01—Abstract
Summary
Summary of the 10-Q filed June 28, 2018. Cited figures are marked; the original filing is the authoritative source.
Accenture plc's (ACN) Form 10-Q filing for the period ending May 31, 2018, demonstrates robust financial performance driven by strong revenue growth across its service lines and geographic regions.
The company reported a significant increase in net revenues for both the third quarter and the first nine months of fiscal year 2018, signaling continued demand for its consulting and outsourcing services, particularly in digital, cloud, and security-related areas. Profitability metrics show an increase in operating income, though gross margin saw a slight decrease primarily due to higher labor costs. The company's effective tax rate was impacted by the U.S. Tax Cuts and Jobs Act, leading to a higher provisional tax expense.
Accenture continued its strong commitment to returning capital to shareholders through significant dividend payments and share repurchases. Overall, the filing portrays a company experiencing healthy growth and effectively managing its operations amidst a dynamic global economic environment.
02—Key points
Key Highlights
- Net revenues increased by 16% in U.S. dollars (11% in local currency) for the third quarter and 14% in U.S. dollars (10% in local currency) for the nine months ended May 31, 2018, indicating strong demand for services.
- Operating income saw a substantial increase of 87% in the third quarter and 32% for the nine months, largely due to the absence of a significant pension settlement charge incurred in the prior year.
- Gross margin for the nine months decreased slightly to 31.3% from 31.7% in the prior year, primarily attributed to higher labor costs.
- The effective tax rate for the nine months increased to 27.2% from 20.2%, significantly impacted by the U.S. Tax Cuts and Jobs Act, which resulted in a provisional tax charge of $258 million.
- Cash and cash equivalents stood at $3.9 billion as of May 31, 2018, reflecting strong operating cash flow generation, which increased by $886 million year-over-year for the nine-month period.
- The company returned approximately $1.71 billion to shareholders through cash dividends and significant share repurchases totaling $2.004 billion for the nine-month period.
- Headcount grew to approximately 449,000 as of May 31, 2018, from 411,000 a year prior, reflecting increased demand and strategic hiring.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, Accenture plc kept $0.10.
- Revenue$10.69B100.0%
- Cost of revenue−$7.36B68.8%
- Gross profit$3.33B31.2%
- Operating costs−$1.70B15.9%
- Operating income$1.63B15.3%
- Interest, other & tax−$591.9M5.5%
- Net income$1.04B9.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed June 28, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $10.69B$9.36B | +14.3% |
| Cost of Revenue | $7.36B$6.45B | +14.2% |
| Gross Profit | $3.33B$2.91B | +14.5% |
| Operating Expenses | $9.06B$8.49B | +6.7% |
| Operating Income | $1.63B$865.43M | +88.9% |
| Interest Expense | $5.84M$3.61M | +61.6% |
| Net Income | $1.04B$669.47M | +55.8% |
| EPS (Basic) | $1.63$1.08 | +50.9% |
| EPS (Diluted) | $1.60$1.05 | +52.4% |
| Shares Outstanding (Basic) | 639.22M619.44M | +3.2% |
| Shares Outstanding (Diluted) | 654.60M658.77M | −0.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of Accenture's revenue growth in this period?
Accenture's revenue growth was primarily driven by strong demand across both its consulting and outsourcing services. Growth was particularly robust in digital, cloud, and security-related services, and in key operating groups like Communications, Media & Technology, Products, and Resources, as well as in North America and Growth Markets.
How did the U.S. Tax Cuts and Jobs Act affect Accenture's financial results?
The U.S. Tax Cuts and Jobs Act, enacted in December 2017, significantly impacted Accenture's effective tax rate. For the nine months ended May 31, 2018, the company recorded a provisional tax charge of $258 million related to this act, leading to a higher effective tax rate (27.2%) compared to the prior year (20.2%). While this increased the tax expense, the company noted that absent these charges, the rate would have been 21.3%.
What is the outlook for share repurchases and dividends?
Accenture's Board of Directors has authorized funding for share repurchases, and the company intends to use a significant portion of its cash generated from operations for share repurchases during the remainder of fiscal 2018. The company also continued its regular dividend payments, returning substantial capital to shareholders.
What are the key new accounting pronouncements Accenture is preparing to adopt?
Accenture is preparing to adopt new accounting standards related to Income Taxes (ASU 2016-16) effective September 1, 2018, which may require recognizing deferred tax assets and could increase its annual effective tax rate. Additionally, the company is planning for the adoption of the new Leases guidance (ASU 2016-02) effective September 1, 2019, which is expected to materially impact its balance sheet by requiring the recognition of lease assets and liabilities. The company is also assessing the impact of the Revenue from Contracts with Customers standard (ASC 606), expected to be adopted September 1, 2018, which is not anticipated to have a material impact on its financial statements.
06—Continue