Accenture plc (NYSE:ACN) is a global professional services company that provides a wide range of services and solutions across Strategy & Consulting, Technology, Operations, Industry X, and Song. With a presence in over 120 countries and a workforce of approximately 750,000 people, Accenture has established itself as a leading player in the technology and consulting landscape.

Financials

Accenture's financial performance has been resilient, showcasing the company's ability to adapt to changing market conditions. In the latest fiscal year, the company reported annual revenue of $64,111,745,000 and annual net income of $6,871,557,000. The company's strong cash generation capabilities are evident in its annual operating cash flow of $9,524,268,000 and annual free cash flow of $8,996,096,000.

Quarterly Performance

In the third quarter of fiscal 2024, Accenture reported revenues of $16.5 billion, a 1% decline in U.S. dollars but a 1.4% increase in local currency compared to the same period in the previous year. The company's adjusted operating margin for the quarter was 16.4%, a 10-basis point increase from the prior year's third quarter. Accenture's new bookings for the quarter were $21.1 billion, representing a 22% increase in U.S. dollars and a 26% increase in local currency.

Navigating Market Conditions

Accenture has demonstrated its ability to navigate the evolving market landscape. The company has observed that clients are prioritizing large-scale transformations, which convert to revenue more slowly, while limiting discretionary spending, particularly in smaller projects. In response, Accenture has leaned into its strengths as the "reinvention partner" for its clients, leveraging its end-to-end services, deep industry and functional expertise, and strong technology capabilities to deliver value.

Embracing Generative AI

One of the key growth areas for Accenture has been the adoption of generative AI (GenAI). The company has seen a significant increase in GenAI-related bookings, reaching $2 billion year-to-date, compared to approximately $300 million in the previous fiscal year. Accenture has also achieved $500 million in GenAI-related revenue so far this fiscal year, up from roughly $100 million in the prior year. The company's early embrace of GenAI positions it well to help clients navigate the transformation required to leverage this emerging technology.

Inorganic Growth

Accenture has been actively pursuing inorganic growth opportunities, deploying $2.3 billion of capital across 12 acquisitions in the third quarter alone. This brings the total number of acquisitions to 35 with invested capital of $5.2 billion year-to-date, compared to $2.5 billion for the entire previous fiscal year. These strategic acquisitions have enabled Accenture to expand its capabilities in areas such as technology learning and training, customer engagement, marketing technology, and public sector services.

Geographic Breakdown

Accenture's geographic performance has been mixed. In the third quarter, North America revenues grew 1% in local currency, driven by growth in the public service sector, partially offset by a decline in banking and capital markets. EMEA revenues declined 2% in local currency, with growth in public service offset by declines in banking and capital markets, as well as communications and media. Growth Markets, which include Asia Pacific and Latin America, saw an 8% increase in local currency revenues, led by growth in banking and capital markets and industrial.

Industry Breakdown

Accenture's industry performance has also been varied. In the third quarter, the company experienced mid-single digit growth or higher in seven of its 13 industry groups, including public service, industrial, high-tech, life sciences, energy, utilities, and health. The communications, media, and technology (CMT) industry group also saw improvement during the quarter.

Operational Highlights

Accenture's workforce has grown to approximately 750,000 people, up from around 732,000 a year ago. The company's utilization rate for the third quarter was 92%, compared to 91% in the same period last year. Annualized voluntary attrition was 14%, up from 13% in the prior year's third quarter.

Outlook

For the fourth quarter of fiscal 2024, Accenture expects revenues to be in the range of $16.05 billion to $16.65 billion, assuming an FX impact of approximately negative 2% compared to the prior year's fourth quarter. For the full fiscal year 2024, the company now expects revenue growth in local currency to be in the range of 1.5% to 2.5%, with an inorganic contribution approaching 3%. Accenture continues to expect business optimization actions to impact fiscal 2024 GAAP operating margin by 70 basis points and EPS by $0.56. The company now expects its adjusted annual effective tax rate to be in the range of 23.5% to 24.5% and its full-year adjusted earnings per share to be in the range of $11.85 to $12, or 2% to 3% growth over the prior fiscal year.

Shareholder Returns

Accenture remains committed to returning a substantial portion of its cash to shareholders. In the third quarter, the company repurchased or redeemed 4.3 million shares for $1.4 billion and paid a quarterly cash dividend of $1.29 per share, representing a 15% increase over the prior year.

Conclusion

Accenture's resilience and agility in navigating the evolving market conditions have been demonstrated through its financial performance, strategic initiatives, and operational excellence. The company's focus on being the "reinvention partner" for its clients, coupled with its early embrace of generative AI, positions it well for future growth. Accenture's strong balance sheet, disciplined capital allocation, and commitment to shareholder returns further solidify its standing as a technology powerhouse in the global professional services landscape.