NEW YORK--(BUSINESS WIRE)--Accenture (NYSE:ACN) reported financial results for the third quarter of fiscal 2016, ended May 31, 2016, with net revenues of $8.4 billion, an increase of 9 percent in U.S. dollars and 10 percent in local currency over the same period last year.

Diluted earnings per share were $1.41, compared with $1.24 for the third quarter last year, which included a non-cash pension settlement charge of $64 million, pre-tax, or $0.06 per share. Excluding this charge, diluted EPS for the third quarter last year were $1.30. Diluted EPS for the third quarter of fiscal 2016 increased 8 percent from adjusted EPS for the third quarter last year.

Operating income for the quarter was $1.31 billion, or 15.5 percent of net revenues, compared with $1.13 billion, or 14.6 percent of net revenues, for the third quarter last year, which included the $64 million pension settlement charge. Excluding this charge, operating income for the third quarter of fiscal 2015 was $1.20 billion, or 15.4 percent of net revenues.

New bookings for the quarter were $9.1 billion, with consulting bookings of $4.9 billion and outsourcing bookings of $4.2 billion.

Pierre Nanterme, Accenture’s chairman and CEO, said, “We are very pleased with our third-quarter financial results and the continued strong momentum in our business. We delivered 10 percent revenue growth in local currency, and our new bookings of $9.1 billion demonstrate that we are providing highly relevant services to our clients. We expanded operating margin, generated strong free cash flow and returned $1.2 billion in cash to our shareholders.

“Our excellent results reflect the investments we have made to differentiate Accenture in the marketplace as well as our successful rotation to digital, cloud and security services, which now account for approximately 40 percent of our total revenues. Looking ahead, we are confident in our ability to continue gaining market share, driving profitable growth and delivering value for our clients and shareholders.”

Financial Review

Revenues before reimbursements (“net revenues”) for the third quarter of fiscal 2016 were $8.43 billion, compared with $7.77 billion for the third quarter of fiscal 2015, an increase of 9 percent in U.S. dollars and 10 percent in local currency. Net revenues for the quarter reflect a foreign-exchange impact of approximately negative 2 percent, compared with the negative 2.5 percent we had previously assumed. Adjusting for the actual foreign-exchange impact of approximately negative 2 percent in the quarter, the company’s guided range for quarterly net revenues was $8.15 billion to $8.40 billion. Accenture’s third quarter fiscal 2016 net revenues were approximately $35 million above this adjusted range.

• Consulting net revenues for the quarter were $4.62 billion, an increase of 12 percent in U.S. dollars and 14 percent in local currency compared with the third quarter of fiscal 2015.
• Outsourcing net revenues were $3.81 billion, an increase of 4 percent in U.S. dollars and 6 percent in local currency over the third quarter of fiscal 2015.

Diluted EPS for the quarter were $1.41, a $0.17, or 14 percent, increase from $1.24 for the third quarter last year, which included a non-cash pension settlement charge of $64 million, pre-tax, or $0.06 per share. Excluding this charge, EPS for the third quarter last year were $1.30. The $0.11, or 8 percent, increase from adjusted EPS last year reflects:

• a $0.12 increase from higher revenue and operating results; and
• a $0.02 increase from a lower share count

partially offset by:

• a $0.02 decrease from a higher effective tax rate; and
• a $0.01 decrease from higher non-operating expense.

Gross margin (gross profit as a percentage of net revenues) for the quarter was 31.9 percent, compared with 32.5 percent for the third quarter last year. Selling, general and administrative (SG&A) expenses for the quarter were $1.38 billion, or 16.4 percent of net revenues, compared with $1.33 billion, or 17.1 percent of net revenues, for the third quarter last year.

Operating income for the quarter was $1.31 billion, or 15.5 percent of net revenues, compared with $1.13 billion, or 14.6 percent of net revenues, for the third quarter last year, which included the $64 million pension settlement charge. Excluding the charge, operating income for the third quarter last year was $1.20 billion, or 15.4 percent of net revenues. Operating income for the third quarter of fiscal 2016 increased 15 percent on a GAAP basis and 9 percent from adjusted operating income for the third quarter last year.

The company’s effective tax rate for the quarter was 26.5 percent, compared with 24.9 percent for the third quarter last year. Excluding the impact of the pension settlement charge, the effective tax rate for the third quarter last year was 25.7 percent.

Net income for the quarter was $950 million, compared with $850 million for the third quarter last year, which included a $39 million after-tax impact from the pension settlement charge. Net income for the third quarter of fiscal 2016 increased 12 percent on a GAAP basis and 7 percent from adjusted net income for the third quarter last year.

Operating cash flow for the quarter was $1.59 billion, and property and equipment additions were $94 million. Free cash flow, defined as operating cash flow net of property and equipment additions, was $1.50 billion. For the same period last year, operating cash flow was $1.41 billion; property and equipment additions were $114 million; and free cash flow was $1.30 billion.

Days services outstanding, or DSOs, were 41 days at May 31, 2016, compared with 37 days at both Aug. 31, 2015 and May 31, 2015.

Accenture’s total cash balance at May 31, 2016 was $3.5 billion, compared with $4.4 billion at Aug. 31, 2015.

Utilization for the quarter was 91 percent, compared with 90 percent for both the second quarter of fiscal 2016 and the third quarter of fiscal 2015.

Attrition for the quarter was 15 percent, compared with 13 percent for the second quarter of fiscal 2016 and 15 percent for the third quarter of fiscal 2015.

New Bookings

New bookings for the third quarter were $9.1 billion and reflect a negative 2 percent foreign-currency impact compared with new bookings in the third quarter last year.

• Consulting new bookings were $4.9 billion, or 54 percent of total new bookings.
• Outsourcing new bookings were $4.2 billion, or 46 percent of total new bookings.

Net Revenues by Operating Group

Net revenues by operating group were as follows:

• Communications, Media & Technology: $1.71 billion, compared with $1.61 billion for the third quarter of fiscal 2015, an increase of 6 percent in U.S. dollars and 8 percent in local currency.
• Financial Services: $1.80 billion, compared with $1.64 billion for the third quarter of fiscal 2015, an increase of 10 percent in U.S. dollars and 12 percent in local currency.
• Health & Public Service: $1.54 billion, compared with $1.38 billion for the third quarter of fiscal 2015, an increase of 11 percent in U.S. dollars and 12 percent in local currency.
• Products: $2.16 billion, compared with $1.88 billion for the third quarter of fiscal 2015, an increase of 15 percent in U.S. dollars and 16 percent in local currency.
• Resources: $1.22 billion, compared with $1.25 billion for the third quarter of fiscal 2015, a decrease of 2 percent in U.S. dollars and an increase of 1 percent in local currency.

Net Revenues by Geographic Region

Net revenues by geographic region for the third quarter of fiscal 2016 were as follows:

• North America: $4.02 billion, compared with $3.64 billion for the third quarter of fiscal 2015, an increase of 10 percent in U.S. dollars and 11 percent in local currency.
• Europe: $2.95 billion, compared with $2.65 billion for the third quarter of fiscal 2015, an increase of 11 percent in U.S. dollars and 12 percent in local currency.
• Growth Markets: $1.47 billion, compared with $1.47 billion for the third quarter of fiscal 2015, flat in U.S. dollars and an increase of 6 percent in local currency.

Returning Cash to Shareholders

Accenture continues to return cash to shareholders through cash dividends and share repurchases.

Dividend

On May 13, 2016, a semi-annual cash dividend of $1.10 per share was paid on Accenture plc Class A ordinary shares to shareholders of record at the close of business on April 15, 2016 and on Accenture Holdings plc ordinary shares to shareholders of record at the close of business on April 12, 2016.

Combined with the semi-annual cash dividend of $1.10 per share paid on Nov. 13, 2015, this brings the total dividend payments for the fiscal year to $2.20 per share, for total cash dividend payments of approximately $1.44 billion.

Share Repurchase Activity

During the third quarter of fiscal 2016, Accenture repurchased or redeemed 4.3 million shares, including 3.9 million shares repurchased in the open market, for a total of $478 million. This brings Accenture’s total share repurchases and redemptions for the first three quarters of fiscal 2016 to 18.9 million shares, including 15.5 million shares repurchased in the open market, for a total of $1.97 billion.

Accenture’s total remaining share repurchase authority at May 31, 2016 was approximately $5.9 billion.

At May 31, 2016, Accenture had approximately 652 million total shares outstanding, including 623 million Accenture plc Class A ordinary shares and minority holdings of 29 million shares (Accenture Holdings plc ordinary shares and Accenture Canada Holdings Inc. exchangeable shares).

Business Outlook

Fourth Quarter Fiscal 2016

Accenture expects net revenues for the fourth quarter of fiscal 2016 to be in the range of $8.25 billion to $8.50 billion, 6 percent to 9 percent growth in local currency, reflecting the company’s assumption of a negative 1 percent foreign-exchange impact compared with the fourth quarter of fiscal 2015.

Fiscal Year 2016

Accenture’s business outlook for the full 2016 fiscal year now assumes a foreign-exchange impact of negative 4.5 percent compared with fiscal 2015; the previous foreign-exchange assumption was negative 5 percent.

For fiscal 2016, the company now expects net revenue growth to be in the range of 9.5 percent to 10.5 percent in local currency, compared with 8 percent to 10 percent previously.

The company now expects diluted EPS to be in the range of $6.03 to $6.07 on a GAAP basis and $5.29 to $5.33 on an adjusted basis, excluding the $0.74 after-tax impact of the gain on the sale of Navitaire in the second quarter. The company previously expected diluted EPS to be in the range of $5.95 to $6.06 on a GAAP basis and $5.21 to $5.32 on an adjusted basis.

Accenture now expects operating margin for the full fiscal year to be 14.6 percent, an expansion of 10 basis points from the adjusted operating margin of 14.5 percent in fiscal 2015, which excluded the 20 basis-point impact of the pension settlement charge. The company previously expected operating margin for the full fiscal year to be in the range of 14.6 percent to 14.7 percent.

For fiscal 2016, the company continues to expect operating cash flow to be in the range of $4.1 billion to $4.4 billion; property and equipment additions to be $500 million; and free cash flow to be in the range of $3.6 billion to $3.9 billion.

The company continues to expect its annual effective tax rate to be in the range of 22.5 percent to 23.5 percent on a GAAP basis and 24.0 percent to 25.0 percent on an adjusted basis, excluding an estimated 1.5 percent impact from the gain on the sale of Navitaire.

About Accenture

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 375,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.