Accenture Q1 Results: FY24 Revenue Guidance Maintained But Earnings Forecast Below Estimates

Accenture Plc has maintained its revenue growth guidance for the fiscal ending August 2024 but warned of near-term pain even as its first-quarter earnings met analyst estimates.

Revenue of the world's largest IT company by market capitalisation rose 3% year-on-year to $16.22 billion in the quarter ended Nov. 30, according to a statement released on Tuesday. That compares with the $16.19 billion consensus estimate of analysts tracked by Bloomberg.

Accenture Q1 Results: Key Highlights (YoY)

• Revenue up 3% at $16.22 billion (Estimate: $16.19 billion)

• Operating income down 1.15% at $2.56 billion

• Operating margin down 70 basis points at 15.8%

• Earnings per share up 1% at $3.10

When adjusted to exclude business optimisation costs, operating income improved to $2.70 billion at an operational profitability of 16.7%. Adjusted EPS stood at $3.27—up 6% over the year-ago period.

New bookings, or value of deal wins, rose 14% year-on-year to $18.4 billion—consulting bookings stood at $8.6 billion and managed services at $9.8 billion.

“Our deep and trusted client relationships are again reflected in the 30 clients with quarterly bookings of more than $100 million,” Julie Sweet, chief executive officer at Accenture, said in the statement.

“And we continue to lead our industry in Generative AI—the great accelerator of reinvention—with over $450 million in new bookings. I am incredibly grateful to the 743,000 people of Accenture, who are steadfastly dedicated to helping our clients achieve their ambition to grow and thrive in the years ahead.”

FY24 Guidance

The Dublin-headquartered company expects its top line to grow at 2-5% in the fiscal ending Aug. 31, 2024, with an operating margin of 14.8-15%—an expansion of 110-130 basis points from fiscal 2023. EPS is seen at $11.41 to $11.76—an increase of 3-6% year-on-year. That's below the consensus estimate of $12.23.

Its second-quarter expectations, however, disappointed. At $15.40-16 billion, Accenture expects its revenue growth at -2% to 2% due to a negative foreign-exchange impact.

Business Performance

According to Accenture, its revenues for the September-November quarter included positive foreign exchange impact of 1.5% as against 2.5% estimated earlier. Adjusting for the actual forex impact, the company's guided range for quarterly revenue was $15.70-16.30 billion— the print is at the upper end of this guidance.

Consequently, the company's total cash balance has taken a hit—as on Nov. 30, Accenture had $7.1 billion on its books as against $9.0 billion on Aug. 31. Operating cash flow for the quarter stood at $499 million while free cash flow was $430 million.

The days services outstanding—or the time taken for deals to convert into revenue—stood at 49 days as on Nov. 30, compared to 42 days on Aug. 31 and 48 days a year ago.

Revenue By Geography

• North America: $7.56 billion, down 1% year-on-year

• EMEA: $5.80 billion, up 9% year-on-year

• Growth Markets: $2.86 billion, up 2% year-on-year

Revenue By Industry Group

• CMT: Down 10% year-on-year at $2.67 billion

• Financial Services: Up 2% year-on-year at $3.03 billion

• Health & Public Services: Up 13% year-on-year at $3.38 billion

• Products: Up 4% year-on-year at $4.86 billion 

• Resources: Up 7% year-on-year at $2.28 billion

Accenture anticipates clients, who are in the midst of a budget cycle, to stay cautious on near-term spending as macro uncertainty continues to weigh on finances. Discretionary deals, as a consequence, are still largely absent or hard to come by—hence the flat consulting book.

“Discretionary spending is down and we're right in the middle of the budget cycle,” Sweet told analysts during an earnings call. “So next quarter, we'll have a much better view of what they are, but if you look around in the environment, there aren't a lot of green shoots on the economic side and obviously, the volatility on the geopolitical side continues.”

Cash To The People

Separately, Accenture paid a dividend of $1.29 per share to shareholders during the quarter, totalling $810 million. The company has declared another dividend of $1.29 per share, payable on Feb. 15, 2024.

The company also effected a share buyback worth $1.12 billion during the first quarter, repurchasing as many as 3.4 million shares from the open market. As on Nov. 30, Accenture had 628 million shares outstanding, worth $5.4 million.

(Corrects an earlier version that misstated Accenture missed estimates. Its guidance was lower than expected)