Accenture (NYSE: ACN) reported financial results for the third quarter of fiscal 2022, ended May 31, 2022, with revenues of $16.2 billion, an increase of 22% in U.S. dollars and 27% in local currency over the same period last year.
Operating income was $2.6 billion, a 23% increase over the same period last year, and operating margin was 16.1%, an expansion of 10 basis points.
New bookings for the quarter were $17.0 billion, a 10% increase in U.S. dollars and 15% in local currency from the third quarter last year, with consulting bookings of $9.1 billion and outsourcing bookings of $7.8 billion.
Diluted earnings per share were $2.79, a 16% increase from $2.40 for the third quarter last year, and include a $96 million, or $0.15 per share, charge related to the disposition of the company’s business in Russia.
Julie Sweet, Accenture’s Chair & CEO, said, “Our very strong financial results for the third quarter reflect continued broad-based demand across markets, services, and industries, and the continued recognition of the outstanding talent of our 710,000 people. We continue to gain significant market share, and our services have never been more relevant as our clients turn to us as the trusted partner for the solutions they need to accelerate growth and become more resilient and efficient.”
Financial Review
Revenues for the third quarter of fiscal 2022 were $16.16 billion, compared with $13.26 billion for the third quarter of fiscal 2021, an increase of 22% in U.S. dollars and 27% in local currency.
Revenues for the quarter reflect a foreign-exchange impact of approximately negative 5%, compared with the negative 4% impact previously assumed. Adjusting for the actual foreignexchange impact, the company’s guided range for quarterly revenues was approximately $15.55 billion to $16.0 billion. Accenture’s third-quarter fiscal 2022 revenues were approximately $160 million above this adjusted range.
▪ Consulting revenues for the quarter were $9.03 billion, an increase of 24% in U.S.
dollars and 30% in local currency compared with the third quarter of fiscal 2021.
▪ Outsourcing revenues were $7.13 billion, an increase of 19% in U.S. dollars and 23% in
local currency compared with the third quarter of fiscal 2021.
Diluted EPS for the quarter were $2.79, a 16% increase from $2.40 for the third quarter last
year. The $0.39 increase in EPS reflects:
▪ a $0.56 increase from higher revenue and operating results;
▪ a $0.02 increase from lower share count; and
▪ a $0.01 increase from lower interest and other non-operating expense;
partially offset by
▪ a $0.15 decrease from the loss on the disposition of the company’s business in Russia;
▪ a $0.04 decrease from a higher effective tax rate; and
▪ a $0.01 decrease from higher non-controlling interest.
Gross margin (gross profit as a percentage of revenues) for the quarter was 32.9%, compared with 33.2% for the third quarter last year. Selling, general and administrative (SG&A) expenses for the quarter were $2.71 billion, or 16.8% of revenues, compared with $2.29 billion, or 17.2% of revenues, for the third quarter last year.
Operating income for the quarter increased 23%, to $2.60 billion, or 16.1% of revenues,
compared with $2.12 billion, or 16.0% of revenues, for the third quarter of fiscal 2021.
The company’s effective tax rate for the quarter was 27.1%, compared with 25.0% for the third quarter of last year.
Net income for the quarter was $1.82 billion, a 16% increase from $1.57 billion for the third quarter last year.
Operating cash flow for the quarter was $3.06 billion, and property and equipment additions were $195 million. Free cash flow, defined as operating cash flow net of property and equipment additions, was $2.87 billion. For the same period last year, operating cash flow was $2.40 billion; property and equipment additions were $158 million; and free cash flow was $2.24 billion.
Days services outstanding, or DSOs, were 44 days at May 31, 2022, compared with 38 days at Aug. 31, 2021 and 36 days at May 31, 2021.
Accenture’s total cash balance at May 31, 2022 was $6.70 billion, compared with $8.17 billion at Aug. 31, 2021.
New Bookings
New bookings for the third quarter were $17.0 billion, an increase of 10% in U.S. dollars and 15% in local currency from the third quarter last year.
▪ Consulting new bookings were $9.1 billion, or 54% of total new bookings.
▪ Outsourcing new bookings were $7.8 billion, or 46% of total new bookings.
Revenues by Geographic Market
Revenues by geographic market were as follows:
▪ North America: $7.61 billion, an increase of 23% in both U.S. dollars and in local currency compared with the third quarter of fiscal 2021.
▪ Europe: $5.35 billion, an increase of 20% in U.S. dollars and 30% in local currency compared with the third quarter of fiscal 2021.
▪ Growth Markets: $3.19 billion, an increase of 22% in U.S. dollars and 30% in local currency compared with the third quarter of fiscal 2021.
Revenues by Industry Group
Revenues by industry group were as follows:
▪ Communications, Media & Technology: $3.43 billion, an increase of 27% in U.S. dollars and 31% in local currency compared with the third quarter of fiscal 2021.
▪ Financial Services: $3.08 billion, an increase of 19% in U.S. dollars and 24% in local currency compared with the third quarter of fiscal 2021.
▪ Health & Public Service: $2.92 billion, an increase of 16% in U.S. dollars and 19% in local currency compared with the third quarter of fiscal 2021.
▪ Products: $4.60 billion, an increase of 25% in U.S. dollars and 31% in local currency compared with the third quarter of fiscal 2021.
▪ Resources: $2.13 billion, an increase of 21% in U.S. dollars and 26% in local currency compared with the third quarter of fiscal 2021.
Returning Cash to Shareholders
Accenture continues to return cash to shareholders through cash dividends and share
repurchases.
Dividend
On May 13, 2022, a quarterly cash dividend of $0.97 per share was paid to shareholders of record at the close of business on April 14, 2022. These cash dividend payments totaled $614 million, bringing dividend payments for the year to date to $1.84 billion.
Accenture plc has declared another quarterly cash dividend of $0.97 per share for shareholders of record at the close of business on July 14, 2022. This dividend, which is payable on Aug. 15, represents a 10% increase over the quarterly dividend rate of $0.88 per share in fiscal 2021.
During the third quarter of fiscal 2022, Accenture repurchased or redeemed 3.1 million shares for a total of $972 million, including approximately 2.9 million shares repurchased in the open market. This brings Accenture’s total share repurchases and redemptions for the first three quarters of fiscal 2022 to 10.1 million shares for a total of $3.51 billion, including approximately 7.7 million shares repurchased in the open market.
Accenture’s total remaining share repurchase authority at May 31, 2022 was approximately $3.7 billion.
At May 31, 2022, Accenture had approximately 633 million total shares outstanding.
Business Outlook
Fourth Quarter Fiscal 2022
Accenture expects revenues for the fourth quarter of fiscal 2022 to be in the range of $15.0 billion to $15.5 billion, 20% to 24% growth in local currency, reflecting the company’s assumption of a negative 8% foreign-exchange impact compared with the fourth quarter of fiscal 2021.
Fiscal Year 2022
Accenture’s business outlook for the full 2022 fiscal year now assumes that the foreignexchange impact on its results in U.S. dollars will be approximately negative 4.5% compared with fiscal 2021; the company previously expected a negative 3% foreign-exchange impact.
For fiscal 2022, the company now expects revenue growth to be in the range of 25.5% to 26.5% in local currency, compared with 24% to 26% previously.
Accenture continues to expect operating margin for the full fiscal year to be 15.2%, an
expansion of 10 basis points from fiscal 2021.
The company now expects its annual effective tax rate to be in the range of 23.5% to 24.5%, compared with 23% to 25% previously.
The company now expects diluted EPS to be in the range of $10.61 to $10.70, an increase of 21% to 22% over adjusted FY21 diluted EPS of $8.80—which exclude gains on an investment of $0.36 from FY21 GAAP diluted EPS of $9.16. The company previously expected fiscal 2022 diluted EPS to be in the range of $10.61 to $10.81.
For fiscal 2022, the company continues to expect operating cash flow to be in the range of $8.7 billion to $9.2 billion; continues to expect property and equipment additions to be $700 million; and continues to expect free cash flow to be in the range of $8.0 billion to $8.5 billion.
The company continues to expect to return at least $6.5 billion in cash to shareholders through dividends and share repurchases.