Accenture plc — Q3 FY2024 Form 10-Q
Reporting period: Quarter and nine months ended May 31, 2024. Accenture is a global professional services company operating across consulting and managed services. Unless noted, amounts below are U.S. dollars.
Key financial results
| Metric | Q3 FY2024 | Change vs. Q3 FY2023 | Nine months FY2024 | Change vs. prior year |
|---|---|---|---|---|
| Revenue | $16.47B | -1% reported; +1% local currency | $48.49B | +1% reported and local currency |
| Operating income | $2.63B | +$272M | $7.24B | +$345M |
| Operating margin | 16.0% | 14.2% prior year; adjusted 16.4% vs. 16.3% | 14.9% | 14.3% prior year; adjusted 15.6% vs. 15.6% |
| Net income attributable to Accenture plc | $1.93B | -4% | $5.58B | +1% |
| Diluted EPS | $3.04 | -3%; adjusted $3.13 vs. $3.19 | $8.77 | +$0.15; adjusted $9.16 vs. $8.96 |
| Operating cash flow | Not separately reported for quarter | — | $5.74B | Down $373M |
Adjusted figures are non-GAAP and exclude business optimization costs; adjusted EPS also excludes the prior-year investment gain. Q3 GAAP results included $77M of business optimization costs, compared with $347M a year earlier. The prior-year quarter included a $253M investment gain, contributing to lower year-over-year other income in FY2024.
Business trends and material changes
- Bookings were $21.1B in Q3, up 22% reported and 26% in local currency. Nine-month bookings were $61.1B, up 10% reported.
- Q3 consulting revenue fell 3% reported and 1% in local currency; managed services rose 2% reported and 4% in local currency. Management cited slower client spending, particularly on smaller, shorter-term consulting projects, while clients continued to prioritize large transformations.
- By industry, Q3 Health & Public Service revenue grew 8% reported; Financial Services declined 8%. Growth Markets revenue rose 8% in local currency, while EMEA declined 2% and North America grew 1%.
- Remaining performance obligations were approximately $29B, up from $26B at August 31, 2023. Accenture expects to recognize about 35% in the remainder of FY2024 and 37% in FY2025. Many client contracts are terminable on short notice, and bookings are not equivalent to these obligations.
- Workforce exceeded 750,000, versus approximately 732,000 a year earlier. Utilization was 92%, up from 91%; annualized voluntary attrition was 14%, versus 13%.
Cash, debt and capital allocation
- Cash and cash equivalents were $5.54B at May 31, 2024, down from $9.05B at August 31, 2023. Current assets were $21.08B and current liabilities $18.21B.
- Nine-month operating cash flow was $5.74B; investing cash outflow was $5.51B, primarily reflecting $5.23B of acquisition consideration; financing cash outflow was $3.63B. Cash declined $3.51B over the period.
- Total debt was $1.68B, including $1.61B of commercial paper outstanding; total debt at August 31, 2023 was $148M. Accenture replaced its $3.0B syndicated facility with a $5.5B revolving facility maturing in May 2029. Management said it was in compliance with covenants and expects funding needs to be met through operations and, if needed, borrowing facilities and future market activity.
- Over nine months, Accenture paid $2.43B in dividends and purchased or redeemed approximately $3.90B of shares. It said it expects to continue using a significant portion of operating cash for repurchases during the remainder of FY2024. A quarterly dividend of $1.29 per share was declared for payment in August 2024.
Outlook, risks and contingencies
- No specific full-year revenue or EPS guidance is stated in the provided filing text. Assuming exchange rates remain within recent ranges, management estimated FY2024 U.S.-dollar revenue growth would be approximately 0.7 percentage points below local-currency growth.
- Accenture expects approximately $450M of business optimization costs in FY2024, as part of a roughly $1.5B program begun in FY2023. Actual timing and costs may vary, partly due to local consultation requirements.
- Management cited economic and geopolitical uncertainty, cautious client spending, competitive pressure and lower pricing. Other disclosed risks include foreign-exchange volatility, talent and cost management, cybersecurity, competition, acquisition integration, regulatory exposure and government contracting.
- Accenture is defending a Marriott-related data-security class action and appealing reinstated class certification; management said it does not currently expect a material effect. A separate DOJ civil and criminal investigation concerning federal security-control submissions by Accenture Federal Services remains unresolved; the company cannot estimate timing or reasonably likely costs.
- Management said there were no material changes to the risk factors in its FY2023 Form 10-K. Disclosure controls were assessed as effective at the reasonable-assurance level, with no material change in internal control over financial reporting reported for the quarter.
Important facts for investors to verify
- Whether bookings convert into revenue, given contract termination rights and longer conversion periods for managed-services contracts.
- Whether consulting demand and pricing stabilize, and whether margin performance holds after business optimization costs decline.
- Cash generation and liquidity after substantial acquisition spending, share repurchases and dividends; monitor commercial-paper balances and borrowing capacity.
- Acquisition integration and returns, including the effect of the $5.23B acquisition consideration on goodwill, which rose to $19.84B.
- Developments, potential costs and financial effects of the DOJ investigation and Marriott litigation.
- Foreign-exchange effects, especially given the gap between reported and local-currency revenue growth and Argentina’s contribution to Growth Markets growth.