01—Abstract
Summary
Summary of the 10-Q filed March 23, 2023. Cited figures are marked; the original filing is the authoritative source.
Accenture plc reported solid financial results for the second quarter and first half of fiscal year 2023, demonstrating resilience amidst global economic uncertainty.
Revenues grew both year-over-year and sequentially, driven by strong performance in Europe and Growth Markets, particularly in Managed Services. The company's robust new bookings indicate continued client demand for its services, especially in areas like cloud enablement, digital transformation, and operational efficiency. While the company faced some margin pressure due to business optimization costs and inflationary pressures, it managed these challenges effectively.
Accenture announced significant business optimization initiatives expected to yield approximately $1.5 billiona in costs, primarily related to streamlining operations and workforce adjustments, which will impact future periods but are seen as strategic for long-term efficiency. The company maintained a strong balance sheet and continued to return capital to shareholders through dividends and share repurchases, signaling confidence in its financial health and future prospects.
02—Key points
Key Highlights
- Total revenues for the six months ended February 28, 2023, reached $31.56 billion, a 5% increase in U.S. dollars and a 12% increase in local currency compared to the prior year period.
- New bookings were strong, with $22.1 billion for the second quarter of fiscal 2023, up 13% in U.S. dollars and 17% in local currency year-over-year, indicating robust client demand.
- Operating margin was 14.4% for the six months ended February 28, 2023, down from 15.0% in the prior year. However, adjusted operating margin (excluding business optimization costs) increased to 15.2%, showing underlying operational strength.
- Diluted earnings per share (EPS) were $5.47 for the six months ended February 28, 2023, up from $5.32 in the prior year. Adjusted diluted EPS (excluding business optimization costs) were $5.77.
- The company initiated business optimization actions expected to incur approximately $1.5 billion in costs, aimed at streamlining operations and reducing costs, with a significant portion to be recognized in fiscal 2023 and 2024.
- Accenture returned $1.8 billion to shareholders in the second quarter of fiscal 2023, comprising $1.1 billion in share repurchases and $708 million in dividends.
- Cash and cash equivalents stood at $6.2 billion as of February 28, 2023, providing ample liquidity, although lower than $7.9 billion at the end of the previous fiscal year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2023, Accenture plc kept $0.10.
- Revenue$15.81B100.0%
- Cost of revenue−$10.98B69.4%
- Gross profit$4.83B30.6%
- Operating costs−$2.89B18.3%
- Operating income$1.94B12.3%
- Interest, other & tax−$420.9M2.7%
- Net income$1.52B9.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2023filed March 23, 2023Financial Statements
Q2 FY2023 against Q2 FY2022
| Line item | Q2 FY2023Q2 FY2022 | Change |
|---|---|---|
| Revenue | $15.81B$15.05B | +5.1% |
| Cost of Revenue | $10.98B$10.52B | +4.3% |
| Gross Profit | $4.83B$4.52B | +6.9% |
| Operating Expenses | $13.87B$12.99B | +6.8% |
| Operating Income | $1.94B$2.06B | −5.7% |
| Interest Expense | $11.63M$11.22M | +3.7% |
| Net Income | $1.52B$1.63B | −6.8% |
| EPS (Basic) | $2.42$2.58 | −6.2% |
| EPS (Diluted) | $2.39$2.54 | −5.9% |
| Shares Outstanding (Basic) | 630.85M633.96M | −0.5% |
| Shares Outstanding (Diluted) | 637.74M644.13M | −1.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the reported period?
Revenue growth was driven by strong performance across geographic markets, particularly in Europe (12% local currency growth) and Growth Markets (14% local currency growth) during the second quarter. Managed Services saw significant year-over-year growth (16% in local currency for Q2), reflecting client demand for application modernization, cloud enablement, and managed security services. Consulting revenues also saw growth, especially in Growth Markets.
How are the business optimization costs expected to impact Accenture's financial performance?
Accenture initiated business optimization actions expected to cost approximately $1.5 billion, primarily for employee severance and office space consolidation. These costs are expected to be incurred over fiscal years 2023 and 2024. While these will negatively impact reported earnings in the short term, they are intended to streamline operations and enhance long-term efficiency and profitability. The company reported $244 million in such costs in the second quarter of fiscal 2023, which reduced operating margin and EPS.
What is the company's outlook regarding cash flow and capital return to shareholders?
Accenture generated $2.8 billion in net cash from operating activities for the first six months of fiscal 2023, demonstrating strong cash flow generation. The company remains committed to returning capital to shareholders, having returned $1.8 billion in the second quarter of fiscal 2023 through share repurchases ($1.1 billion) and dividends ($708 million). Accenture expects to continue using a significant portion of its operating cash flow for share repurchases throughout fiscal 2023.
How did foreign currency fluctuations affect the reported results?
The strengthening of the U.S. dollar against other currencies resulted in unfavorable currency translation. This reduced reported U.S. dollar revenue growth by approximately 4% for the second quarter and 7% for the first six months compared to local currency growth. Management estimates this unfavorable impact will continue, estimating a 4.5% reduction in full fiscal 2023 U.S. dollar revenue growth compared to local currency growth.
06—Continue