01—Abstract
Summary
Summary of the 10-Q filed December 19, 2019. Cited figures are marked; the original filing is the authoritative source.
Accenture plc reported solid performance for the first quarter of fiscal year 2020, ending November 30, 2019.
Revenues grew by 7% in U.S. dollars and 9% in local currency, demonstrating continued strong demand for its consulting and outsourcing services across all its operating segments. The company experienced robust growth in Health & Public Service and Products, with other segments also showing positive trends. Diluted earnings per share increased to $2.09a from $1.96 in the prior year's comparable quarter.
The company also adopted new lease accounting standards (Topic 842) effective September 1, 2019, which resulted in the recognition of significant lease assets and liabilities on the balance sheet, impacting non-current assets and current/non-current liabilities. Despite a decrease in cash and cash equivalents from the prior quarter, the company maintains a strong liquidity position and expects its current and longer-term working capital requirements to be met through operational cash flows and existing borrowing facilities.
02—Key points
Key Highlights
- Revenues increased by 7% year-over-year to $11.36 billion, with a 9% increase in local currency, indicating strong client demand.
- Diluted Earnings Per Share (EPS) grew to $2.09 from $1.96 in the prior year's quarter, reflecting improved profitability.
- Significant adoption of new lease accounting standards (Topic 842) resulted in the recognition of approximately $3.17 billion in lease assets and $3.35 billion in lease liabilities on the balance sheet as of November 30, 2019.
- Goodwill increased by $94.5 million to $6.3 billion, primarily driven by acquisitions and foreign currency translation, indicating continued investment in growth.
- Operating income increased by 8% to $1.77 billion, and operating margin slightly improved to 15.6% from 15.4% in the prior year's quarter.
- The company repurchased approximately $725 million of its shares during the quarter, reflecting a commitment to returning capital to shareholders.
- Cash and cash equivalents decreased to $5.81 billion from $6.13 billion in the prior quarter, mainly due to changes in operating assets/liabilities and dividend payments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Accenture plc kept $0.12.
- Revenue$11.36B100.0%
- Cost of revenue−$7.71B67.9%
- Gross profit$3.65B32.1%
- Operating costs−$1.88B16.6%
- Operating income$1.77B15.6%
- Interest, other & tax−$410.3M3.6%
- Net income$1.36B11.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed December 19, 2019Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $11.36B$10.61B | +7.1% |
| Cost of Revenue | $7.71B$7.31B | +5.5% |
| Gross Profit | $3.65B$3.30B | +10.6% |
| Operating Expenses | $9.59B$8.98B | +6.9% |
| Operating Income | $1.77B$1.63B | +8.5% |
| Interest Expense | $5.47M$4.50M | +21.5% |
| Net Income | $1.36B$1.27B | +6.5% |
| EPS (Basic) | $2.13$2.00 | +6.5% |
| EPS (Diluted) | $2.09$1.96 | +6.6% |
| Shares Outstanding (Basic) | 635.72M638.88M | −0.5% |
| Shares Outstanding (Diluted) | 649.39M652.15M | −0.4% |
05—Questions
Frequently Asked Questions
How did Accenture's revenue performance fare in this quarter compared to the prior year?
Accenture reported a 7% increase in revenues in U.S. dollars to $11.36 billion for the three months ended November 30, 2019, compared to $10.61 billion for the same period in the prior year. In local currency, the revenue growth was even stronger at 9%, indicating robust underlying business demand.
What was the impact of adopting new lease accounting standards on Accenture's balance sheet?
Accenture adopted Topic 842 on September 1, 2019. This resulted in the recognition of approximately $3.17 billion in lease assets and $3.35 billion in lease liabilities (comprising current and non-current portions) on its balance sheet as of November 30, 2019. This adoption primarily affects non-current assets and current/non-current liabilities without a material impact on the income statement.
How is Accenture managing its cash position and liquidity?
As of November 30, 2019, Accenture had $5.81 billion in cash and cash equivalents. While this was a decrease from $6.13 billion at the end of the prior fiscal year, the company stated that its current and longer-term working capital needs are expected to be met through operating cash flows and its existing borrowing facilities. The company also repurchased $725 million in shares during the quarter.
What is the outlook for Accenture's profitability and earnings per share?
For the first quarter of fiscal 2020, Accenture's diluted EPS increased to $2.09 from $1.96 in the prior year's quarter. The company's operating margin slightly improved to 15.6%. The effective tax rate for the quarter was 23.6%, higher than the prior year's 19.8% due to tax reform effects. Management expects the fiscal 2020 annual effective tax rate to be between 23.5% and 25.5%.
06—Continue