Accenture Reports Strong Second-Quarter Fiscal 2008 Financial Results

Accenture (NYSE: ACN) reported strong financial results for the second quarter of fiscal 2008, ended Feb. 29, with net revenues of $5.61 billion, a year-over-year increase of 18 percent in U.S. dollars and 11 percent in local currency. Consulting and outsourcing revenues both grew by double digits in U.S. dollars and in local currency, with outsourcing revenues the highest for any quarter. Earnings per share were $0.64, an increase of 36 percent over the second quarter of fiscal 2007, driven by higher operating income and a lower tax rate in the quarter. In addition, the company has raised its outlook for earnings per share for the full fiscal year 2008 to a range of $2.55 to $2.60 from the previous range of $2.36 to $2.41 provided during the first-quarter earnings announcement in December 2007. New bookings were $6.44 billion, with record quarterly consulting bookings of $3.79 billion. The company also grew operating income by 14 percent over the second quarter last year. William D. Green, Accenture’s chairman & CEO, said, "Our strong performance in the second quarter reflects the momentum we have seen in the marketplace and the essential nature of our services, as clients rely on the value we deliver in helping them achieve high performance in a challenging economic environment. With strong bookings, including our highest consulting bookings ever, we are seeing solid demand for our services. "We continue to invest with confidence in our capabilities across all dimensions of our business to ensure that we are meeting and anticipating our clients’ evolving needs. We are focused on maintaining firm operating discipline and are well positioned to achieve profitable growth through our emphasis on specialization, differentiation and superior execution.” Financial Review Revenues before reimbursements ("net revenues”) for the second quarter of fiscal 2008 were $5.61 billion, compared with $4.75 billion for the second quarter of fiscal 2007, an increase of 18 percent in U.S. dollars and 11 percent in local currency. Consulting net revenues were $3.35 billion, an increase of 18 percent in U.S. dollars and 11 percent in local currency over the second quarter last year. Outsourcing net revenues were $2.26 billion, an increase of 18 percent in U.S. dollars and 11 percent in local currency over the same period last year. Diluted EPS for the second quarter were $0.64, compared with $0.47 in the second quarter last year, an increase of 36 percent. Operating income increased 14 percent, to $638 million, or 11.4 percent of net revenues, compared with $559 million, or 11.8 percent of net revenues, in the second quarter last year. Gross margin (gross profit as a percentage of net revenues) for the second quarter of fiscal 2008 was 29.5 percent, compared with 29.6 percent in the second quarter of fiscal 2007. Selling, general and administrative expenses in the second quarter of fiscal 2008 were $1,009 million, or 18.0 percent of net revenues, compared with $839 million, or 17.7 percent of net revenues, in the second quarter last year. The company’s effective tax rate for the second quarter of fiscal 2008 was 17.8 percent, compared with 29.4 percent in the second quarter last year, driven primarily by benefits related to final determinations in the second quarter of fiscal 2008. Income before minority interest for the second quarter was $534 million, compared with $413 million for the same period of fiscal 2007, an increase of 29 percent. For the three months ended Feb. 29, 2008, operating cash flow was $724 million; property and equipment additions were $79 million; and free cash flow, defined as operating cash flow net of property and equipment additions, was $645 million. Accenture’s total cash balance at Feb. 29, 2008 was $2.58 billion, compared with $3.31 billion at Aug. 31, 2007. Cash combined with $129 million of fixed-income securities classified as investments on the company’s balance sheet was $2.71 billion at Feb. 29, 2008, compared with $3.61 billion at Aug. 31, 2007. Total debt at Feb. 29, 2008 was $9 million. New Bookings New bookings for the second quarter of fiscal 2008 were $6.44 billion. Consulting bookings were $3.79 billion, or 59 percent of new bookings. Outsourcing accounted for $2.65 billion, or 41 percent of new bookings. Net Revenues by Operating Group Net revenues for Accenture’s five operating groups were as follows: Communications & High Tech: $1,339 million, compared with $1,086 million for the second quarter of fiscal 2007, an increase of 23 percent in U.S. dollars and 15 percent in local currency. Financial Services: $1,209 million, compared with $1,051 million for the same period last year, an increase of 15 percent in U.S. dollars and 7 percent in local currency. Products: $1,439 million, compared with $1,165 million for the year-ago period, an increase of 24 percent in U.S. dollars and 17 percent in local currency. Public Service: $675 million, compared with $655 million for the year-ago period, an increase of 3 percent in U.S. dollars and a decrease of 1 percent in local currency. Resources: $944 million, compared with $787 million for the same period last year, an increase of 20 percent in U.S. dollars and 12 percent in local currency. Net Revenues by Geographic Region Net revenues by geographic region were as follows: Americas: $2,317 million, compared with $2,043 million for the second quarter of fiscal 2007, an increase of 13 percent in U.S. dollars and 10 percent in local currency. Europe, Middle East and Africa (EMEA): $2,791 million, compared with $2,334 million for the second quarter of fiscal 2007, an increase of 20 percent in U.S. dollars and 9 percent in local currency. Asia Pacific: $503 million, compared with $373 million for the year-ago period, an increase of 35 percent in U.S. dollars and 23 percent in local currency. Share Repurchase Activity During the second quarter of fiscal 2008, Accenture repurchased or redeemed 16.3 million shares for a total of $549 million, including $120 million for 3.6 million shares repurchased in the open market. At Feb. 29, 2008, Accenture had $3.6 billion of share repurchase authority remaining. Business Outlook Fiscal Year 2008 For the full fiscal year 2008, Accenture continues to expect net revenue growth in the range of 9 percent to 12 percent in local currency. The company has increased its outlook for diluted EPS for the full fiscal year by $0.19, to a range of $2.55 to $2.60. The company now expects operating cash flow in the range of $2.42 billion to $2.62 billion; property and equipment additions to be $420 million; and free cash flow in the range of $2.0 billion to $2.2 billion. The company now expects its annual effective tax rate to be in the range of 28 percent to 30 percent. Accenture continues to target new bookings for fiscal 2008 in the range of $24 billion to $26 billion. Third Quarter Fiscal 2008 Accenture expects net revenues for the third quarter of fiscal 2008 to be in the range of $5.85 billion to $6.05 billion. Conference Call and Webcast Details Accenture will host a conference call at 4:30 p.m. EDT today to discuss its second-quarter 2008 financial results. To participate, please dial +1 (800) 398-9386 [+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 7:00 p.m. EDT Thursday, March 27. 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 914987 from 7:00 p.m. EDT Thursday, March 27 through 11:59 p.m. EDT Thursday, April 10, 2008. About Accenture Accenture is a global management consulting, technology services and outsourcing company. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. With 178,000 people in 49 countries, the company generated net revenues of US$19.70 billion for the fiscal year ended Aug. 31, 2007. Its home page is www.accenture.com. Forward-Looking Statements Except for the historical information and discussions contained herein, statements in this news release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. These include, without limitation, risks that: our results of operations could be negatively affected if we cannot expand and develop our services and solutions in response to changes in technology and client demand; the consulting, systems integration and technology and outsourcing markets are highly competitive and we might not be able to compete effectively; our results of operations could be affected by economic and political conditions and the effects of these conditions on our clients’ businesses and levels of business activity; our work with government clients exposes us to additional risks in the government contracting environment; clients may not be satisfied with our services; our business could be negatively affected by legal liability that results from our providing solutions or services; liabilities could arise if our subcontractors or other third parties cannot deliver their project contributions on time or at all; our results of operations could be adversely affected if our clients terminate their contracts with us on short notice; our outsourcing services subject us to operational and financial risk; our results of operations may be adversely affected by the type and level of technology spending by our clients; our profitability may suffer if we are not able to maintain favorable pricing rates and utilization rates, if we cannot control our costs, or if we cannot anticipate the cost and complexity of performing our work; our global operations are subject to complex risks, some of which might be beyond our control; our growth and our ability to compete may be adversely affected if we cannot attract, retain and motivate our employees or efficiently utilize their skills; our business may be adversely affected if we cannot manage the organizational challenges associated with the size and expansion of our company; tax legislation or negative publicity related to Bermuda companies could adversely affect us; consolidation in the industries that we serve could adversely affect our business; the share price of Accenture Ltd Class A common shares could be adversely affected by sales, or the anticipation of future sales, of Class A common shares held by our employees and former employees; as well as the risks, uncertainties and other factors discussed under the "Risk Factors” heading in our most recent annual report on Form 10-K and other documents filed with or furnished to the Securities and Exchange Commission. Statements in this press release speak only as of the date they were made, and Accenture undertakes no duty to update any forward-looking statements made in this news release or to conform such statements to actual results or changes in Accenture’s expectations. Non-GAAP Financial Information This press release includes certain non-GAAP financial information as defined by Securities and Exchange Commission Regulation G. Accenture’s management believes providing investors with this information gives additional insights into Accenture’s results of operations. While Accenture’s management believes that these non-GAAP financial measures are useful in evaluating Accenture’s operations, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP. ACCENTURE LTD   CONSOLIDATED INCOME STATEMENTS   (In thousands of U.S. dollars, except share and per share data) (Unaudited)                 Three Months Ended Six Months Ended February 29, 2008 % of Net Revenues February 28, 2007 % of Net Revenues February 29, 2008 % of Net Revenues February 28, 2007 % of Net Revenues REVENUES: Revenues before reimbursements (Net revenues) $ 5,611,314 100 % $ 4,749,838 100 % $ 11,285,227 100 % $ 9,503,926 100 % Reimbursements   446,309     419,515     874,353     831,786   Revenues 6,057,623 5,169,353 12,159,580 10,335,712   OPERATING EXPENSES: Cost of services: Cost of services before reimbursable expenses 3,958,264 70.5 % 3,344,772 70.4 % 7,927,100 70.2 % 6,666,616 70.1 % Reimbursable expenses   446,309     419,515     874,353     831,786   Cost of services 4,404,573 3,764,287 8,801,453 7,498,402 Sales and marketing 539,303 9.6 % 434,293 9.2 % 1,059,701 9.4 % 871,223 9.2 % General and administrative costs 469,879 8.4 % 405,065 8.5 % 919,836 8.1 % 784,708 8.2 % Reorganization costs, net   5,811     6,316     14,134     12,395   Total operating expenses   5,419,566     4,609,961     10,795,124     9,166,728     OPERATING INCOME 638,057 11.4 % 559,392 11.8 % 1,364,456 12.1 % 1,168,984 12.3 %   Gain on investments, net 803 33 6,274 2,887 Interest income 24,110 34,948 61,890 71,255 Interest expense (7,684 ) (6,862 ) (13,082 ) (11,984 ) Other (expense) income   (5,708 )   (3,433 )   3,529     (5,899 )   INCOME BEFORE INCOME TAXES 649,578 11.6 % 584,078 12.3 % 1,423,067 12.6 % 1,225,243 12.9 %   Provision for income taxes   115,782     171,542     383,713     406,850     INCOME BEFORE MINORITY INTEREST 533,796 9.5 % 412,536 8.7 % 1,039,354 9.2 % 818,393 8.6 %   Minority interest in Accenture SCA and Accenture Canada Holdings Inc. (123,850 ) (111,311 ) (243,663 ) (227,124 ) Minority interest – other (1)   (3,389 )   (4,503 )   (7,849 )   (10,315 )   NET INCOME $ 406,557   7.2 % $ 296,722   6.2 % $ 787,842   7.0 % $ 580,954   6.1 %   CALCULATION OF EARNINGS PER SHARE: Net income $ 406,557 $ 296,722 $ 787,842 $ 580,954 Minority interest in Accenture SCA and Accenture Canada Holdings Inc. (2)   123,850     111,311     243,663     227,124   Net income for diluted earnings per share calculation $ 530,407   $ 408,033   $ 1,031,505   $ 808,078     EARNINGS PER SHARE: - Basic $ 0.67 $ 0.49 $ 1.29 $ 0.97   - Diluted $ 0.64 $ 0.47 $ 1.24 $ 0.93   WEIGHTED AVERAGE SHARES: - Basic 608,472,725 604,326,019 610,116,498 601,363,210   - Diluted 827,974,896 867,842,561 833,699,703 871,464,150   Cash dividends per share $ - $ - $ 0.42 $ 0.35     (1) Minority interest – other is comprised primarily of minority interest attributable to the minority shareholders of Avanade, Inc. (2) Diluted earnings per share assumes the redemption and exchange of all Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares, respectively, for Accenture Ltd Class A common shares on a one-for-one basis. ACCENTURE LTD           SUMMARY OF REVENUES   (In thousands of U.S. dollars) (Unaudited)   For the Three Months Ended PercentIncreaseUS$ PercentIncrease(Decrease)LocalCurrency Percent ofFiscal 2008QuarterlyNet Revenues February 29, February 28, 2008 2007   OPERATING GROUPS Communications & High Tech $ 1,339,411 $ 1,086,164 23 % 15 % 24 % Financial Services 1,209,223 1,050,667 15 % 7 % 21 % Products 1,439,002 1,165,094 24 % 17 % 26 % Public Service 674,520 655,064 3 % (1 %) 12 % Resources 943,595 787,420 20 % 12 % 17 % Other   5,563   5,429 n/m n/m -   TOTAL Net Revenues 5,611,314 4,749,838 18 % 11 % 100 % Reimbursements   446,309   419,515 6 % TOTAL REVENUES $ 6,057,623 $ 5,169,353 17 %   GEOGRAPHY Americas 2,317,367 $ 2,042,857 13 % 10 % 41 % EMEA 2,790,829 2,333,753 20 % 9 % 50 % Asia Pacific   503,118   373,228 35 % 23 % 9 % TOTAL Net Revenues $ 5,611,314 $ 4,749,838 18 % 11 % 100 %   TYPE OF WORK Consulting $ 3,351,461 $ 2,833,507 18 % 11 % 60 % Outsourcing   2,259,853   1,916,331 18 % 11 % 40 % TOTAL Net Revenues $ 5,611,314 $ 4,749,838 18 % 11 % 100 %         For the Six Months Ended Percent IncreaseUS$ PercentIncreaseLocalCurrency Percent ofFiscal 2008TotalNet Revenues February 29, February 28, 2008 2007   OPERATING GROUPS Communications & High Tech $ 2,651,143 $ 2,182,554 21 % 14 % 23 % Financial Services 2,453,193 2,117,914 16 % 8 % 22 % Products 2,911,858 2,359,762 23 % 17 % 26 % Public Service 1,383,482 1,282,892 8 % 3 % 12 % Resources 1,874,557 1,550,410 21 % 13 % 17 % Other   10,994   10,394 n/m n/m -   TOTAL Net Revenues 11,285,227 9,503,926 19 % 12 % 100 % Reimbursements   874,353   831,786 5 % TOTAL REVENUES $ 12,159,580 $ 10,335,712 18 %   GEOGRAPHY Americas 4,642,588 $ 4,132,962 12 % 10 % 41 % EMEA 5,674,158 4,636,433 22 % 12 % 50 % Asia Pacific   968,481   734,531 32 % 22 % 9 % TOTAL Net Revenues $ 11,285,227 $ 9,503,926 19 % 12 % 100 %   TYPE OF WORK Consulting $ 6,810,047 $ 5,742,960 19 % 11 % 60 % Outsourcing   4,475,180   3,760,966 19 % 12 % 40 % TOTAL Net Revenues $ 11,285,227 $ 9,503,926 19 % 12 % 100 %   n/m = not meaningful ACCENTURE LTD           OPERATING INCOME BY OPERATING GROUP (OG)   (In thousands of U.S. dollars) (Unaudited)   For the Three Months Ended February 29, 2008 February 28, 2007 OPERATING GROUPS OperatingIncome Percent ofOG NetRevenues OperatingIncome Percent ofOG NetRevenues PercentIncrease(Decrease) Communications & High Tech $ 184,926 14 % $ 113,600 10 % 63 % Financial Services 142,792 12 % 103,809 10 % 38 % Products 161,806 11 % 140,331 12 % 15 % Public Service 22,443 3 % 92,629 14 % (76 %) Resources   126,090 13 %   109,023 14 % 16 % Total $ 638,057 11.4 % $ 559,392 11.8 % 14 %     For the Six Months Ended February 29, 2008 February 28, 2007 OPERATING GROUPS OperatingIncome Percent ofOG NetRevenues OperatingIncome Percent ofOG NetRevenues PercentIncrease(Decrease) Communications & High Tech $ 312,958 12 % $ 248,001 11 % 26 % Financial Services 322,316 13 % 237,701 11 % 36 % Products 380,931 13 % 347,410 15 % 10 % Public Service 90,821 7 % 120,991 9 % (25 %) Resources   257,430 14 %   214,881 14 % 20 % Total $ 1,364,456 12.1 % $ 1,168,984 12.3 % 17 % ACCENTURE LTD     CONSOLIDATED BALANCE SHEETS   (In thousands of U.S. dollars)   February 29, 2008 August 31, 2007 (Unaudited) ASSETS   CURRENT ASSETS: Cash and cash equivalents $ 2,584,139 $ 3,314,396 Short-term investments 73,706 231,278 Receivables from clients, net 2,722,616 2,409,299 Unbilled services, net 1,424,748 1,290,035 Other current assets   795,259   726,170   Total current assets   7,600,468   7,971,178   NON-CURRENT ASSETS: Unbilled services, net 53,898 63,995 Investments 68,990 81,935 Property and equipment, net 840,071 808,069 Other non-current assets   2,344,887   1,821,985   Total non-current assets   3,307,846   2,775,984   TOTAL ASSETS $ 10,908,314 $ 10,747,162   LIABILITIES AND SHAREHOLDERS' EQUITY   CURRENT LIABILITIES: Current portion of long-term debt and bank borrowings $ 6,443 $ 23,795 Accounts payable 963,228 985,071 Deferred revenues 1,732,338 1,785,286 Accrued payroll and related benefits 2,216,862 2,274,098 Other accrued liabilities   1,115,469   1,894,366   Total current liabilities   6,034,340   6,962,616   NON-CURRENT LIABILITIES: Long-term debt 2,691 2,565 Other non-current liabilities   2,084,184   978,463   Total non-current liabilities   2,086,875   981,028   MINORITY INTEREST 696,958 740,186   SHAREHOLDERS' EQUITY   2,090,141   2,063,332   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,908,314 $ 10,747,162 ACCENTURE LTD         CONSOLIDATED CASH FLOWS STATEMENTS   (In thousands of U.S. dollars) (Unaudited)   Three Months Ended Six Months Ended February 29,2008 February 28,2007 February 29,2008 February 28,2007   CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 406,557 $ 296,722 $ 787,842 $ 580,954 Depreciation, amortization and asset impairments 111,045 104,465 236,213 249,446 Share-based compensation expense 104,904 84,390 176,921 146,624 Minority interest 127,239 115,814 251,512 237,439 Change in assets and liabilities/ Other, net   (25,751 )   108,787     (759,965 )   (338,457 )   Net cash provided by operating activities   723,994     710,178     692,523     876,006     CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (78,538 ) (75,900 ) (167,318 ) (143,044 ) Purchases of businesses and investments, net of cash acquired (145,243 ) (805 ) (197,618 ) (5,667 ) Other investing, net   84,378     148,990     188,130     214,273     Net cash (used in) provided by operating activities   (139,403 )   72,285     (176,806 )   65,562     CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common shares 53,130 85,868 202,168 282,838 Purchases of common shares (549,243 ) (348,020 ) (1,168,417 ) (1,071,747 ) Cash dividends paid - - (333,685 ) (293,059 ) Other financing, net   (16,060 )   (1,611 )   (3,585 )   (11,285 )   Net cash used in financing activities (512,173 ) (263,763 ) (1,303,519 ) (1,093,253 ) Effect of exchange rate changes on cash and cash equivalents   39,348     3,709     57,545     44,636     NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 111,766 522,409 (730,257 ) (107,049 )   CASH AND CASH EQUIVALENTS, beginning of period   2,472,373     2,437,530     3,314,396     3,066,988     CASH AND CASH EQUIVALENTS, end of period $ 2,584,139   $ 2,959,939   $ 2,584,139   $ 2,959,939