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Image source: Accenture.

Professional services company Accenture (NYSE:ACN) reported results for the first quarter of fiscal year 2017 early Wednesday morning. Shares were down 4% at noon Wednesday. Let's dig into what the company had to say.

Accenture's first-quarter results: The raw numbers

Metric

Q1 2017

Q1 2016

Year-Over-Year Change

Net revenues

$8.5 billion

$8.0 billion

6.4%

Net income

$1.1 billion

$869 million

22%

GAAP EPS (diluted)

$1.58

$1.28

23%

Data source: Accenture [opens in PDF].

What happened with Accenture this quarter?

Overcoming modest revenue gains and a 1% currency exchange headwind, Accenture expanded its profit margins across the board and returned $1.4 billion to shareholders.

  • Gross margin for the first quarter was 32.1%, up from 32% in the year-ago period. Operating margins expanded from 15.2% to 15.6%, and net profit margins jumped from 10.8% to 12.4%. The strong bottom-line leap was helped by lower effective tax rates and a 1.1% lower share count.
  • Free cash flows saw an 82% year-over-year boost, landing at $1.0 billion. The company still had to dip into cash reserves to fully fund its cash returns to shareholders, which included $588 million of share buybacks and $785 million in cash dividend payouts.
  • Three of Accenture's five reportable segments grew sales by single-digit percentages year over year. Revenues related to resources dipped 4% lower while products led the way with a 17% gain. The products division also generated more operating income than any other segment.
  • Sales growth was roughly equal between the consulting and outsourcing work types. Consulting accounted for approximately 54% of the company's total sales.

Management provided financial guidance for the second quarter and updated the view of the full fiscal year.

  • Second-quarter sales should land near $8.3 billion, reflecting roughly 7% year-over-year growth in local currencies and a negative 2% impact from currency exchange effects.
  • The full-year view now assumes a 2% currency headwind as well, compared to a flat currency trend in the guidance provided three months ago. The midpoint of the GAAP earnings range was lowered from $5.87 to $5.76 per diluted share.
  • Other full-year 2017 targets were held steady. Operating margins are still seen at roughly 14.8%, operating cash flows stop near $4.75 billion, and free cash flows are headed toward $4.15 billion for the full year.

What management had to say

In a prepared statement, Accenture CEO and Chairman Pierre Nanterme said that he was pleased with the first-quarter results. He also painted a clear picture of the road ahead. "We continue to make significant investments in new and high-growth areas across Accenture -- especially digital, cloud and security services, which together now account for more than 40 percent of total revenues and again grew at a very strong double-digit rate in the quarter," he said.

Looking ahead

The high-growth services that Nanterme highlighted in his comments now account for roughly 40% of Accenture's overall sales, and are growing at a double-digit percentage pace. Most of these operations fall under Accenture's products segment, so the two concepts of products and high-growth operations go hand in hand.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Accenture. Try any of our Foolish newsletter services free for 30 days.

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