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.