01—Abstract
Summary
Summary of the 10-Q filed December 17, 2015. Cited figures are marked; the original filing is the authoritative source.
Accenture plc reported net revenues of $8.01 billiona for the first quarter of fiscal year 2016, a 1% increase in U.S. dollars and a robust 10% increase in local currency, indicating strong global demand for its services.
The company saw growth across all its operating groups, with particular strength in consulting, driven by digital and technology adoption by clients. While net revenues grew modestly in U.S. dollars, unfavorable foreign currency exchange rates significantly impacted reported growth, making local currency growth a more accurate reflection of underlying business performance. The company's operating income increased by 3% to $1.22 billionb, resulting in an operating margin of 15.2%, a slight improvement from the prior year.
Diluted earnings per share were $1.28c, a marginal decrease from $1.29 in the prior year, primarily due to a higher effective tax rate. Accenture demonstrated strong cash generation from operations, providing $611 million, which was utilized for significant investments in acquisitions, property, and equipment, as well as substantial share repurchases and dividend payments. The company maintained a strong liquidity position with $3.1 billion in cash and cash equivalents.
02—Key points
Key Highlights
- Net revenues for Q1 FY16 increased 1% to $8.01 billion in USD, but grew a stronger 10% in local currency, highlighting robust global demand.
- Operating income rose 3% year-over-year to $1.22 billion, with operating margin improving slightly to 15.2% from 15.0%.
- Diluted Earnings Per Share (EPS) decreased slightly to $1.28 from $1.30 in the prior year's quarter, impacted by a higher effective tax rate.
- Significant investment in acquisitions, notably the acquisition of Cloud Sherpas for approximately $406 million, enhancing cloud services capabilities.
- Strong cash flow from operations of $611 million, supporting investments and shareholder returns.
- Accenture continued its share repurchase program, indicating confidence and a commitment to returning capital to shareholders.
- Headcount increased significantly to approximately 373,000 as of November 30, 2015, reflecting strong demand and integration of acquisitions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2016, Accenture plc kept $0.10.
- Revenue$8.47B100.0%
- Cost of revenue−$5.90B69.7%
- Gross profit$2.56B30.3%
- Operating costs−$1.34B15.8%
- Operating income$1.22B14.4%
- Interest, other & tax−$402.4M4.8%
- Net income$818.9M9.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2016filed December 17, 2015Financial Statements
Q1 FY2016 against Q1 FY2015
| Line item | Q1 FY2016Q1 FY2015 | Change |
|---|---|---|
| Revenue | $8.47B$8.34B | +1.5% |
| Cost of Revenue | $5.90B$5.80B | +1.7% |
| Gross Profit | $2.56B$2.54B | +0.9% |
| Operating Expenses | $7.24B$7.16B | +1.2% |
| Operating Income | $1.22B$1.19B | +2.8% |
| Interest Expense | $4.05M$2.81M | +44.1% |
| Net Income | $818.90M$831.53M | −1.5% |
| EPS (Basic) | $1.31$1.32 | −0.8% |
| EPS (Diluted) | $1.28$1.29 | −0.8% |
| Shares Outstanding (Basic) | 626.46M628.44M | −0.3% |
| Shares Outstanding (Diluted) | 671.30M682.33M | −1.6% |
05—Questions
Frequently Asked Questions
How did foreign currency exchange rates affect Accenture's reported revenue growth?
Foreign currency exchange rates had a significant negative impact on reported U.S. dollar revenue growth. While net revenues grew 1% in U.S. dollars, they increased by a much stronger 10% in local currency. This indicates that a strengthening U.S. dollar against other currencies lowered the reported U.S. dollar figures, and investors should focus on the local currency growth rate to understand the underlying business performance.
What was the primary driver for the increase in goodwill on the balance sheet?
The primary driver for the increase in goodwill was the acquisition of Cloud Sherpas on October 20, 2015, for approximately $405.989 million. This acquisition significantly contributed to the goodwill, which is an intangible asset representing the excess of the purchase price over the fair value of identifiable net assets acquired.
How did the company's effective tax rate change and what was the impact?
The effective tax rate for the first quarter of fiscal 2016 was 29.3%, compared to 25.1% in the prior year's quarter. This increase was primarily due to lower benefits from prior year tax adjustments, partially offset by benefits from changes in the geographic distribution of earnings. The higher tax rate negatively impacted net income and diluted earnings per share.
What is the company's outlook on cash flow and liquidity?
Accenture generated strong cash flow from operations ($611 million) and ended the quarter with $3.1 billion in cash and cash equivalents. The company believes its available cash and expected operational cash flows will be sufficient to meet its working capital and investment needs for the next twelve months. It also anticipates satisfying longer-term requirements through operations and potential borrowing facilities.
06—Continue