Accenture reported solid second quarter results and cut its fiscal 2020 outlook based on the COVID-19 pandemic, but more importantly highlighted what’s happening on the ground as enterprises navigate shutdowns, employee safety and digital continuity.
For Wall Street, Accenture’s second quarter earnings report wasn’t about the quarter just ended, but the outlook and a dose of business reality. For instance, Accenture is a company full of consultants that travel. Not only did Accenture have to navigate its own COVID-19 response but help clients through their own turmoil.
What’s apparent is that Accenture’s software tools and cloud and security services are faring well. Accenture said 65% of new bookings were related to its new digital businesses. Accenture CEO Julie Sweet also noted that the company had digital continuity plans, remote work and client services that could be handled from afar. Accenture reported fiscal second quarter revenue of $11.14 billion, up 7% from a year ago as consulting and outsourcing services fared well. Earnings for the quarter were $1.25 billion, or $1.91 a share.
As for the outlook, Accenture said its third quarter will rocky with revenue growth of negative 2% to positive 2%. For the fiscal year, Accenture is projecting revenue growth of 3% to 6%, down from its initial guidance of 6% to 8%. Earnings for the year will be between $7.48 a share to $7.70 a share, down from $7.66 a share to $7.84 a share.
In other words, Accenture’s outlook, which is fluid given the novel coronavirus outbreak globally, is better than feared. Why? Here are some key takeaways.
What Accenture customers are doing to deal with COVID-19. Sweet served up a few examples about how enterprise clients are handling the pandemic.
- One client implemented Microsoft Teams across their entire workforce of 61,000 employees in 5 days. See: Microsoft Teams usage up by 12 million in the past week, hitting 44 million daily active users, due largely to COVID-19
- Public sector clients are deploying more virtual agents preconfigured with COVID-19 advice to free up call center capacity.
- Mission critical services to settle services, trades and payroll as well as healthcare workflows are coming to the forefront and being executed remote and securely.
- An automotive industry client is retooling its transformation strategy due to COVID-19. “You have a client in the industry and automotive industry that has been hard hit. We’re executing our strategy beautifully there because we’re helping them with enterprise transformation and they’re making choices in this environment given what they’re facing,” said Sweet. “So in that case, for example, they said, look, our HR transformation is mission-critical. We may need to and are likely to postpone the finance transformation. And they’re working with us and their other partners as they make the essential choices you would expect in this environment.”
Accenture’s own digital transformation. Accenture has pivoted to be more of a cloud services and software provider. Sweet said Accenture landed more than $100 million deals with 18 clients with momentum for its SynOps operating engine, which combines data, analytics, and emerging tools to revamp business processes. Accenture has also launched a platform called Living Systems, which brings an agile approach to applications, talent and technology.
Continuity planning. Sweet noted that Accenture doesn’t have a headquarters and global leaders are spread out already. “While we have not planned for a global pandemic, the ability to trigger these (crisis management) protocols and then adapt for this unprecedented situation is allowing us to move rapidly,” she said. “We are deeply experienced in working virtually and already have deployed at scale in the normal course in our business, collaboration technologies and infrastructure for remote working. For example, we’re the largest user of Teams by Microsoft in the world. And in the last few weeks, as we rapidly ramped more people working remotely from home, Team’s audio usage has almost doubled from our typical 16 million minutes per day to almost 30 million minutes per day.”
Accenture will save on travel. CFO Kathleen McClure noted that Accenture will lose travel reimbursement revenue from clients, but also save money by not traveling. Accenture has 500,000 people with significant travel costs even though the company has utilized collaboration tools and remote work. The coronavirus pandemic will boost margins as those travel costs decrease.
Accenture is betting it can recruit talent in the downturn. Sweet said:
We’re obviously slowing recruiting but we’re still recruiting. Like, for example, in Italy, and we all know the situation in there, we’re still recruiting for security right now because as our clients have been moving to home, they need greater help in security services. And just a shout out to our HR team, we’ve rapidly turned our onboarding into entirely virtual so that we can continue to recruit the critical services our clients need during this time, when obviously we cannot have people coming to the office.
Sweet added that the company is always scouting for new skills. “It is important to remember that we will continue to invest in our business and our people for the long-term,” she said.