Accenture plc (ACN) on Q1 2024 Results - Earnings Call Transcript

Operator: Thank you all for standing by. Welcome to Accenture's First Quarter Fiscal 2024 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Katie O'Conor, Managing Director, Head of Investor Relations. Please go ahead. Katie O'Conor: Thank you, operator, and thanks everyone for joining us today on our first quarter fiscal 2024 earnings announcement. As the operator just mentioned, I'm Katie O'Conor, Managing Director, Head of Investor Relations. On today's call, you will hear from Julie Sweet, Chair and Chief Executive Officer; and KC McClure, our Chief Financial Officer. We hope you've had an opportunity to review the news release we issued a short time ago. Let me quickly outline the agenda for today's call. Julie will begin with an overview of our results; KC will take you through the financial details, including the income statement and balance sheet, along with some key operational metrics for the first quarter; Julie will then provide a brief update on our market positioning before KC provides our business outlook for the second quarter and full fiscal year 2024; we will then take your questions before Julie provides a wrap up at the end of the call. Some of the matters we'll discuss on this call, including our business outlook, are forward-looking, and as such, are subject to known and unknown risks and uncertainties, including, but not limited to, those factors set forth in today's news release and discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q and other SEC filings. These risks and uncertainties could cause actual results to differ materially from those expressed in this call. During our call today, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures, where appropriate, to GAAP in our news release or in the Investor Relations section of our website at accenture.com. As always, Accenture assumes no obligation to update the information presented on this conference call. Now, let me turn the call over to Julie. Julie Sweet: Thank you, Katie and everyone joining, and thanks to our 743,000 people around the world for their incredible dedication and commitment every day, which is how we are able to consistently deliver 360 degree value for all our stakeholders. I am pleased that we delivered on our commitments this quarter, while continuing to invest significantly in strategic areas to drive the next waves of growth, including extending our early leadership in generative AI, and we did so against a macro backdrop that continues to be challenging. Starting with our financial results. Our bookings were $18.4 billion, representing 12% growth in local currency. We had 30 clients with quarterly bookings greater than $100 million in the quarter and over half were in North America, representing the trust our clients have in us to be at the center of their major programs, spending and ongoing reinvention. We delivered revenues of $16.2 billion for the quarter, at the top-end of our FX adjusted range, representing growth -- 1% growth in local currency. We continue to take market share. As expected, we continue to see lower discretionary spend, which particularly impacts our consulting type of work as well as slower decision making and our CMT industry group continues to be challenged. We remain on track with the business optimization actions we announced in March to reduce structural costs to create greater resilience. And finally, we expanded adjusted operating margin by 20 basis points and delivered adjusted EPS growth of 6%, while continuing to invest in our business and our people. Turning now to our investments. We closed 12 acquisitions this quarter for a total of $788 million in strategic areas across our geographic markets. In North America, we are continuing to build out our new growth area of capital projects, an $88 billion addressable market in North America, which we entered in August with the acquisition of Anser Advisory. In Q1, we added Comtech, a consulting and program management company for infrastructure projects in Canada. We also invested in the next digital frontier with our supply chain acquisition of The Shelby Group. We expanded our cloud capabilities with the acquisitions of Ocelot Consulting and Incapsulate. And we invested in digital marketing in the healthcare industry with the acquisition of ConcentricLife. In EMEA, we expanded our cybersecurity capabilities with the acquisition of Innotec in Spain, enhanced our business process services in the insurance industry with the acquisition of ON Service GROUP in Germany, and invested in digital healthcare and talent with the acquisitions of Nautilus Consulting and The Storytellers in the UK. Finally, in Growth Markets, we are focused on the cloud opportunity with the acquisition of Solnet in New Zealand, along with cybersecurity with the acquisition of MNEMO in Mexico, and on digital marketing services with the Song acquisition of SIGNAL in Japan. Our ability to invest at scale to fuel our organic growth is a competitive advantage. For example, in EMEA, we are focusing on pivoting our CMT business. We are investing with Vodafone to create a strategic partnership to commercialize its market-leading shared services operations and unlock new sources of growth and efficiency, enhance speed to market and new customer opportunities for their operating companies and partner markets. Together, we plan to create a new data and AI-driven shared services model and a scaled, commercially-driven and more efficient organization with higher-quality services and enhanced speed to market for its portfolio of offerings. The new unit will utilize Accenture's world-class technology, transformation and managed services such as its digital solutions and platforms and deep AI expertise. It will also tap into our well-known learning capabilities to continuously create new skilling and career paths for our -- for its people. This move speaks to Vodafone's ambition to work in new ways, reduce structural complexity, reinvent their company and the industry. And of course, we continue to invest in learning for our people with approximately 8 million training hours in the quarter, representing an average of 12 hours per person. Turning to generative AI, our growth and investments. We continue to take an early leadership position in GenAI, which will be an important part of the reinvention of our clients in the next decade. Last quarter, we shared that we had sold approximately 300 projects with $300 million in sales in all of FY '23. Demand continued to accelerate in Q1 with over $450 million in GenAI sales. As you know, we are investing $3 billion in AI over three years. For many of our clients, 2023 was a year of generative AI experimentation. We are now focusing on helping our clients in 2024 realize value at scale. We are excited about the recent launch of our specialized services to help companies customize and manage foundation models. We're seeing that the true value of generative AI is to deliver on personalization and business relevance. This is driven by context and accuracy, data readiness along with foundation model choices and customization are some of the most important steps and decisions that companies will make in the next year as they pursue value. Our clients are going to use an array of models to achieve their business objectives. Our proprietary switchboard allows a user to select the combination of models to address business context or factors like cost or accuracy. And we will offer rigorous training and certification programs to organizations using these new services to customize and scale GenAI solutions and transform every link in their value chain. We are also investing in AI acquisitions. For example, we recently announced our intent to acquire Ammagamma, an Italy-based firm that helps companies advance their uses of AI and generative AI technologies. With this acquisition, we will add 90 experienced AI professionals, many specializing in generative AI along with the expertise that includes engineering, mathematics, economics, historians, philosophers and designers, who will join our growing network of professionals in our advanced center for AI. And we are progressing towards our goal of doubling our deeply skilled data and AI practitioners from 40,000 to 80,000, with an additional 5,000 practitioners as of Q1. Finally, a few additional highlights of the 360 degree value that we created this quarter. We recently achieved our highest brand value and rank to date on Interbrand's prestigious Best Global Brands list, increasing to $21.3 billion and ranking number 30. We jumped from number 17 to number 10 on the 2023 World's Best Workplaces list by Fortune and Great Place to Work. This recognition is particularly noteworthy, because it is based on feedback from our people. We were recognized for the seventh year in a row on the Wall Street Journal list of Best-Managed Companies for excellence in customer satisfaction, employee engagement and development, innovation, social responsibility, and financial strength. And we also received the top score for social responsibility and are among the top 10 for customer satisfaction. We continue to lead in our ability to attract people with different backgrounds, different perspectives, and different lived experiences. Our success is reflected in the top score on the Human Rights Campaign Corporate Equality Index in the U.S. for the 16th consecutive year for leading equitable workplace policies, practices and benefits for LGBTQ+ people. And today, we are proud to present an update to our 360-degree value reporting experience, which is available on our website, because we believe that transparency builds trust and helps us all make more progress. Over to you, KC. KC McClure: Thank you, Julie. Happy holidays to all of you, and thanks for taking the time to join us on today's call. We are pleased with our Q1 results, which were in-line with our expectations and include continued investments at scale to strengthen our position as a leader in the market. Once again, our results illustrate our ability to manage our business with rigor and discipline and deliver value for our shareholders. So, let me begin by summarizing a few of the highlights for the quarter. Revenues grew 1% local currency with mid-single digit growth or higher in five of our 13 industries, including public service, industrial, utilities, health and energy. As expected, we saw continued pressure in our CMT industry group. And we continue to take market share. As a reminder, we assess market growth against our investable basket, which is roughly two dozen of our closest global public competitors, which represents about a third of our addressable market. We use a consistent methodology to compare our financial results to theirs, adjusted to exclude the impact of any significant acquisitions through the date of their last publicly available results on a rolling four-quarter basis. We delivered adjusted EPS in the quarter of $3.27, reflecting 6% growth over EPS last year. Adjusted operating margin was 16.7% for the quarter, an increase of 20 basis points over Q1 last year and includes significant investments in our people and our business. Finally, we delivered free cash flow of $430 million and returned $2 billion to shareholders through repurchases and dividends. We also invested $788 million in acquisitions across 12 transactions in the quarter. With those high-level comments, let me turn to some of the details, starting with new bookings. New bookings were $18.4 billion for the quarter, representing 14% growth in U.S. dollars and 12% growth in local currency, with a book-to-bill of 1.1. Consulting bookings were $8.6 billion, with a book-to-bill of 1.0. Managed services bookings were $9.8 billion, with a book-to-bill of 1.3. Turning now to revenues. Revenues for the quarter were $16.2 billion, a 3% increase in U.S. dollars and 1% local currency, and we're at the top-end of our guided range adjusted for a foreign exchange tailwind of approximately 1.5% compared to the 2.5% estimate provided last quarter. Consulting revenues for the quarter were $8.5 billion, flat in U.S. dollars and a decline of 2% in local currency. Managed services revenues were $7.8 billion, up 6% in U.S. dollars and 5% in local currency. Taking a closer look at our service dimensions: technology services grew mid-single digits, operations was flat, and strategy and consulting declined mid-single digits. Turning to our geographic markets. In North America, revenue declined 1% in local currency. Growth was led by public service, offset by declines in communications and media, software and platforms, and banking and capital markets. Before I continue, I want to highlight that for this fiscal year '24, we have reorganized our geographic segments. Europe is now EMEA and includes the Middle East and Africa, which were previously included in Growth Markets. The reclassification for prior years can be found in our Investor Relations website. In EMEA, revenues grew 2% in local currency, led by growth in public service and banking and capital markets, partially offset by a decline in communications and media. Revenue growth was driven by Italy, Austria, and France, partially offset by a decline in the United Kingdom. In Growth Markets, we delivered 5% revenue growth in local currency, driven by growth in chemicals and natural resources, public service, and banking and capital markets. Revenue growth was led by Japan. Moving down the income statement. Gross margin for the quarter was 33.6% compared to 32.9% for the first quarter of last year. Sales and marketing expense for the quarter was 10.5% compared with 9.8% for the first quarter of last year. General and administrative expense was 6.4% compared to 6.6% for the same quarter last year. Before I continue, I want to note that in Q1, we recorded $140 million in costs associated with our business optimization actions, which decreased operating margin by 90 basis points and EPS by $0.17. The following comparisons exclude these impacts and reflect adjusted results. Adjusted operating income was $2.7 billion in the first quarter, reflecting a 16.7% operating margin, an increase of 20 basis points from operating margin in Q1 last year. Our adjusted effective tax rate for the quarter was 23.2% compared with an effective tax rate of 23.3% for the first quarter last year. Adjusted diluted earnings per share were $3.27 compared with diluted EPS of $3.08 in the first quarter last year. Days services outstanding were 49 days compared to 42 days last quarter and 48 days in the first quarter of last year. Free cash flow for the quarter was $430 million, resulting from cash generated by operating activities of $499 million, net of property and equipment additions of $69 million. Our cash balance at November 30th was $7.1 billion compared with $9 billion at August 31st. With regards to our ongoing objective to return cash to shareholders, in the first quarter, we repurchased or redeemed 3.8 million shares for $1.2 billion at an average price of $311.90 per share. At November 30th, we had approximately $5.4 billion of share repurchase authority remaining. Also in November, we paid a quarterly cash dividend of $1.29 per share for a total of $810 million. This represents a 15% increase over last year. And our Board of Directors declared a quarterly cash dividend of $1.29 per share to be paid on February 15th, a 15% increase over last year. So, in closing, we remain committed to delivering on our long-standing financial objectives, growing faster than market and taking share, generating modest margin expansion and stronger earnings, while at the same time investing at scale for our long-term market leadership, generating strong free cash flow and returning a significant portion of that cash to shareholders. And now, let me turn it back to Julie. Julie Sweet: Thank you, KC. As we begin our second quarter, we remain laser-focused on creating value for our clients. The pace of spending continues to be impacted by the macro environment. Our business in the UK in particular, in Q1, saw even greater challenges than we expected last quarter. The fundamentals of our industry remain unchanged. All strategies continue to lead to technology and companies need to reinvent every part of their enterprise using tech, data and AI to optimize operations and accelerate growth. To do so, they must build a digital core. Strategy and consulting, which brings our deep industry and functional expertise is critical to how we differentiate by helping our clients ensure they drive business value from their digital core. We are continuing to see significant demand in areas like cloud migration and modernization, modern ERP and data and AI, including GenAI, platforms and security, all of which represent areas of great opportunity and is still early with more digital core to be built in the future than has been done to date. Let me bring to life the significant opportunities still ahead with examples from the quarter. Our cloud momentum continued in Q1 with strong double-digit growth, reflecting the ongoing significant market opportunity. We estimate only 40% of enterprise workloads are in the cloud, of which only 20% or so are modernized, an 80% opportunity remaining. Clients are continuing to prioritize the digital core as evidenced by strong demand for cloud migration. We're working with a leading insurance provider to continue their cloud transformation. Together, we are migrating hundreds of applications to a cloud-based platform, enabling the company to exit their data centers by 2025. To date, we have migrated more than half of their apps to the cloud. And this is not just a migration. We are modernizing applications and accelerating automation to integrate disparate data more easily from acquisitions and help the company move into new markets. And we are helping reshape their organizational mindset, drive cultural change and find new ways of working, including the creation of a new IT service model to lead complex transformations with agility and speed. This transformation will reduce legacy complexity and technical debt, enable more cost effective back-office operations, and drive growth and innovation, ultimately helping the company provide more affordable and personalized insurance solutions for families and businesses. And for those clients who have made significant progress on their migration, they are investing to modernize and innovate across the cloud continuum, extending cloud to the edge, unlocking greater value with more opportunities still ahead. For example, we recently announced an expansion of our strategic partnership with McDonald's to help it execute their technology strategy and leverage the company's scale to unlock greater speed and efficiency for customers, restaurant teams and employees. This new work supports McDonald's ambition to connect restaurants worldwide with cloud technology and apply generative AI solutions across McDonald's platforms. Accenture also will support the acceleration of automation innovation and the enhancement of the digital capabilities of McDonald's employees. Accenture's deep understanding of the McDonald's business, industry and technology will help unlock opportunities in their ongoing digital investments as McDonald's reinvents the customer experience and stays ahead of their customers' changing needs. Turning to data and AI. We estimate that less than 10% of companies have mature data and AI capabilities. This is a critical part of building the digital core and we see this embedded in our larger transformations, in work focused on data and AI modernization and in the opportunities of generative AI. We help leaders such as BBVA, a global financial services group, to stay ahead of the curve by continuing to reinvent its business model with GenAI. For example, we are building a GenAI-powered financial coach assistant to help them disrupt customer centricity in the banking industry while they reinvent their digital core to also become even more efficient. This work is a continuation of our ongoing GenAI implementation which is transforming BBVA's operations and digital marketing and is helping employees be more productive. Thanks to its strong digital core, BBVA can continue to reinvent across their enterprise by applying GenAI. We're also helping a global hospitality group to support its content production capability and marketing communications across its hotel brands, tailoring content to guests' evolving needs. This new data-driven content supply chain model will create personalized, flexible and efficient marketing communications content across every customer touchpoint. Spanning both physical and digital communications, this service will be available to all marketing professionals enabling content production management from its initial brief to performance measurement and content optimization. This will increase the effectiveness of its digital marketing programs, drive more traffic to its branded website, and deliver exceptional customer experiences, all while reducing costs. Platforms are a core component of the digital core and are critical to our clients' transformations. We estimate 60% of the opportunity is still ahead as clients upgrade their core platforms. We are working with OCBC Group, a Singapore-based multinational banking and financial services corporation, on a two-year transformation journey to modernize their human resources organization. We will shift key HR functions such as hiring, talent management, and career development to the cloud and create a next-generation HR operating model with enhanced capabilities. Together, we will drive operational efficiency with a strategic focus on future talent readiness, employee experience, and AI-driven decision-making. And by providing a scalable framework to meet evolving business needs, we'll free up HR capacity to provide high-value advisory work and empower business and HR leaders with analytics and insights to facilitate better talent decisions. Security is also essential to a digital core, and we continue to see very strong double-digit growth in our security business this quarter. While the opportunity to continue to grow and expand, we estimate that currently only 36% of business leaders are confident that their organizations are cyber resilient, representing at least 64% of untapped potential. An example of our important work with our clients to build secure organizations is Fortrea, a global contract research organization of about 19,000 people that provides clinical trial and research services for life sciences companies in more than 90 countries. We're working with Fortrea to deliver database outcomes and health-related insights, which require adherence to regional and local industry and government regulations. As they continue to grow and enter new markets, they need a partner to ensure that their cybersecurity program remains resilient and compliant with security best practices. We will co-create, architect, and operate a series of global cybersecurity services and capabilities through our managed services. Our partnership will help Fortrea grow its business, utilizing flexible risk and security strategies. We are focused on helping clients reimagine marketing and their customer experience to drive growth. Song demand continues to remain strong with double-digit growth in Q1. We are collaborating with Peugeot, a French automotive brand, to lead strategic and creative direction for its global communications. The partnership supports Peugeot's ambition to engage a younger audience and become a leader in the electric vehicle market. Accenture Song will manage global communications across all traditional and digital media channels. The first campaign will be a full 360 integrated launch of the all-new electric fastback SUV E-3008 in early 2024. Finally, we continue to see strong demand for digital manufacturing and engineering services. We estimate that only 5% of enterprises have scaled, matured digital capabilities across their organizations. Industry X grew strong double digits in Q1. We are working with a leading global -- a leading German multinational car manufacturer to engineer the next generation of infotainment system. Using our deep industry expertise and software engineering capabilities, we will support the implementation of a new flexible platform that enables the next level of in-car experience with cutting-edge customer features while minimizing complexity and maximizing the software we use across hardware generations. We're working with a global food manufacturer on a total enterprise reinvention strategy to modernize its supply chain, reduce operating costs, and position it for the future. We will transform key supply chain processes such as planning, procurement, manufacturing, and distribution. AI and intelligent automation will optimize end-to-end supply chain operations and achieve greater efficiency and agility. It will also help the company leverage data for better decision making and implement portfolio optimization to ensure the right assets are focused on for investment to maximize returns and minimize risks. This self-funded program is expected to generate significant productivity gains with ongoing savings fueling further capability builds and bottom-line growth. Back to you, KC. KC McClure: Thanks, Julie. Now, let me turn to our business outlook. For the second quarter of fiscal '24, we expect revenues to be in the range of $15.4 billion to $16 billion. This assumes the impact of FX will be about negative 0.5% compared to the second quarter of fiscal '23 and reflects an estimated negative 2% to positive 2% growth in local currency. For the full fiscal year '24, based upon how the rates have been trending over the last few weeks, we continue to assume the impact of FX on our results in U.S. dollars will be about flat compared to fiscal '23. For the full fiscal '24, we continue to expect our revenue to be in the range of 2% to 5% growth in local currency over fiscal '23, with the inorganic contribution now expected to be more than 2%. We continue to expect business optimization actions to impact fiscal '24 GAAP operating margin by 70 basis points and EPS by $0.56. The following guidance for full year '24 excludes these impacts. For adjusted operating margin, we continue to expect fiscal year '24 to be 15.5% to 15.7%, a 10 basis point to 30 basis point expansion over adjusted fiscal '23 results. We continue to expect our annual adjusted effective tax rate to be in the range of 23.5% to 25.5%. This compares to an adjusted effective tax rate of 23.9% in fiscal '23. We continue to expect our full year adjusted earnings per share for fiscal '24 to be in the range of $11.97 to $12.32 or 3% to 6% growth over adjusted fiscal '23 results. For the full fiscal '24, we continue to expect operating cash flow to be in the range of $9.3 billion to $9.9 billion, property and equipment additions to be approximately $600 million, and free cash flow to be in the range of $8.7 billion to $9.3 billion. Our free cash flow guidance reflects a free cash flow to net income ratio of 1.2. Finally, we continue to expect to return at least $7.7 billion through dividends and share repurchases as we remain committed to returning a substantial portion of our cash to our shareholders. With that, let's open it up so we can take your questions. Katie? Katie O'Conor: Thanks, KC. I would ask that you each keep to one question and a follow-up to allow as many participants as possible to ask a question. Operator, would you provide instructions for those on the call? Operator: Thank you. [Operator Instructions] Your first question comes from the line of Jason Kupferberg from Bank of America. Please go ahead. Jason Kupferberg: Good morning, guys. Happy holidays. I just wanted to start with a question on the revenue guidance for Q2. The midpoint there would suggest 1 point of deceleration, but we do have an easier comparison, and there was a return to positive growth in consulting bookings. So, just hoping you can help us reconcile that and then maybe comment on the second half reacceleration that is continuing to be implied in the guide, maybe slightly steeper than previously thought. Thank you. KC McClure: Yeah, great. Thanks, Jason. Happy holidays to you, too. So first, let me first start in terms of our guidance. I'll first start with Q1. And as you heard us say, we were really pleased with our Q1 performance. And as you stated, our Q2 guidance is the same as Q1. And maybe a couple of things that I'll point out compared to what we thought 90 days ago, and as Julie mentioned, we do see some differences in EMEA, particularly in the UK, where we're focused on repositioning the business back to growth, and that's going to take some time. But Jason, what is the same is that we are still operating in an environment, which is the same that we described last quarter, where the discretionary spend and the decision making is slow. And so right now, as you expect, and you know that we do this every year, we're talking to our clients right now about their '24 budgets. And so that's all, again, to be expected. When we look forward into H2, to start with just what the math is, we continue to see higher growth in the back half of the year. That's going to start with higher growth in Q3. And our confidence in our H2 increased growth is really based on a few things. Again, reiterating what we talked about at the beginning of the year versus our results in Q1, so we're confident, again, that we were able to deliver across the board as we expected in the first quarter. And also then, as Julie mentioned quite a bit, we made a lot of investments in our business in the quarter, and that's helping us pivot to higher growth areas. In addition to that, as we talked about last quarter, the same remains, we do have our revenue positioned in the back half of our year from these larger transformation deals. So that has not changed. We continue to see that. And then, we just need to continue to layer in our new sales as we get closer to the back half of the year. So, we're really very pleased to reiterate the 2% to 5% revenue guidance that we had at the beginning of the year. Jason Kupferberg: Okay. That's helpful. And just as a quick follow-up, what should we expect in terms of second quarter bookings for consulting and management -- managed services year-over-year? I know managed services has a particularly tough comp. Thanks again. KC McClure: Yeah. So, Jason, I know I've been giving color and basically kind of guiding to future quarter bookings, but as you know really well covering up for so long, bookings can really be lumpy. So, I'm not going to give that color anymore, go forward. What I would say is the best way to think about demand for our business is the revenue guide that we give. And we gave revenue guidance for the second quarter as well as our 2% to 5% for the full year. And obviously, we'll continue to do that. And I'll just put in that we do feel good about our pipeline. We have a very solid pipeline. Operator: Your next question comes from the line of Tien-Tsin Huang from JPMorgan. Please go ahead. Tien-Tsin Huang: Hey, perfect. Yeah, I just want to follow up to Jason's question just with the bookings, which is better than expected, and your large deal backlog is quite large now. Just the visibility on the timeliness of those conversions? Have you seen any signs of pushout or delays or that kind of thing? Just trying to understand the conversion potential. KC McClure: Yeah. So maybe just a couple of things on that. So I think, conversion can be really mainly impacted by the mix, right? So, the mix of deals that we have. So, let's just start with, overall, we haven't seen any change in the conversion based on the mix of work. So, strategy and consulting which converts faster than with operations. There's been no change within those different parts of our business, no change in the conversion. What we have talked about, and we've been consistent, that there's really been -- there's no change over the last 90 days in our discretionary spend environment, and that is consistent with our expectations. So -- and we haven't been reliant, and we're not reliant on a change in that macro to get to our full-year guidance. So, what does that mean? Hopefully you guys can hear me. The lower -- a little trouble in the line. Okay. Is that there -- as we have lower discretionary spend, that does impact the conversion, Tien-Tsin, as you know, but we have factored that all into our guidance. Tien-Tsin Huang: Understood, KC. Thanks for that. And just my quick follow-up. I know you've been really busy with acquisitions, and Julie, you listed a bunch of them. Is there a change here in the rhythm of acquisitions or your appetite? It sounds like the revenue contribution is up a nudge, but -- up a little bit. But you tell me. I didn't know if there was a change in your thinking here on the deal. Thanks. KC McClure: Yeah. I'm going to maybe give a little bit of color and then I'll certainly hand it over to Julie. Just more from a financial perspective, I think -- and as you know this really well, but our competitive advantage really is our investment capacity that allows us to pivot to higher areas of growth. And we can do that and invest through every cycle, and you've seen us do that. And I really think that is clearly a differentiator for us. You see that with our strong start this quarter. Julie talked about the 12 acquisitions, $800 million of spend, and we have five more that we've announced for Q2. All of that, and we're reconfirming op margin expansion of 10 basis points to 30 basis points. I think it's important to see that in terms of our strategy, we're continuing to do this to really fuel organic growth. And lastly, I think one of the parts that really distinguishes us is our capital allocation framework, which is durable yet flexible. So, we're able to flex up and do inorganic to the degree that we see that we'd like to, while at the same time, continuing to increase our return to our shareholders. So, I think it's really, really great. Julie Sweet: Great. Yeah. And there's no change in the strategies in the sense of we're still trying to -- we're still investing to either scale in hot areas or add new types of skills. So, you see that we're executing in capital projects like we described, right? In August, we did the -- yeah, in August, we did the Anser Advisory. We just added Canada. And then, of course, adding the niche skills in consulting and whether it's industry or functional. So, no change in strategy. But I would reiterate that it is really a huge competitive advantage for us that we can invest across the cycles. You saw that we did that in the first year after the pandemic, where we significantly increased, and again, always to drive organic growth and position ourselves for those next waves. So, you're going to see the AI acquisitions. You saw health in the UK, another great area of growth, capital projects. So, think about our strengths here is how we accelerate pivoting to growth. KC McClure: And then, I'll just add, Tien-Tsin, that you heard me mention in guidance, that we are going to do now more than 2% in organic contribution for this year. Julie Sweet: Yeah. Tien-Tsin Huang: Yeah. No, I'm sure you'll amplify the growth of what you buy. Just wanted to check on that. That's helpful. Thank you. Julie Sweet: Thanks. Operator: Your next question comes from the line of Ashwin Shirvaikar from Citi. Please go ahead. Ashwin Shirvaikar: Thanks, and congratulations on the performance. Happy holidays from me. I wanted to ask about, as you have conversations with your clients with regards to budget and spending priorities into next year, if you can comment, first of all, on that? And then, it's only a couple of quarters since sort of the GenAI kind of took hold, but it's a fast-moving technology, and I want to kind of inquire into whether the nature of those discussions has changed or become more meaningful, gone past proofs of concept and so on. Julie Sweet: Great. And happy holidays to you, too. Great question. So first, with respect to -- on your first point around what's happening in the market on client budgets is what I would say is that we're having lots of discussions that are pretty similar to what we've been talking about, which is, how do you prioritize in a more cautionary environment? So, we'll really know how that will play out in January as always because this is when we -- they finalize. But what I'd say is it's a consistent thing I've been talking about, which is in a cautionary environment, in a tough macro, we're helping clients prioritize. And they're in the things that we talked about in the script again today, things like building the digital core. It's using the technology to drive both growth and cost. And I would just say on the macro side, right, is that, our clients, we recognize you cannot cut yourself to growth. And if you think about the examples that I used in today's script, most of them were both cost and growth, right? Because that is what our clients are focused on, is how are they going to grow revenue despite whatever the environment is. And that, of course, is our unique capabilities to be able to do both. And then, with respect to GenAI, so first of all, I just want to say $450 million in sales this quarter, we're very pleased with. I mean, it demonstrates we are leading here. All of last year, it was $300 million. And to your point, the conversations are changing. You have examples like BBVA, which we talked about earlier in my script, where we're starting to use it at scale. Our clients want to get out of proofs of concept to material value, and we're super well positioned. Why? GenAI is not plug and play. It is not just technology. In fact, it's closer to any other technology. Think about cloud, that's farther away from the heart of the business. In order to scale, you have to deeply understand the technology, which is still rapidly changing, and the business value. And this is Accenture's leadership position, right? We have strategy. We have consulting, deep industry and functional expertise. We're the biggest partner with every major player. We're working with them at a product level and we can bring those two things together. So, think of 2024 as being the shift for our clients from experimentation to scale, and we believe we're at the best position to lead that shift to value. Ashwin Shirvaikar: Understood. I want to ask also about operations performance. It did decelerate meaningfully. I think it was high-single-digit growth, and now it's flat. Is that also a reflection you mentioned just now, maybe a pivot from cost savings to revenue generation maybe is beginning? Is that what's happening or are there other factors in here? KC McClure: Yeah. Maybe just in terms of the quarter performance, operations came in as expected. As we talked about at the beginning of the year, Ashwin, we do have some impacts in CMT that impact operations, and so we'll see that growth may fluctuate as we go throughout the year. As part, though, of our overall guidance for the full year of managed services continuing to be mid-single to high-single-digit growth for the year. Julie Sweet: Yeah. And in fact, I would say, it's the opposite. Operations, which was impacted, by the way, by CMT, for example, look, it's going to build similar to the way Accenture is going to build over the course of the year. Actually, the sweet spot of operations is that it does both cost and growth. So, the BBVA example includes operations, Fortrea includes operations. So, these are -- our managed services are highly strategic because they are typically able to do both. Think about IT transformation. Our managed services are as much about modernizing. So, in IT, modernized tech is what drives growth. So, we really see our strength being that our managed services are strategic. And one of the reasons is that we do them in the context of understanding the industry and the function. So, we're not back office. We're bringing that strategy and consulting expertise to make sure that it isn't just a cost play. And that's an important differentiator for us. Ashwin Shirvaikar: Got it. Thank you both. Julie Sweet: Thank you. Operator: Your next question comes from the line of Bryan Bergin from TD Cowen. Please go ahead. Bryan Bergin: Hi, guys. Good morning. Happy holidays. I wanted to start on your some of the expectations around shorter cycle and discretionary work within S&C and SI. Do you have a sense of stabilization forming there or cuts still occurring in those areas? And maybe can you give us a sense on how you expect consulting to do in the second quarter? Julie Sweet: Yeah. So, look, we're -- as KC said earlier, we're operating kind of the same environment we have for the last few quarters, right? Discretionary spend is down. And we're right in the middle of the budget cycle, so next quarter, we'll have a much better view of what's there. But if you sort of look around in the environment, there aren't a lot of green shoots on the economic side. And obviously, the volatility on the geopolitical side continues. And so, as KC said, we're not planning right now for kind of a change in the macro, which means that we're not planning for a change in discretionary spending. We just don't see that being meaningfully different as we go into 2024. And obviously, we'll update you. But that's why when you think about the question earlier on revenue conversion, our level of smaller deals is just down. It's going to stay down for a while, which means that how revenues going to -- how sales are going to bleed into revenue is going to be consistent with what we've been seeing. So -- and then, you want to comment? KC McClure: Yeah. Just in terms of, Bryan, on the overall growth, there's no change from what we said at the beginning of the year in terms of our full-year outlook for consulting type of work. We see low-single-digit positive growth for the full year. That's in our 2% to 5%. And Q1 came in as we expected, which was negative 2%. Bryan Bergin: Okay. That's helpful. And then, just a clarification around the M&A. So first, I don't know if you mentioned M&A in the first quarter, the contribution to growth, and we're saying greater than 2% for the full year. Just to be clear, that's just rounding around 2% or upwards of 3%? Thanks. KC McClure: Yeah. So, we're saying more than 2% for the full year, and it can fluctuate by quarter, so we really just stick to our guidance for the overall year. Julie Sweet: Right. And if we get close to 3%, we'll talk about that. But right now it's more than 2%. KC McClure: More than 2%. Julie Sweet: Right. Because we gave you guidance, so it's down definitely more than 2%. And remember, we only do deals that we think are good deals. So, what we see right now is a lot of good deals that is going to get us to above 2%. And if that -- we have a lot of financial flexibility, so if that changes, we'll update if it gets above 3%. Bryan Bergin: Thanks. Happy holidays. Julie Sweet: Happy holidays. KC McClure: Same to you. Operator: Your next question comes from the line of Dave Koning from Baird. Please go ahead. Dave Koning: Yeah. Hey, guys. Thanks so much. One thing I noticed, I guess, gross margin growth, year-over-year expansion in gross margin was the strongest in about nine quarters or so. Is that just lower attrition, offshore shift? Maybe walk through why that's gotten nicely better. KC McClure: Yeah. Hey, Dave. Thanks for the question. So, as you know, we run our business to operating margin, which we did 20 basis point expansion this quarter. And I will mention that if I didn't already, that the 10 basis point to 30 basis point that we have for the year, we might see more variability as we go throughout the quarters. But now back to gross margin, you're right, we did see expansion this quarter, but it's really hard to look at that in isolation. And why is that? Well, there's various things that can go in and out of gross margin in terms of increased or decreased spend. So, for example, one would be acquisitions. There's a lot of -- some of the investment acquisitions, some of that spend will go into gross margin, and that can be lumpy as we go throughout. As you know, it also depends on where people spend their time. So for example, you saw that, yes, we had improvement in gross margin, but then we also had increased sales and marketing costs, which is a result of people spending more time out in the market selling to create the $18.4 billion in sales that we have. So that's why -- again, we look at those components, but really at the end of the day, we always continue to run our business to op margin. Dave Koning: Got you. Thanks for that. And then, maybe as a follow-up just to Jason's question at the beginning on kind of the back-end loaded growth. If I just put in normal sequential patterns in Q3 and Q4, I get to about 2% constant currency, so the low-end of guide. Is there a scenario given bookings were really good this quarter that it actually, the progression sequentially in the back half of the year is better than normal and then that kind of gets to the better parts of the guidance range for revenue? KC McClure: Yeah. So, I think, obviously when you do -- what you're just kind of talking about is a bit of the math. What I would tell is give you the year-over-year way we look at it in terms of our guidance, right? So, we had 1% growth this quarter with strong bookings, right, 1% revenue growth with strong bookings. We see Q2 shaping up the same way year-over-year. And again, just reinforcing that we do see fuel in our sequential growth in the back half of the year based on the transformation deals that we have signed. That's no different than what we talked about at the beginning of the year. We've layered in then the sales that we expect as we go throughout. And that -- there's no difference to how we're doing our range that gets us to the 2% to 5% range. I would say at the top end of our range, again, as we said, last quarter, just when we said guidance, that when -- to get to the top end of our guidance range, you would see S&C reconnecting with growth would be one thing that we'd see. And you would probably also see the mid- to high-single digits that we've been referencing consistently in managed services be more like high-single digits. So hopefully that helps, Dave. Dave Koning: Yeah, that's helpful. Thanks, guys. Nice job. Julie Sweet: Thank you. Operator: Your next question comes from the line of Bryan Keane from Deutsche Bank. Please go ahead. Bryan Keane: Hi, guys. Good morning. I just wanted to ask on the clarification on the UK market in particular. I know the economy has been weak there for a couple years. So -- and I know it's been a call out for kind of the quarter. What exactly happened in the UK? And then, what's the outlook for that? Julie Sweet: In the UK, as you said it, it has been kind of challenge for a couple of years, and we have a big banking capital markets business there, and we're really trying to pivot to more growth there in other areas. That's why you saw the acquisitions that we did, for example, this quarter. And what we're seeing is that it's just taking longer than we anticipated to really move into the other areas. And banking capital markets, which we've talked about, has been more challenged, particularly in the UK. And so, it's really about how long it's taking us to pivot. And we think it's going to take some time. So, I'm not going to call exactly when, but we do think it's going to take some time, and it's taking more time than we anticipated going into the fiscal year. So, we've got a good team. We're on it. And again, this is where you're going to see us do more acquisitions to diversify our business there as we reposition that. KC McClure: Yeah. Maybe just also, Bryan, just for context, it's about 6% of our overall business, a little bit more than $4 billion that we have in the UK. Bryan Keane: Got it. No, that's helpful. And then, KC, just to make sure we understand, the comments on the margins, given the movement in acquisition and the pick of an acquisition, there could be some fluctuations in given quarters. You're not going to have it perfectly 10 -- in the range of 10 basis points to 30 basis points per quarter. Any quarters to call in particular where it could fall below the range given the ramp of acquisitions and the ramp of investments? Thanks. KC McClure: Yeah. I don't want to really guide to the quarter because 10 basis points or 20 basis points on a quarter, that's spend, Bryan, as you know. That's kind of big and small in terms of the dollar amount that we're talking about. So, we're going to guide overall to the full year of 10 basis points to 30 basis points for the full year. And I just wanted to point out that we might have some periods where it's just a little bit more variable than what you've seen us do over the years. Bryan Keane: Got it. Thank you. Happy holidays. KC McClure: Thanks, Bryan. Operator: Your next question comes from the line of Darrin Peller from Wolfe Research. Please go ahead. Darrin Peller: Hey, thanks guys. Just want to touch on headcount growth. I mean, it's still -- I think it's still a bit decelerating. And so, what are the expectations going forward, I mean, just given the backdrop of an acceleration on the revenue in the second half of the year? And then, Julie, maybe we could just touch on the linearity of the business one more time. Just if we could revisit the mix of the kind of business you're seeing now and the revenue per head you'd expect, or maybe just directionally, what you'd anticipate based on the mix we're seeing and what demand is for? KC McClure: Yeah. So, thanks for that, Darrin. So, I'll talk about -- in terms of our people, in terms of number of people we have, first, I'll start with, as you know, managing supply-demand is really our core competency. And you can see that in our ability to manage our utilization at high levels. And I'll just point out that for the last 13 quarters, our utilization has been 91% or higher. And so, we hire for the skills that we need and we hire where we need them. And what you're pointing out is that we had about a 1% increase year-over-year in our headcount, as well as about a 1% sequentially. And that's in-line with what we -- how we see revenue going for the rest of the year. So there's really no change there. And as it relates to the revenue per head and the non-linearity, I mean, we do have automation. We do have value-based projects. So, while there still is a, obviously, connection to the amount of people that we have, we have been able to break that. There are parts where we are able to not fully disconnect, but not completely rely on headcount to drive revenue. Julie Sweet: And Darrin, in terms of just demand, right, so I'd kind of anchor to, first of all, we're seeing demand for transformational deals. So, in an environment like this, the thing that I look at most is, are we continuing to have our clients do more than $100 million of bookings, right, which is in our industry, we are a real standout here. And what does that mean? That means that we continue to be at the heart of where clients are spending to do material transformations. That's where you want to be so that you're positioned when inevitably discretionary spending, the pace goes back up, the macro changes, you want to be at the heart. So, at times like this, that's what I'm really looking at. And that's where you're seeing -- I will tell you, this is one of the most exciting times in the market. Like you just take what we are announcing today on McDonald's. I talked about in the script, right? Incredible company, technology driven. We've been their long-time partner. Just expanded the partnership to take it all the way to the edge and reinvent their restaurants and their crew experience. This is going to be really cutting work at the edge, because that's where we're starting to see the leaders in cloud go, and we're leading there. Those are the kinds of things that then you see how they're going to expand. There's so much opportunity still in these big areas of cloud, of data, and AI. But cloud itself, yes, we've done a lot of migration. There's still more migration to go, but even more importantly, you've got to take it all the way to the edge. So, from a demand perspective, we continue to see the transformations that move the needle for cost and growth, and that's what we're expecting. From a mix perspective, we're not seeing a big change between managed services and consulting. The mix we're seeing is that in this environment, you're seeing less of the smaller deals, which convert to revenue faster, and more on the larger deals. And that's been around for a while, and that's what you're going to continue to see. And we are laser-focused on making sure we are winning in the reinvention, the transformation, and at the same time massively pivoting to GenAI, right? And our clients have so much work to do to be able to use GenAI, but you can see the momentum in our business, right, from that change from $300 million of all of last year to $450 million in a quarter. And I'll just remind you, that's not the pull-through. That's not data. We are very pure because we really want to be sharing with all of you where is GenAI in the market. So, we're pretty excited about where we are today and what's ahead. Darrin Peller: That's really helpful. Look, you guys have obviously managed well through what was a softer discretionary demand environment. So, I guess, my question would be, if we thought about what a normalized run rate of revenues on really S&C would be, if we just said today's a normal, no longer softer discretionary environment, where do you think the difference is? I mean, I know it's probably hard to give an exact or precise estimate, but how much upside is there when we get that back? Julie Sweet: Well, we have a good -- a really strong strategy in consulting business. And so, we're very positive about that business growing. But beyond that, I think, Darrin, we're not going to start to predict growth rates. But in the meantime, it is a huge differentiator. Nobody has that combination that we have, and that is what is driving the resilience of our business to be at the core of our clients' agenda. Thanks so much, Darrin. Darrin Peller: Great. Thanks, guys. Katie O'Conor: Operator, we have time for one more question, and then Julie will wrap up the call. Operator: Okay. That question comes from the line of James Faucette from Morgan Stanley. Please go ahead. James Faucette: Great, thank you so much. I want to just ask a couple of follow-up questions to those that have already been asked. First on the inorganic contribution, appreciate that it's going to be better than 2%. Can you talk a little bit about whether that increased activity is -- or how you would balance that increased activity between just better valuations and more opportunities from a purely financial perspective in the market versus it sounds like some of the acquisitions you're doing, you're just trying to push into new strategic areas, and just wondering how you're balancing those strategic imperatives versus perhaps a little better valuations? Julie Sweet: Yeah. I mean, I wouldn't call out -- I wouldn't say that this activity is because of better valuations, right? At any given time when we look at the market, right, and we see where are the growth opportunities, we want to move quickly and we look at organic versus inorganic ways of moving quickly. We never do anything purely inorganic, right, or purely organic. And so, think about our acquisitions as being matched to what is the opportunity in the market and what's the best way to capture that growth quickly, right? And so, the strategy of categories is the same, right? So, there are new areas that we want to go into, like capital markets. That's an investment decision. We go into a certain number of those. We're executing now with rigor. We went and bought Anser Advisory. Now we bought the next one in Canada, right? So that's just about -- it's a great growth area and we're trying to pivot. And the best way to do that to build something that we don't have already organically is to make some inorganic acquisitions and then that becomes organic growth and we're able to kick in our recruiting machine. If you think about the UK, health is a great area. We just bought a health company, right? So, you look at the market and you say, "If I want to diversify, what's the fastest way to diversify into new areas?" And that's where often inorganic can help us do that through these niche acquisitions and consulting and industry. And then, you've got just massive opportunities like cloud and security, where you saw some of those acquisitions in supply chain. And that's all about both adding phenomenal talent quickly and scaling to go after a market that's today, right? So, that's how we think about it. It's extremely rigorous. We always have a decision what's the best way to get there organically or inorganically. And inorganic is always about acceleration and driving organic growth. So, it's very consistent. We've been doing it in a very disciplined way. And in these kinds of environments, we believe the companies that invest win. And that is why we do actions like we did last year to increase our business resilience and enable us to be really well positioned to invest when others are not. James Faucette: That's great color. I appreciate that. And similarly, just on bookings activity and AI contribution, there are clear acceleration in the AI level of activity, et cetera. When you're talking to clients and that kind of thing, how are they thinking about AI budget allocation versus other initiatives, et cetera, right now? Are they looking at it as, "Hey, this is an incremental investment that we need to be making given the pace of change in technology," or are they trying to really use that spend or have that spend be to offset some other projects maybe that they're going to curtail a little bit sooner? Just trying to think about as that continues to build, how we should think about it being incremental versus substitutive within a lot of the budgets. Julie Sweet: Right now we're seeing a lot of reprioritization, right, because -- I mean, obviously the market is growing. Like, we're growing. The market is growing. So, spending in technology is increasing. It's not increasing as fast as it was increasing a couple of years ago, right? So, spending on technology is increasing. But within that, you're seeing more prioritization. And our research, everybody's research is saying, hey, more spending on AI. For lots of companies, it's also more spending mostly on building that digital core, because many companies don't have the data estates in order -- they're not in the cloud. They don't have the data in order to use the GenAI. So, think of it as a real focus on building a digital core to enable as well. So, market is still growing. It's more about prioritization of where that spending is going. Okay. Great. Thank you so much. So, in closing, I want to thank all of our shareholders for your continued trust and support in all of our people for what you do every single day. And I wish everyone a happy and a healthy holiday season. Thank you for joining today. Operator: That does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.
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Accenture Shares Jump 4% After Beating Q4 Estimates and Issuing Positive Outlook

Accenture (NYSE:ACN) shares surged over 4% in pre-market on Thursday following the company's release of better-than-expected fourth-quarter results and an optimistic outlook for fiscal 2025.

The consulting and outsourcing giant reported adjusted earnings per share of $2.79 for the quarter, slightly exceeding analyst expectations of $2.78. Revenue grew 3% year-over-year to $16.4 billion, surpassing the Street estimate of $16.35 billion.

Accenture's new bookings for the quarter totaled $20.1 billion, marking a 21% year-over-year increase, with $1 billion coming from generative AI projects. For fiscal 2024, the company achieved a record $81.2 billion in new bookings, reflecting a 13% annual increase.

Julie Sweet, Accenture’s chair and CEO, highlighted the company’s resilience and ability to adapt, emphasizing the success of their scalable and evolving business model.

Looking ahead, Accenture forecasts revenue growth of 3% to 6% in local currency for fiscal 2025 and anticipates full-year earnings per share between $12.55 and $12.91, representing 5% to 8% growth from 2024.

In addition, the company announced a 15% hike in its quarterly dividend to $1.48 per share and approved an extra $4 billion for its share repurchase program.

Accenture (NYSE:ACN) Quarterly Earnings Report Preview

  • Earnings Per Share (EPS) estimate for Accenture is set at $2.77, indicating a year-over-year increase of 2.2%.
  • Projected revenue for the quarter is approximately $16.38 billion, marking a 2.2% rise from the same quarter last year.
  • Accenture has a history of exceeding the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 2.9%.

Accenture (NYSE:ACN) is gearing up to release its quarterly earnings report on Thursday, September 26, 2024, before the market opens. This announcement is highly anticipated by investors and analysts alike, as it provides a snapshot of the company's financial health and operational performance. Accenture, a global professional services company, offers a broad range of services and solutions in strategy, consulting, digital, technology, and operations. It operates in a competitive landscape, going head-to-head with other consulting giants such as Deloitte, PwC, and McKinsey & Company. The earnings per share (EPS) estimate set by Wall Street analysts for this quarter is $2.77, with projected revenue of approximately $16.38 billion.

The EPS estimate of $2.77 represents a year-over-year increase of 2.2%, indicating a positive growth trajectory for Accenture. This growth is further underscored by the expected revenue of $16.33 billion for the quarter, marking a 2.2% rise from the same quarter in the previous year. Such financial metrics are crucial for investors as they reflect the company's ability to grow its earnings and expand its operations amidst the competitive and ever-evolving global market.

Over the past 30 days, the consensus EPS estimate has been revised upwards by 0.6%, a testament to the analysts' growing confidence in Accenture's performance. This positive reassessment is likely influenced by the company's strategic initiatives and its ability to adapt to market demands, including the application of Generative AI (GenAI) for large-scale transformations. These technological advancements not only enhance Accenture's service offerings but also position it as a leader in innovation within the consulting industry.

Accenture's history of exceeding the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 2.9%, further bolsters expectations for a strong performance in the upcoming earnings report. Such a track record of earnings surprises plays a significant role in shaping investor expectations and can lead to positive stock price movements if the trend continues.

Given the company's solid financial indicators and the optimistic projections by analysts, there is a high probability that Accenture will beat earnings expectations for the fourth quarter. This potential outcome is supported by Accenture's strategic use of technology, its consistent growth in bookings, and its ability to deliver innovative solutions to its clients. As the earnings report date approaches, investors and market watchers will be keenly observing how Accenture's financial performance aligns with these expectations.

UBS Upgrades Accenture to Buy with $400 Target, Citing AI Growth Potential

UBS analysts upgraded Accenture (NYSE:ACN) to Buy from Neutral, setting a new price target of $400 on the stock.

The analysts highlighted the potential for multiple expansion as the market begins to anticipate accelerated revenue growth driven by AI opportunities. While there are concerns about the pace of IT spending, the analysts believe Accenture's shift towards cloud services, digital transformation, cybersecurity, and now Generative AI will support higher and more sustainable growth.

The analysts’ evaluation of Accenture's top 10 alliance partners indicates a positive trend for revenue acceleration over the next year. They noted that the current stock price does not fully reflect the potential of Generative AI, with Accenture already securing approximately $2 billion in GenAI bookings by Q3/24, compared to $300 million in the fiscal year ending August 2023.

Additionally, the analysts expect GenAI adoption to accelerate as clients recognize the value from initial experimentation, potentially scaling even faster than Accenture's cloud business, which grew from $1 billion in revenue in 2012 to $32 billion, representing about 50% of total revenue in 2023.

Accenture Quarterly Earnings Preview

  • Wall Street anticipates an EPS of 3.14 and revenue estimates of $16.57 billion for Accenture's upcoming earnings report.
  • Despite a forecasted slight year-over-year decline, the Managed Services segment is expected to see a 4.6% revenue increase.
  • Accenture's valuation metrics, including a P/E ratio of approximately 25.54 and a P/S ratio of about 2.78, highlight its financial health and market position.

Accenture (NYSE:ACN) is gearing up for its quarterly earnings report on Thursday, June 20, 2024, before the market opens. With Wall Street setting its sights on an earnings per share (EPS) of 3.14 and revenue estimates hovering around $16.57 billion, the spotlight is on Accenture's financial performance. As a leading global professional services company, Accenture offers a broad range of services and solutions in strategy, consulting, digital, technology, and operations. It operates in a competitive landscape, going head-to-head with other consulting giants and technology service providers. The upcoming earnings report is crucial as it provides insights into the company's operational efficiency and market position.

Despite Accenture's impressive track record of surpassing earnings expectations in the past four quarters, with an average beat of 4.9%, the current forecast suggests a tempered outlook. Analysts predict a slight year-over-year decline in both revenues and earnings for the third quarter of fiscal 2024. The anticipated revenue is pegged at $16.5 billion, a marginal decrease from the previous year, attributed to reduced spending in key sectors such as software and platforms, communications, media, and banking. This scenario underscores the challenges Accenture faces amidst shifting market dynamics and client spending behaviors.

However, not all is bleak for Accenture. The Managed Services segment is expected to shine, with revenues projected to hit $8.2 billion, marking a 4.6% increase from the previous year. This growth is partly fueled by the effective deployment of Accenture's SynOps platform, highlighting the company's ability to innovate and adapt to changing market needs. Such performance in the Managed Services segment could offset the downturns in other areas, underscoring the importance of diversification in Accenture's business model.

The financial community closely watches earnings revisions, as they can significantly impact a stock's short-term movements. In Accenture's case, analysts have revised their consensus EPS estimate downward by 0.6% over the last 30 days. This adjustment reflects a cautious stance on the company's financial outlook for the quarter ended May 2024. Historical trends suggest that the direction of earnings estimate revisions can influence stock performance leading up to the earnings announcement, making it a critical factor for investors to monitor.

Accenture's valuation metrics, such as the price-to-earnings (P/E) ratio of approximately 25.54 and the price-to-sales (P/S) ratio of about 2.78, offer insights into how investors view the company's earnings potential and overall value. These ratios, along with the enterprise value to sales (EV/Sales) and the enterprise value to operating cash flow (EV/OCF), provide a comprehensive picture of Accenture's financial health and market position. With a low debt-to-equity (D/E) ratio and a solid current ratio, Accenture demonstrates financial stability and resilience, key attributes that investors consider when assessing the company's long-term growth prospects.

Accenture Drops 6% on Guidance Cut

Accenture (NYSE:ACN) experienced a 6% drop in its stock price intra-day today after the company adjusted its revenue growth expectations for the fiscal year 2024 downward. In its Q2, Accenture reported an earnings per share of $2.77, which was higher than the anticipated $2.66 by analysts. However, its revenue of $15.8 billion was just shy of the $15.84 billion forecast.

For the upcoming Q3, Accenture projects its revenues to range between $16.25 billion and $16.85 billion.

For the fiscal year 2024, Accenture has revised its expected revenue growth to between 1% and 3% in local currency, down from the earlier projection of 2% to 5%.

Accenture Plunges 5% After Q4 Earnings Report

Accenture (NYSE:ACN) shares dropped more than 5% intra-day today after the company released its Q4 results and provided guidance for its full fiscal year.

The company reported an EPS of $2.71, surpassing the Street estimate of $2.66. However, the revenue for the quarter came in slightly below expectations at $15.99 billion, compared to the Street estimate of $16.07 billion.

Looking forward, Accenture offered guidance for 2024, projecting an EPS range of $11.97 to $12.32. This is slightly lower than the Street forecast of $12.46. Additionally, for fiscal year 2024, Accenture anticipates revenue growth in the range of 2% to 5%.

For the first quarter of fiscal 2024, the company expects revenues to fall within the range of $15.85 billion to $16.45 billion.

Accenture Reports Better Than Expected Q3 Earnings

Accenture (NYSE:ACN) reported its Q3 earnings results yesterday, with EPS of $3.19 coming in better than the Street estimate of $3.01. Revenue was $16.6 billion, beating the Street estimate of $16.49 billion.

Management noted continued pressure on revenue and bookings from smaller deals, especially in Strategy & Consulting, systems integration work and Communications, Media & Technology. New bookings increased 2% year-over-year on a reported basis, and increased 4% in local currency to $22.1B in Q3 for a book-to-bill ratio of 1x.

For Q4/23, the company expects revenue to be in the range of $15.75-$16.35 billion, compared to the Street estimate of $16.35 billion. For the full year, the company sees EPS in the range of $11.52-$11.63, compared to the Street estimate of $11.60.