Accenture (NYSE: ACN) reported financial results for the first quarter of fiscal 2020, ended Nov. 30, 2019, with revenues of $11.4 billion, an increase of 7 percent in U.S. dollars and 9 percent in local currency over the same period last year.
Diluted earnings per share were $2.09, an increase of 7 percent from the first quarter last year.
Operating income was $1.77 billion, an 8 percent increase over the same period last year, and operating margin was 15.6 percent, an expansion of 20 basis points.
New bookings for the quarter were $10.3 billion, with consulting bookings of $6.0 billion and outsourcing bookings of $4.3 billion.
Julie Sweet, Accenture’s chief executive officer, said, “We are very pleased with our strong first-quarter financial results and the continued momentum across our business. With 9 percent revenue growth in local currency, we again gained significant market share. We also delivered strong profitability and cash flow, and returned $1.2 billion in cash to shareholders while continuing to invest significantly in our business.
“Our strong, broad-based results across industries and geographic markets reflect the diversity and scale of Accenture’s business around the world. With our unparalleled technology capabilities, deep industry and function expertise, focus on continuous innovation, and incredibly talented people, we are uniquely positioned to continue driving value for our clients and all our stakeholders.”
Financial Review
Revenues for the first quarter of fiscal 2020 were $11.36 billion, compared with $10.61 billion for the first quarter of fiscal 2019, an increase of 7 percent in U.S. dollars and 9 percent in local currency, above the company’s guided range of $10.9 billion to $11.2 billion. The foreign-exchange impact for the quarter was approximately negative 2 percent, consistent with the assumption provided in the company’s fourth-quarter earnings release.
Consulting revenues for the quarter were $6.38 billion, an increase of 7 percent in U.S. dollars and 9 percent in local currency compared with the first quarter of fiscal 2019.
Outsourcing revenues were $4.98 billion, an increase of 7 percent in U.S. dollars and 9 percent in local currency compared with the first quarter of fiscal 2019.
Diluted EPS for the quarter were $2.09, compared with $1.96 for the first quarter last year. The $0.13 increase in EPS reflects:
- a $0.17 increase from higher revenue and operating results;
- a $0.06 increase from higher non-operating income; and
- a $0.01 increase from a lower share count;
partially offset by
- an $0.11 decrease from a higher effective tax rate.
Gross margin (gross profit as a percentage of revenues) for the quarter was 32.1 percent, compared with 31.1 percent for the first quarter last year. Selling, general and administrative (SG&A) expenses for the quarter were $1.88 billion, or 16.6 percent of revenues, compared with $1.67 billion, or 15.7 percent of revenues, for the first quarter last year.
Operating income for the quarter increased 8 percent, to $1.77 billion, or 15.6 percent of revenues, compared with $1.63 billion, or 15.4 percent of revenues, for the first quarter of fiscal 2019.
The company’s effective tax rate for the quarter was 23.6 percent, compared with 19.8 percent for the first quarter last year.
Net income for the quarter was $1.38 billion, a 6 percent increase from $1.29 billion for the first quarter last year.
Operating cash flow for the quarter was $787 million, and property and equipment additions were $95 million. Free cash flow, defined as operating cash flow net of property and equipment additions, was $692 million. For the same period last year, operating cash flow was $1.03 billion; property and equipment additions were $78 million; and free cash flow was $950 million.
Days services outstanding, or DSOs, were 43 days at Nov. 30, 2019, compared with 40 days at Aug. 31, 2019 and 42 days at Nov. 30, 2018.
Accenture’s total cash balance at Nov. 30, 2019 was $5.8 billion, compared with $6.1 billion at Aug. 31, 2019.
New Bookings
New bookings for the first quarter were $10.3 billion and reflect a negative 1 percent foreign-currency impact compared with new bookings in the first quarter last year.
- Consulting new bookings were $6.0 billion, or 58 percent of total new bookings
- Outsourcing new bookings were $4.3 billion, or 42 percent of total new bookings
Revenues by Operating Group
Revenues by operating group were as follows:
- Communications, Media & Technology: $2.25 billion, compared with $2.13 billion for the first quarter of fiscal 2019, an increase of 5 percent in U.S. dollars and 7 percent in local currency.
- Financial Services: $2.19 billion, compared with $2.12 billion for the first quarter of fiscal 2019, an increase of 3 percent in U.S. dollars and 6 percent in local currency.
- Health & Public Service: $1.97 billion, compared with $1.75 billion for the first quarter of fiscal 2019, an increase of 12 percent in U.S. dollars and 13 percent in local currency.
- Products: $3.22 billion, compared with $2.93 billion for the first quarter of fiscal 2019, an increase of 10 percent in U.S. dollars and 12 percent in local currency
- Resources: $1.73 billion, compared with $1.65 billion for the first quarter of fiscal 2019, an increase of 5 percent in U.S. dollars and 7 percent in local currency.
Revenues by Geographic Region
Revenues by geographic region were as follows:
- North America: $5.29 billion, compared with $4.86 billion for the first quarter of fiscal 2019, an increase of 9 percent in both U.S. dollars and local currency.
- Europe: $3.79 billion, compared with $3.71 billion for the first quarter of fiscal 2019, an increase of 2 percent in U.S. dollars and 7 percent in local currency.
- Growth Markets: $2.28 billion, compared with $2.04 billion for the first quarter of fiscal 2019, an increase of 12 percent in U.S. dollars and 13 percent in local currency.
Returning Cash to Shareholders
Accenture continues to return cash to shareholders through cash dividends and share repurchases.
Dividend
As previously disclosed, the company has moved from a semi-annual to a quarterly schedule for dividend payments in fiscal 2020. On Nov. 15, 2019, a quarterly cash dividend of $0.80 per share was paid to shareholders of record at the close of business on Oct. 17, 2019. These cash dividend payments totaled $508 million.
Accenture plc has declared a quarterly cash dividend of $0.80 per share for shareholders of record at the close of business on Jan. 16, 2020. This dividend is payable on Feb. 14, 2020.
In fiscal 2019, the company paid semi-annual cash dividends of $1.46 per share, equivalent to quarterly payments of $0.73 per share. The quarterly dividend of $0.80 per share this year represents a 10 percent increase over the equivalent quarterly rate in fiscal 2019.
Share Repurchase Activity
During the first quarter of fiscal 2020, Accenture repurchased or redeemed 3.8 million shares for a total of $729 million, including approximately 3.3 million shares repurchased in the open market.
Accenture’s total remaining share repurchase authority at Nov. 30, 2019 was approximately $3.0 billion.
At Nov. 30, 2019, Accenture had approximately 635 million total shares outstanding.
Business Outlook
Second Quarter Fiscal 2020
Accenture expects revenues for the second quarter of fiscal 2020 to be in the range of $10.85 billion to $11.15 billion, 5 percent to 8 percent growth in local currency, reflecting the company’s assumption of a negative 1 percent foreign-exchange impact compared with the second quarter of fiscal 2019.
Fiscal Year 2020
Accenture’s business outlook for the full 2020 fiscal year continues to assume that the foreignexchange impact on its results in U.S. dollars will be negative 1 percent compared with fiscal 2019.
For fiscal 2020, the company now expects revenue growth to be in the range of 6 percent to 8 percent in local currency, compared with 5 percent to 8 percent previously.
Accenture continues to expect operating margin for the full fiscal year to be in the range of 14.7 percent to 14.9 percent, an expansion of 10 to 30 basis points from fiscal 2019.
The company continues to expect its annual effective tax rate to be in the range of 23.5 percent to 25.5 percent.
The company now expects diluted EPS to be in the range of $7.66 to $7.84, compared with $7.62 to $7.84 previously.
For fiscal 2020, the company continues to expect operating cash flow to be in the range of $6.35 billion to $6.75 billion; property and equipment additions to be $650 million; and free cash flow to be in the range of $5.7 billion to $6.1 billion.
Conference Call and Webcast Details
Accenture will host a conference call at 8:00 a.m. EST today to discuss its first-quarter financial results. To participate, please dial +1 (877) 692-8955 [+1 (234) 720-6979 outside the United States, Puerto Rico and Canada] approximately 15 minutes before the scheduled start of the call. The conference call will also be accessible live on the Investor Relations section of the Accenture Web site at www.accenture.com
A replay of the conference call will be available online at www.accenture.com beginning at 10:30 a.m. EST today, Dec. 19, and continuing until Thursday, Mar. 19, 2020. The replay will also be available via telephone by dialing +1 (866) 207-1041 [+1 (402) 970-0847 outside the United States, Puerto Rico and Canada] and entering access code 7450880 from 10:30 a.m. EST today, Dec. 19, through Thursday, Mar. 19, 2020.
Source: https://newsroom.accenture.com/news/accenture-reports-strong-first-quarter-fiscal-2020-results.htm