginning balance	$	(95	)	$	—		$	(54	)	$	(3	)
Other comprehensive income (loss) (OCI) before reclassifications net of tax of $0 for all periods	5			9			(36		)	12
Reclassifications from OCI to other income — net of tax of $0 for all periods	(1		)	—			(1		)	—
Comprehensive income (loss) on investment securities, net of tax of $0 for all periods	4			9			(37		)	12
Closing Balance	$	(91	)	$	9		$	(91	)	$	9
Currency Translation Adjustments
Beginning balance	$	(28,703	)	$	(27,846	)	$	(23,253	)	$	(16,918	)
OCI before reclassifications	(5,388		)	2,099			(10,838		)	(8,829		)
Closing Balance	$	(34,091	)	$	(25,747	)	$	(34,091	)	$	(25,747	)
Cash Flow Hedges
Beginning balance	$	(1,358	)	$	(10,305	)	$	(3,829	)	$	(1,013	)
OCI before reclassifications net of tax of $21, $(488), $(340) and $5,046	573			680			1,727			(10,751		)
Reclassifications from OCI to
- Costs of revenue, net of tax of $(31), $(223), $(360) and $(978)	30			557			867			1,860
- Selling, general and administrative expenses, net of tax of $(16), $(153), $(206) and $(607)	18			318			498			1,154
Comprehensive income (loss) on cash flow hedges, net of tax of $(26), $(864), $(906) and $3,461	621			1,555			3,092			(7,737		)
Closing Balance	$	(737	)	$	(8,750	)	$	(737	)	$	(8,750	)
Benefit plans
Beginning balance	$	(565	)	$	(637	)	$	(578	)	$	(780	)
OCI before reclassifications net of tax of $0 for all periods	(216		)	—			(216		)	—
Reclassifications from OCI for prior service credit (cost) to:
- Costs of revenue, net of tax of $0 for all periods	2			2			6			6
- Selling, general and administrative expenses, net of tax of $0 for all periods	1			—			1			2
Reclassifications from OCI for net actuarial gain (loss) amortization to:
- Costs of revenue, net of tax of $0 for all periods	23			18			52			53
- Selling, general and administrative expenses, net of tax of $0 for all periods	15			5			35			16
Other adjustments	3			(12		)	(37		)	79
Comprehensive income (loss) on benefit plans, net of tax of $0 for all periods	(172		)	13			(159		)	156
Closing Balance	$	(737	)	(624		)	(737		)	(624		)
Accumulated other comprehensive loss closing balance	$	(35,656	)	$	(35,112	)	$	(35,656	)	$	(35,112	)

18

Virtusa Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(14) Subsequent Events

On January 8, 2015, the Company purchased multiple foreign currency forward contracts designed to hedge fluctuation in the U.K. pound sterling against the U.S. dollar (the “U.K. contracts”), the Swedish krona (“SEK”) against the U.S. dollar (the “SEK contracts”) and the Euro (“EUR”) against the U.S. dollar (the “Euro contracts”), each of which will expire on various dates during the period ending March 31, 2015. The U.K. contracts have an aggregate notional amount of approximately £6,982 (approximately $10,493), the SEK contracts have an aggregate notional amount of approximately SEK 7,301 (approximately $914) and the EUR contracts have an aggregate notional amount of approximately EUR 376 (approximately $441). The weighted average U.K. pound sterling settlement rate associated with the U.K. contracts is approximately $1.50, the weighted average U.S. dollar settlement rate associated with the SEK contracts is approximately $0.13, and the weighted average U.S. dollar settlement rate associated with the EUR contracts is approximately $1.17.

19

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of Virtusa Corporation should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2014 (the “Annual Report”), which has been filed with the Securities and Exchange Commission, or SEC.

Forward looking statements

The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended) that involve risks and uncertainties. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seek,” “intends,” “plans,” “estimates,” “projects,” “anticipates,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These forward-looking statements, such as statements regarding anticipated future revenue, contract percentage completions, capital expenditures, the effect of new accounting pronouncements, management’s plans and objectives and other statements regarding matters that are not historical facts, involve predictions. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including those factors set forth in Item 1A. “Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended March 31, 2014. We urge you to consider those risks and uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Business overview

Virtusa Corporation (the “Company”, “Virtusa”, “we”, “us” or “our”) is a global information technology services company. We use an offshore delivery model to provide a broad range of information technology (“IT”) services, including IT consulting, technology implementation and application outsourcing. Using our enhanced global delivery model, innovative platforming approach and industry expertise, we provide cost-effective services that enable our clients to use IT to enhance business performance, accelerate time-to-market, increase productivity and improve customer experience. We manage to a targeted 25% to 75% 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. Headquartered in Massachusetts, we have offices in the United States, the United Kingdom, Germany, Sweden and Austria, with global delivery centers in India, Sri Lanka, Hungary, Singapore and Malaysia, as well as a near shore delivery center in the United States. At December 31, 2014, we had 9,023 employees, or team members.

In the three months ended December 31, 2014, our revenue increased by 22% to $123.0 million, compared to $101.0 million in the three months ended December 31, 2013. In the nine months ended December 31, 2014, our revenue increased by 23% to $353.0 million, compared to $285.8 million in the nine months ended December 31, 2013.

In the three months ended December 31, 2014, net income increased by 26% to $11.8 million, as compared to $9.3 million in the three months ended December 31, 2013. Net income increased by 27% to $30.9 million in the nine months ended December 31, 2014, as compared to $24.3 million in the nine months ended December 31, 2013.

The increase in revenue for the three and nine months ended December 31, 2014, as compared to the three and nine months ended December 31, 2013, primarily resulted from:

·Broad based revenue growth among our clients existing at December 31, 2013, particularly among our non-top ten clients collectively

·Broad based revenue growth within our banking, financial services and insurance (“BFSI”) and communication and technology (“C&T”) industry groups

·Broad based growth in all geographies

20

·Revenue generated from clients acquired by us in the acquisition of OSB Consulting LLC (“OSB”) on November 1, 2013 and TradeTech Consulting Scandinavia AB and its subsidiaries (“TradeTech”) on January 2, 2014

The key drivers of the increase in our net income for the three and nine months ended December 31, 2014, as compared to the three and nine months ended December 31, 2013, were as follows:

·Higher revenue contribution from existing clients, as well as clients from our OSB and TradeTech acquisitions

·Increase in gross profit, which also reflects lower costs due to the depreciation of the Indian rupee, partially offset by higher operating costs, including an increased investment in our sales and business development organization and facilities to support our growth, and acquisition amortization

·Further offset by increased income tax expense related to higher taxable profits

High repeat business and client concentration are common in our industry. During the three months ended December 31, 2014 and 2013, 89% of our revenue was derived from clients who had been using our services for more than one year. During the nine months ended December 31, 2014 and 2013, 87% and 90%, respectively, of our revenue was derived from clients who had been using our services for more than one year. 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 derive our revenue from two types of service offerings: application outsourcing, which is recurring in nature; and consulting, including technology implementation, which is non-recurring in nature. For the three months ended December 31, 2014 and 2013, our application outsourcing and consulting revenue represented 55% and 45%, respectively, of our total revenue. For the nine months ended December 31, 2014, our application outsourcing and consulting revenue represented 55% and 45%, respectively, of our total revenue as compared to 56% and 44%, respectively, for the nine months ended December 31, 2013.

In the three months ended December 31, 2014, our European revenue increased by 27%, or $6.8 million, to $31.7 million, or 26% of total revenue, from $24.9 million, or 25% of total revenue in the three months ended December 31, 2013. In the nine months ended December 31, 2014, our European revenue increased by 52%, or $33.4 million, to $98.1 million, or 28% of total revenue, from $64.7 million, or 23% of total revenue in the three months ended December 31, 2013.The increase in revenue for the three and nine months ended December 31, 2014 is primarily due to the broad-based revenue growth in Europe, particularly from our largest European client, as well as clients acquired in our TradeTech acquisition.

Our gross profit increased by $8.6 million to $45.8 million for the three months ended December 31, 2014, as compared to $37.2 million in the three months ended December 31, 2013. Our gross profit increased by $24.6 million to $128.3 million for the nine months ended December 31, 2014 as compared to $103.7 million in the nine months ended December 31, 2013.The increase in gross profit during the three and nine months ended December 31, 2014, as compared to the three and nine months ended December 31, 2013, was primarily due to higher revenue, partially offset by increased cost of revenue, which includes increases in the number of IT professionals. As a percentage of revenue, gross margin was 37.3% and 36.8% in the three months ended December 31, 2014 and 2013, respectively. During the nine months ended December 31, 2014 and 2013, gross margin, as a percentage of revenue was unchanged at 36.3%. The increase in gross margin for the three months ended December 31, 2014 was primarily due to lower onsite effort, as well as depreciation in the Indian rupee partially offset by increased compensation costs related to an increase in the number of IT professionals and higher subcontractor costs for the three months ended December 31, 2014. The gross margin for the nine months ended December 31, 2014 remained unchanged.

We perform our services under both time-and-materials and fixed-price contracts. Revenue from fixed-price contracts represented 38% and 31% of total revenue, and revenue from time-and-materials contracts represented 62% and 69% of total revenue for the three months ended December 31, 2014 and 2013, respectively. Revenue from fixed-price contracts represented 37% and 27% of total revenue and revenue from time-and-materials contracts represented 63% and 73% for the nine months ended December 31, 2014 and 2013, respectively. The increase in revenue earned from fixed-price contracts in the three and nine months ended December 31, 2014 primarily reflects our client preferences.

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From time to time, we have also supplemented organic revenue growth with acquisitions. These acquisitions have focused on adding domain expertise, expanding our professional services teams and expanding our client base. We expect that for our long-term growth, we will continue to seek evolving market opportunities through a combination of organic growth and acquisitions. We believe we can fund future acquisitions with our internally available cash, cash equivalents and marketable securities, and cash generated from operations, or through debt or equity financings, although we cannot assure you that any such additional financing will be available at terms favorable to us, or at all.

As an IT services company, our revenue growth is highly dependent on our ability to attract, develop, motivate and retain skilled IT professionals. We monitor our overall attrition rates and patterns to align our people management strategy with our growth objectives. At December 31, 2014, our attrition rate for the trailing 12 months, which reflects voluntary and involuntary attrition, was approximately 18.3%. Our attrition rate at December 31, 2014 reflects a slightly higher rate of voluntary attrition as compared to the corresponding prior year period and is slightly above our long-term goal. Although we remain committed to continuing to improve our attrition levels, there is intense competition for IT professionals with the specific domain skills necessary to provide the type of services we offer. 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 engage in a foreign currency hedging strategy using foreign currency forward contracts designed to hedge fluctuations in the Indian rupee against the U.S. dollar and U.K. pound sterling, as well as the Euro, the Swedish krona and the U.K. pound sterling against the U.S. dollar, to reduce the effect of change in these foreign currency exchange rates on our foreign operations, when consolidated into U.S. dollars and intercompany balances. There is no assurance that these hedging programs or hedging contracts will be effective. Because these foreign currency forward contracts are designed to reduce volatility in the Indian rupee, U.K. pound sterling and the Swedish krona exchange rates, they not only reduce the negative impact of a stronger Indian rupee, weaker U.K. pound sterling and weaker Swedish krona, but also could reduce the positive impact of a weaker Indian rupee on our Indian rupee expenses or reduce the impact of a stronger U.K. pound sterling or stronger Swedish krona on our U.K. pound sterling and Swedish krona denominated revenues. In addition, to the extent that these hedges do not qualify for hedge accounting, we may have to recognize gains or losses on the aggregate amount of hedges placed earlier and in larger amounts than expected.

Application of critical accounting estimates and risks

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible assets, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, in particular those related to the recognition of revenue and profits based on the percentage of completion method of accounting for fixed-price contracts, share-based compensation, income taxes, including reserves for uncertain tax positions, deferred taxes and liabilities, contingent consideration both upon and subsequent to acquisitions and valuation of financial instruments including derivative contracts and investments. Actual amounts could differ significantly from these estimates. Our management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenue and expenses that are not readily apparent from other sources. Additional information about these critical accounting policies may be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included in the Annual Report.

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Results of operations

Three months ended December 31, 2014 compared to the three months ended December 31, 2013

The following table presents an overview of our results of operations for the three months ended December 31, 2014 and 2013:

	Three Months EndedDecember 31,				$		%
(dollars in thousands)	2014		2013		Change		Change
Revenue	$	122,996	$	101,043	$	21,953	21.7	%
Costs of revenue	77,144		63,821		13,323		20.9	%
Gross profit	45,852		37,222		8,630		23.2	%
Operating expenses	31,233		26,026		5,207		20.0	%
Income from operations	14,619		11,196		3,423		30.6	%
Other income (expense)	1,360		1,155		205		17.7	%
Income before income tax expense	15,979		12,351		3,628		29.4	%
Income tax expense	4,200		3,023		1,177		38.9	%
Net income	$	11,779	$	9,328	$	2,451	26.3	%

Revenue

Revenue increased by 21.7%, or $22.0 million, from $101.0 million during the three months ended December 31, 2013 to $123.0 million in the three months ended December 31, 2014. The increase in revenue was primarily driven by higher revenue contribution from our clients existing as of December 31, 2013, particularly among our non-top ten clients collectively, revenue generated from clients acquired in the acquisition of OSB and TradeTech and broad based revenue growth within our BFSI and C&T industry groups. Revenue from North American clients in the three months ended December 31, 2014 increased by $12.8 million, or 18.2%, as compared to the three months ended December 31, 2013, due to broad based revenue growth, particularly in our financial services and C&T industry groups and clients acquired in the last twelve months. Revenue from European clients increased by $6.8 million, or 27.2%, as compared to the three months ended December 31, 2013, primarily due to broad-based growth in Europe, particularly our largest European client, as well as clients acquired in our TradeTech acquisition. We had 112 active clients at December 31, 2014, as compared to 95 active clients at December 31, 2013.

Costs of revenue

Costs of revenue increased from $63.8 million in the three months ended December 31, 2013 to $77.1 million in the three months ended December 31, 2014, an increase of $13.3 million, or 20.9% which reflects a benefit of $0.9 million due to the depreciation of the Indian rupee. 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 $8.4 million, including higher onsite costs related to the composition of resources required for onsite work. The increased costs of revenue are also due to an increase in subcontractor costs of $3.3 million and an increase in travel expenses of $1.4 million. At December 31, 2014, we had 8,096 IT professionals as compared to 6,817 at December 31, 2013.

As a percentage of revenue, cost of revenue decreased from 63.2% for the three months ended December 31, 2013 to 62.7% for three months ended December 31, 2014.

Gross profit

Our gross profit increased by $8.6 million, or 23.2%, to $45.8 million for the three months ended December 31, 2014, as compared to $37.2 million for the three months ended December 31, 2013, primarily due to our growth in revenue, partially offset by increased cost of revenue related to the growth in the number of IT professionals and subcontractor costs. As a percentage of revenue, our gross profit was 37.3% and 36.8% in the three months ended December 31, 2014 and 2013, respectively.

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Operating expenses

Operating expenses increased from $26.0 million in the three months ended December 31, 2013 to $31.2 million in the three months ended December 31, 2014, an increase of $5.2 million, or 20.0%, which reflects a benefit of $0.4 million due to the depreciation of the Indian rupee. The increase in operating expenses was primarily due to an increase of $2.5 million in compensation related expenses, $1.1 million in facilities expenses and an increase of $0.2 million in travel expenses. As a percentage of revenue, our operating expenses decreased from 25.8% in the three months ended December 31, 2013 to 25.4% in the three months ended December 31, 2014.

Income from operations

Income from operations increased by 30.6%, from $11.2 million in the three months ended December 31, 2013 to $14.6 million in the three months ended December 31, 2014. As a percentage of revenue, income from operations increased from 11.1% in the three months ended December 31, 2013 to 11.9% in the three months ended December 31, 2014.

Other income (expense)

Other income (expense) increased from $1.2 million in the three months ended December 31, 2013 to $1.4 million in the three months ended December 31, 2014 primarily due to increases in interest income.

Income tax expense

Income tax expense increased by $1.2 million, from $3.0 million in the three months ended December 31, 2013 to $4.2 million in the three months ended December 31, 2014. Our effective tax rate increased from 24.5% for the three months ended December 31, 2013 to 26.3% for the three months ended December 31, 2014. The increase in the effective tax rate was primarily due to the geographic mix of profit and reduced tax holiday benefits in India. This is partially offset by tax benefits generated from new Special Economic Zone (“SEZ”) tax holiday incentives in India and certain discrete items required to be recorded during the three months ended December 31, 2014.

Net income

Net income increased by 26.3%, from $9.3 million in the three months ended December 31, 2013 to $11.8 million in the three months ended December 31, 2014 due primarily to higher gross profits.

Nine months ended December 31, 2014 compared to the nine months ended December 31, 2013

The following table presents an overview of our results of operations for the nine months ended December 31, 2014 and 2013:

	Nine Months EndedDecember 31,				$		%
(dollars in thousands)	2014		2013		Change		Change
Revenue	$	352,969	$	285,833	$	67,136	23.5	%
Costs of revenue	224,701		182,126		42,575		23.4	%
Gross profit	128,268		103,707		24,561		23.7	%
Operating expenses	90,180		73,806		16,374		22.2	%
Income from operations	38,088		29,901		8,187		27.4	%
Other income (expense)	3,615		2,396		1,219		50.9	%
Income before income tax expense	41,703		32,297		9,406		29.1	%
Income tax expense	10,806		7,969		2,837		35.6	%
Net income	$	30,897	$	24,328	$	6,569	27.0	%

Revenue

Revenue increased by 23.5%, or $67.2 million, from $285.8 million during the nine months ended December 31, 2013 to $353.0 million in the nine months ended December 31, 2014. The increase in revenue was primarily driven by higher revenue contribution from our clients existing as of December 31, 2013, particularly among our non-top ten clients collectively, revenue generated from clients acquired in the acquisition of OSB and TradeTech and broad based revenue growth within our BFSI and C&T industry groups. Revenue from North American clients in the nine months ended December 31, 2014 increased by $27.3 million, or

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13.3%, as compared to the nine months ended December 31, 2013, due to broad based revenue growth, particularly in our financial services and C&T industry groups and clients acquired in the last twelve months. Revenue from European clients increased by $33.4 million, or 51.6%, as compared to the nine months ended December 31, 2013, primarily due to the broad-based growth in Europe, particularly our largest European client, as well as clients acquired in our TradeTech acquisition. We had 112 active clients at December 31, 2014, as compared to 95 active clients at December 31, 2013.

Costs of revenue

Costs of revenue increased from $182.1 million in the nine months ended December 31, 2013 to $224.7 million in the nine months ended December 31, 2014, an increase of $42.6 million, or 23.4%, which reflects a benefit of $3.0 million due to the depreciation of the Indian rupee. 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 $28.4 million, including higher onsite costs related to the composition of resources required for onsite work. The increased costs of revenue are also due to an increase of $3.6 million in travel expenses and an increase in subcontractor costs of $10.1 million. At December 31, 2014, we had 8,096 IT professionals as compared to 6,817 at December 31, 2013.

As a percentage of revenue, cost of revenue for the nine months ended December 31, 2014 and 2013 remained unchanged at 63.7%.

Gross profit

Our gross profit increased by $24.6 million, or 23.7%, to $128.3 million for the nine months ended December 31, 2014, as compared to $103.7 million for the nine months ended December 31, 2013, primarily due to our growth in revenue, partially offset by increased cost of revenue related to the growth in the number of IT professionals, subcontractor costs and immigration related costs. As a percentage of revenue, our gross profit for the nine months ended December 31, 2014 and 2013 remained unchanged at 36.3%.

Operating expenses

Operating expenses increased from $73.8 million in the nine months ended December 31, 2013 to $90.2 million in the nine months ended December 31, 2014, an increase of $16.4 million, or 22.2%, which reflects a benefit of $1.5 million due to the depreciation of the Indian rupee. The increase in operating expenses was primarily due to an increase of $9.6 million in compensation related expenses, $4.7 million in facilities expenses, $1.0 million increase in professional service expenses and an increase of $1.5 million in travel expenses, partially offset by a $0.9 million net decrease in earn-out consideration.  The $0.9 million net decrease in earn-out consideration was a result of a $1.8 million decrease in earn-out consideration related to the TradeTech acquisition offset by an increase of approximately $0.9 million in earn-out consideration related to the OSB acquisition. As a percentage of revenue, our operating expenses decreased to 25.5% in the nine months ended December 31, 2014 as compared to 25.8% in the nine months ended December 31, 2013.

Income from operations

Income from operations increased by 27.4%, from $29.9 million in the nine months ended December 31, 2013 to $38.1 million in the nine months ended December 31, 2014. As a percentage of revenue, income from operations increased from 10.5% in the nine months ended December 31, 2013 to 10.8% in the nine months ended December 31, 2014, primarily due to higher gross profit.

Other income (expense)

Other income (expense) increased from $2.4 million in the nine months ended December 31, 2013 to $3.6 million in the nine months ended December 31, 2014 primarily due to increase in the interest income.

Income tax expense

Income tax expense increased by $2.8 million, from $8.0 million in the nine months ended December 31, 2013 to $10.8 million in the nine months ended December 31, 2014. Our effective tax rate increased from 24.7% for the nine months ended December 31, 2013 to 25.9% for the nine months ended December 31, 2014. The increase in the effective tax rate was primarily due to the geographic mix of profit and additional tax expense incurred due to increased executive compensation expense not being eligible for tax deduction.  The increase is partially offset by new tax benefits realized in certain SEZ operations in India and a reversal of earn-out accrual recorded in connection with the acquisition of Trade Tech for which no tax expense is recorded.

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Net income

Net income increased by 27.0%, from $24.3 million in the nine months ended December 31, 2013 to $30.9 million in the nine months ended December 31, 2014 due primarily to higher operating profits.

Liquidity and capital resources

We have financed our operations from sales of shares of equity securities, including common stock, and from cash from operations. We have not borrowed against our existing or preceding credit facilities to fund operations.

On December 31, 2013, we entered into an amended and restated credit agreement with JPMorgan Chase Bank, N.A. (“JPM”) expiring December 31, 2018. The credit agreement amends and restates our $3.0 million secured revolving credit agreement with JPM and provides for a $25 million secured revolving credit facility, which shall be available to fund working capital and other corporate purposes, as well as to serve as security in support of our foreign currency hedging programs. The credit agreement contains financial and reporting covenants and limitations. At December 31, 2014, there were no borrowings outstanding under the credit facility (see Note 11 to the notes to our consolidated financial statements included in this Quarterly Report).

At December 31, 2014, a significant portion of our cash and short-term investments was held by our foreign subsidiaries. We continually monitor our cash needs and employ tax planning and financing strategies to ensure cash is available in the appropriate jurisdictions to meet operating needs. The cash held by our foreign subsidiaries is considered indefinitely reinvested in local operations. If required, it could be repatriated to the United States. However, under current law, any repatriation would be subject to United States federal income tax less applicable foreign tax credits.

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 nine months ended December 31, 2014, we sold $22.7 million of receivables under the terms of the financing agreement. Fees paid pursuant to this agreement were not material during the three and nine months ended December 31, 2014. No amounts were due under the financing agreement at December 31, 2014, 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.

In connection with the OSB acquisition, the purchase price was subject to adjustment after the closing for up to an additional $6.0 million in earn-out consideration based on the achievement of certain revenue and operating margin targets for the five months ended March 31, 2014, the nine months ending December 31, 2014 and the twelve months ending December 31, 2015. At March 31, 2014, the Company determined that OSB had met 100% of the performance targets for the five months ended March 31, 2014 and $500 earn-out consideration was paid as of December 31, 2014. The fair value of the remaining contingent consideration at December 31, 2014 is $4,610.

In connection with the TradeTech acquisition, the purchase price was subject to adjustment after the closing for up to an additional $4.1 million in earn-out consideration based on the achievement of certain revenue and EBITA targets for the twelve-month period ending December 31, 2014.  At December 31, 2014, TradeTech did not achieve the targets and therefore no earn-out consideration will be paid.

In connection with the OSB acquisition on November 1, 2013 and the TradeTech acquisition on January 2, 2014, 10% or $684 and 12.5% or $2,444 of the purchase price respectively, were held back and placed into escrow for a period of 12 months from the acquisition date as security for indemnification obligations. In November 2014, we released $684 to OSB with respect to the hold back. In connection with the TradeTech acquisition, a working capital adjustment of $468 was released to us from escrow pursuant to the Share Purchase Agreement.  At December 31, 2014, the TradeTech holdback was $1,746 inclusive of a foreign currency translation adjustment of $230.

Cash flows

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

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	Nine Months Ended December 31,
(in thousands)	2014			2013
Net cash provided by operating activities	$	31,771		$	39,527
Net cash used for investing activities	(20,076		)	(25,824		)
Net cash provided by financing activities	5,971			25,292
Effect of exchange rate changes on cash	(2,149		)	(2,788		)
Net increase in cash and cash equivalents	15,517			36,207
Cash and cash equivalents, beginning of period	82,761			57,199
Cash and cash equivalents, end of period	$	98,278		$	93,406

Operating activities

Net cash provided by operating activities was $31.8 million during the nine months ended December 31, 2014 as compared to $39.5 million provided by operating activities during the nine months ended December 31, 2013. This change was primarily attributable to an increased use of working capital of $17.7 million, reversal of the contingent consideration of $1.8 million and a decreased change in excess tax benefits from stock option exercises of $1.0 million. These were partially offset by an increase in net income of $6.6 million and an increase in depreciation and share-based compensation of $4.8 million.

Investing activities

Net cash used in investing activities was $20.1 million during the nine months ended December 31, 2014 as compared to $25.8 million used in investing activities during the nine months ended December 31, 2013. The change was primarily due to the net increases in the proceeds of investments of $2.6 million, a decrease in cash used for business acquisition of $5.5 million and a decrease in restricted cash of $1.0 million, primarily due to the hold back release related to the OSB acquisition of $0.7 million.  This was partially offset by an increase in the purchase of property and equipment of $3.3 million, which includes the acquisition of certain intellectual property rights for $1.1 million during the nine months ended December 31, 2014.

Financing activities

Net cash provided by financing activities was $6.0 million during the nine months ended December 31, 2014 as compared to cash provided by financing activities of $25.3 million during the nine months ended December 31, 2013. The decrease in cash provided is primarily due to decrease in borrowing from credit revolving facility of $20.0 million, payment of contingent consideration related to the OSB acquisition of $0.4 million partially offset by an increase in excess tax benefits from the stock options exercises of $1.0 million

Off-balance sheet arrangements

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

We have a foreign currency cash flow hedging program designed to 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.” The program contemplates a partially hedged position of the Indian rupee for a rolling twelve-quarter period. 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 against the U.S. dollar, and multiple foreign currency hedges designed to hedge foreign currency transaction gains and losses on our intercompany balances. 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

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on April 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Our market risks, and the ways we manage them, are summarized in Item 7A of the Annual Report. There have been no material changes in the nine months ended December 31, 2014 to such risks or to our management of such risks except for the additional factors noted below.

Foreign Currency Exchange Rate Risk

We are exposed to foreign currency exchange rate risk in the ordinary course of business. We have historically entered into, and in the future we may enter into, foreign currency derivative contracts to minimize the impact of foreign currency fluctuations on both foreign currency denominated assets and forecasted expenses. The purpose of this foreign exchange policy is to protect us from the risk that the recognition of and eventual cash flows related to Indian rupee denominated expenses might be affected by changes in exchange rates. Some of these contracts meet the criteria for hedge accounting as cash flow hedges (See Note 6 of the notes to our financial statements included herein for a description of recent hedging activities).

We evaluate our foreign exchange policy on an ongoing basis to assess our ability to address foreign exchange exposures on our balance sheet, income statement and operating cash flows from all foreign currencies, including most significantly the U.K. pound sterling, the Indian rupee, the Euro, the Sri Lankan rupee and the Swedish krona.

We use foreign currency hedging programs to mitigate the risks of volatility in the Indian rupee against the U.S. dollar and U.K. pound sterling. The U.S. dollar equivalent market value of the outstanding foreign currency derivative contracts at December 31, 2014 was $113.9 million. There is no assurance that these hedging programs or hedging contracts will be effective. As these foreign currency hedging programs are designed to reduce volatility in the Indian rupee, they not only reduce the negative impact of a stronger Indian rupee but also reduce the positive impact of a weaker Indian rupee on our Indian rupee expenses. In addition, to the extent that these hedges do not qualify for hedge accounting, we may have to recognize gains or losses on the aggregate amount of hedges placed earlier than expected.

The U.K. pound sterling and Swedish krona exchange fluctuations can have an unpredictable impact on our U.K. pound sterling and Swedish krona revenues generated, and costs incurred. In response to this volatility, we have entered into hedging transactions designed to hedge our forecasted revenue and expenses denominated in the U.K. pound sterling as well as the Swedish krona. These derivative contracts have maximum duration of 92 days and do not meet the criteria for hedge accounting. Such hedges may not be effective in mitigating this currency volatility.  These hedges are designed to reduce the negative impact of a weaker U.K. pound sterling or a Swedish krona, however they also reduce the positive impact of a stronger U.K. pound sterling or Swedish krona.

Interest Rate Risk

We had no debt outstanding at December 31, 2014 under our $25.0 million secured revolving credit facility. We do not believe we are exposed to material direct risks associated with changes in interest rates other than with our cash and cash equivalents, short-term investments and long-term investments. At December 31, 2014, we had $224.5 million in cash and cash equivalents, short-term investments and long-term investments, the interest income from which is affected by changes in interest rates. Our invested securities primarily consist of government sponsored entity bonds, money market mutual funds, commercial paper, corporate debts and municipal bonds. Our investments in debt securities are classified as “available-for-sale” and are recorded at fair value. Our “available-for-sale” investments are sensitive to changes in interest rates. Interest rate changes would result in a change in the net fair value of these financial instruments due to the difference between the market interest rate at the period end and the market interest rate at the date of purchase of the financial instrument.

Concentration of Credit Risk

Financial instruments which potentially expose us to concentrations of credit risk primarily consist of cash and cash equivalents, short-term investments and long-term investments, accounts receivable, derivative contracts, other financial assets and unbilled accounts receivable. We place our operating cash, investments and derivatives in highly-rated financial institutions. We adhere to a formal investment policy with the primary objective of preservation of principal, which contains minimum credit rating and diversification requirements. We believe that our credit policies reflect normal industry terms and business risk. We do not anticipate non-performance by the counterparties and, accordingly, do not require collateral. Credit losses and write-offs of accounts receivable balances have historically not been material to our financial statements and have not exceeded our expectations.

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Item 4.  Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

At December 31, 2014, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level in (i) enabling us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period and (ii) ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

We have not made any changes in our internal control over financial reporting during the nine months ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 1A.  Risk Factors

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2014, as filed with the Securities and Exchange Commission, on May 23, 2014 (the “Annual Report”), which could materially affect our business, financial condition or future results. During the quarterly periods covered by this Quarterly Report on Form 10-Q, there were no material changes to the risk factors described in our Annual Report.

Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds; Purchases of Equity Securities By the Issuer and Affiliated Purchasers

Under the terms of our 2007 Stock Option and Incentive Plan, or the 2007 Plan, we have issued shares of restricted stock to our employees. On the date that these restricted shares vest, we automatically withhold (unless instructed otherwise in advance by an employee that the employee will pay such taxes in cash), via a net exercise provision pursuant to our applicable restricted stock agreements and the 2007 Plan, the number of vested shares (based on the closing price of our common stock on such vesting date) equal to the tax liability owed by such grantee. The shares withheld from the grantees to settle their minimum withholding tax liability are reallocated to the number of shares available for issuance under the 2007 Plan. For the three month period ended December 31, 2014, we withheld an aggregate of 16,198 shares of restricted stock at a price of $39.79 per share.

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Item 6.  Exhibits.

The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q:

Exhibit No.		Description
10.1*		Amendment No. 1, dated as of November 1, 2014 to the Master Service Provider Agreement by and between the Registrant and JPMorgan Chase Bank, N.A.
31.1*		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of principal financial and accounting officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.
32.2**		Certification of principal financial and accounting officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.
101*		The following financial statements from Virtusa Corporation’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2014, as filed with the SEC on February 5 , 2015, formatted in XBRL (eXtensible Business Reporting Language), as follows:
	(i)	Consolidated Balance Sheets at December 31, 2014 (Unaudited) and March 31, 2014
	(ii)	Consolidated Statements of Income for the Three and Nine Months Ended December 31, 2014 and December 31, 2013 (Unaudited)
	(iii)	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended December 31, 2014 and December 31, 2013 (Unaudited)
	(iv)	Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2014 and December 31, 2013 (Unaudited)
	(v)	Notes to Condensed Consolidated Financial Statements (Unaudited)

*Filed herewith.

**Furnished herewith. This certification shall not be deemed filed for any purpose, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Virtusa Corporation
Date: February 5, 2015	By:	/s/ Kris Canekeratne
		Kris Canekeratne,
		Chairman and Chief Executive Officer
		(Principal Executive Officer)
Date: February 5, 2015	By:	/s/ Ranjan Kalia
		Ranjan Kalia,
		Executive Vice President
		and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit No.		Description
10.1*		Amendment No. 1, dated as of November 1, 2014 to the Master Service Provider Agreement by and between the Registrant and JPMorgan Chase Bank, N.A.
31.1*		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of principal financial and accounting officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.
32.2**		Certification of principal financial and accounting officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.
101*		The following financial statements from Virtusa Corporation’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2014, as filed with the SEC on February 5, 2014, formatted in XBRL (eXtensible Business Reporting Language), as follows:
	(i)	Consolidated Balance Sheets at December 31, 2014 (Unaudited) and March 31, 2014
	(ii)	Consolidated Statements of Income for the Three and Nine Months Ended December 31, 2014 and December 31, 2013 (Unaudited)
	(iii)	Consolidated Statements of Comprehensive Income for the Nine Months Ended December 31, 2014 and December 31, 2013 (Unaudited)
	(iv)	Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2014 and December 31, 2013 (Unaudited)
	(v)	Notes to Condensed Consolidated Financial Statements (Unaudited)

*              Filed herewith.

**Furnished herewith. This certification shall not be deemed filed for any purpose, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of 1934.

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EX-10.1

Exhibit 10.1

Contract ID No. CW717613

AMENDMENT NO. 1 TO MASTER SERVICE PROVIDER AGREEMENT

This Amendment No. 1 to the Master Service Provider Agreement (together with any Exhibits attached hereto or incorporated into this document, this “Amendment”) is entered into as of the effective date indicated in the signature box below (the “Effective Date”) by and between JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a national banking association (“JPMC”) and the supplier named in the signature box below (“Supplier”).

JPMC and Supplier are parties to a Master Agreement dated December 6, 2004 (“Agreement”).  JPMC and Supplier, by signing in the signature blanks below, agree to amend the terms of the Agreement to include the terms set forth in this Amendment.  Sections references in this Amendment refer to the Section of this Amendment unless otherwise noted. In the event of a conflict between the terms of this Amendment and the terms previously set forth in the Agreement, the terms set forth in this Amendment will prevail.  Except as expressly stated in this Amendment, the terms of the Agreement remain in full force and effect.

Master Contract ID Number: 70575
Effective Date: Novmeber 1, 2014
VIRTUSA CORPORATION		JPMORGAN CHASE BANK, NATIONAL
		ASSOCIATION
By:	/s/ Paul D. Tutun	By:	/s/ Scott Daugherty
Name:	Paul D. Tutun	Name:	Scott Daugherty
Title:	SVP & General Counsel	Title:	Executive Director
Date:	12/23/14	Date:	1/5/15
For JPMC, notice must be sent to the following address:
		With a copy to:
JPMorgan Chase Bank, N.A.		JPMorgan Chase Bank, N.A.
Contracts Management		Legal Department
Mail Code OH1-0638		Mail Code NY1-A425
1111 Polaris Parkway, Suite 1N		1 Chase Manhattan Plaza, 25th Floor
Columbus, Ohio 43240-0638		New York, New York 10081
Attn: Contracts Manager		Attn: Workflow Manager
Reference: Contract ID No. CW717613		Reference: Contract ID No. CW717613
Fax: (614) 213-9455		Fax: (212) 383-0800

For Supplier, a copy of each notice must be sent to the following addresses:

Virtusa Corporation

2000 West Park Drive

Westborough, MA01581

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NOW, THEREFORE, in consideration of the foregoing premises and the promises, terms and conditions set forth below and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as under.

I.To amend the Agreement as follows:

1.Section 1, Definitions and Construction, is hereby amended as follows:

A.Section 1.1, Definitions, is hereby amended as follows:

(i)Section 1.1(i), Change of Control, is hereby deleted in entirety.

B.Section 1.2, References, is hereby amended to append the following provision at the end thereof:

“The term “days” refers to calendar days.  “Business Day” means Monday through Friday, excluding any official JPMC holidays.  “Agent” mean third party consultants, outsourcers, contractors and other service providers.  When used in this Agreement, the phrases “represents and warrants” and “represents, warrants and covenants” mean that the representations, warranties, and covenants are deemed given as of the Effective Date and on an ongoing basis throughout the term of this Agreement and throughout each Schedule Term.”

C.Section 1, Definition and Construction, is hereby further amended to include the following new sections:

“1.5 Schedules

The parties will agree on the goods, licensed materials or services that Supplier will provide (each, a “Deliverable”), the prices that JPMC will pay and other transaction-specific terms through schedules to this Agreement (“Schedules”).  Each Schedule will either be (a) a separate document that is signed by both JPMC and Supplier; (b) a proposal or other offer to provide goods or services by Supplier that is accepted by an authorized representative of JPMC via email; or (c) a JPMC purchase order, electronic (e.g., “Procure to Pay”) or otherwise, that is accepted by Supplier and references either this Agreement or a Schedule.  Each Schedule will be deemed to incorporate all of the terms of this Agreement.  If a term in a Schedule conflicts with a term in this Agreement, the provisions of this Agreement will prevail unless the term in the Schedule specifically states that it will prevail. If a term in a Schedule conflicts with a term in a purchase order that is issued pursuant to that Schedule, the provisions of the Schedule will prevail unless the purchase order specifically states that the term in the purchase order shall prevail.  If terms in this Agreement conflict, the term most closely describing the type of transaction giving rise to the issue will prevail.”

“1.6 Entities Entering into Schedules

JPMC or any of its Affiliates (each, a “JPMC Entity” and collectively, “JPMorgan Chase & Co.”) may enter into Schedules.  The term “Affiliate” means an entity owned by, controlling, controlled by, or under common control with, directly or indirectly, a party.  For this purpose, one entity “controls” another entity if it has the power to direct the management and policies of the other entity (for example, through the ownership of voting securities or other equity interest, representation on its board of directors or other governing body, or by contract).  The benefits of any Schedule extend to the JPMC Entity that signs the Schedule and to other JPMC Entities, customers, employees, suppliers, business partners and divested companies (each, a “Recipient”).”

“1.7 Each Schedule Is a Separate Agreement

Each Schedule will be a separate agreement between Supplier and the JPMC Entity that signs the Schedule.  All subsequent references to “JPMC” in this Agreement will be deemed references to the JPMC Entity that signed the Schedule.  Only the JPMC Entity and Supplier entity that signs a Schedule will be liable for such JPMC/Supplier Entity’s obligations under that Schedule.  Notwithstanding anything to the contrary contained in this Agreement or any Schedule, in no event will any JPMC Entity that is a bank be deemed to be a guarantor of, or otherwise liable for, any performance or payment obligation of any other JPMC Entity in connection with this Agreement or any Schedule.”

“1.8 Schedule Term

A Schedule may state a term for that Schedule (the “Schedule Term”).  A Schedule that does not state a Schedule Term will be effective from its effective date until the termination of this Agreement, unless otherwise terminated in accordance with this Agreement or the Schedule.  Unless otherwise agreed in the applicable Schedule, following the Schedule Term stated in any Schedule, JPMC will have the right to renew the Schedule Term with respect to services for up to five additional one year renewal terms.”

“1.9 Country Specific Terms

JPMC and Supplier agree that outside of the United States, the Deliverables may be subject to mutually acceptable country unique terms and conditions which may require amending or supplementing this Agreement as appropriate.

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To the extent possible, the JPMC Entity located outside of the United States will order Deliverables directly from Supplier entity in the applicable country. Supplier entity in the applicable country will supply the Deliverables and invoice such JPMC Entity in local currency and such JPMC Entity will pay Supplier entity in the applicable country in local currency.”

2.Section 2, Services, is hereby amended as follows:

A.Section 2.4, Applicable Laws; Country-Specific Legal and Regulatory Requirements, is hereby amended to be deleted in its entirety and replaced with the following:

“2.4 Compliance with Laws

(a)Supplier represents and warrants that Supplier will perform all of its obligations to JPMorgan Chase & Co. in compliance at all times with all foreign, federal, state and local statutes, orders, conventions, regulations, self-regulatory standards, and regulatory interpretations and guidance including those of any governmental agency (collectively, “Laws”) that are applicable to Supplier in performing its obligations to JPMorgan Chase & Co. or that would be applicable to JPMorgan Chase & Co. if JPMorgan Chase & Co. were performing those obligations using its own employees and assets.

(b)To the extent Supplier is providing, serving, or hosting Internet, email or portable device ready user interface elements or functionality, Supplier represents and warrants that such elements and functionality will conform to the W3C Web Content Accessibility Guidelines Version 2.0 Level A & AA Success Criteria, as well as any state or federal laws applicable to Internet, email or portable device accessibility including, but not limited to, the U.S. Americans with Disabilities Act.

(c)To the extent any Supplier Personnel are performing any services within the United States or any territory to which U.S. immigration Laws apply, Supplier represents, warrants and covenants that, during the Schedule Term of any applicable Schedule (i) Supplier and all applicable subcontractors will comply with all (x) U.S. immigration Laws, including but not limited to the Immigration and Nationality Act and the Immigration Reform and Control Act of 1986; and (y) Laws, regulations, orders, and policy guidance relating to all forms of work authorization such as H-1B and L-1 visas, including guidance from the U.S. Citizenship and Immigration Service on H-1B visas and third-party site placements; (ii) all Supplier Personnel assigned to a JPMC U.S. location shall have valid, unexpired work authorization; and (iii) Form I-9, Employment Eligibility Verification has been completed for all Supplier Personnel assigned to a JPMC U.S. location and I-9s with expiring work authorizations shall be re-verified as necessary.”

B.Section 2, Services, is hereby further amended to include the following new sections:

“2.7Timing of Services

Supplier will begin providing the Services on the date specified in the applicable Schedule.  If the Schedule does not specify a start date, Supplier will begin providing the Services on the effective date of the applicable Schedule.  Supplier will complete the Services on the date(s) specified in the Schedule.  If the Schedule does not specify completion date(s), Supplier will complete the Services in a timely manner.

“2.8 Materials, Facilities and Assistance for Performance of Services

Supplier will provide all necessary equipment and related materials, including specialized equipment and the like, to perform the Services and neither JPMC nor any Recipient will be required to provide any work space, equipment, materials, training, supervision or other assistance in connection with the Services.”

“2.9 Right of Supplier Personnel to Work in a Country

For Services performed within a given country, Supplier will assign only Supplier Personnel who are either citizens of that country or legally eligible to work there.  Supplier represents and warrants that it has complied and will comply with the immigration Laws of the countries in which the Services are performed.”

“2.10 Termination Assistance for Critical Services

In addition to the general provisions for termination assistance services in this Agreement, for all Critical Services, Supplier agrees that:

(a)Disengagement Plan.

Supplier will, within 90 days after the commencement of Services provide to JPMC for its approval a draft plan for the disengagement and transfer of the Services upon the expiration or termination of the Services (upon approval, the “Disengagement Plan”). Supplier will ensure that the Disengagement Plan:  (i) specifies Supplier Key Personnel and other resources that will be used to perform Termination Assistance Services; (ii) provides an estimate of

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incremental fees for the additional resources, if any, required to provide the Termination Assistance Services; (iii) specifies substantially all things necessary to efficiently carry out the Termination Assistance Services; and (iv) sets out a timetable and process for the Termination Assistance Services that will enable JPMC to have completed disengagement as quickly as reasonably possible without materially disrupting the quality of the Services and without limiting Supplier’s obligation to meet any applicable services levels during the Termination Assistance Period.

Supplier will provide updates to the Disengagement Plan during the Schedule Term as necessary to take into account changes to the Services and submit the updates to JPMC for approval.  Upon approval the updates will be incorporated into the Disengagement Plan.

(b)Termination Assistance Services.

“Termination Assistance Services” means (i) the Services to the extent JPMC requests the Services during the Termination Assistance Period, (ii) Supplier’s cooperation with JPMC or another supplier designated by JPMC in the transfer of the Services; and (iii) any other services requested by JPMC in order to facilitate the transfer of the Services to JPMC or another supplier designated by JPMC. In addition to the general provisions for termination assistance service in this Agreement, Supplier will, upon the expiration or termination of the applicable Schedule, provide the Termination Assistance Services in accordance with the Disengagement Plan.  Except as otherwise set forth in this Agreement, the Termination Assistance Services will be provided at the applicable rates set forth in the applicable Schedule(s) or, if the applicable rates are not set forth in the Schedule(s), at Supplier’s rates then in effect for like services immediately prior to the expiration or termination of the applicable Schedule, except to the extent that resources included in the fees being paid by JPMC to Supplier after expiration or termination of the applicable Schedule can be used to provide the Termination Assistance Services.

(c)Termination Assistance Period.

“Termination Assistance Period” (i) means a period of time designated by JPMC commencing on the date JPMC delivers to Supplier a notice of intent to terminate the applicable Schedule, or (ii) where no such time is so designated, means the period between the effective date of the termination notice and the 120th day after the effective date of the termination of the applicable Schedule. In any event, during the Termination Assistance Period Supplier will provide the Termination Assistance Services in accordance with this Section. The quality and level of performance of the Services during the Termination Assistance Period will not be degraded as compared to the quality and level of performance of the Services prior to the Termination Assistance Period.  After the expiration of the Termination Assistance Period, Supplier will (i) answer questions from JPMC regarding the terminated Services on an “as needed” basis at Supplier’s then standard billing rates and (ii) deliver to JPMC any remaining JPMC owned reports and documentation relating to the terminated Services still in Supplier’s possession.”

“2.12 Exit Rights

Upon the later to occur of (a) the expiration or termination of the applicable Schedule or (b) the last day of any Termination Assistance Period (the “End Date”), (i) the access right, if any, granted to Supplier and Supplier Personnel to JPMC networks or computing systems will immediately terminate; and (ii) if and to the extent the applicable Schedule gives JPMC license rights, Supplier will deliver to JPMC a copy of any software in the form in use as of the End Date, which JPMC has such rights.”

“2.13 Supplier Personnel Information

Upon the delivery of a notice of intent to terminate the applicable Schedule or a determination that the Schedule Term will not be renewed, with respect to the then current Supplier Personnel who are providing Critical Services (each an “Affected Supplier Personnel”). Supplier will (i) not terminate, reassign or otherwise remove from providing the Services or Termination Assistance Services any Affected Supplier Personnel; and (ii) to the extent not prohibited by applicable Law, provide JPMC and its designees full access to the Affected Supplier Personnel to the extent such access does not adversely impact Supplier’s delivery of the Services or Termination Assistance Services to JPMC.”

“2.14 Complaints

If Supplier receives any communication from or on behalf of a JPMorgan Chase & Co. customer indicating a complaint with respect to Supplier’s Services or other Deliverables, JPMorgan Chase & Co. or any JPMorgan Chase & Co. product or service (whether or not related to any Services or other Deliverables), Supplier will report that communication to JPMC and take only such actions as reasonably requested by JPMC or as set forth in the

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applicable Schedule with respect to the reporting and other handling of complaints.  Any such communications will be deemed JPMC Confidential Information.”

3.Section 4, Covenants and Obligations of the parties, is hereby amended to append the following provision at the end of Section 4.1 (b) Financial Reports thereof:

“Further, JPMC may use any Supplier information already in JPMC’s possession, whether received as a result of this Agreement or any other relationship Supplier has with JPMC.  Supplier will promptly notify JPMC of any material adverse changes in Supplier’s financial stability.”

4.Section 5, Project Team, is hereby amended as follows:

A.Section 5.2 (d), is hereby deleted in its entirety.

B.Section 5.2 (f), is hereby deleted in its entirety and replaced with the following:

“(i) If JPMC or Recipient determines that the continued assignment to JPMC’s account of any Supplier Personnel is not in the best interests of JPMC due to material performance issues, JPMC may request in writing that the individual be replaced.  On receipt of such notice, Supplier will have two weeks chance to cure.  If Supplier is unable to cure within such two week period, then Supplier will remove that individual from JPMC’s account and all JPMorgan Chase & Co. facilities and within a reasonable time period replace that individual with Supplier Personnel of suitable ability and qualifications at no additional cost to JPMC.  JPMC will not be invoiced for any work performed by that individual if JPMC’s request for removal and replacement of that individual is made within the first 10 Business Days of that individual’s assignment to JPMC’s account.  Additionally, JPMC shall not be obligated to pay for any time that replacement Supplier Personnel spend performing Services until such time as the replacement Supplier Personnel have reached the level of proficiency required to effectively perform their required roles such ramp-up period not to exceed 10 business days.

(ii) Supplier agrees to notify JPMC immediately in the event that any Supplier Personnel ceases to work on behalf of Supplier with respect to the provision of the Services.  Supplier’s notice will contain the name of the Supplier Personnel, the date of the cessation of the Services by such Supplier Personnel, the JPMC Standard or Global Identification Number, as the case may be, for such Supplier Personnel, if applicable, information with respect to the systems, if any, to which such Supplier Personnel had access, and a list of all JPMC property, assets and equipment, if any, held by such Supplier Personnel (“JPMC Returnable Property”).  Supplier will collect and secure all JPMC Returnable Property and will promptly return it to JPMC together with any identification cards, secure tokens and other access or status authorizations issued to such Personnel, or to Supplier for use by such Supplier Personnel.  All notices pursuant to this Section will be given as provided in this Agreement unless otherwise specified in the applicable Schedule.”

C.Section 5.5, Supplier Personnel’s Compliance with JPMC Requirements, is hereby amended to be deleted in its entirety and replaced with the following:

“5.5 Fingerprinting; Drug Testing; Background Checks of Supplier Personnel

(a)As a participant in a highly regulated industry, JPMC has certain requirements (as may be amended from time to time by JPMC, the “JPMC Requirements”) that will apply to Designated Supplier Personnel.  There are two types of Designated Supplier Personnel:  Category I Designated Supplier Personnel and Category II Designated Supplier Personnel.  Category I Designated Supplier Personnel and Category II Designated Supplier Personnel are collectively referred to as “Designated Supplier Personnel”.  Supplier represents, warrants and covenants that it will not assign any Designated Supplier Personnel to JPMC if such person has been convicted of, pled guilty or no contest to, or participated in a pre-trial diversion program for felony or multiple misdemeanor offenses involving crimes of dishonesty or breach of trust including theft; money laundering; embezzlement; or the manufacture, sale, distribution of, or trafficking in drugs or controlled substances or criminal conspiracy.  Supplier will comply with all JPMC Requirements (where permitted by applicable Law) and agrees that all assignments of Designated Supplier Personnel made pursuant to this Agreement or any applicable Schedule will be made in accordance with the JPMC Requirements.

(b)“Category I Designated Supplier Personnel” are:  (i) Supplier Personnel that are assigned to provide Services on-site at a JPMorgan Chase & Co. location and that will receive a JPMorgan Chase & Co. identification access badge; or (ii) Supplier Personnel that have access to networks or systems of JPMorgan Chase & Co. whether such Supplier Personnel are working on-site at a JPMorgan Chase & Co. location or off-site.

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(c)“Category II Designated Supplier Personnel” are Supplier Personnel who, as part of the Services, have access to either sensitive data (including Personal Information about JPMC’s customers, clients or employees (current, former or prospective), customer property (tangible or intangible), or any JPMC Data.

(d)If, at any time, JPMC determines, in its sole discretion, that any Category II Designated Supplier Personnel has or will have access to any highly sensitive JPMC Data, JPMC may, upon notice to Supplier convert the relevant Category II Designated Supplier Personnel to Category I Designated Supplier Personnel and the JPMC Requirements for Category I Designated Supplier Personnel specified in Section 5.5(f) below will apply as of the date of Supplier’s receipt of such notice from JPMC, Supplier having a reasonable period of time to comply with JPMC Requirements.

(e)Any Designated Supplier Personnel who do not successfully meet or comply with any of the then-current JPMC Requirements will not be assigned, or if applicable, will not continue in an assignment, to provide Services to JPMC and Supplier will promptly replace such Designated Supplier Personnel at no additional charge to JPMC; provided, however, such failure to meet or comply with any of the applicable JPMC Requirements will not affect such individual’s eligibility for employment with Supplier or any Supplier subcontractor, as the case may be.

(f)The JPMC Requirements require that on or before the first day of the assignment, all Category I Designated Supplier Personnel:

(i)Accurately complete, sign and submit to Supplier a JPMC Pre-Assignment Statement (a current copy of which is located at http://www.jpmorganchase.com/corporate/About-JPMC/supplier-personnel-policies.htm or is otherwise available from JPMC upon request).  Supplier will retain original signed copies of each executed JPMC Pre-Assignment Statement and, upon JPMC’s request, Supplier will promptly deliver to JPMC original signed copies of each such document.  If any Category I Designated Supplier Personnel answers questions three or four in the Pre-Assignment Statement in the affirmative, Supplier will report this fact to JPMC prior to such Category I Designated Supplier Personnel’s first day of assignment for review and consideration by JPMC with the understanding that JPMC may require Supplier to assign different Category I Designated Supplier Personnel based on this information.  The affirmative answers of all Category I Designated Supplier Personnel to questions five and six of the Pre-Assignment Statement will be reported to JPMC prior to such Category I Designated Supplier Personnel’s first day of assignment for use in conjunction with JPMC-administered background checks, Supplier acknowledging that JPMC may require Supplier to assign different Category I Designated Supplier Personnel based on this information;

(ii)Submit to fingerprinting (at a location designated by JPMC) in accordance with the then-current JPMC Fingerprinting Policy (a current copy of which is located at http://www.jpmorganchase.com/corporate/About-JPMC/supplier-personnel-policies.htm or is otherwise available from JPMC upon request); provided, that if any fingerprints are not readable then the relevant Category I Designated Supplier Personnel will submit to an alternative form of background check as required by JPMorgan Chase & Co., all at JPMC’s sole cost and expense;

(iii)Submit to and successfully pass a drug test (administered by Supplier or a third party hired by Supplier, in each case at Supplier’s sole cost and expense) that complies with the then-current JPMC Drug Testing Policy (a current copy of which is located at http://www.jpmorganchase.com/corporate/About-JPMC/supplier-personnel-policies.htm or is otherwise available from JPMC upon request);

(iv)Agree to have his/her photograph taken; and

(v)Agree to complete privacy and data protection training, subject to local employment law, as required and as defined by the JPMC line of business or corporate group engaging the Category I Designated Supplier Personnel.

(g)The JPMC Requirements require that on or before the first day of the assignment, all Category II Designated Supplier Personnel:

(i)Will have been submitted to and passed a background check (including criminal background checks) conducted by Supplier or a third party vendor contracted by Supplier (“Supplier Background Checks”).  As between Supplier and JPMC, Supplier is solely responsible for all expenses associated with such Supplier Background Checks.  Upon request, Supplier will provide JPMC with the written policies and procedures governing such Supplier Background Checks.  The Supplier Background Checks will, if permitted by law, at a minimum, meet the national standards for employment screening as set forth in the Federal Fair Credit Reporting Act (FCRA), as updated from time to time and include, at a minimum, a certification of county, state & federal criminal records, national criminal database records, international criminal records searches, social security number validation, OFAC and other prohibited parties searches and sex offender registry searches.  In the event of a conflict between the

6

FCRA and any state law (including state labor codes and guidelines), the more thorough requirements will govern.  Supplier will not provide the detailed results of the Supplier Background Checks to JPMC.  No less than quarterly, Supplier will review the roster of current Category II Designated Supplier Personnel and ensure that each one passed the Supplier Background Checks.

(ii)Agree to complete privacy and data protection training consistent with Supplier’s obligations under this Agreement with respect to Personal Information, subject to local employment law.”

5.Section 8, Payments to Supplier, is hereby amended as follows:

A.Section 8.2, Payment Schedule and Invoices, is hereby amended to include the following sub-clauses:

“(a)General

All invoices will identify:  (i) the applicable Schedule and Agreement numbers, (ii) the applicable purchase order number (if any), (iii) dates when each Deliverable was provided and, if applicable, (iv) the taxing jurisdiction(s) in which each Deliverable was provided.

(b) Invoices for Licensed or Purchased Goods

Invoices for licensed or purchased goods will also include:  (i) the name and description of the good, (ii) the part number or other identifier of the good, (iii) the quantity of Deliverables being licensed or purchased, (iv) the unit price for the good, (v) if applicable, the level of discount being applied and (vi) the total dollar amount owed.

(c) Invoices for Services

Invoices for services and maintenance will also include, if applicable:  (i) a brief description of the services provided, (ii) the quantity of hours worked, (iii) the names and hourly rates of each individual performing the services, (iv) the tasks performed, (v) the dates of performance, (vi) the service code number or other identifier for the services (if any) and (vii) the total dollar amount owed.

(d) Address

Unless otherwise specified by JPMC, Supplier will send all invoices to the address specified in the applicable Schedule.”

B.Deleted.

C.Section 8.5, Increase in Fees, is hereby deleted in its entirety and replaced with the following:

“8.5 Increase in Fees

The rates and prices provided under any Schedule will not be increased by Supplier during the Schedule Term.  For any renewal terms, rates and prices will not be increased by Supplier more than once annually and by more than the lower of:  (i) for personnel in each respective geography, the cumulative rise in the applicable “Country CPI” as defined below; (ii) the percentage increase in the rates or prices generally charged by Supplier; or (iii) three percent.  The term “Country CPI” means (i) for the United States, the Consumer Price Index for All Urban Consumers for the US City Average for all Items, 1982-1984 Equal 100 Base, as reported by the US Department of Labor’s Bureau of Labor Statistics and (ii) for India, the Linked All India CPI (UNME) on base 1984-85 = 100; Published by Govt. of India, Ministry of Statistics and Programme Implementation, Central Statistical Organization...

D.Section 8.6, Audit of Fees, is hereby deleted in its entirety and replaced with the following:

“8.6, Audit of Fees

Upon JPMC’s request with reasonable notice, Supplier will permit, for each Schedule, technical, financial and operational audits of Supplier and its Affiliates, related to the subject matter of this Agreement as applicable to each Schedule, by the internal and external auditors and personnel of JPMorgan Chase & Co. and regulators (collectively, “Auditors”).  Audits by internal or external auditors and personnel of JPMorgan Chase & Co. will not occur more than twice in any calendar year per Schedule unless such audit is materially different in scope from a preceding audit or JPMC has a good faith belief that Supplier is in material breach of the Agreement.  During each audit, Supplier will grant the Auditors reasonable access to Supplier’s books, records, third-party audit and examination reports, systems, facilities, controls, processes, procedures, service level measurement systems, and actual service levels to the extent related to a reasonable assessment of Supplier’s performance of its obligations to JPMC.  Supplier will, in a timely manner, fully cooperate with the Auditors and provide the Auditors all assistance as they may reasonably

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request in connection with the audit.  The Auditors will seek to avoid disrupting Supplier’s operations during the audit.  If the Auditors document either an overcharge of the fees for the audited period or a material breach of Supplier’s obligations, Supplier will promptly (a) reimburse JPMC for its reasonable cost of performing the audit if the overcharge is more than two percent of the fees for the audited period, (b) reimburse JPMC for any overcharge (c) promptly correct any identified breach, and (d) such audit shall not be counted for the purposes of the limitation in the second sentence above.”

E.Section 8, Payments to Supplier, is hereby amended to include the following sections:

“8.7 Payments

All payments will be made in U.S. Dollars.  JPMC will pay all undisputed amounts on each invoice within 45 days after JPMC’s receipt of an accurate invoice, i.e., an invoice showing only undisputed amounts.  JPMC will have no obligation to pay any charges and expenses that Supplier fails to invoice to JPMC within 120 days after the charges or expenses were incurred.”

“8.8Expenses

Only when agreed to in the applicable Schedule will JPMC pay reasonable and actual (meaning without mark-up or administrative fee), pre-approved in writing travel and communications expenses (for which Supplier can provide receipts) incurred by Supplier to perform services under this Agreement and only in accordance with the JPMorgan Chase Supplier Travel and Expense Policy (a current copy of which is located at http://www.jpmorganchase.com/corporate/About-JPMC/travel-policy.htm or is otherwise available from JPMC upon request).  For the avoidance of doubt, JPMC will benefit from any rebates provided to Supplier by the travel and communications service providers regardless of whether they are reflected on the receipts or are applied at some other time.  If JPMC reimburses for meals or entertainment costs incurred by Supplier, any Internal Revenue Code Section 274 limitation on deductibility of the costs will be assumed by Supplier, not JPMC.”

“8.9 Credits

Any undisputed credits due to JPMC will be applied on the next invoice for the applicable Schedule against amounts then due and owing.  If any credit is due to JPMC after the termination or expiration of the applicable Schedule, Supplier will pay the amount of the credit to JPMC within 30 days after such termination or expiration.  All credits will be credited or paid in U.S. Dollars only.”

“8.10 Right to Set Off

JPMC will have the right to set off undisputed amounts owed by Supplier or any of Supplier’s Affiliates to JPMorgan Chase & Co. against amounts payable under this Agreement, if Supplier agrees in writing that such amount is due and payable to JPMC.”

“8.11 Invoice Disputes

In the event of a good faith dispute with regard to one or more item(s) appearing on an invoice, JPMC may withhold the disputed amount while the parties attempt to resolve the dispute in accordance with Section 19.14, 19.15, 19.25, & 19.26.  JPMC’s withholding of that payment prior to resolution of the dispute will not constitute a breach of this Agreement or be grounds for Supplier to suspend its provision of Deliverables.”

6.Section 11, Confidentiality; Compliance with Privacy Policies is hereby amended as follows:

A.Section 11.4(e) is hereby deleted except the last sentence of the paragraph, to be replaced with the following:

“If Supplier receives, has access to or processes personal information protected by the Privacy Regulations (“Personal Information”) from JPMorgan Chase & Co., or from other person within the scope of this Agreement, Supplier will be subject to applicable Laws restricting collection, use, disclosure, processing and free movement of personal data (collectively, the “Privacy Regulations”).  The Privacy Regulations include the Federal “Privacy of Consumer Financial Information” Regulation (12 CFR Part 40) and Interagency Guidelines Establishing Information Security Standards (App B to 12 CFR Part 30), as amended from time to time, issued pursuant to the Gramm-Leach-Bliley Act of 1999 (15 U.S.C. §6801, et seq.), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §1320d), The Data Protection Act 1998 and Directives 95/46/EC, 2009/136/EC and 2002/58/EC of the European Parliament and of the Council, as amended from time to time, and applicable implementing legislation.  JPMorgan Chase & Co. may provide guidelines to help Supplier comply with the Privacy Regulations, but Supplier using its own legal advisors will remain fully responsible for interpreting and complying with the Privacy Regulations with respect to Supplier’s business.”

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B.Section 11, Confidentiality; Compliance with Privacy Policies is hereby further amended to include the following sections:

“11.5 Return or Destruction

Supplier will return or destroy any of JPMC”s Confidential Information in Supplier’s possession or under Supplier’s control, as soon as possible after the earlier of:  (a) JPMC’s request, or (b) the date Supplier no longer requires that Confidential Information to perform its obligations to JPMC.  Supplier will provide JPMC with a certificate, signed by an officer of Supplier, certifying that all of that Confidential Information has been destroyed or returned to JPMC or its designee (e.g., JPMC’s escrow agent).  JPMC is entitled to withhold payment of any and all amounts due to Supplier so long as Supplier fails to comply with this Section or any other provisions of this Agreement or the applicable Schedule with respect to destruction or return of Confidential Information (collectively and individually, “Supplier’s Purge Obligations”).  The limitations of liability and disclaimers in this Agreement will not apply to any breach of Supplier’s Purge Obligations.  This provision shall survive termination or expiration of this Agreement.”

7.Section 12, Representation and Warranties, is hereby amended as follows:

A.Section 12.1(c) is hereby deleted in its entirety and replaced with the following:

“Each party represents and warrants that it has:  (a) all requisite legal and corporate power to execute and deliver this Agreement and each Schedule, (b) taken all corporate action necessary for the authorization, execution and delivery of this Agreement and each Schedule, (c) no agreement or understanding with any third party that interferes with or will interfere with its performance of its obligations under this Agreement and each Schedule, (d) obtained and will maintain all rights, approvals and consents necessary to perform its obligations and grant all rights and licenses granted under this Agreement and each Schedule, and (e) taken all action required to make this Agreement and each Schedule a legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms.”

B.Section 12.1(j) is hereby deleted in its entirety and replaced with the following:

“Supplier represents and warrants that each Deliverable will:  (a) be free from errors and defects caused by Supplier in workmanship and materials categorized as a Severity 1 (defect which crashes the deliverable and renders it unusable in the production environment or Severity 2 (defect in major functionality with significant impact on the user for which no workaround is available) for ninety (90) days after Acceptance of the Deliverable.  Within ten days after JPMC informs Supplier in writing during the warranty period that a Deliverable does not conform to this warranty, Supplier will, at its own expense, replace the nonconforming Deliverable with a Deliverable that is in Compliance.  If Supplier fails to do so within that period, JPMC may, at its option:  (i) extend the correction period or (ii) bring a claim against Supplier for the damages caused by the non-conforming Deliverable and any other Deliverables that JPMC is unable to use as a consequence of the nonconformity.

The forgoing warranty shall not apply to the extent the defect is caused by (i) JPMC’s hardware malfunction, environment or infrastructure, or other causes beyond the reasonable control of Supplier, (ii) third party software not licensed through Supplier, (iii) the installation of the Deliverable in a hardware or operating environment not expressly stated in the applicable Schedule; (iv) modification to the Deliverables (other than by Supplier), (v) failure of any assumption agreed by the parties, of (vi) the non-performance of JPMC of its obligations under any Schedule.”

D.Section 12, Representation and Warranties, is hereby further amended to include the following new sections:

“12.3 No Inducements

Supplier represents and warrants that Supplier has not provided, and will not provide, to any JPMorgan Chase & Co. employee or contractor any gift, gratuity, service or other inducement or favor to influence or reward that employee or contractor in connection with any Schedule.  By way of example and for the avoidance of doubt, meals and tickets are considered inappropriate under this Section.”

“12.4 Adequate Documentation

To the extent Documentation is included in the scope of the Schedule, Supplier represents and warrants that the Documentation will describe fully and accurately the features and functions of the version(s) of the Deliverables then in use by JPMC or Recipient well enough to allow a reasonably skilled JPMC or Recipient user to effectively use all of its features and functions without assistance from Supplier.  If Supplier provides source code, the Documentation will also include all information that a reasonably skilled programmer needs to maintain, modify and implement the applicable Deliverables without assistance from Supplier.”

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“12.5 Pass Through of Third Party Warranties

In addition to its other representations and warranties given in the Agreement, Supplier will provide to JPMC and Recipients the full benefit of all covenants, warranties, representations and indemnities granted to Supplier by third parties in connection with any Deliverables. Where the third party prohibits Supplier from passing through any indemnities, representations or warranties to JPMC, Supplier shall either (a) provide them directly to JPMC as part of this Agreement or (b) enforce them against the third party and provide the benefits of that enforcement to JPMC.”

“12.6 Adequate Assurances

With respect to any Schedule to be entered into between a JPMC Entity and a Supplier Affiliate, the JPMC entity may request and Supplier shall provide, contemporaneous with the execution of the applicable Schedule, an adequate assurance of such Supplier Affiliate’s ability to deliver the Deliverables in the form of a parent guarantee, letter of credit or performance bond (each, an “Assurance Document”) acceptable to the JPMC Entity in its reasonable discretion. However, in the absence of such Assurance Document at the time the Schedule is executed, and in connection with any Schedule to which Supplier itself is a part, Supplier covenants and agrees that during the Schedule Term of each Schedule, if the JPMC Entity becomes aware of facts or circumstances that it reasonably believes would cause Supplier Affiliate not to be willing or able to deliver the Deliverables or a significant portion of the Deliverables, the JPMC Entity may request, and Supplier shall provide within 48 hours after receipt of a request, adequate assurances (which may include furnishing an Assurance Document), acceptable to the JPMC Entity in its reasonable discretion, of Supplier Affiliate’s continuing ability and willingness to deliver the Deliverables as required by the applicable Schedule; provided, that any dispute with respect to this provision will trigger an immediate executive level face-to-face meeting at JPMC’s offices in accordance with Section 19.14.”

“12.7 Financial Interests

Supplier represents and warrants that it will reveal all financial interests related to any hardware, software, services, or provider thereof that Supplier might recommend to JPMC.”

8.Section 13, Indemnities in hereby deleted in its entirety and replaced with the following:

“13 Indemnities

13.1Supplier will indemnify, defend and hold harmless JPMorgan Chase & Co. and all of its direct and indirect officers, directors, employees, agents, successors and assigns (each, an “Indemnified Person”) from any and all losses, liabilities, damages (including taxes), and all related costs and expenses, including reasonable legal fees and disbursements and costs of investigation, litigation, settlement, judgment, interest and penalties (collectively, “Losses”), and threatened Losses due to, arising from or relating to third party claims, demands, actions or threat of action (whether in law, equity or in an alternative proceeding) (“Claim”) arising from or relating to:  (a) Supplier’s actual or alleged breach of the warranties set forth in Sections 12.1(a), 12.1(b), 12.1(c),12.1(d), 12.1(e), 12.1(f), 12.1(g), 12.1(h). 12.1(i), 12.1(n), 12.1(o), 12.3, 12.5, 12.6 in this Agreement; (b) any actual or alleged infringement, violation or misappropriation of the Intellectual Property Rights of any third person by (i) any Deliverables provided by Supplier or (ii) JPMC or a Recipient’s use of those Deliverables; (c) Supplier’s actual or alleged breach of any of the confidentiality or privacy provisions in this Agreement; (d) the failure of Supplier or any of its subcontractors or anyone acting on its or their behalf to pay any withholding or other employment-related taxes or other obligations in connection with Supplier Personnel; (e) fraud, grossly negligent, willful or reckless acts or omissions of or by Supplier or any Supplier Personnel or (f) death, bodily injury, personal injury or property damage caused by Supplier or Supplier Personnel or incurred during the performance of the Services (each, an “Indemnified Claim”).  No settlement or compromise that imposes any liability or obligation on any Indemnified Person will be made without the Indemnified Person’s prior written consent (not to be unreasonably withheld).  If Supplier fails to defend an Indemnified Person as provided in this Section after reasonable notice of an Indemnified Claim, Supplier will be bound:  (i) to indemnify and reimburse any Indemnified Person for any Losses incurred by the Indemnified Person, in its sole discretion, to defend, settle or compromise the Indemnified Claim; and (ii) by the determination of facts common to an action and subsequent action to enforce the Indemnified Person’s reimbursement rights. Notwithstanding the above, Supplier shall have no obligation under this Subsection 12.1or other liability for any infringement or misappropriation claim resulting or alleged to result from: (1) third party software not licensed by Supplier or if the Deliverable has been modified or altered by any person or entity other than Supplier without the written approval of Supplier (such writing may include Documentation and comments to the source code); (2) any aspect of JPMC software, documentation or data which existed prior to

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Supplier’s performance of Services; or (3) JPMC continuing the allegedly infringing activity after being notified thereof and provided with modifications that would have avoided the alleged infringement.  This Subsection 12.1sets forth the exclusive remedy and entire liability and obligation of Supplier with respect to intellectual property infringement or misappropriation claims, including patent or copyright infringement claims and trade secret misappropriation.

13.2  Indemnification Procedures.

(a)   If any Claim is commenced against any Party entitled to indemnification under this Article 12 (“Indemnified Party”), written notice thereof shall be given to the Party that is obligated to provide indemnification (“Indemnifying Party”) promptly upon receipt of the Claim by the Indemnified Party.  Failure to give such notification shall not affect the indemnification provided hereunder except to the extent that the Indemnifying Party has actually been materially and adversely affected as a result of such failure (except that the Indemnifying Party shall not be liable for any expenses incurred during the period in which the Indemnified Party failed to give notice if such Indemnified Party failed to give prompt notice).  To the extent received, the Indemnified Party shall make reasonable efforts to deliver copies of all notices and documents related to the Claim, including court papers, to the Indemnifying Party within five (5) business days of the Indemnified Party’s receipt thereof.

(b)   After such notice, if the Indemnifying Party shall acknowledge in writing to such Indemnified Party that this Agreement applies with respect to such Claim, then the Indemnifying Party shall be entitled, if it so elects, in a notice delivered to the Indemnified Party not less than fifteen (15) days prior to the date on which a response to such Claim is due, to immediately take control of the defense and investigation of such Claim and to select and engage attorneys reasonably satisfactory to the Indemnified Party to handle and defend the same, at the Indemnifying Party’s sole cost and expense.

(c)   The Indemnified Party shall cooperate in all reasonable respects with the Indemnifying Party and its attorneys in the investigation, trial and defense of such Claim and any appeal arising therefrom; provided, however, that the Indemnified Party may, at its own cost and expense, participate, through the Indemnified Party’s own attorneys or otherwise, in such investigation, trial and defense of such Claim; and any appeal arising therefrom.  The Indemnifying Party will bear the costs of counsel engaged by the Indemnified Party by reimbursing the Indemnified Party, as such costs are incurred and upon request therefor, if: (i) the use of counsel chosen by the Indemnifying Party to represent the Indemnified Party would present such counsel with a conflict of interest that would preclude such counsel from representing the Indemnified Party or (ii) the Indemnifying Party has failed to engage counsel reasonably satisfactory to the Indemnified Party within thirty (30) days after the Indemnifying Party has received notice of a Claim.

(d)   If the Indemnifying Party does not assume full control over the defense of a Claim subject to such defense as provided in this Section 13.3 (Indemnification Procedures), the Indemnifying Party may participate in such defense, at its sole cost and expense, and the Indemnified Party shall have the right to defend the Claim in such manner as it may deem appropriate, at the cost and expense of the Indemnifying Party, and the Indemnifying Party will bear the costs incurred by the Indemnified Party in connection therewith by reimbursing the Indemnified Party, as such costs are incurred and upon request therefor.

(e)   Supplier shall not settle any claim, action or proceeding in respect of which indemnity may be sought hereunder, whether or not JPMC is an actual or potential party to such claim, action or proceeding without JPMC’s written consent, which consent shall not be unreasonably withheld, delayed, or conditioned.  Notwithstanding the foregoing, JPMC may withhold, delay and/or condition its consent to any settlement of a Claim, in JPMC’s sole and absolute discretion, if:

(1)   such settlement: (A) involves a remedy other than the payment of money by the Indemnifying Party, (B) affect any rights of JPMC, including any rights with respect to the Work Product, (C) impose any actual liability upon JPMC, or (D) contain or imply (1) a factual admission by or with respect to JPMC, (2) any adverse statement or implication with respect to the character, professionalism, due care, loyalty, expertise, or reputation of JPMC, or (3) any wrongful action or inaction by JPMC; or

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(2)   Supplier and all plaintiffs or claimants do not affirmatively and unconditionally absolve and release JPMC from any responsibility or liability with respect thereto and the subject matter thereof and any responsibility or liability with respect to the same, similar, or related facts or circumstances.

(f)    If JPMC is enjoined, or is otherwise prohibited, from using Deliverable or Documentation (or any part thereof) as a result of or in connection with any claim under Section 12.1, Supplier promptly shall, at its sole expense and in the following order of precedence: (i) procure for JPMC the right to continue to use the Deliverable or Documentation; (ii) modify the Deliverable or Documentation so that it becomes noninfringing and nonviolative, without diminishing the functionality or performance of the Deliverable or Documentation or (iii) replace the Deliverable or Documentation with software and documentation that are noninfringing and nonviolative with equivalent functionality and performance.  If Supplier cannot, after using its best commercial efforts to do so within a reasonable period of time, so procure, modify or replace the Deliverable or Documentation, the Supplier shall terminate the applicable Schedule with respect to the Deliverable or Documentation involved and promptly refund to JPMC the fees for the Deliverable or Documentation involved under such Schedule.

9.Section 14.2 Exclusions, sub-clause (d), is hereby amended to include the sub-provision towards the exclusions from the Liability provided:

“(viii) death, personal injury or tangible property damage caused by either party”

10.Section 15, Insurance, is hereby deleted in its entirety and replaced with the following:

“15 Insurance

Within five Business Days after the execution of this Agreement or before commencing the provision of Deliverables or permitting any subcontractor to commence the provision of Deliverables, whichever is earlier, Supplier will, at its own cost and expense, procure and maintain in full force and effect throughout the Schedule Term the insurance policies listed in the Insurance Exhibit attached hereto.”
Insurance Exhibit is hereby added by way of this Amendment.

11.Section 16, Term; Termination is hereby amended as follows:

A.Section 16.4, Termination for Insolvency; Change of Control is hereby amended to be deleted in its entirety and replaced with the following:

“16.4, Termination for Insolvency; Change of Control

Either party may terminate this Agreement or any Schedule, in whole or in part, for cause as of the date specified in a termination notice if the other party, or, in the case of Supplier, any of Supplier’s Affiliates providing Deliverables to JPMC:  (a) files for bankruptcy, (b) becomes or is declared insolvent, (c) is the subject of any proceedings (not dismissed within 30 days) related to its liquidation, insolvency or the appointment of a receiver or similar officer for that party, (d) makes an assignment for the benefit of all or substantially all of its creditors, (e) takes any corporate action for its winding-up, dissolution or administration, (f) enters into an agreement for the extension or readjustment of substantially all of its obligations, or (g) recklessly or intentionally makes any material misstatement as to financial condition.”

B.Section 16, Term; Termination is hereby further amended to include the following new sections:

“16.7 Termination Assistance Services

In connection with the termination of any Schedule, Supplier will provide any and all services reasonably requested by JPMC, or as otherwise provided in the Schedule, to make a smooth transition from the use of Deliverables provided under the applicable Schedule to internal functions or alternate providers.  JPMC will pay Supplier the most applicable rates in any Schedule or in accordance with the Pricing Schedule Exhibit, in consideration of those services.  However, if JPMC terminates the Schedule for cause, Supplier will provide to JPMC these termination assistance services at rates in effect at time of termination.”

“16.8 Survival

(a)   Effect on Schedules

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After this Agreement terminates, the terms of this Agreement will remain in effect with respect to any Schedule entered into before the termination.  However, no Schedule may be entered into under this Agreement after it terminates.

(b)   Surviving Provisions

After this Agreement or a Schedule terminates or expires, the terms of this Agreement and that Schedule that expressly or by their nature contemplate performance after such termination or expiration will survive and continue in full force and effect.  For avoidance of doubt, the provisions protecting Confidential Information, permitting audits, providing for rights of quiet enjoyment, granting perpetual licenses, requiring reimbursement of Losses, requiring indemnification and setting forth limitations of liability each, by their nature, contemplate performance or observance after this Agreement or a Schedule expires or terminates.”

12.Section 18, Security; Information Technology Control Policies is hereby amended as follows:

A.Section 18.3, Compliance with JPMC Information/Technology Control Policies, is hereby amended to be deleted in its entirety and replaced with the following:

“18.3 Compliance with JPMC Information/Technology Control Policies

(a)   Whenever Supplier has JPMC Data, Supplier will (i) comply with ISO/IEC 27002 (Information Technology — Code of Practice for Information Security Management), (ii) comply with JPMC’s Minimum Control Requirements (a current copy of which is located at http://www.jpmorganchase.com/corporate/About-JPMC/supplier-minimum-control-requirements.htm or is otherwise available from JPMC upon request), and (iii) if Supplier stores, processes or transmits payment card primary account numbers or other cardholder data, comply with the then current Payment Card Industry Data Security Standard as well as any procedures set forth in the applicable Schedule (collectively, the “IT Risk Management Policies”).  JPMC may update the Minimum Control Requirements from time to time on reasonable notice, and Supplier will comply with the updated Minimum Control Requirements within the time required by applicable Law or as reasonably requested by JPMC.  Additionally, whenever Supplier has JPMC Data, Supplier will have policies and procedures to detect patterns, practices, or specific activity that indicates the possible existence of identity theft (“Red Flags”) that may arise in the performance of Supplier’s obligations under this Agreement and either report the Red Flags to JPMC or take appropriate steps to prevent or mitigate identity theft.  Supplier will not provide any JPMC Data to any subcontractor unless the subcontract requires the subcontractor to comply with the IT Risk Management Policies and the Privacy Regulations and to permit security audits by Auditors.

(b)   Unless and until JPMC is satisfied that Supplier is fully complying with this Section, Section 18.5 and Section 20, JPMC will not be bound by any obligation to allow Supplier access to JPMC Data.  Any breach of this Section 18.3, 18.5 and Section 20 that is not corrected within 30 days after JPMC gives Supplier a notice describing the breach will be deemed a material breach of this Agreement (even if the breach was not otherwise material).

(c)   Before Supplier may modify its systems in a way that could adversely impact the security of its systems, Supplier must send a 30 day advance notice to JPMC containing a reasonably detailed description of the proposed modification and a representation and warranty that:  (i) the proposed modifications will not pose any new or additional risks to the JPMC Data, and (ii) Supplier’s systems will continue to comply with JPMC’s IT Risk Management Policies.

(d)   In addition to any reporting requirements set forth in the applicable Schedule, Supplier will provide the following written periodic reports to the JPMC Relationship Manager:  (i) on a quarterly basis:  (A) summary system and network security incident reporting and access violation reporting, and summary of any Supplier remediation or action plans; (B) summary of incidents and breaches as to which Supplier was required to inform JPMC under Section 20.1 and Section 11, and summary of any Supplier remediation or action plans; and (C) the status of any existing remediation or action plans, including those that are related to security or that may impact the Deliverables; (ii) on a semi-annual basis, a then current list of names, user IDs and access levels for any JPMC personnel having access to Supplier applications and systems; and (iii) on an annual basis, summary security vulnerability scan or penetration test reporting with respect to the Deliverables and Supplier’s system and networks, including the perimeter, and summary of any Supplier remediation or action plans.”

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B.Section 18.5, Reports & On-Site Review, is hereby amended to delete sub-clause (c) in its entirety and replace with the following:

“(c) In addition to JPMC’s other audit rights under this Agreement, Auditors may conduct on-site security reviews, vulnerability testing and disaster recovery testing for Supplier’s systems containing JPMC Data and otherwise audit Supplier’s operations for compliance with the Minimum Control Requirements.  Auditors, other than regulators, will provide reasonable notice of such reviews. If vulnerabilities are identified, Supplier will (i) promptly document and implement mutually agreed upon remediation plan, and (ii) upon JPMC’s request, provide JPMC with the status of the implementation. JPMC is not responsible for any harm that results from these tests except to the extent it is a result of JPMC’s gross negligence, reckless or willful misconduct.

(d)   At least annually, Supplier will have a certified independent public accounting firm or another independent third party reasonably acceptable to JPMC:  (i) to the extent applicable/required as set forth in the Schedule, conduct a review or assessment and provide a full attestation, review or report under (A) SSAE 16 (Statement on Standards for Attestation Engagements No. 16)SOC (Service Organization Control) 2; (B) ISAE 3402 (International Standards on Assurance Engagements No. 3402) Type II; (C) BITS Financial Institution Shared Assessment Program (Standardized Information Gathering plus Agreed Upon Procedures); (D) SysTrust review (in accordance with principles and criteria developed by the American Institute of Certified Public Accountants); (E) a replacement for one of the foregoing approved by JPMC; or (F) other third party reviews and reports reasonably acceptable to JPMC, in each case, of all key systems and operational controls used in connection with any JPMC Data; and (ii) conduct and provide a full report of an independent network and application penetration test.  Each of these attestations, reviews, reports and tests will be for a scope approved by JPMorgan Chase & Co. in its reasonable discretion.  Supplier will provide all findings from these attestations, reviews and tests to JPMC upon receipt from the third party.  Supplier will (A) implement all recommendations set forth in such attestations, reviews, reports and any other reasonable recommendations made by JPMC arising out of JPMC’s analysis of such reviews and (B) upon JPMC’s request, provide JPMC with the status of the implementation.”

C.Section 18.6, Changes that may affect Services, is hereby deleted in its entirety and replaced with the following:

“18.6, Changes that may affect Services

Supplier will notify JPMC promptly of any actual or threatened occurrence of any event described in Section 16.4 or any other event that materially affects in an adverse manner, or that could reasonably be expected to materially affect in an adverse manner, Supplier’s ability to perform fully its obligations to any Recipient.  Events or conditions that Supplier must report include (a) any material breach (whether or not cured) of any (i) representation, warranty, covenant or obligation of Supplier or any Supplier Affiliate or subcontractor under this Agreement, or (ii) other agreement between Supplier or any Supplier Affiliate and JPMC or any JPMC Affiliate; (b) any actual, threatened or reasonably alleged violation of any applicable Law (including any criminal conviction of, or charge of a criminal violation, or imposition of any sanctions or professional disciplinary action that relate to provision of Deliverables) against, (i) Supplier, (ii) any Supplier Affiliate, (iii) any Supplier Personnel or (iv) any entity that is a party to or an Affiliate of a party to any agreement for the merger, acquisition, divestiture of any similar arrangement involving Supplier or any Supplier Affiliate; and (c) any risks or control issues that have been identified that could prevent fulfillment of Supplier’s obligations under this Agreement, along with, where applicable, information on any systems and processes that have been established to monitor and manage them.”

D.Section 18.9, Disaster Recovery Plan is hereby deleted in its entirety and replaced with the following:

“18.9, Disaster Recovery Plan and Business Continuity Plan for Resources Required to Provide Critical Services.

Unless Services are identified in a Schedule as “non-critical” to JPMC, all Services provided are considered critical (“Critical Services”).  If the Services are Critical Services, then throughout the Schedule Term:

(a)   Supplier will maintain a disaster recovery and business continuity plan (a “DRBCP”) for all technology, operational, financial, human or other resources required to provide the Services, together with the capacity to execute the DRBCP, with respect to Supplier’s primary, backup and other Systems, resources and locations.  The DRBCP will, at a minimum, conform to the standards set by the Federal Financial Institutions Examination Council, if applicable, as well as the requirements set forth in the applicable Schedule.  In addition, the DRBCP will address (to JPMC’s reasonable satisfaction) planning for pandemic and other circumstances that may result in material loss

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of availability of Supplier Personnel. Any breach of this Section will be deemed a material breach of this Agreement.

(b)   Within five days after signing the applicable Schedule and on an annual basis thereafter, Supplier will provide JPMC with an executive summary of Supplier’s then-current version of the DRBCP.  (If Supplier provided that summary to JPMC before signing, then within five days after signing, Supplier will provide JPMC a written confirmation that the DRBCP has not materially changed from that previously summarized.) Upon request, Supplier will provide Auditors and other JPMC designees access to the full DRBCP. In connection with each Schedule, Supplier will revise the DRBCP to adequately address concerns that JPMC raises from time to time.

(c)   Supplier will perform disaster recovery and business continuity tests at least annually.  Supplier will give JPMC reasonable notice of, and JPMC will be entitled to participate in, each test. Supplier will provide JPMC a written description of all DRBCP test results in sufficient detail to allow JPMC to assess the success of each test. Supplier will also participate and otherwise cooperate with JPMC, as reasonably requested by JPMC, in connection with JPMC’s development and testing of JPMC’s own disaster recovery and business continuity plans.

(d)   Upon the occurrence of any disaster or other event requiring use of the DRBCP, Supplier will promptly:  (i) notify JPMC of the disaster or other event and (ii) provide JPMC and each Recipient access to the Services in a manner that is at least equal to the access provided to Supplier’s other customers.  If JPMC determines that Supplier has not complied or cannot comply with the provisions of this Section or implement the DRBCP quickly enough to meet JPMC’s needs, Supplier will promptly assist and support JPMC in obtaining the Critical Services from an alternate provider.”

E.Section 18, Security; Information Technology Control Policies is hereby further amended to include the following additional section:

“18.10 Compliance with Procedures in Performance of Services

Supplier will, and will ensure that the Supplier Personnel will:  (a) while visiting or accessing JPMorgan Chase & Co.’s or any Recipient’s facilities, comply with JPMorgan Chase & Co.’s or any Recipient’s then-current safety and security procedures, including pre-screening requirements, and other rules and regulations applicable to JPMorgan Chase & Co. or Recipient personnel at those facilities, (b) comply with all reasonable requests of JPMorgan Chase & Co. or Recipient personnel, as applicable, pertaining to personal and professional conduct, including Supplier Personnel training requirements, (c) comply with JPMorgan Chase & Co.’s Supplier Code of Conduct, a current copy of which is located at http://www.jpmorganchase.com/corporate/About-JPMC/supplier-relations.htm or is otherwise available from JPMC upon request, (d) comply with the JPMorgan Chase & Co. Supplier Anti-Corruption Policy, a current copy of which is located at http://www.jpmorganchase.com/corporate/About-JPMC/supplier-relations.htm or is otherwise available from JPMC upon request and (e) otherwise conduct themselves in an ethical, professional and businesslike manner.  Supplier will provide Supplier Personnel with adequate training regarding JPMorgan Chase & Co. Supplier Code of Conduct, JPMorgan Chase & Co. Supplier Anti-Corruption Policy, compliance with applicable Laws and the proper provision (including as may be otherwise described in this Agreement or the applicable Schedule) of Services and other Deliverables.  If JPMC so requests, based on a reasonable belief that any Supplier Personnel has breached any of the foregoing obligations, Supplier will immediately, within 24 hours, remove any such Supplier Personnel from performing Services to JPMC.”

13.Section 19, Miscellaneous, is hereby amended as follows:

A.Section 19.2, Notices, is hereby amended to append the following provision at the end thereof:

“All notices must be in writing and in the English language. In addition, where this Agreement states that notice will be given “immediately” after an event occurs, the notifying party will also send an immediate e-mail message to the other party’s Relationship Manager.  Notices to be given “promptly” will be given, in any event, within five days.  A party may change its address for notices by sending a change of address notice using this notice procedure.”

C.Section 19.4, Waivers, is hereby deleted in its entirety and replaced with the following:

“19.4 Waivers

The failure of either party to enforce strict performance by the other party of any provision of this Agreement or to exercise any right under this Agreement will not be construed as a waiver to any extent of that party’s right to assert

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or rely upon any provision of this Agreement or right in that or any other instance.  A delay or omission by JPMC or Supplier to exercise any right or power under this Agreement will not be construed to be a waiver of that right or power.  Waiving one breach will not be construed to waive any succeeding breach.  All waivers must be in writing and signed (not in electronic form) by the party waiving rights.”

D.Section 19.6, EEOC, is hereby amended to be deleted in its entirety and replaced with the following:

“19.6 EEOC

If Supplier is a U.S. legal entity, then Supplier will not, and will ensure that Supplier Personnel do not, discriminate against any of its employees or applicants for employment because of age, race, color, religion, creed, citizenship status, marital status, sexual orientation, sex, gender identity, genetic information, national origin,  disability, veteran status or any other protected status under applicable law (e.g., civil union status, height, weight, arrest record and status with regard to public assistance, to the extent protected under applicable law). Supplier further agrees, unless exempt, to comply with all applicable requirements of the equal opportunity and affirmative action clauses set forth in Executive Order 11246 (applicable to subcontractors), as amended, in the regulations of the Department of Labor implementing the Vietnam Era Veterans Readjustment Act of 1974, and in the Rehabilitation Act of 1973, as amended, which, together with the implementing rules and regulations prescribed by the Secretary of Labor, are incorporated into this Agreement by reference.  The Supplier will abide by the requirements of 41 CFR §§ 60-1.4(a), 60-300.5(a) and 60-741.5(a).  These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, or national origin.  Moreover, these regulations require that Supplier takes affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, national origin, protected veteran status or disability.  Supplier will comply with JPMorgan Chase & Co.’s policy of maintaining a business environment free of all forms of discrimination, including sexual harassment.”

E.Section 19.7, Publicity, is hereby amended to delete the last sentence of the section and replace with the following:

“No exceptions are granted without the prior written consent of both the JPMorgan Chase & Co. Global Media Relations Department and a Managing Director within JPMorgan Chase & Co.’s sourcing organization.”

F.Section 19.14, Dispute Resolution, is hereby amended to include the following provision at the end thereof:

“If either party invokes executive level dispute resolution pursuant to Section 12.6, the executive sponsors designated by each party will convene at a meeting at JPMC’s offices, or other location designated by JPMC, within 48 hours of notice by either party.”

F.Section 19.22, Supplier Diversity is hereby amended to include Service Disabled Veteran Business Enterprises (“DVBE”) within the definition and scope of “Diverse Suppliers”

G.Section 19, Miscellaneous is hereby further amended to include the following new sections:

(i) “19.23 Relationship Manager

Each party will name one of its employees as the primary liaison with the other party for each Schedule (each, a “Relationship Manager”).  The Relationship Managers will serve as the parties’ points of contact.”

(ii) “19.24 Executive Order 13496 Compliance

The Supplier agrees to comply with all regulations issued pursuant to Executive Order 13496, if applicable, including 29 CFR Part 471, Appendix A to Subpart A of Part 471.”

(iii) “19.25 Immediate Injunctive Relief

Supplier acknowledges that JPMC will be irreparably harmed and Section 19.14 will not apply if Supplier breaches (or attempts or threatens to breach):  (a) its obligation to provide critical services to JPMC or Recipients (such as the termination assistance services as provided in Section 16.7), (b) its obligation respecting continued performance in accordance with Section 16.4, or (c) its obligations with respect to JPMC’s Confidential Information or JPMC Data.  If a court of competent jurisdiction finds that Supplier has breached (or attempted or threatened to breach) any of those obligations, Supplier agrees that, without any additional findings of irreparable injury or other conditions to injunctive relief, it will not oppose the entry of an appropriate order compelling performance by Supplier and restraining it from any further breaches (or attempted or threatened breaches).”

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(iv) “19.26 Waiver of Jury Trial

BOTH PARTIES AGREE TO WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN THE RESOLUTION OF THE DISPUTE OR CLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN ANY OF THE PARTIES OR ANY OF THEIR RESPECTIVE AFFILIATES ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THIS AGREEMENT.”

(iv) “19.27 Interpretation

Each party acknowledges that this Agreement has been the subject of active and complete negotiations, and that this Agreement should not be construed in favor of or against any party by reason of the extent to which any party or its professional advisors participated in the preparation of this Agreement.”

(v) “19.29 Disablement of Software and Hardware

Except if and to the extent expressly necessary for performance of maintenance or any other servicing or support expressly authorized in writing by JPMC, in no event will Supplier, its agents or employees or anyone acting on its behalf, intentionally disable or interfere, in whole or in part, with JPMC or Recipient’s use of any Deliverables or any software, hardware, systems or data owned, utilized or held by JPMorgan Chase & Co., Recipients or customers without the written permission of a corporate officer of JPMC, whether or not the disablement is in connection with any dispute between the parties or otherwise.  Supplier understands that a breach of this provision could cause substantial harm to JPMC and to numerous third parties having business relationships with JPMorgan Chase & Co.  No limitation of liability, whether contractual or statutory, will apply to a breach of this Section.”

(vi) “19.30 Nature of Licenses

All rights and licenses granted by Supplier pursuant to this Agreement by Supplier are, and will otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (or any replacement Law) (the “Code”), licenses to rights to “intellectual property” as defined in the Code.  The parties agree that each licensee, as licensee of those rights under this Agreement, will retain and may fully exercise all of its rights and elections under the Code.  The parties further agree that, if bankruptcy proceedings are brought by or against Supplier under the Code, each licensee will be entitled to retain all of its rights under this Agreement.”

(vii) “19.31 JPMC Delays

If a failure of JPMC to perform any of its obligations within the timeframes set forth in this Agreement or any Schedule prevents Supplier from timely performing its obligations, then the relevant dates of Supplier’s performance will be extended by an amount equal to the delay caused by JPMC.  The provisions of this Section will apply only if Supplier:  (a) notifies JPMC promptly (not more than seven days) after the occurrence of an event that constitutes a delay by JPMC under this Section, and (b) uses commercially reasonable efforts to perform notwithstanding JPMC’s failure to perform.  JPMC’s failure to perform any of its stated operational responsibilities or provide any JPMC resources expressly required pursuant to a Schedule will neither constitute a breach nor give rise to any right to terminate this Agreement or any Schedule.”

(viii) “19.32 Model Analysis

To the extent a Deliverable is used by or for JPMC to value positions, measure exposure or evaluate risk (collectively, the “Models”), including to facilitate JPMC’s compliance with regulatory and management requirements to fully understand and explain the Models used for its businesses, promptly after request from JPMC and at no additional charge, Supplier will (a) deliver to JPMC documentation sufficient to enable a detailed understanding of the methodology, analysis and calculations that are referenced, included or implemented in the development or use of the Models (collectively, “Model Analysis”) so as to enable JPMC to review and explain the Models; and (b) make qualified Supplier Personnel available to JPMC and its designees (including regulators and other Auditors) to provide “plain English” explanations of any such Models or Model Analysis.  Any such documentation and explanation is subject to Section 11.”

(ix) “19.33 Time is of the Essence

Supplier acknowledges that time is of the essence with respect to the performance of Supplier’s obligations to JPMC.”

(x) “19.34 English Language

The official language of the Agreement, its Exhibits and Schedules will be the English language.”

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14.The following additional provisions are included by way of this Amendment:

A.“20 Data Handler Terms

20.1 Grant of License to Use JPMC Data; Obligation to Notify JPMC

JPMC hereby grants Supplier a limited license to use the JPMC Data solely to perform Supplier’s obligations to JPMC during the Schedule Term.  Supplier will not use JPMC Data to contact any person except if required by any applicable Law and in accordance with this Agreement, provided, however, that in no event will any such contact involve marketing or solicitation of products or services. JPMC reserves all other rights in the JPMC Data.  Supplier will immediately notify JPMC of any actual or reasonably suspected unauthorized access to or use of the JPMC Data under Supplier’s control and Supplier will include with that notice the reasonably expected impact that the breach or access may have on any JPMC Entity or its customers.  Supplier will cooperate fully with JPMorgan Chase & Co. to investigate any such unauthorized access.

20.2 Protection of JPMC Data in the Event of Data Handler Bankruptcy

If Supplier undergoes any of the events described in Section 16.4, JPMC will have the immediate right to take possession of and retain for safekeeping all JPMC Data then in Supplier’s possession or under Supplier’s control.  JPMC may retain the JPMC Data until the trustee or receiver in bankruptcy or other appropriate court officer provides JPMC with adequate assurances and evidence that the JPMC Data will be protected from sale, release, inspection, publication or inclusion in any publicly accessible record, document, material or filing.  Supplier and JPMC agree that this Section is a material term of this Agreement, and without it, JPMC would not have entered into this Agreement or permitted any access to or use of JPMC Data.

20.3 Regeneration of JPMC Data by Data Handler

Supplier will promptly replace or regenerate from Supplier’s machine-readable media any data, programs or information stored by Supplier that Supplier has lost or damaged or obtain a new copy of the lost or damaged data, programs or information.  Alternatively, if Supplier breaches this Section 20.3 and is unable to replace or regenerate such data, programs or information JPMC may replace or regenerate any data, programs or information that Supplier has lost or damaged or obtain a new copy of the lost or damaged data, programs or information, in which case, Supplier will promptly reimburse JPMC for all reasonable costs associated with its regeneration or replacement efforts.

20.4 Storage, Return or Destruction of JPMC Data

Supplier will accurately and completely collect and maintain information regarding the storage location, media, and method of storage of all JPMC Data on an ongoing basis.  Unless expressly set forth in the applicable Schedule, if Supplier stores JPMC Data (including any and all copies, whether in production, backup or archival) it will do so on media logically and physically separate from other media used to store data of other Supplier clients.  Further, in addition to the return and/or destruction obligations under Section 11.5, with respect to JPMC Data, prior to termination of the applicable Schedule, or on a date otherwise reasonably specified by JPMC, Supplier will:  (a) meet with JPMC representatives to prepare and implement a plan for the return of all JPMC Data (in a format reasonably requested by JPMC); and (b) return to JPMC all JPMC Data as requested by JPMC.  To the extent applicable record retention Laws require Supplier to have access to JPMC Data after termination or expiration of the applicable Schedule or JPMC’s request for return or destruction, unless expressly set forth in an applicable Schedule, Supplier will provide those requirements to JPMC.  Additionally, upon JPMC’s written direction, Supplier will either:  (i) Securely Delete electronic JPMC Data from all media within 10 Business Days of that direction or (ii) to the extent that JPMC Data is in a form or media other than electronic, comply with JPMC’s written instructions to Securely Delete that JPMC Data.  Within 15 Business Days of that direction, Supplier will cause an officer of Supplier to certify to JPMC in writing that Supplier has complied with its obligations under clause (i) and (ii), as the case may be, including in compliance with JPMC’s instructions.  To the extent that JPMC Data cannot be so Securely Deleted due to technical or other reasons reasonably acceptable to JPMC, and to the extent JPMC expressly agrees in writing, Supplier will promptly provide a written description of measures to be taken that will ensure, for as long as any JPMC Data remains under Supplier’s or its subcontractors’ control, the continued protection of such JPMC Data, in compliance with the requirements of Section 20 and Section 11.  “Securely Delete” means using any and all means (including shredding or incineration in compliance with the National Institute for Standards and Technology (“NIST”) 800-88 standard) of deleting all data and information to ensure that the data and information deletion is permanent and cannot be retrieved, in whole or in part, by any data or information retrieval tools or similar means in accordance with JPMC’s prior written instructions. In no event will Supplier remove or have removed any JPMC Data from Supplier’s or any subcontractor’s site without JPMC’s prior written authorization.

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20.5 Survival of Data Handler Terms

The terms set forth in Section 20 will survive any expiration or termination of this Agreement or any Schedule for any reason.

20.6 Allocation of Risk

The limitations of liability and disclaimers in this Agreement will not apply to any breach of Section 20.”

B.“21 Testing, Correction and Acceptance

Each Deliverable will be subject to acceptance by JPMC as follows:

21.1 Acceptance Testing

After a Deliverable has been delivered, installed and configured and is ready for production in Recipient’s environment in accordance with Section 22.1(c), JPMC will have 45 days (or another time period as may be agreed in writing by the parties in the applicable Schedule) (the “Acceptance Testing Period”) to verify that the Deliverable is in Compliance.  Supplier will provide all reasonable assistance to JPMC or Recipient in connection with this testing.

21.2 Correction

If, during the Acceptance Testing Period, JPMC or a Recipient finds that a Deliverable is not in Compliance, JPMC will describe to Supplier in reasonable detail why the Deliverable is not in Compliance.  Within five Business Days (or another time period as may be agreed in writing by the parties in the applicable Schedule) after receipt of that description (the “Correction Period”), Supplier will, at no additional cost to JPMC, render the Deliverable in Compliance.  If Supplier fails to render the Deliverable in Compliance within the Correction Period, JPMC may (a) extend the Correction Period; or (b) terminate the applicable Schedule, in whole or in part, for material breach immediately by notice.

21.3 Acceptance

(a)Notice of Acceptance

If JPMC determines that a Deliverable is in Compliance, JPMC will notify Supplier that the Deliverable has been accepted (“Acceptance” or “Accepted”).  Acceptance will be implied:  (i) if Supplier gives JPMC notice after the Acceptance Testing Period requesting JPMC provide a formal notice of Acceptance and JPMC fails to respond within five Business Days; or (ii) if JPMC puts the Deliverable into full production for 15 Business Days.  Acceptance will not be implied from any other event.  Thus, for example, Acceptance will not be implied if JPMC uses the Deliverable in limited production, authorizes work on subsequent Deliverables, or makes a milestone payment.

(b)Component Deliverables

For fixed fee Schedules, if a Deliverable (a “Component Deliverable”) associated with a particular Milestone is to be integrated with another Deliverable (which may be an enhancement) associated with that same Milestone (an “Integrated Deliverable”), JPMC’s Acceptance of the Component Deliverable will be not final until Supplier successfully integrates the Component Deliverable with the Integrated Deliverable and JPMC Accepts those Integrated Deliverables.  Such right shall only extend to Deliverables which have not been previously accepted pursuant to a previous Milestone and acceptance may not be revoked for previously accepted Deliverables

(c)No Waiver

Acceptance does not waive any of JPMC’s rights to warranty and maintenance service for the Deliverable, even if JPMC knows of the problems prior to Acceptance.

21.4 Quiet Enjoyment

Upon Acceptance, Supplier will not disturb JPMC’s or Recipient’s quiet enjoyment of the Deliverables.”

C.“22 Delivery, Installation and Training

22.1 Pre-Delivery Testing

(a) General

Before Supplier delivers any Deliverable to a JPMC Entity or a Recipient, or provides access to any Deliverable to the extent they will be delivered remotely, Supplier will verify that the Deliverable is in full compliance with all applicable specifications, including functional, performance and operational specifications described in the applicable Schedule (“Documentation”) or other written technical specifications provided to, or agreed with,

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JPMorgan Chase & Co. about the Deliverable which are referred to and incorporated in to a Schedule (“Compliance”).  Upon JPMC’s request, Supplier will permit JPMC or any Recipient (or its designees) to observe that verification and obtain a report of all results.

(b)Software Deliverables.

To the extent that Supplier is providing software, including software development services as set forth in a Schedule for JPMC, Supplier shall demonstrate the maturity of controls in its development process by providing JPMC with applicable documentation and/or artifacts that the following software development controls are in place for the scope of the Deliverables being provided to JPMC hereunder which may include, to the extent agreed in the Schedule, the following:  (i) security requirements in the requirements phase of the software development life cycle; (ii) application architectural framework(s) designed for resiliency; (iii) static code analysis during development; (iv) dynamic scanning in the quality assurance or build process; (v) manual penetration testing, and (vi) security vulnerability management.  If Supplier is unable to provide any of the documentation or artifacts described above, then before Supplier delivers any Deliverable to a JPMC Entity or a Recipient, the following shall be required:  (x) a dynamic scan of Supplier’s developed code in a JPMC quality assurance environment, or (y) a third party provided scan of the binaries in a run time environment (the cost of such scan to be at Supplier’s sole cost and expense).

(c)Delivery.

Supplier will deliver or provide access to each Deliverable and Documentation to be provided under any Schedule to JPMC or the applicable Recipient(s) in the quantities, on the date(s) and/or to the place(s) specified in that Schedule, subject to JPMC obligations set forth in the Schedule, and, if so provided in the applicable Schedule install each Deliverable at JPMC or Recipient, in the quantities, at the locations and on or before the dates specified in the applicable Schedule.  If Supplier fails to do so, JPMC may, at its option:  (a) extend the required date and receive from Supplier, as liquidated damages and not as a penalty, the late delivery discount set forth in the applicable Schedule, or (b) terminate the applicable Schedule(s), in whole or in part

22.2 Postponement

JPMC may at any time, upon thirty (30) days prior written notice to Supplier, postpone Supplier’s scheduled provision of any Deliverable(s).  This notice will specify the commencement and estimated duration of the postponement, on mutually agreed terms.  Upon receiving the notice of postponement and expiration of the 30 day notice period, Supplier will implement the postponement and, during the period of postponement, properly care for and protect all Deliverables in progress.  JPMC may withdraw any postponement by notice to Supplier, in which case Supplier will resume its provision of the Deliverables after a reasonable resumption period, on mutually agreed terms.

22.3 Training

Training (if any) to be provided by Supplier with respect to the Deliverables will be specified in the applicable Schedule.”

15.Exhibit C - Pre-JPMC Assignment Statement, Exhibit E - Statement of JPMC Domestic Fingerprinting Policy for Contingent Worker Providers/Servicing Agencies and Exhibit F - Statement of JPMC Domestic Drug Testing Policy for Contingent Worker Providers/Servicing Agencies and Appendix 1 to Master Agreement Exhibit F are hereby deleted by way of this Amendment.

II.Except as expressly amended herein, the Agreement remains in full force and effect.

End of Document

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INSURANCE EXHIBIT

Supplier, within five Business Days after the execution of this Agreement or before commencing the provision of Deliverables or permitting any subcontractor to commence the provision of Deliverables, whichever is the earlier, will procure, maintain and evidence, at its own expense, the following required insurance of the following kinds and limits, with companies carrying a financial strength rating of not less than “A-” and in a financial size category of Class VIII or better, each as rated in the most current Best’s Insurance Reports, and permitted to insure risks in each jurisdiction where a claim or claims might arise or who are otherwise acceptable to JPMC.  Supplier may carry, at its own expense, such additional insurance as it may deem necessary.  Supplier will not be deemed to be relieved of any responsibility by the fact that it carries insurance.

A.REQUIRED INSURANCE.

(i) Workers’ Compensation and Employer’s Liability Insurance in accordance with the applicable laws of (a) the State of New York or (b) the state in which the Deliverables are to be provided or performed or (c) the state in which Supplier is obligated to pay compensation to employees engaged in the performance or provision of the Deliverables.  The policy limit under the Employer’s Liability Insurance section will not be less than $1,000,000 for any one accident and will include a waiver of subrogation against JPMorgan Chase & Co. and its subsidiaries, agents, officers, directors and employees.  If the Supplier is a sole proprietor and qualifies for exemption, Supplier will provide to JPMC evidence of exemption in the form of a certificate of exemption, affidavit of exemption or its equivalent received from the State’s Workers Compensation Division.  The required limit of liability may be satisfied through a combination of primary Employer’s Liability and Umbrella Liability insurance.

(ii) Commercial General Liability Insurance written on ISO occurrence form CG 00 01 (or a substitute form providing equivalent coverage) covering claims related to or arising from the Deliverables, the performance and provision of the Deliverables and everything incidental thereto, with limits of not less than $2,000,000 per occurrence,  or in whatever higher amounts as may be requested by JPMC from time to time and mutually agreed, in writing, by the parties, and extended to cover:  (a) Contractual Liability, with defense provided in addition to policy limits for indemnitees of the named insured; (b) if any of the Deliverables are subcontracted, Independent Contractors Liability providing coverage in connection with such portion of the Deliverables which may be subcontracted; (c) Broad Form Property Damage Liability; (d) Products & Completed Operations;  (e) Personal and Advertising Injury Liability and (f) Hired and Non-Ownership Automobile Liability, if not covered under Automobile Liability Insurance.  The policy will include: (x) a waiver of subrogation against all parties named as additional insureds, (y) a severability of interest provision and (z) “JPMorgan Chase & Co. and any and all subsidiaries, directors, officers, employees, and agents as their interest may appear” as additional insureds.  If such Commercial General Liability insurance contains a general aggregate limit, it will apply separately to the location or project that is the subject of the applicable Schedule.  The Commercial General Liability Insurance required under this paragraph will be raised to not less than $5,000,000 per occurrence combined single limit if Supplier’s provision of the Deliverables, in the ordinary course, involves hazardous trades (e.g., mechanical, electrical, plumbing or construction services or trades requiring the use of heavy machinery).  The required limit of liability may be satisfied through a combination of primary Commercial General Liability and Umbrella Liability insurance.

(iii) If automobiles or other vehicles are used in connection with the performance or provision of the Deliverables, Automobile Liability Insurance written on ISO occurrence form CA 00 01 (or a substitute form providing equivalent coverage) for any auto, including owned, hired, and non-owned automobiles and other vehicles, with bodily injury and property damage limits of not less than $2,000,000 each accident limit.  The policy will include “JPMorgan Chase & Co. and any and all subsidiaries, directors, officers, employees, and agents as their interests may appear” as additional insureds and a waiver of subrogation against all parties named as additional insureds.  The Automobile Liability Insurance required under this paragraph will be raised to not less than $5,000,000 each accident limit if Supplier’s provision of the Deliverables, in the ordinary course, involves hazardous trades (e.g., mechanical, electrical, plumbing or construction services or trades requiring the use of heavy machinery).  The required limit of liability may be satisfied through a combination of primary Automobile Liability and Umbrella Liability insurance.

(iv) If Supplier transports the property of JPMC or JPMC’s customers, All Risk Motor Truck Cargo Insurance or All Risk Transit and Premises Insurance with limits of not less than the replacement cost value, including reconstruction

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coverage in an amount of not less than $250,000, with no per item limit, covering property of JPMC or JPMC’s customers while on the premises of, in transit with or otherwise in the possession of Supplier Personnel.  This policy will:  (a) have no coverage limitations, exclusions or warranties other than standard exclusions for war, nuclear accident and breakage and (b) name JPMC as loss payee.

(v) If Supplier will be performing or providing Deliverables on JPMC premises, have access to JPMC tangible property or have control of or access to JPMC systems, accounts, money, or securities, Commercial Blanket Bond or an equivalent insurance policy covering all Supplier Personnel while engaged in connection with the Deliverables with a limit of not less than $10,000,000 per loss and including coverage for property of others in possession of Supplier Personnel while performing or providing the Deliverables.  This policy will (a) have no coverage limitations, exclusions or warranties other than standard exclusion for war, nuclear accident and breakage; and (b) name JPMC as loss payee.

(vi) To the extent Supplier holds, stores, stages, works upon or in any manner possesses personal property that is owned, held, or leased by, or the responsibility of JPMC or any of its customers, All Risk property damage insurance or Special Causes of Loss Form property insurance including coverage for loss caused by fire, flood, sprinkler leakage, windstorm, or earthquake in an amount equal to the replacement cost of such property.  Flood insurance will be required only to the extent that the property is within an area designated as having special flood hazards pursuant to the National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001-4128) or any amendments or supplements thereto or substitutions therefore (collectively, the “National Flood Insurance Program”).  The insurance carried in accordance with this subsection (vi) will contain an endorsement that provides that JPMC will be named as a loss payee relative to any loss or damage to the property described in this subsection (vi), and JPMC’s interest in any claim under Supplier’s insurance will be primary to and non-contributing with any interest of Supplier or any other party included under Supplier’s insurance.

(vii) To the extent that Supplier provides software, hardware, software or system development, consulting services, or Internet/Application Service Provider services (e.g., outsourced functions such as web-hosting), Technology Errors & Omissions (or technology professional liability coverage) insurance, including coverage for loss or disclosure of electronic data, media and content rights infringement and liability, network security failure and software copyright infringement liability and bodily injury and property damage due to the failure of Supplier’s products or services with limits of not less than $10,000,000 per occurrence.  If the policy is written on a claims-made basis, the coverage must remain in force for a period of at least two years following the provision or performance of the Deliverables.

(viii) To the extent that Supplier provides content, Media Errors & Omissions (or Media Liability) insurance, including coverage for loss or disclosure of electronic data, media and content rights infringement and liability, with limits of not less than $10,000,000 per occurrence.  If the policy is written on a claims-made basis, the coverage must remain in force for a period of at least two years following the provision or performance of the Deliverables.

(ix) If Supplier has access to Confidential Information, Privacy and Network Security (sometimes otherwise known as Cyber Liability) coverage which includes providing protection against liability for (a) system attacks, (b) denial or loss of service attacks, (c) spread of malicious software code, (d) unauthorized access and use of computer systems, (e) crisis management and customer notification expenses, (f) privacy regulatory defense and penalties and (g) liability arising from the loss or disclosure of confidential data with coverage limits of not less than $5,000,000 per occurrence. Such policy will include “JPMorgan Chase & Co. and any and all subsidiaries, directors, officers, employees, and agents as their interests may appear” as an additional insured.

(x) Professional Liability/Errors and Omissions Liability Insurance in the amount of not less than $10,000,000 per claim covering loss arising from claims alleging wrongful acts, errors or omissions committed by Supplier, its employees, or agents in the provision of or failure to render professional services.  If the policy is written on a claims-made basis, the coverage must remain in force for a period of at least two years following the provision or performance of the Deliverables.

Additional insured status for JPMorgan Chase & Co. and any of its subsidiaries, directors, officers, agents, employees or any other party required to be named as additional insureds under this Agreement will extend to the full limits of liability maintained by the Supplier even if those limits of liability are in excess of those required by this Agreement.

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Supplier’s insurance will be primary and all insurance carried by JPMorgan Chase & Co. is strictly excess and secondary and will not contribute with Supplier’s insurance.

Any self-insurance retentions or deductibles maintained by Supplier must be approved in writing by JPMC.

The requirements of this Agreement as to insurance limits, acceptability of insurers, and insurance to be maintained by Supplier are not intended to and will not in any manner limit or qualify the liabilities and obligations assumed by Supplier under this Agreement.

B.CERTIFICATES OF INSURANCE; GENERAL.

Supplier will have its insurance broker provide Certificates of Insurance to Supplier certifying that all insurance required is in force.  Supplier will maintain the certificates and, upon JPMC’s request, make them available for review.  Certificates of Insurance will include a copy of the insurance policy endorsements or policy form provisions providing the following: (i) JPMC is included as an additional insured where required, (ii) subrogation is waived where required; (iii) Supplier’s insurance is primary, and all insurance maintained by JPMorgan Chase & Co. is excess and secondary and shall not contribute with Supplier’s insurance; and (iv) all insurance will not be canceled or substantially changed without 30 days’ prior notice by certified mail to JPMC at the above address.

In the event of any renewal, termination, cancellation, or expiration in any policy of insurance required under this Agreement, Supplier will have its insurance broker provide a Certificate of Insurance to Supplier, which Supplier will maintain and make available at JPMC’s request for review.

Certificates must disclose all applicable policy deductibles and self-insured retentions (“SIR”).  Supplier agrees to be liable for all costs within the deductibles and SIR.  Any self-insured retentions or deductibles maintained by Supplier must be approved in writing by JPMC.

With respect to additional insured endorsements, coverage will be no less broad than one or the other of the following alternatives:  (a) the coverage afforded to the named insured under the policy with respect to the Deliverables to be provided or performed under this Agreement; or (b) the coverage afforded by Insurance Services Office Endorsement entitled (“Additional Insured — Designated Person or Organization”).

Supplier will, on request, permit JPMC to examine original insurance policies and certificates.

Where allowed or required by law to allow indemnification for “action-over” claims, Supplier specifically and expressly waives any immunity that may be granted it under the applicable State workers compensation/Industrial Insurance Act.  Further, the indemnification obligation under this Agreement will not be limited in any way by any amount or type of damages, compensation or benefits payable to or for any third party under workers compensation acts, disability benefit acts, or other employee benefits acts; provided Supplier’s waiver of immunity by the provisions of this paragraph extends only to “action-over” claims against Supplier by JPMC, and does not include, or extend to, any claims by Supplier’s employees directly against Supplier.

In the event that Deliverables are performed or provided by persons other than Supplier who are not parties to any Agreement with JPMC, Supplier will arrange to have such subcontractors furnish to Supplier evidence of insurance, subject to terms and conditions determined adequate to satisfy Supplier, at least two weeks prior to commencing with the performance or provision of such Deliverables.  It is understood and agreed that Supplier’s determination of the adequacy of the insurance carried by subcontractors in no way relieves Supplier from liability assumed by Supplier or insurance required of Supplier.

END OF DOCUMENT

23

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Kris Canekeratne, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Virtusa Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 5, 2015	/s/ Kris Canekeratne
	Kris Canekeratne
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Ranjan Kalia, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Virtusa Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 5, 2015	/s/ Ranjan Kalia
	Ranjan Kalia
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Virtusa Corporation (the “Company”) on Form 10-Q for the period ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kris Canekeratne, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 5, 2015	/s/ Kris Canekeratne
	Kris Canekeratne
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Virtusa Corporation (the “Company”) on Form 10-Q for the period ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ranjan Kalia, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 5, 2015	/s/ Ranjan Kalia
	Ranjan Kalia
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

XML

Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		3 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Mar. 31, 2014
Income Taxes
Effective tax rate (as a percent)	26.30%	24.50%	25.90%	24.70%
Decrease in contingent consideration			$ 1,833
Total liability for unrecognized tax benefits which would impact the annual effective rate, if realized	406		406		410
Decrease in unrecognized tax benefits			4	3,873
Unremitted earnings from foreign subsidiaries	184,273		184,273
Cash and short-term investments available for distribution if not indefinitely reinvested	$ 94,144		$ 94,144
India
Income Taxes
Number of subsidiaries which is export oriented			1
Statutory tax rate (as a percent)	34.00%	34.00%	34.00%	34.00%
India | Indian operations in areas designated as a SEZ
Income Taxes
Income tax exemption period			15 years
Number of subsidiaries eligible for tax holiday on export income			2
India | Virtusa India
Income Taxes
Income tax exemption period			10 years
Number of STPs operated			2
India | Virtusa India | Chennai
Income Taxes
Number of STPs operated			1
India | Virtusa India | Hyderabad
Income Taxes
Number of STPs operated			1
Sri Lanka | Virtusa (Private) Limited
Income Taxes
Income tax exemption period			12 years		12 years

XML

Fair Value of Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Changes in fair value of the Company's Level 3 financial liabilities
Increase (decrease) in contingent consideration (See Note 7)			$ (1,833)
Cumulative foreign currency translation adjustments	(5,388)	2,099	(10,838)	(8,829)
OSB
Changes in fair value of the Company's Level 3 financial liabilities
Increase (decrease) in contingent consideration (See Note 7)			1,068
Level 3
Changes in fair value of the Company's Level 3 financial liabilities
Balance at start of period			5,925
Cumulative foreign currency translation adjustments			(50)
Balance at end of period	4,610		4,610
Level 3 | OSB
Changes in fair value of the Company's Level 3 financial liabilities
Payment of OSB contingent consideration (See Note 7)			(500)
Increase (decrease) in contingent consideration (See Note 7)			1,068
Level 3 | TradeTech
Changes in fair value of the Company's Level 3 financial liabilities
Increase (decrease) in contingent consideration (See Note 7)			$ (1,833)

XML

Derivative Financial Instruments (Tables)

9 Months Ended

Dec. 31, 2014

Derivative Financial Instruments

Schedule of fair value of derivative instruments included in the consolidated balance sheets

	December 31, 2014		March 31, 2014
Foreign currency exchange contracts:
Other current assets	$	1,550	$	398
Other long-term assets	$	634	$	586
Accrued expenses and other current liabilities	$	2,535	$	3,925
Long-term liabilities	$	1,041	$	2,449

Schedule of effect of the foreign currency exchange contracts on the consolidated financial statements

	Amount of Gain or (Loss) Recognized in AOCI on Derivative (Effective Portion)
Derivatives Designated as Cash Flow	Three months ended December 31,				Nine months ended December 31,
Hedging Relationships	2014		2013		2014		2013
Foreign currency exchange contracts	$	553	$	1,167	$	2,067	$	(15,798	)

Location of Gain or (Loss) Reclassified	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
from AOCI into Income (Effective	Three months ended December 31,						Nine months ended December 31,
Portion)	2014			2013			2014			2013
Costs of revenue	$	(61	)	$	(780	)	$	(1,227	)	$	(2,839	)
Operating expenses	$	(34	)	$	(471	)	$	(704	)	$	(1,760	)

		Amount of Gain or (Loss) Recognized in Income on Derivatives
		Three months ended						Nine months ended
Derivatives not Designated	Location of Gain or (Loss)	December 31,						December 31,
as Hedging Instrument	Recognized in Income on Derivatives	2014			2013			2014			2013
Foreign currency exchange contracts	Foreign currency transaction gains (losses)	$	(216	)	$	420		$	(299	)	$	(3,034	)
	Revenue	$	183		$	(74	)	$	319		$	(555	)
	Costs of revenue	$	(106	)	$	30		$	(187	)	$	214
	Selling, general and administrative expenses	$	(38	)	$	3		$	(51	)	$	23

XML

Debt (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Debt
Receivables sold under the terms of the financing agreement	$ 22,744
Amounts due related to a financing agreement to sell certain accounts receivable balances	0
Prior secured revolving credit agreement
Debt
Maximum borrowing capacity under the credit agreement		3,000
Prior secured revolving credit agreement | Maximum
Debt
Debt to Adjusted EBITDA Ratio	2.00
Fixed Charge Coverage Ratio	2.50
Line of credit agreement
Debt
Maximum borrowing capacity under the credit agreement		25,000
Term of credit facility	5 years
Amount outstanding under the credit facility	0
Line of credit agreement | LIBOR
Debt
Variable rate basis	LIBOR
Line of credit agreement | LIBOR | Minimum
Debt
Interest rate added to the base rate (as a percent)	1.50%
Line of credit agreement | LIBOR | Maximum
Debt
Interest rate added to the base rate (as a percent)	1.75%
Prior amended and restated line of credit agreement
Debt
Maximum borrowing capacity under the credit agreement		$ 3,000

XML

Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2014
Changes in goodwill
Balance at the beginning of the period	$ 53,448
Cumulative foreign currency translation adjustments	(2,117)
Balance at the end of the period	51,331
Acquisition costs and goodwill deductible for tax purposes	41,834
Trade Tech Consulting Scandinavia A B
Changes in goodwill
Acquisition costs and goodwill not deductible for tax purposes	$ 10,888

XML

Net Income per Share

9 Months Ended

Dec. 31, 2014

Net Income per Share

Net Income per Share

(3) Net Income per Share

Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period, and diluted earnings per share is computed by including the dilutive impact of common stock equivalents outstanding for the period in the denominator. Common stock equivalents include shares issuable upon the exercise of outstanding stock options, stock appreciation rights, unvested restricted stock awards and unvested restricted stock units, net of shares assumed to have been purchased with the proceeds, using the treasury stock method. The following table sets forth the computation of basic and diluted net income per share for the periods set forth below:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013
Numerators:
Net income	$	11,779	$	9,328	$	30,897	$	24,328
Denominators:
Weighted average common shares outstanding	28,871,023		25,652,538		28,681,156		25,499,625
Dilutive effect of employee stock options and unvested restricted stock	748,620		874,810		781,270		819,364
Dilutive effect of stock appreciation rights	7,978		13,334		8,663		14,731
Weighted average shares-diluted	29,627,621		26,540,682		29,471,089		26,333,720
Net income per share-basic	$	0.41	$	0.36	$	1.08	$	0.95
Net income per share-diluted	$	0.40	$	0.35	$	1.05	$	0.92

During the three and nine months ended December 31, 2014, options to purchase 19,847 and 22,564 shares of common stock, respectively, were excluded from the calculations of diluted earnings per share as their effect would have been anti-dilutive.

During the three and nine months ended December 31, 2013, options to purchase 28,613 and 100,408 shares of common stock, respectively, were excluded from the calculations of diluted earnings per share as their effect would have been anti-dilutive.

XML

Pensions and Post-retirement Benefits (Details) (Pension benefits, USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Pension benefits
Pensions and post-retirement benefits
Service cost	$ 154	$ 129	$ 425	$ 397
Interest cost	58	56	175	160
Expected return on plan assets	(53)	(58)	(162)	(164)
Amortization past service cost	2	2	7	8
Amortization of actuarial loss	38	22	87	68
Net periodic pension cost	199	151	532	469
Expected cash contributions to the plans in current fiscal period			508
Cash contributions to the plan for the current fiscal year			$ 332

XML

Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Dec. 31, 2014

Accumulated Other Comprehensive Loss

Schedule of changes in accumulated other comprehensive income (loss) by component

Accumulated Other Comprehensive Income (Loss)	Three Months Ended December 31,						Nine Months Ended December 31,
(In thousands, except per share amounts)	2014			2013			2014			2013
Investment securities
Beginning balance	$	(95	)	$	—		$	(54	)	$	(3	)
Other comprehensive income (loss) (OCI) before reclassifications net of tax of $0 for all periods	5			9			(36		)	12
Reclassifications from OCI to other income — net of tax of $0 for all periods	(1		)	—			(1		)	—
Comprehensive income (loss) on investment securities, net of tax of $0 for all periods	4			9			(37		)	12
Closing Balance	$	(91	)	$	9		$	(91	)	$	9
Currency Translation Adjustments
Beginning balance	$	(28,703	)	$	(27,846	)	$	(23,253	)	$	(16,918	)
OCI before reclassifications	(5,388		)	2,099			(10,838		)	(8,829		)
Closing Balance	$	(34,091	)	$	(25,747	)	$	(34,091	)	$	(25,747	)
Cash Flow Hedges
Beginning balance	$	(1,358	)	$	(10,305	)	$	(3,829	)	$	(1,013	)
OCI before reclassifications net of tax of $21, $(488), $(340) and $5,046	573			680			1,727			(10,751		)
Reclassifications from OCI to
- Costs of revenue, net of tax of $(31), $(223), $(360) and $(978)	30			557			867			1,860
- Selling, general and administrative expenses, net of tax of $(16), $(153), $(206) and $(607)	18			318			498			1,154
Comprehensive income (loss) on cash flow hedges, net of tax of $(26), $(864), $(906) and $3,461	621			1,555			3,092			(7,737		)
Closing Balance	$	(737	)	$	(8,750	)	$	(737	)	$	(8,750	)
Benefit plans
Beginning balance	$	(565	)	$	(637	)	$	(578	)	$	(780	)
OCI before reclassifications net of tax of $0 for all periods	(216		)	—			(216		)	—
Reclassifications from OCI for prior service credit (cost) to:
- Costs of revenue, net of tax of $0 for all periods	2			2			6			6
- Selling, general and administrative expenses, net of tax of $0 for all periods	1			—			1			2
Reclassifications from OCI for net actuarial gain (loss) amortization to:
- Costs of revenue, net of tax of $0 for all periods	23			18			52			53
- Selling, general and administrative expenses, net of tax of $0 for all periods	15			5			35			16
Other adjustments	3			(12		)	(37		)	79
Comprehensive income (loss) on benefit plans, net of tax of $0 for all periods	(172		)	13			(159		)	156
Closing Balance	$	(737	)	(624		)	(737		)	(624		)
Accumulated other comprehensive loss closing balance	$	(35,656	)	$	(35,112	)	$	(35,656	)	$	(35,112	)

XML

Pensions and Post-retirement benefits (Tables)

9 Months Ended

Dec. 31, 2014

Pensions and post-retirement benefits

Schedule of pension expense recognized

	Three Months Ended December 31,						Nine Months Ended December 31,
	2014			2013			2014			2013
Components of net periodic pension cost
Service cost	$	154		$	129		$	425		$	397
Interest cost	58			56			175			160
Expected return on plan assets	(53		)	(58		)	(162		)	(164		)
Amortization past service cost	2			2			7			8
Amortization of actuarial loss	38			22			87			68
Net periodic pension cost	$	199		$	151		532			$	469

XML

Accumulated Other Comprehensive Loss (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Mar. 31, 2014
Changes in accumulated other comprehensive income (loss)
Balance at the beginning of the period					$ (27,714)
Reclassifications from OCI to:
Balance at the end of the period	(35,656)	(35,112)	(35,656)	(35,112)	(27,714)
Investment securities.
Changes in accumulated other comprehensive income (loss)
Balance at the beginning of the period	(95)		(54)	(3)
Other comprehensive income (loss) before reclassifications net of tax	5	9	(36)	12
Other comprehensive income (loss) (OCI) before reclassifications, tax effect	0	0	0	0
Reclassifications from OCI to:
Other income, net of tax	(1)		(1)
Comprehensive income (loss), net of tax	4	9	(37)	12
Comprehensive income (loss), tax effect	0	0	0	0
Balance at the end of the period	(91)	9	(91)	9
Investment securities. | Reclassification out of accumulated other comprehensive income
Reclassifications from OCI to:
Other income, tax effect	0	0	0	0
Currency Translation Adjustments
Changes in accumulated other comprehensive income (loss)
Balance at the beginning of the period	(28,703)	(27,846)	(23,253)	(16,918)
Other comprehensive income (loss) before reclassifications net of tax	(5,388)	2,099	(10,838)	(8,829)
Reclassifications from OCI to:
Balance at the end of the period	(34,091)	(25,747)	(34,091)	(25,747)
Cash Flow Hedges
Changes in accumulated other comprehensive income (loss)
Balance at the beginning of the period	(1,358)	(10,305)	(3,829)	(1,013)
Other comprehensive income (loss) before reclassifications net of tax	573	680	1,727	(10,751)
Other comprehensive income (loss) (OCI) before reclassifications, tax effect	21	(488)	(340)	5,046
Reclassifications from OCI to:
Comprehensive income (loss), net of tax	621	1,555	3,092	(7,737)
Comprehensive income (loss), tax effect	(26)	(864)	(906)	3,461
Balance at the end of the period	(737)	(8,750)	(737)	(8,750)
Cash Flow Hedges | Reclassification out of accumulated other comprehensive income
Reclassifications from OCI to:
Costs of revenue, net of tax	30	557	867	1,860
Costs of revenue, tax effect	(31)	(223)	(360)	(978)
Selling, general and administrative expenses, net of tax	18	318	498	1,154
Selling, general and administrative expenses, tax effect	(16)	(153)	(206)	(607)
Benefit plans
Changes in accumulated other comprehensive income (loss)
Balance at the beginning of the period	(565)	(637)	(578)	(780)
Other comprehensive income (loss) before reclassifications net of tax	(216)		(216)
Other comprehensive income (loss) (OCI) before reclassifications, tax effect	0	0	0	0
Reclassifications from OCI to:
Other adjustments	3	(12)	(37)	79
Comprehensive income (loss), net of tax	(172)	13	(159)	156
Comprehensive income (loss), tax effect	0	0	0	0
Balance at the end of the period	(737)	(624)	(737)	(624)
Benefit plans, prior service credit (cost) | Reclassification out of accumulated other comprehensive income
Reclassifications from OCI to:
Costs of revenue, net of tax	2	2	6	6
Costs of revenue, tax effect	0	0	0	0
Selling, general and administrative expenses, net of tax	1		1	2
Selling, general and administrative expenses, tax effect	0	0	0	0
Benefit plans, net actuarial gain (loss) | Reclassification out of accumulated other comprehensive income
Reclassifications from OCI to:
Costs of revenue, net of tax	23	18	52	53
Costs of revenue, tax effect	0	0	0	0
Selling, general and administrative expenses, net of tax	15	5	35	16
Selling, general and administrative expenses, tax effect	$ 0	$ 0	$ 0	$ 0

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Net Income per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Numerators:
Net income	$ 11,779	$ 9,328	$ 30,897	$ 24,328
Denominators:
Weighted average common shares outstanding	28,871,023	25,652,538	28,681,156	25,499,625
Dilutive effect of employee stock options and unvested restricted stock (in shares)	748,620	874,810	781,270	819,364
Dilutive effect of stock appreciation rights (in shares)	7,978	13,334	8,663	14,731
Weighted average shares-diluted	29,627,621	26,540,682	29,471,089	26,333,720
Net income per share-basic (in dollars per share)	$ 0.41	$ 0.36	$ 1.08	$ 0.95
Net income per share-diluted (in dollars per share)	$ 0.40	$ 0.35	$ 1.05	$ 0.92
Options excluded from the calculations of diluted earnings per share (in shares)	19,847	28,613	22,564	100,408

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Investment Securities (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Mar. 31, 2014
Investment Securities
Amortized Cost	$ 126,318	$ 117,992
Gross Unrealized Gains	7	15
Gross Unrealized Losses	(131)	(104)
Fair Value	126,194	117,903
Corporate bonds | Current
Investment Securities
Amortized Cost	49,265	20,255
Gross Unrealized Gains	4	9
Gross Unrealized Losses	(52)	(8)
Fair Value	49,217	20,256
Corporate bonds | Non-current
Investment Securities
Amortized Cost	26,978	50,264
Gross Unrealized Gains	2	5
Gross Unrealized Losses	(68)	(70)
Fair Value	26,912	50,199
Auction-rate securities | Non-current
Investment Securities
Amortized Cost		300
Gross Unrealized Losses		(12)
Fair Value		288
Agency and short-term notes | Current
Investment Securities
Amortized Cost	1,013	561
Gross Unrealized Gains	1
Fair Value	1,014	561
Agency and short-term notes | Non-current
Investment Securities
Amortized Cost	13,370	11,341
Gross Unrealized Gains		1
Gross Unrealized Losses	(11)	(14)
Fair Value	13,359	11,328
Commercial paper | Current
Investment Securities
Amortized Cost		5,497
Fair Value		5,497
Municipal bonds | Current
Investment Securities
Amortized Cost	200
Fair Value	200
Municipal bonds | Non-current
Investment Securities
Amortized Cost		200
Fair Value		200
Time deposits | Current
Investment Securities
Amortized Cost	35,492	29,574
Fair Value	$ 35,492	$ 29,574

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Unaudited Interim Financial Information

9 Months Ended

Dec. 31, 2014

Unaudited Interim Financial Information

Unaudited Interim Financial Information

(2) Unaudited Interim Financial Information

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with U.S. generally accepted accounting principles and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, and should be read in conjunction with the Company’s audited consolidated financial statements (and notes thereto) for the fiscal year ended March 31, 2014 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 23, 2014. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of the accompanying unaudited consolidated financial statements have been included, and all material adjustments are of a normal and recurring nature. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire fiscal year.

Principles of Consolidation

The consolidated financial statements reflect the accounts of the Company and its direct and indirect subsidiaries, Virtusa Consulting Services Private Limited and Virtusa Software Services Private Limited, each organized and located in India, Virtusa (Private) Limited, organized and located in Sri Lanka, Virtusa UK Limited, organized and located in the United Kingdom, Virtusa Securities Corporation, a Massachusetts securities corporation, InSource LLC, a limited liability company organized in Connecticut,  Virtusa International, B.V., organized and located in the Netherlands, Virtusa Hungary Kft., incorporated and located in Hungary, Virtusa Germany GmbH, organized and located in Germany, Virtusa Singapore Private Limited, organized and located in Singapore, Virtusa Malaysia Private Limited, organized and located in Malaysia, Virtusa Austria GmbH, organized and located in Austria, Virtusa Philippines Inc., organized and located in the Philippines, TradeTech Consulting Scandinavia AB, organized and located in Sweden and Virtusa Canada, Inc., a corporation organized under the laws of British Columbia, Canada. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Management reevaluates these estimates on an ongoing basis. The most significant estimates relate to the recognition of revenue and profits based on the percentage of completion method of accounting for fixed price contracts, share based compensation, income taxes, including reserves for uncertain tax positions, deferred taxes and liabilities, intangible assets, contingent consideration and valuation of financial instruments including derivative contracts and investments. Management bases its estimates on historical experience and on various other factors and assumptions that are believed to be reasonable under the circumstances. The actual amounts may vary from the estimates used in the preparation of the accompanying consolidated financial statements.

Fair Value of Financial Instruments

At December 31, 2014 and March 31, 2014, the carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, unbilled accounts receivable, restricted cash, accounts payable, accrued employee compensation and benefits and other accrued expenses, approximate their fair values due to the nature of the items. See Note 5 for a discussion of the fair value of the Company’s other financial instruments.

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Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Mar. 31, 2014
Level 3
Liabilities:
Total liabilities	$ 4,610	$ 5,925
Recurring | Level 2
Investments:
Available-for-sale securities - current	85,923
Available-for-sale securities - non-current	40,271
Foreign currency derivative contracts	2,184
Total assets	128,378
Liabilities:
Foreign currency derivative contracts	3,576
Total liabilities	3,576
Recurring | Level 3
Liabilities:
Contingent consideration	4,610
Total liabilities	4,610
Recurring | Total
Investments:
Available-for-sale securities - current	85,923
Available-for-sale securities - non-current	40,271
Foreign currency derivative contracts	2,184
Total assets	128,378
Liabilities:
Foreign currency derivative contracts	3,576
Contingent consideration	4,610
Total liabilities	$ 8,186

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Concentration of Revenue and Assets (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Mar. 31, 2014
Concentration of Revenue and Assets
Consolidated revenue	$ 122,996	$ 101,043	$ 352,969	$ 285,833
Consolidated long-lived assets, net	110,791		110,791		117,455
North America
Concentration of Revenue and Assets
Consolidated revenue	83,324	70,510	232,773	205,547
Europe
Concentration of Revenue and Assets
Consolidated revenue	31,658	24,895	98,141	64,686
Consolidated long-lived assets, net	19,832		19,832		23,658
Rest of world
Concentration of Revenue and Assets
Consolidated revenue	8,014	5,638	22,055	15,600
United States
Concentration of Revenue and Assets
Consolidated long-lived assets, net	59,916		59,916		61,562
Asia
Concentration of Revenue and Assets
Consolidated long-lived assets, net	$ 31,043		$ 31,043		$ 32,235

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Mar. 31, 2014
Current assets:
Cash and cash equivalents	$ 98,278	$ 82,761
Short-term investments	85,923	55,888
Accounts receivable, net of allowance of $1,006 and $1,130 at December 31, 2014 and March 31, 2014, respectively	73,582	64,662
Unbilled accounts receivable	25,175	26,548
Prepaid expenses	11,651	9,036
Deferred income taxes	6,026	6,610
Restricted cash	1,792	2,662
Other current assets	12,582	11,922
Total current assets	315,009	260,089
Property and equipment, net of depreciation of $35,015 and 30,625 at December 31, 2014 and March, 2014, respectively	35,888	35,346
Long-term investments	40,271	62,015
Deferred income taxes	4,272	4,651
Goodwill	51,331	53,448
Intangible assets, net	23,572	28,661
Other long-term assets	5,788	5,215
Total assets	476,131	449,425
Current liabilities:
Accounts payable	9,418	11,002
Accrued employee compensation and benefits	22,047	27,175
Accrued expenses and other current liabilities	27,784	27,299
Income taxes payable	2,478	1,294
Total current liabilities	61,727	66,770
Deferred income taxes	2,037	2,744
Long-term liabilities	5,125	5,841
Total liabilities	68,889	75,355
Commitments and guarantees
Stockholders' equity:
Undesignated preferred stock, $0.01 par value: Authorized 5,000,000 shares at December 31, 2014 and March 31, 2014; zero shares issued and outstanding at December 31, 2014 and March 31, 2014
Common stock, $0.01 par value: Authorized 120,000,000 shares at December 31, 2014 and March 31, 2014; issued 30,805,814 and 30,263,243 shares at December 31, 2014 and March 31, 2014, respectively; outstanding 28,949,111 and 28,406,540 shares at December 31, 2014 and March 31, 2014, respectively	308	303
Treasury stock, 1,856,703 common shares, at cost, at December 31, 2014 and March 31, 2014, respectively	(9,652)	(9,652)
Additional paid-in capital	279,723	269,511
Retained earnings	172,519	141,622
Accumulated other comprehensive loss	(35,656)	(27,714)
Total stockholders' equity	407,242	374,070
Total liabilities, undesignated preferred stock and stockholders' equity	$ 476,131	$ 449,425

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Subsequent Events (Details) (Subsequent event, Derivatives designated as hedging instruments, Foreign currency forward contracts) In Thousands, unless otherwise specified	Jan. 08, 2015 U.S. Dollar and U.K. Pound Sterling Forward Contract USD ($)	Jan. 08, 2015 U.S. Dollar and U.K. Pound Sterling Forward Contract GBP (£)	Jan. 08, 2015 U.S. dollar and Swedish Krona ("SEK") Forward Contract USD ($)	Jan. 08, 2015 U.S. dollar and Swedish Krona ("SEK") Forward Contract SEK	Jan. 08, 2015 U.S. Dollar and Euro Forward Contract USD ($)	Jan. 08, 2015 U.S. Dollar and Euro Forward Contract EUR (€)
Subsequent Events
Aggregate notional amount of foreign currency forward contracts	$ 10,493	£ 6,982	$ 914	7,301	$ 441	€ 376
Weighted average settlement rate	1.50		0.13		1.17

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities:
Net income	$ 30,897	$ 24,328
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	10,459	7,892
Share-based compensation expense	7,974	5,725
Reversal of contingent consideration	(1,833)
Provision for doubtful accounts	(30)	524
Loss on sale of property and equipment	40	10
Deferred income taxes	73
Foreign currency losses, net	200	434
Amortization of discounts and premiums on investments	962
Excess tax benefits from stock option exercises	(3,968)	(2,974)
Net change in operating assets and liabilities:
Accounts receivable and unbilled receivable	(10,655)	6,205
Prepaid expenses and other current assets	109	(3,022)
Other long-term assets	(705)	(923)
Accounts payable	(898)	(1,171)
Accrued employee compensation and benefits	(8,710)	67
Accrued expenses and other current liabilities	5,840	(1,921)
Income taxes payable	1,371	4,639
Other long-term liabilities	645	(286)
Net cash provided by operating activities	31,771	39,527
Cash flows from investing activities:
Proceeds from sale of property and equipment	84	71
Purchase of short-term investments	(8,605)	(12,302)
Proceeds from sale or maturity of short-term investments	16,017	5,024
Purchase of long-term investments	(25,911)	(7,074)
Proceeds from sale or maturity of long-term investments	7,500	800
Decrease (increase) in restricted cash	669	(362)
Business acquisition	(684)	(6,156)
Purchase of property and equipment	(9,146)	(5,825)
Net cash used in investing activities	(20,076)	(25,824)
Cash flows from financing activities:
Borrowings on revolving credit facility		20,000
Proceeds from exercise of common stock options	2,535	2,330
Payment of contingent consideration related to acquisitions	(441)
Principal payments on capital lease obligation	(91)	(12)
Excess tax benefits from stock option exercises	3,968	2,974
Net cash provided by financing activities	5,971	25,292
Effect of exchange rate changes on cash and cash equivalents	(2,149)	(2,788)
Net increase in cash and cash equivalents	15,517	36,207
Cash and cash equivalents, beginning of period	82,761	57,199
Cash and cash equivalents, end of period	$ 98,278	$ 93,406

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Derivative Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Costs of revenue
Derivative Financial Instruments
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	$ (61)	$ (780)	$ (1,227)	$ (2,839)
Operating expenses
Derivative Financial Instruments
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	(34)	(471)	(704)	(1,760)
Derivatives designated as hedging instruments | Foreign currency exchange contracts
Derivative Financial Instruments
Amount of Gain or (Loss) Recognized in AOCI on Derivatives (Effective Portion)	553	1,167	2,067	(15,798)
Derivatives not Designated as Hedging Instrument | Foreign currency exchange contracts | Foreign currency transaction gains (losses)
Derivative Financial Instruments
Amount of Gain or (Loss) Recognized in Income on Derivatives	(216)	(420)	(299)	(3,034)
Derivatives not Designated as Hedging Instrument | Foreign currency exchange contracts | Revenue
Derivative Financial Instruments
Amount of Gain or (Loss) Recognized in Income on Derivatives	183	(74)	319	(555)
Derivatives not Designated as Hedging Instrument | Foreign currency exchange contracts | Costs of revenue
Derivative Financial Instruments
Amount of Gain or (Loss) Recognized in Income on Derivatives	(106)	30	(187)	214
Derivatives not Designated as Hedging Instrument | Foreign currency exchange contracts | Selling, general and administrative expenses
Derivative Financial Instruments
Amount of Gain or (Loss) Recognized in Income on Derivatives	$ (38)	$ 3	$ (51)	$ 23

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Net Income per Share (Tables)

9 Months Ended

Dec. 31, 2014

Net Income per Share

Schedule of computation of basic and diluted net income per share

	Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013
Numerators:
Net income	$	11,779	$	9,328	$	30,897	$	24,328
Denominators:
Weighted average common shares outstanding	28,871,023		25,652,538		28,681,156		25,499,625
Dilutive effect of employee stock options and unvested restricted stock	748,620		874,810		781,270		819,364
Dilutive effect of stock appreciation rights	7,978		13,334		8,663		14,731
Weighted average shares-diluted	29,627,621		26,540,682		29,471,089		26,333,720
Net income per share-basic	$	0.41	$	0.36	$	1.08	$	0.95
Net income per share-diluted	$	0.40	$	0.35	$	1.05	$	0.92

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Acquisitions (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended		0 Months Ended	1 Months Ended	5 Months Ended	0 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Nov. 01, 2013	Nov. 30, 2014	Mar. 31, 2014	Jan. 02, 2014	Jan. 02, 2013
Consideration Transferred:
Payments for earn-out consideration	$ 441
Increase (decrease) in contingent consideration (See Note 7)	(1,833)
Payment of hold back	684	6,156
OSB
Acquisitions
Purchase price in cash			6,840
Hold back percentage			10.00%
Hold back period			12 months
Percentage of the performance targets met					100.00%
Consideration Transferred:
Payments for earn-out consideration	500
Increase (decrease) in contingent consideration (See Note 7)	1,068
Fair value of contingent consideration	4,610				4,042
Payment of hold back				684
OSB | Maximum
Acquisitions
Additional earn-out consideration			6,000
Trade Tech Consulting Scandinavia A B | Virtusa BV
Acquisitions
Purchase price in cash						19,087
Hold back percentage						12.50%
Hold back period						12 months
Consideration Transferred:
Increase (decrease) in contingent consideration (See Note 7)	(1,833)
Fair value of contingent consideration	0
Trade Tech Consulting Scandinavia A B | Deferred restricted stock awards
Purchase Price Allocation
Authorized value of awards						2,000
Number of authorized shares						65,000
Vesting period						5 years
Trade Tech Consulting Scandinavia A B | Maximum | Virtusa BV
Acquisitions
Additional earn-out consideration							$ 4,080

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Dec. 31, 2014

Fair Value of Financial Instruments

Schedule of financial assets and liabilities measured at fair value on a recurring basis

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Available-for-sales securities—current	$	—	$	85,923	$	—	$	85,923
Available-for-sales securities—non-current	—		40,271				40,271
Foreign currency derivative contracts	—		2,184		—		2,184
Total assets	$	—	$	128,378	$		$	128,378
Liabilities:
Foreign currency derivative contracts	$	—	$	3,576	$	—	$	3,576
Contingent consideration	—		—		4,610		4,610
Total liabilities	$	—	$	3,576	$	4,610	$	8,186

Schedule of changes in fair value of the Company's Level 3 financial liabilities

	Level 3 Liabilities
Balance at April 1, 2014	$	5,925
Payment of OSB contingent consideration (See Note 7)	(500		)
Reversal of the TradeTech earn-out recognized in earnings (See Note 7)	(1,833		)
Increase of the OSB earn-out recognized in earnings (See Note 7)	1,068
Cumulative foreign currency translation adjustments	(50		)
Balance at December 31, 2014	$	4,610

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Nature of Business

9 Months Ended

Dec. 31, 2014

Nature of Business

Nature of Business

(1) Nature of Business

Virtusa Corporation (the “Company” or “Virtusa”) is a global information technology services company. The Company uses a global delivery model to provide a broad range of information technology, or IT, services, including IT consulting, technology implementation and application outsourcing. Using its enhanced global delivery model, innovative platforming approach and industry expertise, the Company provides cost-effective services that enable its clients to accelerate time to market, improve service and enhance productivity. Headquartered in Massachusetts, Virtusa has offices in the United States, the United Kingdom, Sweden, Germany, Netherlands and Austria and global delivery centers in India, Sri Lanka, Hungary, Singapore and Malaysia, as well as a near shore center in the United States.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2014	Mar. 31, 2014
Consolidated Balance Sheets
Accounts receivable, allowance (in dollars)	$ 1,006	$ 1,130
Property and equipment, accumulated depreciation (in dollars)	$ 35,015	$ 30,625
Undesignated preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Undesignated preferred stock, Authorized shares	5,000,000	5,000,000
Undesignated preferred stock, shares issued	0	0
Undesignated preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, Authorized shares	120,000,000	120,000,000
Common stock, issued shares	30,805,814	30,263,243
Common stock, outstanding shares	28,949,111	28,406,540
Treasury stock, common shares	1,856,703	1,856,703

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Debt

9 Months Ended

Dec. 31, 2014

Debt

Debt

(11) Debt

On December 31, 2013, the Company entered into an amended and restated credit agreement with JPMorgan Chase Bank, N.A. (“JPM”). The credit agreement amended and restated the Company’s $3,000 secured revolving credit agreement with JPM and provides for a $25,000 secured revolving credit facility, which shall be available to fund working capital and other corporate purposes, as well as to serve as security in support of the Company’s foreign currency hedging programs. The credit agreement contains financial covenants that require the Company to maintain a Funded Debt to Adjusted EBITDA Ratio of not more than 2.00 to 1.00 and a Fixed Charge Coverage Ratio of less than 2.50 to 1.00, each as determined for the trailing twelve month period ending on each fiscal quarter. The Company is currently in compliance with all covenants contained in the credit agreement and believes that the credit agreement provides sufficient flexibility to enable continued compliance with its terms. Interest under this credit facility accrues at a rate between LIBOR plus 1.5% and LIBOR plus 1.75% based on the Company’s ratio of indebtedness to Adjusted EBITDA. The term of the credit facility is five years, ending December 31, 2018. This facility replaced the Company’s prior $3,000 line of credit with JPM. At December 31, 2014, there were no borrowings outstanding under the credit facility.

Beginning in fiscal 2009, the Company’s U.K. subsidiary entered into an agreement with a financial institution to sell, without recourse, certain of its Europe-based accounts receivable balances to the financial institution. During the nine months ended December 31, 2014, $22,744 of receivables was sold under the terms of the financing agreement. Fees paid pursuant to this agreement were immaterial during the three and nine months ended December 31, 2014. No amounts were outstanding under the financing agreement at December 31, 2014.

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Document and Entity Information	9 Months Ended
	Dec. 31, 2014	Feb. 02, 2015
Document and Entity Information
Entity Registrant Name	VIRTUSA CORP
Entity Central Index Key	0001207074
Document Type	10-Q
Document Period End Date	Dec. 31, 2014
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		29,602,143
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3

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Pensions and Post-retirement benefits

9 Months Ended

Dec. 31, 2014

Pensions and post-retirement benefits

Pensions and post-retirement benefits

(12) Pensions and post-retirement benefits

The Company has noncontributory defined benefit plans covering its employees in India and Sri Lanka as mandated by the Indian and Sri Lankan governments. The following tables provide information regarding pension expense recognized:

	Three Months Ended December 31,						Nine Months Ended December 31,
	2014			2013			2014			2013
Components of net periodic pension cost
Service cost	$	154		$	129		$	425		$	397
Interest cost	58			56			175			160
Expected return on plan assets	(53		)	(58		)	(162		)	(164		)
Amortization past service cost	2			2			7			8
Amortization of actuarial loss	38			22			87			68
Net periodic pension cost	$	199		$	151		532			$	469

The Company expects to contribute approximately $508 in cash to the pension plans during the fiscal year ending March 31, 2015. The Company made cash contributions of $332 to the plans during the nine months ended December 31, 2014.

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Consolidated Statements of Income
Revenue	$ 122,996	$ 101,043	$ 352,969	$ 285,833
Costs of revenue	77,144	63,821	224,701	182,126
Gross profit	45,852	37,222	128,268	103,707
Operating expenses:
Selling, general and administrative expenses	31,233	26,026	90,180	73,806
Income from operations	14,619	11,196	38,088	29,901
Other income (expense):
Interest income	1,410	1,021	3,799	2,623
Foreign currency transaction (losses) gains	(132)	138	(200)	(434)
Other, net	82	(4)	16	207
Total other income	1,360	1,155	3,615	2,396
Income before income tax expense	15,979	12,351	41,703	32,297
Income tax expense	4,200	3,023	10,806	7,969
Net income	$ 11,779	$ 9,328	$ 30,897	$ 24,328
Net income per share of common stock:
Basic (in dollars per share)	$ 0.41	$ 0.36	$ 1.08	$ 0.95
Diluted (in dollars per share)	$ 0.40	$ 0.35	$ 1.05	$ 0.92

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Derivative Financial Instruments

9 Months Ended

Dec. 31, 2014

Derivative Financial Instruments

Derivative Financial Instruments

(6) Derivative Financial Instruments

The Company evaluates its foreign exchange policy on an ongoing basis to assess its ability to address foreign exchange exposures on its consolidated balance sheets, statements of income and consolidated statement of cash flows from all foreign currencies, including most significantly the U.K. pound sterling, Indian rupee, Euro, Swedish krona and Sri Lankan rupee. The Company enters into hedging programs with highly rated financial institutions in accordance with its foreign exchange policy (as approved by the Company’s audit committee and board of directors) which permits hedging of material, known foreign currency exposures. Currently, the Company maintains three hedging programs, each with varying contract types, duration and purposes. The Company’s “Cash Flow Program” is designed to mitigate the impact of volatility in the U.S. dollar equivalent of the Company’s Indian rupee denominated expenses over a rolling 36 month period. The Cash Flow Program transactions currently meet the criteria for hedge accounting as cash flow hedges. The Company’s “Balance Sheet Program” involves the use of 30 day derivative instruments designed to mitigate the monthly impact of foreign exchange gains/losses on certain intercompany balances and payments. The Company’s “Economic Hedge Program” involves the purchase of derivative instruments with maturities of up to 92 days, and is designed to mitigate the impact of foreign exchange on the U.K. pound sterling, Euro and Swedish krona denominated revenue and costs with respect to the quarter for which such instruments are purchased. The Balance Sheet Program and the Economic Hedge Program are treated as economic hedges as these programs do not meet the criteria for hedge accounting and all gains and losses are recognized in consolidated statement of income under the same line item as the underlying exposure being hedged.

The Company evaluates all of its derivatives based on market observable inputs, including both forward and spot prices for currencies. Any significant change in the forward or spot prices for hedged currencies would have a significant impact on the value of the Company’s derivatives. Changes in fair value of the designated cash flow hedges for the Company’s Cash Flow Program are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”), net of tax, until the forecasted hedged transactions occur and are then recognized in the consolidated statement of income in the same line item as the item being hedged. The Company evaluates hedge effectiveness at the time a contract is entered into, as well as on an ongoing basis. If, and when, all or part of a hedge relationship is discontinued because the forecasted transaction is deemed probable of not occurring by the end of the originally specified period or within an additional two-month period of time thereafter, the contract, or the relative amount of the contract, is deemed “ineffective” and any related derivative amounts recorded in equity are reclassified to earnings. There were no gains (losses) that were reclassified from AOCI into earnings as a result of forecasted transactions that were considered probable of not occurring for the three months and nine month periods ended December 31, 2014 and 2013.

Changes in the fair value of the derivatives purchased under the Balance Sheet Program are reflected in the Company’s consolidated statement of income and are included in foreign currency transaction gains (losses) for each period. Changes in the fair value of the derivatives purchased under the Economic Hedge Program are also reflected in the Company’s consolidated statement of income and are included in the same line item as the underlying exposure being hedged for each period.

The U.S. dollar notional equivalent market value, which consists of the notional value and net unrealized gain or loss, of all outstanding foreign currency derivative contracts, was $113,947 and $102,801, at December 31, 2014 and March 31, 2014, respectively. Unrealized net losses related to these contracts which are expected to be reclassified from AOCI to earnings during the next 12 months were $985 at December 31, 2014. At December 31, 2014, the maximum outstanding term of any derivative instrument was 33 months.

The following table sets forth the fair value of derivative instruments included in the consolidated balance sheets at December 31, 2014 and March 31, 2014:

Derivatives designated as hedging instruments

	December 31, 2014		March 31, 2014
Foreign currency exchange contracts:
Other current assets	$	1,550	$	398
Other long-term assets	$	634	$	586
Accrued expenses and other current liabilities	$	2,535	$	3,925
Long-term liabilities	$	1,041	$	2,449

The following tables set forth the effect of the Company’s foreign currency exchange contracts on the consolidated financial statements of the Company for the three and nine months ended December 31, 2014 and 2013:

	Amount of Gain or (Loss) Recognized in AOCI on Derivative (Effective Portion)
Derivatives Designated as Cash Flow	Three months ended December 31,				Nine months ended December 31,
Hedging Relationships	2014		2013		2014		2013
Foreign currency exchange contracts	$	553	$	1,167	$	2,067	$	(15,798	)

Location of Gain or (Loss) Reclassified	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
from AOCI into Income (Effective	Three months ended December 31,						Nine months ended December 31,
Portion)	2014			2013			2014			2013
Costs of revenue	$	(61	)	$	(780	)	$	(1,227	)	$	(2,839	)
Operating expenses	$	(34	)	$	(471	)	$	(704	)	$	(1,760	)

		Amount of Gain or (Loss) Recognized in Income on Derivatives
		Three months ended						Nine months ended
Derivatives not Designated	Location of Gain or (Loss)	December 31,						December 31,
as Hedging Instrument	Recognized in Income on Derivatives	2014			2013			2014			2013
Foreign currency exchange contracts	Foreign currency transaction gains (losses)	$	(216	)	$	420		$	(299	)	$	(3,034	)
	Revenue	$	183		$	(74	)	$	319		$	(555	)
	Costs of revenue	$	(106	)	$	30		$	(187	)	$	214
	Selling, general and administrative expenses	$	(38	)	$	3		$	(51	)	$	23

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Fair Value of Financial Instruments

9 Months Ended

Dec. 31, 2014

Fair Value of Financial Instruments

Fair Value of Financial Instruments

(5) Fair Value of Financial Instruments

The Company uses a framework for measuring fair value under U.S. generally accepted accounting principles and enhanced disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company’s financial assets and liabilities reflected in the consolidated financial statements at carrying value include marketable securities and other financial instruments which approximate fair value. Fair value for marketable securities is determined using a market approach based on quoted market prices at period end in active markets. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

· Level 1—Quoted prices in active markets for identical assets or liabilities.

· Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2014:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Available-for-sales securities—current	$	—	$	85,923	$	—	$	85,923
Available-for-sales securities—non-current	—		40,271				40,271
Foreign currency derivative contracts	—		2,184		—		2,184
Total assets	$	—	$	128,378	$		$	128,378
Liabilities:
Foreign currency derivative contracts	$	—	$	3,576	$	—	$	3,576
Contingent consideration	—		—		4,610		4,610
Total liabilities	$	—	$	3,576	$	4,610	$	8,186

The Company determines the fair value of the contingent consideration related to the Company’s acquisition on November 1, 2013 of OSB Consulting LLC (“OSB”) and on January 2, 2014 of TradeTech Consulting Scandinavia AB (“TradeTech”) based on the probability of attaining certain revenue and profit margin targets using an appropriate discount rate to present value the liability. See Note 7 of the notes to our financial statements included herein for a description of OSB and TradeTech acquisitions and related contingent consideration targets. The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities at December 31, 2014.

	Level 3 Liabilities
Balance at April 1, 2014	$	5,925
Payment of OSB contingent consideration (See Note 7)	(500		)
Reversal of the TradeTech earn-out recognized in earnings (See Note 7)	(1,833		)
Increase of the OSB earn-out recognized in earnings (See Note 7)	1,068
Cumulative foreign currency translation adjustments	(50		)
Balance at December 31, 2014	$	4,610

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Investment Securities (Tables)

9 Months Ended

Dec. 31, 2014

Investment Securities

Schedule of investment securities

The following is a summary of investment securities at December 31, 2014:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
Corporate bonds:
Current	$	49,265	$	4	$	(52	)	$	49,217
Non-current	26,978		2		(68		)	26,912
Auction-rate securities:
Non-current	—		—		—			—
Agency and short-term notes:
Current	1,013		1		—			1,014
Non-current	13,370		—		(11		)	13,359
Commercial paper:
Current	—		—		—			—
Municipal bonds:
Current	200		—		—			200
Time deposits:
Current	35,492		—		—			35,492
Total available-for-sale securities	$	126,318	$	7	$	(131	)	$	126,194

The following is a summary of investment securities at March 31, 2014:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
Corporate bonds:
Current	$	20,255	$	9	$	(8	)	$	20,256
Non-current	50,264		5		(70		)	50,199
Auction-rate securities:
Non-current	300		—		(12		)	288
Agency and short-term notes:
Current	561		—		—			561
Non-current	11,341		1		(14		)	11,328
Commercial paper:
Current	5,497		—		—			5,497
Municipal bonds:
Non-current	200		—		—			200
Time deposits:
Current	29,574		—		—			29,574
Total available-for-sale securities	$	117,992	$	15	$	(104	)	$	117,903

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Accumulated Other Comprehensive Loss

9 Months Ended

Dec. 31, 2014

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

(13) Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive income (loss) by component were as follows for the three and nine months ended December 31, 2014 and 2013:

Accumulated Other Comprehensive Income (Loss)	Three Months Ended December 31,						Nine Months Ended December 31,
(In thousands, except per share amounts)	2014			2013			2014			2013
Investment securities
Beginning balance	$	(95	)	$	—		$	(54	)	$	(3	)
Other comprehensive income (loss) (OCI) before reclassifications net of tax of $0 for all periods	5			9			(36		)	12
Reclassifications from OCI to other income — net of tax of $0 for all periods	(1		)	—			(1		)	—
Comprehensive income (loss) on investment securities, net of tax of $0 for all periods	4			9			(37		)	12
Closing Balance	$	(91	)	$	9		$	(91	)	$	9
Currency Translation Adjustments
Beginning balance	$	(28,703	)	$	(27,846	)	$	(23,253	)	$	(16,918	)
OCI before reclassifications	(5,388		)	2,099			(10,838		)	(8,829		)
Closing Balance	$	(34,091	)	$	(25,747	)	$	(34,091	)	$	(25,747	)
Cash Flow Hedges
Beginning balance	$	(1,358	)	$	(10,305	)	$	(3,829	)	$	(1,013	)
OCI before reclassifications net of tax of $21, $(488), $(340) and $5,046	573			680			1,727			(10,751		)
Reclassifications from OCI to
- Costs of revenue, net of tax of $(31), $(223), $(360) and $(978)	30			557			867			1,860
- Selling, general and administrative expenses, net of tax of $(16), $(153), $(206) and $(607)	18			318			498			1,154
Comprehensive income (loss) on cash flow hedges, net of tax of $(26), $(864), $(906) and $3,461	621			1,555			3,092			(7,737		)
Closing Balance	$	(737	)	$	(8,750	)	$	(737	)	$	(8,750	)
Benefit plans
Beginning balance	$	(565	)	$	(637	)	$	(578	)	$	(780	)
OCI before reclassifications net of tax of $0 for all periods	(216		)	—			(216		)	—
Reclassifications from OCI for prior service credit (cost) to:
- Costs of revenue, net of tax of $0 for all periods	2			2			6			6
- Selling, general and administrative expenses, net of tax of $0 for all periods	1			—			1			2
Reclassifications from OCI for net actuarial gain (loss) amortization to:
- Costs of revenue, net of tax of $0 for all periods	23			18			52			53
- Selling, general and administrative expenses, net of tax of $0 for all periods	15			5			35			16
Other adjustments	3			(12		)	(37		)	79
Comprehensive income (loss) on benefit plans, net of tax of $0 for all periods	(172		)	13			(159		)	156
Closing Balance	$	(737	)	(624		)	(737		)	(624		)
Accumulated other comprehensive loss closing balance	$	(35,656	)	$	(35,112	)	$	(35,656	)	$	(35,112	)

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Income Taxes

9 Months Ended

Dec. 31, 2014

Income Taxes

Income Taxes

(9) Income Taxes

The Company’s effective tax rate was 26.3% and 25.9% for the three and nine months ended December 31, 2014, as compared to an effective tax rate of 24.5% and 24.7% for the three and nine months ended December 31, 2013. The increase in the effective tax rate for three months ended December 31, 2014 was primarily due to geographical income distribution and expiration of certain holiday benefits in India.  This was partially offset by new tax benefits generated from special economic zone (“SEZ”) tax holiday incentives located in Bangalore and Pune, India.  The increase in the effective tax rate in the nine months ended December 31, 2014 was primarily due to geographical income distribution and expiration of certain tax benefits in India. This was partially offset by a tax benefit associated with the reduction in fair value of $1.8 million in the nine months period ended December 31, 2014 related to the determination that Trade Tech would not achieve its performance targets for earn-out consideration and new tax benefits generated from SEZ tax holiday incentives located in Bangalore and Pune, India.

One of the Company’s Indian subsidiaries, Virtusa (India) Private Limited, which was merged with and into Virtusa Consulting Services Private Limited (collectively referred to as “Virtusa India”), is an export oriented company. The Indian Income Tax Act of 1961 entitles taxpayers to claim tax exemption for a period of ten consecutive years for each Software Technology Park (“STP”) that it operates.  Virtusa India operates two STPs, one in Chennai and one in Hyderabad, India. The STP tax holiday in Hyderabad, India expired on March 31, 2010 and the STP tax holiday in Chennai, India expired on March 31, 2011. For the three and nine months ended December 31, 2014 and 2013, all profits in the STPs in Hyderabad and Chennai, India were fully taxable at the Indian statutory tax rate of 34.0%. In anticipation of, and to mitigate the impact of, the phase-out of the STP tax holidays in Hyderabad and Chennai, India, the Company located new Indian operations in areas designated as an SEZ under the SEZ Act of 2005 through two operating subsidiaries, Virtusa Software Services Private Limited and Virtusa Consulting Services Private Limited. In the fiscal year ended March 31, 2014, the Company leased a facility in SEZ designated locations in Bangalore and Pune, India, each of which is eligible for tax holiday benefits that began in the fiscal year ended March 31, 2014.The Company’s profits from these SEZ operations are eligible for certain additional income tax exemptions for a period of up to 15 years based on export income.

In addition, the Company’s Sri Lankan subsidiary, Virtusa (Private) Limited, is operating under a 12 year income tax holiday arrangement that is set to expire on March 31, 2019 and which required Virtusa (Private) Limited to meet certain job creation and investment criteria by March 31, 2014. The Company is required each year to apply for certification during the 12 year holiday period. During the fiscal year ended March 31, 2014, the Company believes it fulfilled its hiring and investment commitments and is eligible for the tax holiday benefits through March 2019. The current agreement provides income tax exemption for all export business income. During the three months ended December 31, 2014, the Company submitted and received confirmation of exemption for the fiscal year ended March 31, 2014. At December 31, 2014, the Company believes it is eligible for the entire 12 year tax holiday.

The Company’s effective income tax rate is based on the composition of estimated income in different jurisdictions, including those where the Company is enjoying tax holidays, for the applicable fiscal year and adjustments, if any, in the applicable quarterly periods, for unrecognized tax benefits for uncertain income tax positions or other discrete items required to be reported during interim periods. The Company’s aggregate income tax rate in foreign jurisdictions is lower than its income tax rate in the United States due primarily to lower rates generally in jurisdictions in which the Company operates and applicable tax holiday benefits of the Company, obtained primarily in India and Sri Lanka.

Unrecognized tax benefits represent uncertain tax positions for which the Company has established reserves. At December 31, 2014 and March 31, 2014, the total liability for unrecognized tax benefits was $406 and $410, respectively, all of which would negatively impact the Company’s annual effective tax rate, if realized. Each fiscal year, unrecognized tax benefits may be adjusted upon the closing of the statute of limitations for income tax returns filed in various jurisdictions. During the nine months ended December 31, 2014 and December 31, 2013, the unrecognized tax benefits decreased by $4 and $3,873, respectively. The decrease in unrecognized tax benefits in the nine months period ending December 31, 2014 was predominantly due to a cash settlement with tax authorities, partially offset by increases for incremental interest accrued on existing uncertain tax positions. The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. Recently, the Internal Revenue Service (“IRS”) conducted a routine audit of the Company’s fiscal years 2008 to 2011, pursuant to which the IRS made certain assessments. In connection with the audit, during the fourth quarter of fiscal year 2013, the Company executed a settlement arrangement with the IRS for all periods under audit to close out the audit. The Company has fully accrued for all such assessments and the settlement impact on the Company’s financial statements is properly reflected at December 31, 2014.

The Company’s U.S. tax return for the fiscal year ended March 31, 2012 was recently audited by the IRS pursuant to which the IRS made certain assessments.  During the three months ended June 30, 2014, the Company executed a settlement agreement with the IRS for the fiscal year ended March 31, 2012. The Company has fully accrued for all such assessments and the settlement impact on the Company’s financial statements is properly reflected at December 31, 2014.  In addition, tax returns for various years are under examination by tax authorities of foreign jurisdictions. Currently, several issues are at various levels of appeal with the Indian and Sri Lankan tax authorities. While it is difficult to predict the final outcome, the Company believes its reserves represent the most likely outcome and continues to evaluate all tax return positions.

Undistributed Earnings of Foreign Subsidiaries

A substantial amount of the Company’s income before provision for income tax is from operations earned in its Indian and Sri Lankan subsidiaries and is subject to tax holiday. The Company intends to use accumulated and future earnings of foreign subsidiaries to expand operations outside the United States and, accordingly, undistributed income is considered to be indefinitely reinvested. The Company does not provide for U.S. income taxes on foreign earnings. At December 31, 2014, the Company had $184,273 of unremitted earnings from foreign subsidiaries and approximately $94,144 of cash and short-term investments that would otherwise be available for potential distribution, if not indefinitely reinvested. If required, such cash and investments could be repatriated to the United States. However, under current law, any repatriation would be subject to United States federal income tax less applicable foreign tax credits. Due to the various methods by which such earnings could be repatriated in the future, the amount of taxes attributable to the undistributed earnings is not practicably determinable.

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Acquisitions

9 Months Ended

Dec. 31, 2014

Acquisitions

Acquisitions

(7) Acquisitions

On November 1, 2013, the Company acquired substantially all of the business and assets of OSB pursuant to an asset purchase agreement dated November 1, 2013 (the “Asset Purchase Agreement”) by and among OSB and the sole member of OSB. The acquisition of OSB extends the Company’s service offerings to include a broader set of finance transformation services in the financial services and insurance domains to existing and new clients, including service offerings targeted to enable clients to automate their finance and accounting processes, reporting capabilities, including SAP based capabilities, and regulatory compliance programs.

The purchase price was $6,840 in cash. Ten percent of the purchase price is subject to a hold back by the Company for a period of 12 months as security for the sellers’ indemnification obligations under the Asset Purchase Agreement. The purchase price is subject to adjustment after the closing of up to an additional $6,000 in earn-out consideration, in the aggregate, upon the achievement of certain revenue and operating margin targets for the five months ended March 31, 2014, the nine months ending December 31, 2014 and the twelve months ending December 31, 2015. At March 31, 2014, the Company determined that OSB had met 100% of the performance targets for the five months ending March 31, 2014. The fair value of the contingent consideration at December 31, 2014 and March 31, 2014 was $4,610 and $4,042, respectively. During the nine months ended December 31, 2014, the Company paid the $500 earn-out consideration to OSB. The change in fair value of $1,068 was recorded as a change to selling, general and administration expenses in the nine months ended December 31, 2014. In November 2014, the Company released $684 to OSB with respect to the hold back.

Under the terms of the Asset Purchase Agreement, the Company agreed to offer employment to all of the employees of OSB, including certain key employees and the sole member of OSB.

There are no material relationships between the Company or any of its affiliates and any of the parties to the Asset Purchase Agreement and related agreements, other than with respect to such agreements themselves.

On January 2, 2014, Virtusa International B.V., a wholly owned subsidiary of the Company organized and formed in the Netherlands (“Virtusa BV”), acquired all of the outstanding shares of TradeTech and its subsidiaries (together with TradeTech, the “TradeTech Group”), pursuant to a share purchase agreement dated as of January 2, 2014 (the “Share Purchase Agreement”) by and among Virtusa BV and the shareholders of TradeTech. The acquisition expands the Company’s position within the banking, financial services and insurance industries by increasing its asset management and treasury services domain and technology expertise, as well as by expanding the Company’s global presence into the Nordic countries.

Under the terms of the Share Purchase Agreement, Virtusa BV acquired all the outstanding shares of TradeTech for $19,087 in cash, reflective of a working capital adjustment as part of the Share Purchase Agreement, subject to adjustment after the closing by up to $4,080 of potential earn-out consideration contingent upon TradeTech Group’s achievement of certain revenue and EBITA targets for the 12-month period ending December 31, 2014. At June 30, 2014, the Company determined that the earn-out consideration targets would not be achieved for the 12-month period ending December 31, 2014, resulting in a reduction of $1,833 in the fair value of the recorded earn-out liability forthe nine months ended December 31, 2014.  At December 31, 2014, there is no liability recorded. The reduction of the entire fair value of the earn-out consideration of $1,833 was recorded as a reduction to selling, general and administration expenses in the nine-month period ended December 31, 2014.  Under the terms of the Share Purchase Agreement, 12.5% of the purchase price was also held back and placed into escrow by the Company for a period of 12 months as security for the indemnification obligations of the TradeTech Shareholders. The Company also agreed to issue an aggregate of up to $2,000 in deferred restricted stock awards from the Company’s stock option and incentive plan, not to exceed an aggregate of 65,000 shares, to certain of these new TradeTech Group employees. The shares will be recognized as compensation cost over the requisite employee service period. The shares will vest annually over a five year period.

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Goodwill and Intangible Assets

9 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets

Goodwill and Intangible Assets

(8) Goodwill and Intangible Assets

Goodwill:

The Company has one reportable segment at December 31, 2014. The following are details of the changes in goodwill balance at December 31, 2014:

	Amount
Balance at April 1, 2014	$	53,448
Cumulative foreign currency translation adjustments	(2,117		)
Balance at December 31, 2014	$	51,331

The acquisition costs and goodwill balance deductible for the Company’s business acquisitions for tax purposes are $41,834. The acquisition costs and goodwill balance not deductible for tax purposes are $10,888 and relate to the Company’s TradeTech acquisition.

The Company performed the annual assessment of its goodwill during the fourth quarter of the fiscal year ended March 31, 2014 and determined that the estimated fair value of the Company’s reporting unit exceeded its carrying value and therefore goodwill was not impaired. The Company will continue to complete goodwill impairment assessments at least annually during the fourth quarter of each ensuing fiscal year. The Company will continue to evaluate whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets, including intangible assets, may warrant revision or that the carrying value of these assets may be impaired. Any write -downs are treated as permanent reductions in the carrying amount of the assets.

Intangible Assets:

The following are details of the Company’s intangible asset carrying amounts acquired and amortization at December 31, 2014.

	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable intangible assets:
Customer relationships	9.4	$	34,814	$	11,369	$	23,445
Partner relationships	6.5	700		573		127
Trademark	1.0	63		63		—
Backlog	1.0	1,259		1,259		—
	9.0	$	36,836	$	13,264	$	23,572

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Concentration of Revenue and Assets

9 Months Ended

Dec. 31, 2014

Concentration of Revenue and Assets

Concentration of Revenue and Assets

(10) Concentration of Revenue and Assets

Total revenue is attributed to geographic areas based on the location of the client. Long-lived assets represent property, plant and equipment, intangible assets and goodwill, net of accumulated depreciation and amortization, and are attributed to geographic area based on their location. Geographic information is summarized as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013
Client revenue:
North America	$	83,324	$	70,510	$	232,773	$	205,547
Europe	31,658		24,895		98,141		64,686
Rest of world	8,014		5,638		22,055		15,600
Consolidated revenue	$	122,996	$	101,043	$	352,969	$	285,833

	December 31, 2014		March 31, 2014
Long-lived assets, net of accumulated depreciation and amortization:
United States	$	59,916	$	61,562
Asia	31,043		32,235
Europe	19,832		23,658
Consolidated long-lived assets, net	$	110,791	$	117,455

Revenue from significant clients as a percentage of the Company’s consolidated revenue was as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013
Customer 1	11.9	%	13.3	%	12.5	%	12.4	%
Customer 2	11.1	%	13.1	%	10.0	%	13.4	%

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Derivative Financial Instruments (Details) (Foreign currency exchange contracts, USD $) In Thousands, unless otherwise specified	9 Months Ended	3 Months Ended		9 Months Ended
	Dec. 31, 2014 item	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2013	Mar. 31, 2014
Derivative Financial Instruments and Trading Activities
Number of hedging programs maintained	3
U.S. dollar notional equivalent market value	$ 113,947	$ 113,947			$ 102,801
Maximum outstanding term of derivative instruments	33 months
Derivatives designated as hedging instruments
Derivative Financial Instruments and Trading Activities
Period hedged by Cash Flow Program	36 months
Additional period after which the contract is deemed ineffective	2 months
Unrealized net losses related to derivative instruments expected to be reclassified from AOCI into earnings during the next 12 months	985
Other current assets	1,550	1,550			398
Other long-term assets	634	634			586
Accrued expenses and other current liabilities	2,535	2,535			3,925
Long-term liabilities	1,041	1,041			2,449
Derivatives designated as hedging instruments | Cash Flow Hedges | Reclassification out of accumulated other comprehensive income
Derivative Financial Instruments and Trading Activities
Amount reclassified to earnings as a result of hedge ineffectiveness	$ 0	$ 0	$ 0	$ 0
Derivatives not Designated as Hedging Instrument
Derivative Financial Instruments and Trading Activities
Maturity period of Balance Sheet Program derivatives	30 months
Maximum outstanding term of derivative instruments	92 days

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Unaudited Interim Financial Information (Policies)

9 Months Ended

Dec. 31, 2014

Unaudited Interim Financial Information

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with U.S. generally accepted accounting principles and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, and should be read in conjunction with the Company’s audited consolidated financial statements (and notes thereto) for the fiscal year ended March 31, 2014 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on May 23, 2014. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of the accompanying unaudited consolidated financial statements have been included, and all material adjustments are of a normal and recurring nature. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire fiscal year.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements reflect the accounts of the Company and its direct and indirect subsidiaries, Virtusa Consulting Services Private Limited and Virtusa Software Services Private Limited, each organized and located in India, Virtusa (Private) Limited, organized and located in Sri Lanka, Virtusa UK Limited, organized and located in the United Kingdom, Virtusa Securities Corporation, a Massachusetts securities corporation, InSource LLC, a limited liability company organized in Connecticut,  Virtusa International, B.V., organized and located in the Netherlands, Virtusa Hungary Kft., incorporated and located in Hungary, Virtusa Germany GmbH, organized and located in Germany, Virtusa Singapore Private Limited, organized and located in Singapore, Virtusa Malaysia Private Limited, organized and located in Malaysia, Virtusa Austria GmbH, organized and located in Austria, Virtusa Philippines Inc., organized and located in the Philippines, TradeTech Consulting Scandinavia AB, organized and located in Sweden and Virtusa Canada, Inc., a corporation organized under the laws of British Columbia, Canada. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Management reevaluates these estimates on an ongoing basis. The most significant estimates relate to the recognition of revenue and profits based on the percentage of completion method of accounting for fixed price contracts, share based compensation, income taxes, including reserves for uncertain tax positions, deferred taxes and liabilities, intangible assets, contingent consideration and valuation of financial instruments including derivative contracts and investments. Management bases its estimates on historical experience and on various other factors and assumptions that are believed to be reasonable under the circumstances. The actual amounts may vary from the estimates used in the preparation of the accompanying consolidated financial statements.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

At December 31, 2014 and March 31, 2014, the carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, unbilled accounts receivable, restricted cash, accounts payable, accrued employee compensation and benefits and other accrued expenses, approximate their fair values due to the nature of the items. See Note 5 for a discussion of the fair value of the Company’s other financial instruments.

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets

Schedule of changes in goodwill

	Amount
Balance at April 1, 2014	$	53,448
Cumulative foreign currency translation adjustments	(2,117		)
Balance at December 31, 2014	$	51,331

Schedule of carrying amount and amortization of acquired intangible asset

The following are details of the Company’s intangible asset carrying amounts acquired and amortization at December 31, 2014.

	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable intangible assets:
Customer relationships	9.4	$	34,814	$	11,369	$	23,445
Partner relationships	6.5	700		573		127
Trademark	1.0	63		63		—
Backlog	1.0	1,259		1,259		—
	9.0	$	36,836	$	13,264	$	23,572

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Concentration of Revenue and Assets (Details 2) (Sales revenue)	3 Months Ended		9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Customer 1
Concentration of Revenue and Assets
Revenue from significant clients as a percentage of consolidated revenue	11.90%	13.30%	12.50%	12.40%
Customer 2
Concentration of Revenue and Assets
Revenue from significant clients as a percentage of consolidated revenue	11.10%	13.10%	10.00%	13.40%

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Consolidated Statements of Comprehensive Income
Net income	$ 11,779	$ 9,328	$ 30,897	$ 24,328
Other comprehensive income (loss):
Foreign currency translation adjustments	(5,388)	2,099	(10,838)	(8,829)
Pension plan adjustment	(172)	13	(159)	156
Unrealized gain (loss) on available-for-sale securities, net of tax	4	9	(37)	12
Unrealized gain (loss) on effective cash flow hedges, net of tax	621	1,555	3,092	(7,737)
Other comprehensive (loss) income	(4,935)	3,676	(7,942)	(16,398)
Comprehensive income	$ 6,844	$ 13,004	$ 22,955	$ 7,930

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Investment Securities

9 Months Ended

Dec. 31, 2014

Investment Securities

Investment Securities

(4) Investment Securities

At December 31, 2014 and March 31, 2014, all of the Company’s investment securities were classified as available-for-sale and were carried on its balance sheet at their fair market value. A fair market value hierarchy based on three levels of inputs was used to measure each security (see Note 5).

The following is a summary of investment securities at December 31, 2014:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
Corporate bonds:
Current	$	49,265	$	4	$	(52	)	$	49,217
Non-current	26,978		2		(68		)	26,912
Auction-rate securities:
Non-current	—		—		—			—
Agency and short-term notes:
Current	1,013		1		—			1,014
Non-current	13,370		—		(11		)	13,359
Commercial paper:
Current	—		—		—			—
Municipal bonds:
Current	200		—		—			200
Time deposits:
Current	35,492		—		—			35,492
Total available-for-sale securities	$	126,318	$	7	$	(131	)	$	126,194

The following is a summary of investment securities at March 31, 2014:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
Corporate bonds:
Current	$	20,255	$	9	$	(8	)	$	20,256
Non-current	50,264		5		(70		)	50,199
Auction-rate securities:
Non-current	300		—		(12		)	288
Agency and short-term notes:
Current	561		—		—			561
Non-current	11,341		1		(14		)	11,328
Commercial paper:
Current	5,497		—		—			5,497
Municipal bonds:
Non-current	200		—		—			200
Time deposits:
Current	29,574		—		—			29,574
Total available-for-sale securities	$	117,992	$	15	$	(104	)	$	117,903

The Company evaluates investments with unrealized losses to determine if the losses are other than temporary. The Company has determined that the gross unrealized losses at December 31, 2014 and March 31, 2014 are temporary. In making this determination, the Company considered the financial condition, credit ratings and near-term prospects of the issuers, the underlying collateral of the investments, and the magnitude of the losses as compared to the cost and the length of time the investments have been in an unrealized loss position. Additionally, while the Company classifies the securities as available for sale, the Company does not currently intend to sell such investments and it is more likely than not the Company will not be required to sell such investments prior to the recovery of their carrying value, except as disclosed in Note 5.

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Concentration of Revenue and Assets (Tables)

9 Months Ended

Dec. 31, 2014

Concentration of Revenue and Assets

Schedule of revenue attributed to geographic areas based on location of the client

	Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013
Client revenue:
North America	$	83,324	$	70,510	$	232,773	$	205,547
Europe	31,658		24,895		98,141		64,686
Rest of world	8,014		5,638		22,055		15,600
Consolidated revenue	$	122,996	$	101,043	$	352,969	$	285,833

Schedule of long-lived assets, net of accumulated depreciation and amortization attributed to geographic areas based on location of assets

	December 31, 2014		March 31, 2014
Long-lived assets, net of accumulated depreciation and amortization:
United States	$	59,916	$	61,562
Asia	31,043		32,235
Europe	19,832		23,658
Consolidated long-lived assets, net	$	110,791	$	117,455

Schedule of revenue from significant clients as a percentage of consolidated revenue

	Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013
Customer 1	11.9	%	13.3	%	12.5	%	12.4	%
Customer 2	11.1	%	13.1	%	10.0	%	13.4	%

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Goodwill and Intangible Assets (Details 2) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2014	Mar. 31, 2014
Intangible Assets
Weighted Average Useful Life	9 years
Gross Carrying Amount	$ 36,836
Accumulated Amortization	13,264
Net Carrying Amount	23,572	28,661
Customer relationships
Intangible Assets
Weighted Average Useful Life	9 years 4 months 24 days
Gross Carrying Amount	34,814
Accumulated Amortization	11,369
Net Carrying Amount	23,445
Partner relationships
Intangible Assets
Weighted Average Useful Life	6 years 6 months
Gross Carrying Amount	700
Accumulated Amortization	573
Net Carrying Amount	127
Trademark
Intangible Assets
Weighted Average Useful Life	1 year
Gross Carrying Amount	63
Accumulated Amortization	63
Backlog
Intangible Assets
Weighted Average Useful Life	1 year
Gross Carrying Amount	1,259
Accumulated Amortization	$ 1,259

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Subsequent Events

9 Months Ended

Dec. 31, 2014

Subsequent Events

Subsequent Events

(14) Subsequent Events

On January 8, 2015, the Company purchased multiple foreign currency forward contracts designed to hedge fluctuation in the U.K. pound sterling against the U.S. dollar (the “U.K. contracts”), the Swedish krona (“SEK”) against the U.S. dollar (the “SEK contracts”) and the Euro (“EUR”) against the U.S. dollar (the “Euro contracts”), each of which will expire on various dates during the period ending March 31, 2015. The U.K. contracts have an aggregate notional amount of approximately £6,982 (approximately $10,493), the SEK contracts have an aggregate notional amount of approximately SEK 7,301 (approximately $914) and the EUR contracts have an aggregate notional amount of approximately EUR 376 (approximately $441). The weighted average U.K. pound sterling settlement rate associated with the U.K. contracts is approximately $1.50, the weighted average U.S. dollar settlement rate associated with the SEK contracts is approximately $0.13, and the weighted average U.S. dollar settlement rate associated with the EUR contracts is approximately $1.17.