Accenture Reports Strong Third-Quarter Fiscal 2007 Financial Results

Accenture (NYSE: ACN) reported strong financial results for the third quarter of fiscal 2007, ended May 31, with record net revenues of $5.08 billion, a year-over-year increase of 15 percent in U.S. dollars and 9 percent in local currency. Consulting and outsourcing revenues both grew by double digits in U.S. dollars for the third consecutive quarter and were also quarterly records.


GAAP diluted earnings per share were $0.54, compared with $0.56 in the third quarter of fiscal 2006. EPS of $0.54 represent an increase of 8 percent over adjusted EPS of $0.50 in the third quarter last year, which exclude the benefit from a $58 million reduction in reorganization liabilities for that quarter described below under Financial Review.


The company has raised its outlook for earnings per share for the full fiscal year 2007 to a range of $1.94 to $1.96 from the previous range of $1.88 to $1.93 provided during its second-quarter earnings announcement in March.


New bookings for the third quarter of fiscal 2007 rose to $6.22 billion, with outsourcing bookings of $2.72 billion and record consulting bookings of $3.50 billion.


Operating income was $682 million (13.4 percent of net revenues), compared with $690 million (15.7 percent of net revenues) in the third quarter last year on a GAAP basis and $632 million (14.3 percent of net revenues) on an adjusted basis, described below under Financial Review.


William D. Green, Accenture’s chairman and CEO, said, “We are pleased to report another excellent quarter. Our strong performance and continued business momentum reflect the strength of our global franchise and our success in helping clients become high-performance businesses. We grew revenues in both U.S. dollars and local currency and achieved double-digit growth in both consulting and outsourcing. Moreover, new bookings of $6.2 billion, including our third straight quarter of record consulting bookings, demonstrate the strong and growing demand for our services. In addition, we are on the path to expand operating margin and achieve record EPS for the full fiscal year.

“We believe that our competitive differentiation and unique market position will continue to drive the growth of our business. The special ability to serve clients from idea through design, implementation and operation continues to show its power in delivering value to our clients — and our shareholders.”

Financial Review


In addition to providing year-over-year GAAP comparisons, Accenture is presenting results for the third quarter of fiscal 2006 on an adjusted basis, excluding the benefit from a $58 million reduction in reorganization liabilities in that quarter, where relevant. The company believes that adjusting for this item, which affects the comparability of results between periods, provides an additional meaningful comparison.


Revenues before reimbursements (“net revenues”) for the third quarter of fiscal 2007 were $5.08 billion, compared with $4.41 billion for the third quarter of fiscal 2006, an increase of 15 percent in U.S. dollars and 9 percent in local currency.

§ Consulting net revenues were $3.08 billion, an increase of 16 percent in U.S. dollars and 9 percent in local currency over the third quarter last year.


§ Outsourcing net revenues were $2.00 billion, an increase of 15 percent in U.S. dollars and 9 percent in local currency over the same period last year.


GAAP diluted EPS for the third quarter of fiscal 2007 were $0.54, compared with $0.56 in the third quarter last year on a GAAP basis and $0.50 on an adjusted basis, which excludes a $0.06 benefit from the reduction in reorganization liabilities mentioned above.


GAAP operating income was $682 million, or 13.4 percent of net revenues, compared with $690 million, or 15.7 percent of net revenues, in the third quarter last year. On an adjusted basis, operating income for the third quarter last year was $632 million, or 14.3 percent of net revenues.


Gross margin (gross profit as a percentage of net revenues) was 31.7 percent, compared with 33.0 percent in the third quarter last year.


Selling, general and administrative expenses were $921 million, or 18.1 percent of net revenues, compared with $816 million, or 18.5 percent of net revenues, in the third quarter last year.


The company’s effective tax rate for the third quarter of fiscal 2007 was 33.3 percent, which includes the effect of the reduction in the year-to-date tax rate from 34.9 percent to 34.3 percent as a result of changes in the forecasted geographic mix of income. The year-to-date tax expense also includes a $21 million benefit recorded as a discrete item in the second quarter of fiscal 2007, which reduced the year-to date effective tax rate by 1.1 percentage points, to 33.2 percent.


GAAP income before minority interest was $473 million, compared with $499 million on a GAAP basis and $445 million on an adjusted basis in the third quarter last year.


For the three months ended May 31, 2007, operating cash flow was $978 million; property and equipment additions were $82 million; and free cash flow, defined as operating cash flow net of property and equipment additions, was $896 million.


Accenture’s total cash balance at May 31, 2007, was $3.09 billion, compared with $3.07 billion at Aug. 31, 2006. Cash combined with $352 million of fixed-income securities classified as investments on the company’s balance sheet was $3.45 billion, compared with $3.53 billion at Aug. 31, 2006. Total debt at May 31, 2007, was $28 million.

New Bookings


New bookings for the third quarter of fiscal 2007 were $6.22 billion.


§ Consulting bookings were $3.50 billion, a new quarterly record.


§ Outsourcing bookings were $2.72 billion.

Net Revenues by Operating Group


Net revenues for Accenture’s five operating groups were as follows:


Communications & High Tech: $1.201 billion, compared with $1.079 billion for the third quarter of fiscal 2006, an increase of 11 percent in U.S. dollars and 5 percent in local currency.

Financial Services: $1.108 billion, compared with $922 million for the same period last year, an increase of 20 percent in U.S. dollars and 12 percent in local currency.

Government: $638 million, compared with $599 million for the year-ago period, an increase of 7 percent in U.S. dollars and 2 percent in local currency.

Products: $1.280 billion, compared with $1.117 billion for the year-ago period, an increase of 15 percent in U.S. dollars and 9 percent in local currency.

Resources: $850 million, compared with $687 million for the same period last year, an increase of 24 percent in U.S. dollars and 18 percent in local currency.
Net Revenues by Geographic Region



Net revenues by geographic region were as follows:

Americas: $2.157 billion, compared with $2.018 billion for the third quarter of fiscal 2006, an increase of 7 percent in U.S. dollars and 6 percent in local currency.

Europe, Middle East and Africa (EMEA): $2.468 billion, compared with $2.073 billion for the third quarter of fiscal 2006, an increase of 19 percent in U.S. dollars and 8 percent in local currency.

Asia Pacific: $457 million, compared with $317 million for the year-ago period, an increase of 44 percent in U.S. dollars and 37 percent in local currency.
Share Repurchase Activity


During the third quarter of fiscal 2007, Accenture repurchased or redeemed 24.1 million shares for a total of $835 million, which includes $558 million for 16.9 million shares repurchased or redeemed at a discount. As previously announced, in March of 2007 the company’s board of directors approved $1.5 billion in additional share repurchase authority, bringing Accenture’s total remaining share repurchase authority at May 31, 2007, to approximately $2.0 billion.

Business Outlook


Fourth Quarter Fiscal 2007


Accenture expects net revenues for the fourth quarter of fiscal 2007 to be in the range of $4.8 billion to $5.0 billion.


Fiscal Year 2007


For the full fiscal year 2007, Accenture now expects net revenue growth to be close to the top of its previously communicated range of 9 percent to 12 percent in local currency. The company has raised its outlook for fiscal 2007 GAAP diluted EPS to a range of $1.94 to $1.96, up from its previously expected range of $1.88 to $1.93.


The company now expects operating cash flow to be $2.2 billion to $2.4 billion; property and equipment additions to be $335 million; and free cash flow to be in the range of $1.9 billion to $2.1 billion. The company now expects its annual effective tax rate to be in the range of 33 percent to 35 percent. Accenture continues to target new bookings for fiscal 2007 in the range of $22 billion to $24 billion.

Conference Call and Webcast Details


Accenture will host a conference call at 4:30 p.m. EDT today to discuss its third-quarter 2007 financial results. To participate, please dial +1 (800) 230-1074 [+1 (612) 288-0329 outside the United States, Puerto Rico and Canada] approximately 15 minutes before the scheduled start of the call. The conference call will also be accessible live on the Investor Relations section of the Accenture Web site at www.accenture.com.


A replay and podcast of the conference call will be available online at www.accenture.com for approximately two weeks beginning at 9:45 p.m. EDT Thursday, June 28. The replay will also be available via telephone by dialing +1 (800) 475-6701 [+1 (320) 365-3844 outside the United States, Puerto Rico and Canada] and entering access code 876610 from 9:45 p.m. EDT Thursday, June 28 through 11:59 p.m. EDT Thursday, July 12, 2007.