Accenture reported financial results for the firstquarter of fiscal 2015, ended Nov. 30, with record net revenues of $7.9 billion, an increase of 7 percent in U.S. dollars and 10 percent in local currency over the same period last year. Diluted earnings per share were $1.29, an increase of $0.14, or 12 percent, over the same period last year.
Operating income was $1.19 billion, an increase of 9 percent over the same period last year, and operating margin was 15 percent, a year-over-year expansion of 20 basis points.
New bookings for the quarter were $7.7 billion, with consulting bookings of $3.9 billion and outsourcing bookings of $3.8 billion.
Pierre Nanterme, Accenture’s chairman and CEO, said, “We delivered an excellent first quarter.I am particularly pleased with our 10 percent local-currency revenue growth, including strong growth in both consulting and outsourcing, as well as double-digit growth in four of our five operating groups. We expanded operating margin 20 basis points and delivered outstanding earnings per share of $1.29 — a 12 percent increase — while returning $1.3 billion in cash to our shareholders. Based on our first-quarter results, we are raising our business outlook for revenues for the full fiscal year.
“Our very strong results demonstrate that we are executing a growth strategy that is highly relevant for our clients. We continue to invest in capabilities, solutions and talent to further differentiate Accenture in the marketplace and improve our competitiveness. We remain verywell-positioned to continue gaining market share and driving profitable growth.”
Financial Review
Revenues before reimbursements for the first quarter of fiscal 2015 were$7.0 billion, compared with $7.36 billion for the first quarter of fiscal 2014, an increase of 7 percent in U.S. dollars and 10 percent in local currency. Net revenues for the quarter reflect a foreign-exchange impact of approximately negative 3 percent, compared with the negative 2 percent we had previously assumed. Adjusting for the actual foreign-exchange impact ofapproximately negative 3 percent in the quarter, the company’s guided range for quarterly netrevenues would have been $7.495 billion to $7.745 billion. Accenture’s first quarter fiscal 2015net revenues were above this adjusted range.
- Consulting net revenues for the quarter were $4.09 billion, an increase of 4 percent in U.S. dollars and 7 percent in local currency compared with the first quarter of fiscal 2014.
- Outsourcing net revenues were $3.80 billion, an increase of 11 percent in U.S. dollars and14 percent in local currency over the first quarter of fiscal 2014.
Diluted EPS for the quarter were $1.29, compared with $1.15 for the first quarter last year. The $0.14 increase in EPS reflects:
- $0.10 from higher revenue and operating results;
- $0.03 from a lower share count; and
- $0.01 from higher non-operating income.
Gross margin (gross profit as a percentage of net revenues) for the quarter was 32.2 percent,compared with 33.3 percent for the first quarter last year. Selling, general and administrative(SG&A) expenses for the quarter were $1.35 billion, or 17.1 percent of net revenues, comparedwith $1.38 billion, or 18.7 percent of net revenues, for the first quarter last year.
Operating income for the quarter increased 9 percent, to $1.19 billion, or 15 percent of net revenues, compared with $1.09 billion, or 14.8 percent of net revenues, for the first quarter of fiscal 2014.
The company’s effective tax rate for the quarter was 25.1 percent, consistent with the first quarter last year.
Net income for the quarter was $892 million, compared with $812 million for the first quarter last year, a 10 percent increase.
Operating cash flow for the quarter was $873 million, and property and equipment additions were $52 million. Free cash flow, defined as operating cash flow net of property and equipment additions, was $821 million. For the same period last year, operating cash flow was $181 million; property and equipment additions were $59 million; and free cash flow was $122 million.
Days services outstanding, or DSOs, were 37 days at Nov. 30, compared with 36 days at Aug. 31, and 34 days at Nov. 30, 2013.
Accenture’s total cash balance at Nov. 30, 2014 was $4.5 billion, compared with $4.9 billion at Aug. 31.
Utilization for the quarter was 91 percent, compared with 88 percent for the fourth quarter of fiscal 2014 and 87 percent for the first quarter of fiscal 2014. Approximately 3 percentage pointsof the increase are due to a change in the company’s methodology for calculating utilization to include all billable employees.
Attrition for the first quarter of fiscal 2015 was 13 percent, compared with 15 percent for the fourth quarter of fiscal 2014 and 11 percent for the first quarter of fiscal 2014.
New Bookings
New bookings for the first quarter were $7.7 billion and reflect a negative 3 percent foreign currency impact compared with new bookings in the first quarter last year.
- Consulting new bookings were $3.9 billion, or 51 percent of total new bookings.
- Outsourcing new bookings were $3.8 billion, or 49 percent of total new bookings.
Net Revenues by Operating Group
Net revenues by operating group were as follows:
- Communications, Media & Technology: $1.58 billion, compared with $1.41 billion for the first quarter of fiscal 2014, an increase of 12 percent in U.S. dollars and 15 percent in local currency.
- Financial Services: $1.72 billion, compared with $1.60 billion for the first quarter offiscal 2014, an increase of 7 percent in U.S. dollars and 11 percent in local currency.
- Health & Public Service: $1.37 billion, compared with $1.23 billion for the first quarter of fiscal 2014, an increase of 11 percent in U.S. dollars and 13 percent in local currency.
- Products: $1.93 billion, compared with $1.8 billion for the first quarter of fiscal 2014, an increase of 7 percent in U.S. dollars and 10 percent in local currency.
- Resources: $1.30 billion, compared with $1.32 billion for the first quarter of fiscal 2014,a decrease of 1 percent in U.S. dollars and an increase of 2 percent in local currency.
Net Revenues by Geographic Region
Net revenues by geographic region for the first quarter of fiscal 2015 were as follows:
- North America: $3.44 billion, compared with $3.09 billion for the first quarter of fiscal 2014, an increase of 11 percent in U.S. dollars and 12 percent in local currency.
- Europe: $2.91 billion, compared with $2.76 billion for the first quarter of fiscal 2014, an increase of 5 percent in U.S. dollars and 9 percent in local currency.
- Growth Markets: $1.55 billion, compared with $1.50 billion for the first quarter of fiscal 2014, an increase of 3 percent in U.S. dollars and 9 percent in local currency.
Returning Cash to Shareholders
Accenture continues to return cash to shareholders through cash dividends and sharerepurchases.
Dividend
On Nov. 17, a semi-annual cash dividend of $1.02 per share was paid to Accenture plc Class A ordinary shareholders of record at the close of business on Oct. 17, 2014 and to Accenture SCA Class I common shareholders of record at the close of business on Oct. 14.These cash dividend payments totaled $679 million. This dividend represents an increase of$0.09 per share, or 10 percent, over the company’s previous semi-annual dividend, declared inMarch.
Share Repurchase Activity
During the first quarter of fiscal 2015, Accenture repurchased or redeemed 8.4 million shares fora total of $670 million, including approximately 7.1 million shares repurchased in the openmarket.
Accenture’s total remaining share repurchase authority at Nov. 30, 2014 was approximately$4.1 billion.
At Nov. 30, Accenture had approximately 664 million total shares outstanding, including 627 million Accenture plc Class A ordinary shares and 37 million Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares.
Business Outlook
Second Quarter Fiscal 2015
Accenture expects net revenues for the second quarter of fiscal 2015 to be in the range of$7.25 billion to $7.5 billion. This range assumes a foreign-exchange impact of negative 5 percent compared with the second quarter of fiscal 2014.
Full Fiscal Year 2015
Accenture’s business outlook for the full 2015 fiscal year now assumes a foreign-exchange impact of negative 5 percent compared with fiscal 2014; the previous foreign-exchange assumption was negative 2 percent.
For fiscal 2015, the company has raised its outlook for net revenue growth in local currency to be in the range of 5 percent to 8 percent, compared with 4 percent to 7 percent previously.Accenture now expects diluted EPS to be in the range of $4.66 to $4.80, compared with the company’s previously guided range of $4.74 to $4.88, reflecting the positive impact of its increased revenue outlook, which is more than offset by the negative impact of its revised foreign-exchange assumption.
Accenture continues to expect operating margin for the full fiscal year to be in the range of14.4 percent to 14.6 percent, an expansion of 10 to 30 basis points from fiscal 2014.
For fiscal 2015, the company continues to expect operating cash flow to be in the range of$3.95 billion to $4.25 billion; property and equipment additions to be $450 million; and free cashflow to be in the range of $3.5 billion to $3.8 billion.
The company continues to expect to return at least $3.8 billion to its shareholders in fiscal 2015 through dividends and share repurchases.
The company continues to expect its annual effective tax rate to be in the range of 26 percent to 27 percent.
Accenture continues to target new bookings for fiscal 2015 in the range of $34 billion to$36 billion.
