Accenture Reports Strong First-Quarter Fiscal 2023 Results
-- Revenues are $15.7 billion, an increase of 5% in U.S. dollars and 15% in local currency --
-- Operating margin expands 20 basis points to 16.5%, with operating income increasing 7% to $2.59 billion --
-- EPS are $3.08, an 11% increase from $2.78 for the first quarter of fiscal 2022 --
-- New bookings are $16.2 billion across consulting and managed services with both at $8.1 billion --
-- Company declares quarterly cash dividend of $1.12 per share, up 15% from a year ago --
-- Accenture updates business outlook for fiscal 2023; raises EPS to $11.20 to $11.52; continues to expect revenue growth of 8% to 11% in local currency; and now expects foreign-exchange impact of negative 5% --
Accenture (NYSE: ACN) reported financial results for the first quarter of fiscal 2023, ended November 30, 2022, with revenues of $15.7 billion, an increase of 5% in U.S. dollars and 15% in local currency over the same period last year.
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Q1 FY2023 Earnings Infographic (Graphic: Business Wire)
Diluted earnings per share were $3.08, an 11% increase from $2.78 for the first quarter last year.
Operating income was $2.59 billion, a 7% increase over the same period last year, and operating margin was 16.5%, an expansion of 20 basis points. Operating cash flow was $495 million and free cash flow was $397 million.
New bookings for the quarter were $16.2 billion, with bookings of $8.1 billion for both consulting and managed services (previously referred to as outsourcing).
Julie Sweet, chair and CEO, Accenture, said, “Our strong first quarter results reflect our laser focus on creating value for our clients, as well as the significant investments in our business and capabilities we make year in and year out to meet the evolving needs of our clients. Today, all strategies lead to technology, and Accenture’s depth and breadth, leading ecosystem relationships and continuous innovation are enabling clients to digitize faster, build greater resiliency and optimize costs. Thanks to our extraordinary people, we continue to deliver 360° value for all our stakeholders, and are pleased to share our goals, progress and performance in our newly enhanced 360° Value Reporting Experience.”
Revenues for the first quarter of fiscal 2023 were $15.75 billion, compared with $14.97 billion for the first quarter of fiscal 2022, an increase of 5% in U.S. dollars and 15% in local currency.
Revenues for the quarter reflect a foreign-exchange impact of approximately negative 9.5% compared with the negative 8.5% impact previously assumed. Adjusting for the actual foreign-exchange impact, the company’s guided range for quarterly revenues was approximately $15.05 billion to $15.60 billion. Accenture’s first-quarter fiscal 2023 revenues were approximately $150 million above this adjusted range.
- Consulting revenues for the quarter were $8.44 billion, an increase of 1% in U.S. dollars and 10% in local currency compared with the first quarter of fiscal 2022.
- Managed Services revenues were $7.30 billion, an increase of 11% in U.S. dollars and 20% local currency compared with the first quarter of fiscal 2022.
Diluted EPS for the quarter were $3.08, an 11% increase from $2.78 for the first quarter last year. The $0.30 increase in EPS reflects:
- a $0.19 increase from higher revenue and operating results; and
- a $0.04 increase from non-operating income; and
- a $0.04 increase from a lower effective tax rate; and
- a $0.03 increase from a lower share count.
Gross margin (gross profit as a percentage of revenues) for the quarter was 32.9%, flat compared to 32.9% in the first quarter last year. Selling, general and administrative (SG&A) expenses for the quarter were $2.59 billion, or 16.5% of revenues, compared with $2.48 billion, or 16.6% of revenues, for the first quarter last year.
Operating income for the quarter increased 7%, to $2.59 billion, or 16.5% of revenues, compared with $2.43 billion, or 16.3% of revenues, for the first quarter of fiscal 2022.
The company’s effective tax rate for the quarter was 23.3%, compared with 24.4% for the first quarter last year.
Net income for the quarter was $2.00 billion, compared with $1.82 billion for the first quarter last year.
Operating cash flow for the quarter was $495 million, and property and equipment additions were $99 million. Free cash flow, defined as operating cash flow net of property and equipment additions, was $397 million. For the same period last year, operating cash flow was $531 million; property and equipment additions were $182 million; and free cash flow was $349 million.
Days services outstanding, or DSOs, were 48 days at Nov. 30, 2022, compared with 43 days at Aug. 31, 2022 and 42 days at Nov. 30, 2021.
Accenture’s total cash balance at Nov. 30, 2022 was $5.9 billion, compared with $7.9 billion at Aug. 31, 2022.
New bookings for the first quarter were $16.22 billion, a 3% decrease in U.S. dollars and a 6% increase in local currency from the first quarter last year.
- Consulting new bookings were $8.11 billion, or 50% of total new bookings.
- Managed Services new bookings were $8.11 billion, or 50% of total new bookings.
Revenues by Geographic Market
Revenues by geographic market were as follows:
- North America: $7.62 billion, an increase of 10% in U.S. dollars and 11% in local currency compared with the first quarter of fiscal 2022.
- Europe: $5.07 billion, a decrease of 0.5% in U.S. dollars and an increase of 17% in local currency compared with the first quarter of fiscal 2022.
- Growth Markets: $3.05 billion, an increase of 3% in U.S. dollars and 19% in local currency compared with the first quarter of fiscal 2022.
Revenues by Industry Group
Revenues by industry group were as follows:
- Communications, Media & Technology: $2.98 billion, an increase of 3% in U.S. dollars and 11% in local currency compared with the first quarter of fiscal 2022.
- Financial Services: $2.96 billion, an increase of 2% in U.S. dollars and 13% in local currency compared with the first quarter of fiscal 2022.
- Health & Public Service: $3.00 billion, an increase of 10% in U.S. dollars and 15% in local currency compared with the first quarter of fiscal 2022.
- Products: $4.67 billion, an increase of 4% in U.S. dollars and 15% in local currency compared with the first quarter of fiscal 2022.
- Resources: $2.14 billion, an increase of 10% in U.S. dollars and 21% in local currency compared with the first quarter of fiscal 2022.
Returning Cash to Shareholders
Accenture continues to return cash to shareholders through cash dividends and share repurchases.
On Nov. 15, 2022, a quarterly cash dividend of $1.12 per share was paid to shareholders of record at the close of business on Oct. 13, 2022. These cash dividend payments totaled $706 million.
Accenture plc has declared another quarterly cash dividend of $1.12 per share for shareholders of record at the close of business on Jan. 10, 2023. This dividend, which is payable on Feb. 15, 2023, represents a 15% increase over the quarterly dividend rate of $0.97 per share in fiscal 2022.
Share Repurchase Activity
During the first quarter of fiscal 2023, Accenture repurchased or redeemed 5.2 million shares for a total of $1.4 billion, including approximately 4.5 million shares repurchased in the open market.
Accenture’s total remaining share repurchase authority at Nov. 30, 2022 was approximately $4.9 billion.
At Nov. 30, 2022, Accenture had approximately 630 million total shares outstanding.
Second Quarter Fiscal 2023
Accenture expects revenues for the second quarter of fiscal 2023 to be in the range of $15.20 billion to $15.75 billion, an increase of 6% to 10% in local currency, reflecting the company’s assumption of an approximately negative 5% foreign-exchange impact compared with the second quarter of fiscal 2022.
Fiscal Year 2023
Accenture’s business outlook for the full 2023 fiscal year now assumes that the foreign-exchange impact on its results in U.S. dollars will be approximately negative 5% compared with fiscal 2022; the company previously expected a negative 6% foreign-exchange impact.
For fiscal 2023, the company continues to expect revenue growth to be in the range of 8% to 11% in local currency.
Accenture continues to expect operating margin for the full 2023 fiscal year to be in the range of 15.3% to 15.5%, an expansion of 10 to 30 basis points from fiscal 2022.
The company continues to expect its annual effective tax rate to be in the range of 23% to 25%.
The company now expects diluted EPS to be in the range of $11.20 to $11.52, an increase of 5% to 8% over FY22 diluted EPS. The company previously expected diluted EPS to be in the range of $11.09 to $11.41.
For fiscal 2023, the company continues to expect operating cash flow to be in the range of $8.5 billion to $9.0 billion; property and equipment additions to be $800 million; and free cash flow to be in the range of $7.7 billion to $8.2 billion.
The company continues to expect to return at least $7.1 billion in cash to shareholders through dividends and share repurchases.
360° Value Reporting
Accenture’s goal is to create 360° value for our clients, people, shareholders, partners, and communities. Our reporting captures how we deliver unique value across six vital dimensions and offers a comprehensive view of our financial and environmental, social and governance (ESG) measures, and our goals, progress and performance for each. We are pleased to publish our first full 360° Value Report for fiscal 2022 in tandem with our enhanced, online 360° Value Reporting Experience, which now provides customizable reports. To access please visit the Accenture 360° Value Reporting Experience at www.accenture.com/reportingexperience.
Conference Call and Webcast Details
Accenture will host a conference call at 8:00 a.m. EST today to discuss its first-quarter fiscal 2023 financial results. To participate, please dial +1 (877) 692-8955 [+1 (234) 720-6979 outside the United States, Puerto Rico and Canada] and enter access code 9024690 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 website at www.accenture.com.
A replay of the conference call will be available at www.accenture.com beginning at 11:00 a.m. EST today, December 16, and continuing through March 22, 2023. 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 2975215 from 11:00 a.m. EST today, December 16, through Wednesday, March 22, 2023.
Accenture is a leading global professional services company that helps the world’s leading businesses, governments and other organizations build their digital core, optimize their operations, accelerate revenue growth and enhance citizen services—creating tangible value at speed and scale. We are a talent and innovation led company with 738,000 people serving clients in more than 120 countries. Technology is at the core of change today, and we are one of the world’s leaders in helping drive that change, with strong ecosystem relationships. We combine our strength in technology with unmatched industry experience, functional expertise and global delivery capability. We are uniquely able to deliver tangible outcomes because of our broad range of services, solutions and assets across Strategy & Consulting, Technology, Operations, Industry X and Accenture Song. These capabilities, together with our culture of shared success and commitment to creating 360° value, enable us to help our clients succeed and build trusted, lasting relationships. We measure our success by the 360° value we create for our clients, each other, our shareholders, partners and communities. Visit us at www.accenture.com.
Non-GAAP Financial Information
This news release includes certain non-GAAP financial information as defined by Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of this non-GAAP financial information to Accenture’s financial statements as prepared under generally accepted accounting principles (GAAP) are included in this press release. Financial results “in local currency” are calculated by restating current-period activity into U.S. dollars using the comparable prior-year period’s foreign-currency exchange rates. Accenture’s management believes providing investors with this information gives additional insights into Accenture’s results of operations. While Accenture’s management believes that the non-GAAP financial measures herein are useful in evaluating Accenture’s operations, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP. Accenture provides full-year revenue guidance on a local-currency basis and not in U.S. dollars because the impact of foreign exchange rate fluctuations could vary significantly from the company’s stated assumptions.
Except for the historical information and discussions contained herein, statements in this news release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “aspires,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “positioned,” “outlook,” “goal,” “target,” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance nor promises that goals or targets will be met, and involve a number of risks, uncertainties and other factors that are difficult to predict and could cause actual results to differ materially from those expressed or implied. 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Statements in this news release speak only as of the date they were made, and Accenture undertakes no duty to update any forward-looking statements made in this news release or to conform such statements to actual results or changes in Accenture’s expectations.