Even as the broader stock market tumbled to new lows on Thursday morning, Accenture posted strong second quarter results, with CEO Julie Sweet saying the company is well positioned to weather the coronavirus pandemic, as it did the financial crisis in 2009, and emerging stronger on the other side.
“As you think about what is actually happening, and it’s still early days, but we can see what’s going on, our services will be even more relevant as we get through this first period,” Sweet told investors during the company’s second quarter earnings call Thursday morning. “At the end of the day, we have to serve our clients. We need to help them adjust. We need to make sure their mission critical services are continuing. And then help them evaluate how to navigate, grow, and address it. That will be very different, in different industries and companies. This is where our relationships matter so much. You know 95 of our top 100 clients, we have been there for over 10 years. I feel very confident, and I think we’re in a very significant position of strength as we go into this chapter.”
Accenture delivered its best-ever quarter for new bookings with $US14.2 billion in the three months ending February 29, but the market free fall as the coronavirus pandemic has spread unabated from nation to nation, has knocked $US41.12 billion off the company’s market value in the past 30 days, prior to Thursday’s open. Accenture stock was up in early trading, rising 10.36 points to $US161.51.
Sweet said the current environment – as customers scramble to help their employees work from home and find ways to cut costs -- favors Accenture’s services offerings, which are focused on providing operational efficiencies and digital transformation.
“We’ve been focusing on building the digital core of our clients, which is moving to the cloud, having the right systems, all of which, this current crisis actually points out to, are very critical,” she said. “And in the first wave of that you’re just seeing it in the demand for us to help them improve their infrastructure, deploy collaboration technologies and so on. The second thing we’ve been helping them with is optimizing their operations … We already have inbound things about ‘Can you help us achieve more savings through technology in the shorter term?’ so we have very relevant offerings.”
Accenture CFO KC McClure told investors that following the market collapse in 2009, the company managed to claim a bigger piece of the solution provider market, and it expects to do so this time as well.
“We saw coming out of the last crisis -- that we also believe where we are well positioned this time again -- is taking market share,” McClure said. “So, when we came out of the last financial crisis, we did take market share and that is our expectation, as we look long term, that we will have tremendous opportunity for us over the long term by staying close to our clients.”
She said that while the company does have exposure to the travel business it represents only about 3 percent of the company’s revenue. She said the company also expects headwinds in its space and defense business, which represents about 7 percent of its overall revenue. Still, the company’s guidance projects that in the second half of the year Accenture’s consulting business will come in around the low, single-digit positive, or negative; while its outsourcing business will be low single-digit positive. Overall, Accenture said its revenue should grow between 3 and 6 percent, which is down from the previous 6 to 8 percent growth guidance it gave earlier in its fiscal year.
“Our guidance assumes that there will be an improvement in the business environment in Q4, either because the situation is better or because clients and ourselves are adjusting to working together,” Sweet said. “I would say, as you think about today, it is a very different circumstance than the financial crisis. As we look at it, we can’t imagine a better positioned company to address it.”
For the second quarter ended Feb. 29, Accenture revenue increased 7 percent to $US11.14 billion from $US10.45 billion the same quarter one year ago. Net income for the quarter was $US1.24 billion, up nearly 10 percent from $US1.13 billion one year earlier. Earnings per share were $US1.91, an increase of 10 percent from the year ago quarter. The company is paying a cash dividend of $US0.80 per share for owners of record on May 10.