Accenture (NYSE:ACN) reported strong financial results for the third
quarter of fiscal 2014, ended May 31, 2014, with net revenues of
$7.74 billion, an increase of 7 percent in both U.S. dollars and local
currency over the same period last year, above the company's guided
range of $7.40 billion to $7.65 billion.
Diluted earnings per share were $1.26, compared with $1.21 for the third
quarter last year, which included a benefit of $50 million, or $0.07 per
share, from a reduction in reorganization liabilities. Excluding this
benefit, diluted EPS for the third quarter last year were $1.14. Diluted
EPS for the third quarter of fiscal 2014 increased 11 percent from
adjusted EPS for the third quarter last year.
Operating income for the quarter was $1.18 billion, or 15.2 percent of
net revenues, compared with $1.14 billion, or 15.9 percent of net
revenues, for the third quarter last year, which included the benefit of
$50 million from the reduction in reorganization liabilities. Excluding
this benefit, operating income for the third quarter of fiscal 2013 was
$1.09 billion, or 15.2 percent of net revenues.
New bookings for the quarter were $8.8 billion, with consulting bookings
of $4.3 billion and outsourcing bookings of $4.5 billion.
Pierre Nanterme, Accenture's chairman and CEO, said, "We are very
pleased with our third-quarter financial results. We delivered strong
revenue growth, which was broad-based across the different dimensions of
our business, and earnings per share of $1.26, up 11 percent. New
bookings of $8.8 billion bring us to $27.6 billion for the first three
quarters of the year, and demonstrate that our services continue to be
highly relevant to our clients. We generated solid free cash flow and
returned $1.1 billion in cash to our shareholders.
"These results clearly demonstrate that we are successfully executing
our growth strategy. We are leveraging our unique positioning at the
intersection of business and technology, capturing new opportunities in
key growth areas-especially digital-and investing to further
differentiate our capabilities. At the same time, we are maintaining a
disciplined management approach to continue enhancing our
competitiveness. We remain confident in our ability to continue driving
profitable growth and delivering value for our clients and shareholders."
Revenues before reimbursements ("net revenues") for the third quarter of
fiscal 2014 were $7.74 billion, compared with $7.20 billion for the
third quarter of fiscal 2013, an increase of 7 percent in both U.S.
dollars and local currency, and above the company's guided range of
$7.40 billion to $7.65 billion. The foreign-exchange impact for the
quarter was approximately zero percent, consistent with the assumption
provided in the company's second-quarter earnings release.
Diluted EPS for the quarter were $1.26, compared with $1.21 for the
third quarter last year, which included a $0.07 benefit from the
reduction in reorganization liabilities. Excluding this benefit, EPS for
the third quarter last year were $1.14. The $0.12 increase from adjusted
EPS last year reflects:
partially offset by:
Gross margin (gross profit as a percentage of net revenues) for the
quarter was 32.8 percent, compared with 33.9 percent for the third
quarter last year. Selling, general and administrative (SG&A) expenses
for the quarter were $1.36 billion, or 17.5 percent of net revenues,
compared with $1.35 billion, or 18.7 percent of net revenues, for the
third quarter last year.
Operating income for the quarter was $1.18 billion, or 15.2 percent of
net revenues, compared with $1.14 billion, or 15.9 percent of net
revenues, for the third quarter last year, which included the $50
million reorganization benefit. Excluding the reorganization benefit,
operating income for the third quarter last year was $1.09 billion, or
15.2 percent of net revenues. Operating income for the third quarter of
fiscal 2014 increased 3 percent on a GAAP basis and 8 percent from
adjusted operating income for the third quarter last year.
The company's effective tax rate for the quarter was 25.0 percent,
compared with 23.8 percent for the third quarter last year. Excluding
the reorganization benefit, the effective tax rate for the third quarter
last year was 24.8 percent.
Net income for the quarter was $882 million, compared with $874 million
for the third quarter last year, which included the favorable impact of
the $50 million reorganization benefit.
Operating cash flow for the quarter was $1.36 billion, and property and
equipment additions were $85 million. Free cash flow, defined as
operating cash flow net of property and equipment additions, was
$1.28 billion. For the same period last year, operating cash flow was
$1.50 billion; property and equipment additions were $91 million; and
free cash flow was $1.41 billion.
Days services outstanding, or DSOs, were 35 days, compared with 31 days
at Aug. 31, 2013 and 30 days at May 31, 2013.
Accenture's total cash balance at May 31, 2014 was $4.0 billion,
compared with $5.6 billion at Aug. 31, 2013. The lower cash balance at
May 31, 2014 was principally due to share repurchases and cash dividend
payments, as well as funds used for business acquisitions.
Utilization for the quarter was 88 percent, compared with 87 percent for
the second quarter of fiscal 2014 and 88 percent for the third quarter
of fiscal 2013. Attrition for the third quarter of fiscal 2014 was
14 percent, compared with 12 percent for both the second quarter of
fiscal 2014 and the third quarter of fiscal 2013.
New bookings for the third quarter were $8.8 billion and reflect a flat
foreign-currency impact compared with new bookings in the third quarter
Net Revenues by Operating Group
Net revenues by operating group were as follows:
Net Revenues by Geographic Region
Net revenues by geographic region were as follows:
Returning Cash to Shareholders
Accenture continues to return cash to shareholders through cash
dividends and share repurchases.
On May 15, 2014, a semi-annual cash dividend of $0.93 per share was paid
on Accenture plc Class A ordinary shares to shareholders of record at
the close of business on April 11, 2014, and on Accenture SCA Class I
common shares to shareholders of record at the close of business on
April 8, 2014.
Combined with the semi-annual cash dividend of $0.93 per share paid on
Nov. 15, 2013, this brings the total dividend payments for the fiscal
year to $1.86 per share, for total cash dividend payments of
approximately $1.3 billion.
Share Repurchase Activity
During the third quarter of fiscal 2014, Accenture repurchased or
redeemed 5.5 million shares, including approximately 4.8 million shares
repurchased in the open market, for a total of $441 million. This brings
Accenture's total share repurchases and redemptions for the first three
quarters of fiscal 2014 to 24.4 million shares, including 19.4 million
shares repurchased in the open market, for a total of $1.9 billion.
Accenture's total remaining share repurchase authority at May 31, 2014
was approximately $5.3 billion.
At May 31, 2014, Accenture had approximately 671 million total shares
outstanding, including 631 million Accenture plc Class A ordinary shares
and 40 million Accenture SCA Class I common shares and Accenture Canada
Holdings Inc. exchangeable shares.
Fourth Quarter Fiscal 2014
Accenture expects net revenues for the fourth quarter of fiscal 2014 to
be in the range of $7.45 billion to $7.70 billion. This range assumes a
foreign-exchange impact of positive 1.5 percent compared with the fourth
quarter of fiscal 2013.
Full Fiscal Year 2014
For fiscal 2014, the company now expects net revenue growth to be in the
range of 4 percent to 5 percent in local currency, compared with
3 percent to 6 percent previously.
Accenture's business outlook for the full 2014 fiscal year continues to
assume a foreign-exchange impact of negative 0.5 percent compared with
The company now expects diluted EPS to be in the range of $4.50 to
$4.54, compared with $4.50 to $4.62 previously.
Accenture now expects operating margin for the full fiscal year to be
14.3 percent, a 10 basis-point expansion from the adjusted Non-GAAP
operating margin of 14.2 percent for fiscal 2013. The GAAP operating
margin for fiscal 2013 of 15.2 percent included a positive impact of
100 basis points from reductions in reorganization liabilities. The
company previously expected an operating margin for fiscal 2014 of
14.3 percent to 14.5 percent.
For fiscal 2014, the company continues to expect operating cash flow to
be in the range of $3.3 billion to $3.6 billion; property and equipment
additions to be $400 million; and free cash flow to be in the range of
$2.9 billion to $3.2 billion.
The company continues to expect to return at least $3.7 billion to its
shareholders in fiscal 2014 through dividends and share repurchases.
The company continues to expect its annual effective tax rate to be in
the range of 25.5 percent to 26.5 percent.
Accenture now expects new bookings for the full fiscal year to be in the
upper end of its previously guided range of $33 billion to $36 billion.
Conference Call and Webcast Details
Accenture will host a conference call at 8:00 a.m. EDT today to discuss
its third-quarter fiscal 2014 financial results. To participate, please
dial +1 (800) 230-1059 [+1 (612) 234-9959 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. EDT today, Thursday, June 26, and continuing
until Wednesday, Sept. 24, 2014. A podcast of the conference call will
be available online at www.accenture.com
beginning approximately 24 hours after the call and continuing until
Wednesday, Sept. 24, 2014. The replay will also be available via
telephone by dialing +1 (800) 475-6701 [+1 (320) 365-3844 outside the
United States, Puerto Rico and Canada] and entering access code 328224
from 10:30 a.m. EDT Thursday, June 26 through Wednesday, Sept. 24, 2014.
Accenture is a global management consulting, technology services and
outsourcing company, with more than 293,000 people serving clients in
more than 120 countries. Combining unparalleled experience,
comprehensive capabilities across all industries and business functions,
and extensive research on the world's most successful companies,
Accenture collaborates with clients to help them become high-performance
businesses and governments. The company generated net revenues of
US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page
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.
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," "expects," "intends," "plans," "projects," "believes,"
"estimates," "positioned," "outlook" and similar expressions are used to
identify these forward-looking statements. These statements involve a
number of risks, uncertainties and other factors that could cause actual
results to differ materially from those expressed or implied. These
include, without limitation, risks that: the company's results of
operations could be adversely affected by volatile, negative or
uncertain economic conditions and the effects of these conditions on the
company's clients' businesses and levels of business activity; the
company's business depends on generating and maintaining ongoing,
profitable client demand for the company's services and solutions, and a
significant reduction in such demand could materially affect the
company's results of operations; if the company is unable to keep its
supply of skills and resources in balance with client demand around the
world and attract and retain professionals with strong leadership
skills, the company's business, the utilization rate of the company's
professionals and the company's results of operations may be materially
adversely affected; the markets in which the company competes are highly
competitive, and the company might not be able to compete effectively;
the company's profitability could suffer if its cost-management
strategies are unsuccessful, and the company may not be able to improve
its profitability through improvements to cost-management to the degree
it has done in the past; the company's results of operations could
materially suffer if the company is not able to obtain sufficient
pricing to enable it to meet its profitability expectations; if the
company's pricing estimates do not accurately anticipate the cost, risk
and complexity of the company performing its work or third parties upon
whom it relies do not meet their commitments, then the company's
contracts could have delivery inefficiencies and be unprofitable; the
company could have liability or the company's reputation could be
damaged if the company fails to protect client and/or company data or
information systems as obligated by law or contract or if the company's
information systems are breached; the company's results of operations
and ability to grow could be materially negatively affected if the
company cannot adapt and expand its services and solutions in response
to ongoing changes in technology and offerings by new entrants; as a
result of the company's geographically diverse operations and its growth
strategy to continue geographic expansion, the company is more
susceptible to certain risks; the company's Global Delivery Network is
increasingly concentrated in India and the Philippines, which may expose
it to operational risks; the company might not be successful at
identifying, acquiring or integrating businesses or entering into joint
ventures; the company's work with government clients exposes the company
to additional risks inherent in the government contracting environment;
the company's business could be materially adversely affected if the
company incurs legal liability; the company's results of operations
could be materially adversely affected by fluctuations in foreign
currency exchange rates; the company's alliance relationships may not be
successful or may change, which could adversely affect the company's
results of operations; outsourcing services and the continued expansion
of the company's other services and solutions into new areas subject the
company to different operational risks than its consulting and systems
integration services; the company's services or solutions could infringe
upon the intellectual property rights of others or the company might
lose its ability to utilize the intellectual property of others; if the
company is unable to protect its intellectual property rights from
unauthorized use or infringement by third parties, its business could be
adversely affected; the company's ability to attract and retain business
and employees may depend on its reputation in the marketplace; many of
the company's contracts include payments that link some of its fees to
the attainment of performance or business targets and/or require the
company to meet specific service levels, which could increase the
variability of the company's revenues and impact its margins; changes in
the company's level of taxes, and audits, investigations and tax
proceedings, or changes in the company's treatment as an Irish company,
could have a material adverse effect on the company's results of
operations and financial condition; if the company is unable to manage
the organizational challenges associated with its size, the company
might be unable to achieve its business objectives; if the company is
unable to collect its receivables or unbilled services, the company's
results of operations, financial condition and cash flows could be
adversely affected; the company's share price and results of operations
could fluctuate and be difficult to predict; the company's results of
operations and share price could be adversely affected if it is unable
to maintain effective internal controls; any changes to the estimates
and assumptions that the company makes in connection with the
preparation of its consolidated financial statements could adversely
affect its financial results; the company may be subject to criticism
and negative publicity related to its incorporation in Ireland; as well
as the risks, uncertainties and other factors discussed under the "Risk
Factors" heading in Accenture plc's most recent annual report on Form
10-K and other documents filed with or furnished to the Securities and
Exchange Commission. 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.
Net income attributable to noncontrolling interests in Accenture
and Accenture Canada Holdings Inc. (2)
Operating Margin as
Excluding Reorganization Benefits
EARNINGS PER SHARE, AS ADJUSTED (NON-GAAP)
Total non-current liabilities
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