The FINANCIAL — Accenture (NYSE: ACN) reported financial results for the second quarter of fiscal 2015, ended Feb. 28, 2015, with net revenues of $7.5 billion, an increase of 5 percent in U.S. dollars and 12 percent in local currency over the same period last year.
Diluted earnings per share were $1.08, an increase of $0.05, or 5 percent, over the same period last year.
Operating income was $1.02 billion, an increase of 7 percent over the same period last year, and operating margin was 13.6 percent, a year-over-year expansion of 30 basis points, according to Accenture.
New bookings for the quarter were $9.4 billion, with consulting bookings of $4.2 billion and outsourcing bookings of $5.1 billion.
Pierre Nanterme, Accenture’s chairman and CEO, said, “We are extremely pleased with our very strong financial results for the second quarter and first half of fiscal 2015. Our revenue growth of 12 percent in the second quarter was again broad-based across the different dimensions of our business, and we gained significant market share. We delivered excellent new bookings of
$9.4 billion, demonstrating that our services continue to be highly relevant to our clients. Based on our continued momentum and very strong performance in the first half, we are raising our business outlook for revenues for the full fiscal year.
“Our growth strategy and the focused investments we have made across our business are clearly differentiating Accenture in the marketplace—particularly in digital, where we delivered revenue growth of more than 20 percent in local currency in the first half of the fiscal year. We continue to invest to further differentiate our capabilities and to enhance our competitiveness. We remain confident in our ability to continue driving sustainable, profitable growth and delivering value for our clients and shareholders.”
Financial Review
Revenues before reimbursements (“net revenues”) for the second quarter of fiscal 2015 were $7.49 billion, compared with $7.13 billion for the second quarter of fiscal 2014, an increase of 5 percent in U.S. dollars and 12 percent in local currency. Net revenues for the quarter reflect a foreign-exchange impact of negative 6.5 percent, compared with the negative 5 percent we had
previously assumed. Adjusting for the actual foreign-exchange impact of negative 6.5 percent in the quarter, the company’s guided range for quarterly net revenues was $7.15 billion to
$7.40 billion. Accenture’s second quarter fiscal 2015 net revenues were $90 million above this adjusted range.
Consulting net revenues for the quarter were $3.84 billion, an increase of 4 percent in U.S. dollars and 11 percent in local currency compared with the second quarter of fiscal 2014.
Outsourcing net revenues were $3.65 billion, an increase of 6 percent in U.S. dollars and 13 percent in local currency over the second quarter of fiscal 2014.
Diluted EPS for the quarter were $1.08, compared with $1.03 for the second quarter last year. The $0.05 increase in EPS reflects:
$0.08 from higher revenue and operating results; and
$0.02 from a lower share count;
partially offset by
$0.02 from lower non-operating income; and
$0.03 from a higher effective tax rate.
Gross margin (gross profit as a percentage of net revenues) for the quarter was 29.9 percent, compared with 31.3 percent for the second quarter last year. Selling, general and administrative (SG&A) expenses for the quarter were $1.22 billion, or 16.3 percent of net revenues, compared with $1.28 billion, or 17.9 percent of net revenues, for the second quarter last year.
Operating income for the quarter increased 7 percent, to $1.02 billion, or 13.6 percent of net revenues, compared with $951 million, or 13.3 percent of net revenues, for the second quarter of fiscal 2014.
The company’s effective tax rate for the quarter was 26.0 percent, compared with 24.0 percent for the second quarter last year.
Net income for the quarter was $743 million, compared with $722 million for the second quarter last year, a 3 percent increase.
Operating cash flow for the quarter was $301 million, and property and equipment additions were $82 million. Free cash flow, defined as operating cash flow net of property and equipment
additions, was $220 million. For the same period last year, operating cash flow was $292 million; property and equipment additions were $76 million; and free cash flow was $216 million.
Days services outstanding, or DSOs, were 35 days at Feb. 28, 2015, compared with 36 days at Aug. 31, 2014 and 33 days at Feb. 28, 2014.
Accenture’s total cash balance at Feb. 28, 2015 was $4.1 billion, compared with $4.9 billion at Aug. 31, 2014.
Utilization for the quarter was 91 percent, compared with 91 percent for the first quarter of fiscal 2015.
Attrition for the second quarter of fiscal 2015 was 14 percent, compared with 13 percent for the first quarter of fiscal 2015 and 12 percent for the second quarter of fiscal 2014.
New Bookings
New bookings for the second quarter were $9.4 billion and reflect a negative 6 percent foreign- currency impact compared with new bookings in the second quarter last year.
Consulting new bookings were $4.2 billion, or 45 percent of total new bookings.
Outsourcing new bookings were $5.1 billion, or 55 percent of total new bookings.
Net Revenues by Operating Group
Net revenues by operating group were as follows:
Communications, Media & Technology: $1.52 billion, compared with $1.41 billion for the second quarter of fiscal 2014, an increase of 8 percent in U.S. dollars and 15 percent in local currency.
Financial Services: $1.59 billion, compared with $1.56 billion for the second quarter of fiscal 2014, an increase of 2 percent in U.S. dollars and 9 percent in local currency.
Health & Public Service: $1.32 billion, compared with $1.18 billion for the second quarter of fiscal 2014, an increase of 12 percent in U.S. dollars and 15 percent in local currency.
Products: $1.85 billion, compared with $1.75 billion for the second quarter of fiscal 2014, an increase of 6 percent in U.S. dollars and 13 percent in local currency.
Resources: $1.21 billion, compared with $1.22 billion for the second quarter of fiscal 2014, a decrease of 1 percent in U.S. dollars and an increase of 6 percent in local currency.
Net Revenues by Geographic Region
Net revenues by geographic region for the second quarter of fiscal 2015 were as follows:
North America: $3.41 billion, compared with $3.03 billion for the second quarter of fiscal 2014, an increase of 13 percent in both U.S. dollars and local currency.
Europe: $2.66 billion, compared with $2.72 billion for the second quarter of fiscal 2014, a decrease of 2 percent in U.S. dollars and an increase of 9 percent in local currency.
Growth Markets: $1.42 billion, compared with $1.38 billion for the second quarter of fiscal 2014, an increase of 3 percent in U.S. dollars and 12 percent in local currency.
Beginning in fiscal 2015, the company is reporting its geographic regions as follows: North America (the United States and Canada); Europe; and Growth Markets (Asia Pacific, Latin America, Africa, the Middle East, Russia and Turkey). Previously, the company’s three geographic regions were the Americas; EMEA
(Europe, the Middle East and Africa); and Asia Pacific.
Returning Cash to Shareholders
Accenture continues to return cash to shareholders through cash dividends and share repurchases.
Dividend
Accenture plc has declared a semi-annual cash dividend of $1.02 per share on Accenture plc Class A ordinary shares for shareholders of record at the close of business on April 10, 2015, and Accenture SCA will declare a semi-annual cash dividend of $1.02 per share on Accenture SCA Class I common shares for shareholders of record at the close of business on April 7, 2015. These dividends are both payable on May 15, 2015.
Combined with the semi-annual cash dividend of $1.02 per share paid on Nov. 17, 2014, this will bring the total dividend payments for the fiscal year to $2.04 per share, for total projected cash dividend payments of approximately $1.35 billion.
Share Repurchase Activity
During the second quarter of fiscal 2015, Accenture repurchased or redeemed 6.8 million shares for a total of $601 million, including approximately 5.0 million shares repurchased in the open market.
Accenture’s total remaining share repurchase authority at Feb. 28, 2015 was approximately $3.7 billion.
At Feb. 28, 2015, Accenture had approximately 663 million total shares outstanding, including 626 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
Third Quarter Fiscal 2015
Accenture expects net revenues for the third quarter of fiscal 2015 to be in the range of $7.35 billion to $7.60 billion. This range assumes a foreign-exchange impact of negative 11 percent compared with the third 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 8 percent compared with fiscal 2014; the previous foreign-exchange assumption was negative 5 percent.
For fiscal 2015, the company has raised its outlook for net revenue growth in local currency to be in the range of 8 percent to 10 percent, compared with 5 percent to 8 percent previously.
In May 2015, the company will record a non-cash settlement charge of approximately
$60 million, pre-tax, as a result of a current offer to former employees to receive a voluntary one-time, lump-sum cash payment from the company’s U.S. pension plan. The payment will settle the company’s pension obligations to those former employees who participate. This settlement charge will reduce the company’s fiscal 2015 GAAP EPS by approximately $0.05 and its full-year GAAP operating margin by approximately 20 basis points.
Accenture now expects diluted GAAP EPS to be in the range of $4.61 to $4.71, including the positive impact of its increased revenue outlook, which is offset by the negative impact of its revised foreign-exchange assumption, as well as the negative impact of the settlement charge.
Excluding the settlement charge, adjusted EPS is expected to be in the range of $4.66 to $4.76.
The company’s previously guided range for EPS was $4.66 to $4.80.
Accenture now expects GAAP operating margin for the full fiscal year to be in the range of 14.2 percent to 14.4 percent, compared with its previously guided range of 14.4 percent to 14.6 percent. Excluding the settlement charge, operating margin for the full fiscal year is
expected to be in the range of 14.4 percent to 14.6 percent, an expansion of 10 to 30 basis points from fiscal 2014—consistent with the company’s previous expectation.
Reflecting its revised foreign-exchange assumption, the company now expects operating cash flow for fiscal 2015 to be in the range of $3.85 billion to $4.15 billion, compared with
$3.95 billion to $4.25 billion previously; continues to expect property and equipment additions to be $450 million; and now expects free cash flow to be in the range of $3.4 billion to $3.7 billion, compared with $3.5 billion to $3.8 billion previously.
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 26.0 percent to 27.0 percent.
Accenture is now targeting new bookings for fiscal 2015 in the range of $33 billion to $35 billion, compared with $34 billion to $36 billion previously, reflecting its revised foreign- exchange assumption.
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