Accenture reports very strong first-quarter results and raises business outlook for fiscal 2022

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-- Revenues are $15.0 billion, an increase of 27% in both U.S. dollars and local currency --

-- EPS are $2.78, a 20% increase from $2.32 for the first quarter last year, which included $0.15 in gains on an investment; excluding these gains, EPS are up 28% from adjusted EPS of $2.17 in the first quarter last year --

-- Operating income increases 29% to $2.43 billion, with operating margin of 16.3%, an expansion of 20 basis points --

-- New bookings are a record $16.8 billion, a 30% increase in both U.S. dollars and local currency from the first quarter last year, with record consulting bookings of $9.4 billion and outsourcing bookings of $7.4 billion --

-- Company declares quarterly cash dividend of $0.97 per share, up 10% from a year ago --

-- Accenture raises its business outlook for fiscal 2022; now expects full-year revenue growth of 19% to 22% in local currency; EPS of $10.32 to $10.60; and free cash flow of $7.7 billion to $8.2 billion --

Accenture (NYSE: ACN) reported financial results for the first quarter of fiscal 2022, ended Nov. 30, 2021, with revenues of $15.0 billion, an increase of 27% in both U.S. dollars and local currency over the same period last year.

Diluted earnings per share were $2.78, a 20% increase from $2.32 for the first quarter last year, which included $0.15 in gains on an investment. On an adjusted basis, EPS increased 28% from $2.17 for the first quarter last year.

Operating income was $2.43 billion, a 29% increase over the same period last year, and operating margin was 16.3%, an expansion of 20 basis points.

New bookings for the quarter were a record $16.8 billion, with record consulting bookings of $9.4 billion and outsourcing bookings of $7.4 billion.

Julie Sweet, Accenture’s Chair & CEO, said, “We were pleased to continue delivering 360° value for our clients as they accelerate their digital transformations. Our outstanding first-quarter financial performance and ability to capitalize on the market opportunity reflects continued market share gains. This is the direct result of having executed for years a strategy to rotate our business to digital, cloud and security, both hiring and upskilling exceptionally talented people across the globe and fostering deep relationships with both the world’s leading companies and our technology partners. I am especially proud that we added 50,000 people to our workforce this quarter, now at 674,000, reflecting our strong employee experience, which enables us to attract and grow great people.”

“Our goal is to create 360° value for all our stakeholders and reflects our growth strategy, our core values and our culture of shared success — succeeding not only financially, but in dimensions of value such as inclusion and diversity, reskilling, sustainability and experience. And today, we are launching our integrated 360° Value Reporting Experience, a new way to share the value we create in all directions.”

Financial Review

Revenues for the first quarter of fiscal 2022 were $14.97 billion, compared with $11.76 billion for the first quarter of fiscal 2021, an increase of 27% in both U.S. dollars and local currency. Revenues were more than $600 million above the company’s guided range of $13.90 billion to $14.35 billion. The foreign-exchange impact for the quarter was approximately flat, compared with the assumption of a positive 0.5% impact provided in the company’s fourth-quarter earnings release.

▪Consulting revenues for the quarter were $8.39 billion, an increase of 33% in U.S. dollars and 32% in local currency compared with the first quarter of fiscal 2021.

▪Outsourcing revenues were $6.57 billion, an increase of 21% in both U.S. dollars and local currency compared with the first quarter of fiscal 2021.

Diluted EPS for the quarter were $2.78, a 20% increase from $2.32 for the first quarter last year, which included pre-tax gains on an investment of $120 million, or $0.15 per share. Excluding these gains, EPS increased 28% from adjusted EPS of $2.17 for the first quarter of fiscal 2021. The $0.61 increase in EPS on an adjusted basis reflects:

▪a $0.64 increase from higher revenue and operating results; and

▪a $0.01 increase from a lower share count;

partially offset by

▪a $0.03 decrease from a higher effective tax rate; and

▪a $0.01 decrease from higher income attributable to noncontrolling interests.

Gross margin (gross profit as a percentage of revenues) for the quarter was 32.9%, compared with 33.1% for the first quarter last year. Selling, general and administrative (SG&A) expenses for the quarter were $2.48 billion, or 16.6% of revenues, compared with $2.01 billion, or 17.1% of revenues, for the first quarter last year.

Operating income for the quarter increased 29%, to $2.43 billion, or 16.3% of revenues, compared with $1.89 billion, or 16.1% of revenues, for the first quarter of fiscal 2021.

The company’s effective tax rate for the quarter was 24.4%, compared with 23.4% for the first quarter last year. Excluding the investment gains and the related tax expense of $23 million, the effective tax rate for the first quarter of fiscal 2021 was 23.7%.

Net income for the quarter was $1.82 billion, compared with $1.52 billion for the first quarter last year. Excluding after-tax investment gains of $97 million, net income for the first quarter of fiscal 2021 was $1.43 billion.

Operating cash flow for the quarter was $531 million, and property and equipment additions were $182 million. Free cash flow, defined as operating cash flow net of property and equipment additions, was $349 million. For the same period last year, operating cash flow was $1.60 billion; property and equipment additions were $93 million; and free cash flow was $1.51 billion.

Days services outstanding, or DSOs, were 42 days at Nov. 30, 2021, compared with 38 days at Aug. 31, 2021 and 38 days at Nov. 30, 2020.

Accenture’s total cash balance at Nov. 30, 2021 was $5.6 billion, compared with $8.2 billion at Aug. 31, 2021.

New Bookings

New bookings for the first quarter were a record $16.8 billion, a 30% increase in both U.S. dollars and local currency from the first quarter last year.

▪Consulting new bookings were a record $9.4 billion, or 56% of total new bookings.

▪Outsourcing new bookings were $7.4 billion, or 44% of total new bookings.