Q4 2020 Accenture PLC Earnings Call

Thank you operator and thanks everyone for joining us today on our fourth quarter and full fiscal 2020 earnings announcement at the operator just mentioned. I'm Angie Park managing director of investor relations on today's call. You will hear from Julie sleep our chief executive officer in KC McClure. Our Chief Financial Officer. We hope you've had an opportunity to review the news release. She's a short time ago. Let me quickly outline the agenda for today's call Julie begin with an overview of our results. Casey will take you through the financial details including the income statement and balance sheet along with some key operational metrics for both the fourth quarter and full fiscal year. Julie will then provide a brief update on our Market positioning before Casey provides our business outlook for the first quarter and full fiscal year 2021. We will then take your questions before Julie provides a wrap up at the end of the call them in the matters. We'll discuss on this call including our business Outlook or forward-looking and upset are subject to no ninja

and uncertainties

Including but not limited to those factors set forth in today's news release and discuss in our annual report on form 10-K and quarterly reports on form 10-q and other SEC filings Thursday and uncertainties could cause actual results to differ materially from those expressed in this call during our call today. We will reference certain non-gaap Financial measures, which we believe provide useful information investors. We include reconciliations of non-gaap financial measures where appropriate to Gap in our news release or an investor relations section of our website at eccentric as long as it's interesting has no obligation to update the information presented on this conference call now, let me turn the call over to Julie. Thank you Angie and thank you everyone for joining us off.

To school twenty results demonstrate the relevance of our growth strategy the resilience of our business and our people our operational rigor and discipline. The power of the nation ships we have with the world's leading companies and ecosystem partners and our ability to Pivot rapidly to meet the needs of our clients and new ways of operating the school year Thursday also demonstrated the unique advantages of our long track record of focusing on being a responsible business from our commitment to inclusion and diversity that has helped make up an innovation-led company to our focus on investing in our people and their skills to the way. We live our core values all of which helped make us the trusted partner that our club have turned two in the face of the ongoing Global Health economic and social crisis and if there was ever any doubt, we clearly demonstrated that scheme.

Matters, we are unique in our industry for the scale of our digital cloud and security capabilities and for our leadership in all the services critical to building companies digital core transforming its operations and accelerating growth with our for services of strategy and Consulting interactive technology and operations Thursday as well as our deep industry experience and data and artificial intelligence capabilities. And we are also unique in the scale we have with large client relationships and across thirteen industry groups with a global footprint. This scale has been core to our resilience in the second half of FY twenty. Let me share a few highlights. We are now approximately 70% in the new digital cloud and security just when the need for these Services already high accelerated dramatically as a result of covid-19 dead.

In fact in FY 21 will no longer measure the new as the new is now our core and as of March 1st with the new growth model, we have embedded didja everywhere. We will continue to share color on our growth drivers including cloud and security as we continue to invest in these large high-growth Market opportunities, but we ended fy20 with 216 Diamond clients, which represent our largest client relationships a net increase of fifteen over the prior year, but we transitioned seamlessly to our new growth model with a new Global Management committee to increase our agility in bringing together the power of our multi service teams to our clients and create greater opportunities for our people and the new model and teams successfully passed a challenging test navigating the pandemic and emerging stronger more on that log.

Committed to Stronger bookings in Q4 and we delivered with our second highest bookings ever in the fourth quarter finishing the year with a record $50 of sales rep in FY twenty. We continue to increase our investments for the future at scale with one point five billion dollars in Acquisitions $871 billion in our home and our assets platforms and solutions including growing or portfolio of patents and pending patents to over seven thousand nine hundred and delivering a 6% increase in training hours for our five hundred thousand people while reducing our training costs by 11% to 866 million due to our digital learning a platforms.

We are now 45% women on track for our 20 25 goal of a fifty-fifty gender balance and this month. We announced ambitious new goals to increase am African-American and Black and Hispanic American and Latin communities in the US.

And despite the unprecedented uncertainty and volatility with the pandemic declared only a few days before we had to give guidance for Q3. We called it. Like we saw it for each of $200 and Q4 and delivered within our guidance for the full year. We delivered either within or above are guided range and continue to deliver growth ahead of Market modest margin expansion and record free cash flow.

Our resilience begins with an exceptional leadership team and are incredibly talented and dedicated people before I turn over to Casey. I want each of them for what has truly been an exceptional year that we should all be proud of Casey over to you. Thank you Joe Lee and thanks to all of you for joining us on today's call, We were pleased with our overall results in the fourth quarter which were within our guided range and a line to our expectations are results reinforce our distinctive position in the marketplace and reject the diversity of our business. Once again, these results illustrate extenders unique ability to run our business with discipline and deliver significant value for our shareholders money in an uncertain environment. So let me Begin by summarizing a few of the highlights of the quarter.

Revenues declined 1% in local currency in line with our guided range. This includes a reduction of approximately two percentage points from a decline in revenues from reimbursable travel importantly a line with our growth imperative. We continue to take significant market share for both the quarter and the year.

The diversity of our business continues to serve us well from an industry perspective consistent with last quarter approximately 50% of our revenues came from 7 industries that were less impacted from the pandemic and in aggregate grew high single-digits with continued double-digit growth and public service software and platforms and life sciences.

at the same time

As we expected we saw continued pressure from clients in a highly impacted Industries, which includes travel Retail Energy high-tech, including Aerospace defense and Industrial while performance varied this group collectively represents over 20% of our revenues and declined mid-teens operating margin is 14.3% and increase of ten basis points for the quarter and the full year. We continue to drive sustainable margin expansion while making significant investments in our business and our page to extend our Market leadership. We continue to benefit from lower spend on travel meetings and events.

And finally, we delivered free cash flow of three billion dollars which surpassed our expectations driven by Superior management. Now, let me turn to some of the detainees new bookings were fourteen billion for the quarter our second highest on record and reflect 9% growth with a book-to-bill of 1.3 Consulting bookings were six point five billion with a book-to-bill of 1.1 Outsourcing bookings of 7.5 billion were record with a book-to-bill of 1.5.

Bookings continue to be dominated by strong demand for digital cloud and security related Services, which we estimate represented approximately 70% of our new bookings Thursday. We were very pleased that we delivered on our expectations of strong bookings this quarter and they came in as we expected with strong bookings and technology and operations and lower bookings and strategy and Consulting with turning out of revenues revenues for the quarter were ten point eight billion a 1% decline in local currency and 2% decline in US Dollars, including a reduction of approximately 2% from a declining revenues from reimbursable travel costs Consulting revenues for the quarter or 5.7 billion a decline of 8% in both local currency in u.s. Dollars, which includes a reduction of approximately fifty percent from a decline in revenues from reimbursable travel costs Outsourcing revenues were 5.2 billion of 7% local currency and 6% in US dollars.

Digital cloud and security related Services grew low single-digits taking a closer. Look at our service Dimensions operations grew high single-digits technology Services Group of single digits and strategy and Consulting Services declined low teens before it gives color on our markets the industry Dynamics. I've mentioned previously played song in a similar fashion across all three in North America Revenue growth was flat and local currency in Europe Revenue declined 5% in local currency. We saw middle digit growth in Italy flat growth in Germany with continued decline from the UK.

In the growth markets we do.

3% Revenue growth in local currency led by double-digit growth in Japan and high single-digit growth in Brazil moving down the income statement gross. Margin for the quarter was 31.8% compared with 31.1% for the same period last year sales and marketing expense for the quarter was 10.6% consistent with a fourth-quarter last year. I want to Made A administrative expenses was 6.8% compared to 6.2% for the same quarter last year.

Operating income was 1.5 billion in the fourth quarter reflecting a 14.3 operating margin of ten basis points compared with Q4 last year.

Before I continue I'd like to highlight an investment game that impacted our tax rate and increased by $0.29 for the fourth quarter and 43% off 4 year.

Of this 43% gain $0.27 was factored into the full year EPS guidance provided in June and a quarterly reconciliation can be found on our website the following comparisons exclude this impact and reflect adjusted results.

Our adjusted effective tax rate for the quarter was 28.4% compared with an effective tax rate of 26.6% for the fourth quarter last year.

Adjusted diluted earnings per share or $1.70 compared to EPS of $1.74 and the fourth quarter last year for the full fiscal year adjusted Thursday. We're $7.46, which was $0.03 above our adjusted guided range for the year.

Dave service outstanding for 35 days compared to 41 days last quarter and forty days in the fourth quarter of last year free cash flow for the quarter was three billion dollars resulting from a cash generated by operating activities of 3.2 billion net of property and Equipment additions of $189 million. Our cash balance at August 31st was 8.4 billion compared with 6.1 billion August 31st of last year with regards to our ongoing objective to return cash to shareholders and the fourth quarter. We purchased or redeemed two point six million shares for $590 and an average price of $225.25 per share.

Also in August we paid our fourth quarterly cash dividend of $0.80 per share for total of $509 and our board of directors declared a quarterly cash dividend of eighty eight cents per share to be paid on November 13th at 10% increase over last year and approved $5 billion dollars of additional share repurchase Authority.

Reflecting our our results for the full year. We started strong strong. We started with strong momentum in the first half and quickly adjusted and reset with the onset of the pandemic.

We deliver.

Approximately fifty billion dollars in new bookings reflecting a 10% increase over last year setting to record highs this year. We continued to provide guidance on our business throughout the week and importantly delivered revenues within our guided range at 4% significantly taking market share.

We delivered on our commitment of margin expansion even with lower top-line growth and fully continued all elements of our Capital allocation with 1.5 billion of investment options a record 7.6 billion of free cash flow and return $5 of cash to shareholders exceeding our Outlook provided last September.

In closing our fiscal with fiscal year 20 behind us. We are proud of how we managed our business and delivered for our clients. Our people our shareholders are partner and our communities and what was truly an unprecedented fiscal year and we feel really good about our position positioning for fiscal Twenty-One. Now, let me turn it back to Julie. Thank you Casey from an overall demand perspective the trends that we discussed last quarter are continuing companies need to accelerate their digital transformation across their Enterprises and moved to the cloud address cost pressures which vary by industry but our Universal build resilience adjust their operations and customer engagement to a remote everything in a moment and find new sources of growth now, we'll give you a little more color on the depth and breadth of our ability to deliver value to our clients and this environment through the Dead.

Ends of some of our Seventeen clients with new bookings over 100 million in Q4, then I will turn to fiscal year 21 people next door. Global leader in Services software and hardware for the banking and Retail Industries and Accenture have extended as strategic agreement to accelerate diebold nixdorf multi-year digital and Cloud transformation program, which includes streamlining its Finance human resource. I, t and Sales Systems, the collaboration will unlock approximately $50 of incremental savings through 2023 while improving business productivity consolidating operations and enabling investment in Innovation and growth opportunities.

Dental Financial a financial Wellness leader and Premier active Global investment manager has entered into an agreement with Accenture to transform its Group Insurance operation model by redesigning its processes operations and Technology to create simple intuitive interactions between Brokers customers and employees that enhance Financial Wellness bought a new digital Solutions designed by Accenture interactive and powered by artificial intelligence and analytics from our platform and our operations team will provide mobile data driven seamless and human-centered experiences in onboarding Billing and claims processes enhancing user satisfaction and ultimately Revenue growth.

Halliburton

A leading Global provider of products and services to the energy industry Accenture and Microsoft entered into a five-year strategic agreement to advance halliburton's digital capabilities wage Microsoft Azure Halliburton will complete its move to cloud-based digital platforms Drive additional business agility reduced Capital expenditures and strengthen its customer offerings as well as achieve sustainability benefits by migrating all of its physical data centers to azure.

A leading Global Automotive company has selected Accenture to migrate 55% of its applications over 18 months to the cloud working with its ecosystem partners for the public Cloud a double EP and hpe for its hybrid Cloud. This work will address both cost pressures and the need to transform their it infrastructure to address obsolescence and provide digital experiences. These examples are noteworthy for their diversity across Industries complexity requiring multi-service teams, strong ecosystem Partnerships, and they using our assets platforms and solutions and many involve as delivering what we call 360 degree value because we are creating agility helping re-skill our club employees or helping reduce their carbon footprint to the move to the cloud in addition to delivering clear Financial value.

Stepping back for a moment. Our clients were being impacted by unprecedented change before covid-19. Then came covid-19 giving a whole new meaning to unprecedented and requiring our clients to change virtually every aspect of their business faster than ever before and they returning to us to help Embrace that need for Change and become stronger turning to fiscal year 21 our own formula for Market ship is enduring. We continually transform our business and embrace change to create more value for our clients with incredibly talented people. We interview fiscal year 21 as turning a page. We are no longer navigating a crisis. We are facing a new reality dead.

And we plan on returning to pre-crisis by the second half of this fiscal year and we are ready. We are emerging from the second half of fiscal year 20 stronger than when we entered which was our strategy as a leadership team. We set five measures of what strong genes and we have met each of them first. Did we grow market share faster than pre kovid check we grew at approximately four times the market in H2 as compared to two times the market in each one. And as a reminder when we say Market, we were referring to our basket of publicly traded company.

II did we

Execute on our big deal pipeline in H2 despite the crisis which would be a proxy for enhancing our role as The Trusted transformation partner check. In fact, we had three more clients with over 100 million of bookings in age to compared to H one of this year. Third did wage capture new growth opportunities check. We have had substantial new bookings in the health and public sector such as the Ten states in the US where we are doing contact trade-in remote collaboration Services as well as Cloud security supply chain and digital manufacturing which helped offset a portion of the severe impact on some of our clients. Did we continue to invest in our business in our people check not only did we invest significantly in our business and increase our training hours, but we also created the Kapak.

Need to pay our people meaning meaningful bonuses for fiscal year 20 performance and are planning for a significant level of promotions and our upcoming December promotion cycle and all this we believe will distinguish us from our competitors. And finally V. Did we continue to deliver consistently on our shareholder commitments check and we also reduce structural costs through our new growth model and took steps to accelerate our fiscal year Twenty-One usual level of Performance Management related exit off of around 5% each fiscal year so that we are preserving our talented Workforce for the future while positioning ourselves from Modest margin expansion and contraction you'd investment in our business and fiscal year 21 before Casey gives you more details on our FY 21 Outlook. I want to touch on Accenture Cloud first, which is an example.

How we anticipate client needs and then act at speed and at scale last week, we announced the creation of Accenture Cloud first and a three billion dollar investment over three years, which will be funded by prioritizing are expected Investments across the business Accenture Cloud first is a new multi service group of 70,000 Cloud professionals with more than one thousand people providing Cloud related Services, which brings together the full power and breadth of eccentrics industry and Technology capabilities ecosystem Partnerships and deep commitment to upskilling clients employees and to responsible business with the singular focus of enabling organizations to move to the cloud with greater speed and Achieve greater value for all the stakeholders at this critical time. We have been building our Cloud capabilities for the last decade and our leader with approximately twelve billion dollars in Cloud revenue for birth.

20 growing double-digit which includes

Is our staff's capabilities delivered through our intelligent platform Services business this position, Das well to recognize the covid-19 has created a new age section point that requires every company to dramatically accelerate the move to the cloud as a foundation for digital transformation to build the resilience new experience and prod trust speed and structural cost reduction that the ongoing Health economic and societal crisis demand and that a better future for all requires post office with leadership requires that every business become a cloud-first business quickly moving from today's approximately 20% in the cloud to 80% This is a once in the digital age a massive re-platforming of global business since your Cloud first work seamlessly with our intelligent platform Services which focuses on our staff's capabilities which are an important place.

Every platform in global business recent wins include working with a leading consumer goods manufacturer on a global deployment of sap s 4hana initially focusing on a special Finance system and building a new digital backbone for the entire supply chain in China from purchasing to direct consumer sales working with the US Airforce to establish a new clouddead common infrastructure for its Oracle Enterprise resources planning programs working with a bank on the integration of their front office operations and enhancing customer relationships powered by Salesforce and working with a top higher education research institution to implement workday to transform their HR capabilities to drive real-time data analytics and become a strategic partner across the organization in service now is another digital platform that is critical for example for a public service agency. We collaborated with service now to rapidly Implement a cloud.

Build workflow solution enabling millions of citizens to access government services while complying with Dynamic pandemic health safety guidelines. Now over to you Casey. Thanks, Julie before I get into our business Outlook. As I did last quarter. I would like to remind you that given the coronavirus pandemic. There are a number of factors that we may not be able to accurately predict including duration and magnitude the impact the pace of the recovery as well as those described in our most recent quarterly filings with that said, let me now turn to our business outlook for the first quarter of fiscal 21, we expect revenues to be in the range of 11.15 to 11.55 billion. This assumes the impact of FX will be about a positive 1.5% compared to the first quarter of fiscal twenty.

It also reflects an estimated -3 per cent to Flat growth and local-currency and includes a reduction of approximately two percentage points from a decline in Revenue income reimbursable travel costs.

for the

No, fiscal year Twenty-One based on how the rates have been trending of the last few weeks. We currently assumed the impact of FX on our results in US Dollars will be approximately part of 2% compared to fiscal twenty.

For the full fiscal 21, we expect our Revenue to be in the range of 2 to 5% growth and local currency over fiscal twenty including approximately -1 per cent from a decline in revenues from reimbursable travel based on a 2% reduction the first half of the Year and no material impact in the second half of the year off a couple key points that are helpful to understand our guidance.

We expect our growth will be lower in H1 with q1 and Q2 range as being similar and we expect we will reconnect with higher growth in H2 off in the range of high single-digits to load double digits.

For operating. Margin, we expect fiscal year 21 to be 14.8% to 15% a 10 to 30 basis-point expansion over fiscal 20 results.

We expect our annual effective tax rate to be in the range of 23 to 25% This compares to an adjusted effective tax rate of 23.9% in fiscal 2004, earnings-per-share. We expect full-year diluted EPS for fiscal Twenty-One to be in the range of $7.80 to $8.10 or five to 9% growth over adjusted fiscal twenty results for the full fiscal 21, we expect operating cash flow to be in the range of 6.35 to 6.85 billion month property and Equipment additions to be approximately 650 million and free cash flow to be in the range of 5.7 to 6.2 billion our free cash flow guidance rejects a very strong free cash flow to net income ratio of 1.1 to 1.2. Finally. We expect to return at least five point three billion through dividends.

Gary purchases as we remain committed to returning a substantial portion of our cash to our shareholders with that. Let's open it up so that we can take your question Angie. Thanks Casey M. I would ask that you each keep to one question and a follow-up fill out as many participants as possible to ask a question operator. Would you provide instructions for those on the call? Thank you. And once again Thursday and gentlemen, if you'd like to ask a question, please press one and then zero on your keypad. You can withdraw your question at any time by repeating that one zero command. And if you're using a speaker phone, please pick up your handset before pressing the numbers once again for questions today. It's 1 and then zero our first question today will come from the line of Tianjin long of JPMorgan, please go ahead.

I thank you. Thank you so much. I want to you gave a lot of good information here. Sounds like strategy and Consulting Services saw the biggest rate of change exiting the year a little bit more pressure. I know operations improves. I'm I'm curious on the visibility and the outlook for strategy and Consulting and fiscal 21 that presume that's going to see probably a a nice recovery in the in the second half based on your your comments there. And are you over indexed at all in strategy Consulting to some of the industry's impacted by by the pandemic?

Thanks for your question. So let me talk about what we see is for growth in strategy Consulting and then Julie can have fun some additional caller. So first thing I would say is that took a look at strategy and Consulting. We really do see that it's held up in this environment because it really is critical to our differentiation in the places where our clients are continuing to invest and then took the actual results strategy and Consulting the Cayman really as we expected in Q4 and you're right. It does follow a very similar pattern from an industry perspective to engine off where we see pressure in strategy Consulting in the most highly impacted Industries in the market.

Now in terms of the Dynamics for growth we see the same Dynamics in the first quarter essentially that we saw, you know that we're seeing from an industry perspective and strategy Consulting growth in the first choice. We saw in the fourth quarter and that was should play off pretty similar in the first half but we do see recovery and reconnecting with growth in the back half of the year off. I mean it over the Julie for some attention. I think it's important. So so in other words, we're not over index and strategy and Consulting versus the rest of our business and industries. And so, you know how it's kind of worked with, you know, sort of 20% in severe Industries, etcetera, you know, as I talked about last quarter, right when you think about strategy and Consulting it's a huge differentiator in sort of these transformational deals and I'll talk about that in a minute. And then as I said, the leading companies right now are very focused. So some of the smaller work that you would do to sort of incubate and to start doing things companies are saying and we're telling, ma'am.

Focus on the big rocks that you need to do, right? And so what's playing out of the market isn't about sort of a weakness in strategy and Consulting. It's a reflection of how our clients are thinking about their businesses and what they need. So, I'm actually quite pleased with how well strategy and Consulting is holding up and and the thing that's the most important is that this is how we roll livering, you know, Seventeen clients with over 100 million dollar bookings because each of these big Transformations like require this deep understanding of Industries functions, and you see that in other places, for example, the bank of England we announced a deal there where we're helping them with their high-value payments infrastructure to support resistance and Innovation digital payments and instant payments were huge before the crisis, as you know, it's changed dramatically and it's you know, because we understand the industry we have crossed it off.

expertise and how digital payments are being

Used right as well as the understanding of data and the technology those things come together to create this new, you know this new system that improves resiliency customer experience access to data and end-to-end risk management. No one can do that right with all of those skills, but us

anything I mean next next question. Next question is from Lisa.

Morning. Thanks guys.

Yes, good morning. Thanks guys. Thanks for taking my question. Yeah, following up a little bit on On a related question to change his question about Consulting. Can you talk a little bit about just looking like obviously revenues down in the quarter but then bookings and Consulting very strong. I guess a follow-up on that is dead. What are you seeing clients commit to in the current environment, uh on the Consulting side of things like meaning what's their willingness to commit on this Earth You know kind of knew more strategic projects in the current environment. Um, I'll leave it there and then I have a follow-up Thank you Lisa and again, and I know all of you guys think very much about you know, strategy and Consulting and then the technology and operations separately. But in fact as I've said consistently including pre covid-19,

Example of one of the most severely impacted Industries energy so last week, you know, I'm with the CEO and the leadership team of one of our major clients and the meeting goes like this. The first part of the meeting is thank you very much. Thank you for helping us save money in Finance and Accounting operations, cuz we lowered what they needed to create some, you know, help them their cost pressures. Then the next part of the meeting is all about the it modernization that we signed during Q3, right which includes strategy and Consulting includes our application Outsourcing maintenance and it includes a technology Services, right and that was about which is they have to continue to you know, build their digital core. They need it's helping them with costs but it's also about moving to the cloud. It's about creating those capabilities. Then the third part of the meeting was around some Pilots that were trying to shape with them that include that are, you know, driven by strategy and Consulting wage.

Criteria is we need to turn them faster. So they're small Pilots all about Innovation. Right? But the criteria we're helping them say is well, how can you you know, what should we do? That will get more return right? Because I've got a balance right? So again, we think about this as what are the needs of the client and how do we bring these services to deal with their short-term? There are longer-term transformation off and also thinking very quickly about how they can innovate to get nearer term return. Does that help kind of bring that together in terms of how they're thinking? Yes. Yes. Thank you. And then my follow-up this is can think up a broader industry question. But we're we're looking at we typically think of you know Accenture giving your scale as sort of a Bellwether for the industry and we're looking at kind of historical times in history when we've seen this bifurcation between it spending and GDP, you know, and you know, you're running kind of flattish on revenues, which is

Very impressive given that GDP is running down, you know mid-to-high single-digits.

And those times in history have always been when there's been like a really big disruption on the technology side in the internet, you know.

Personal computers whatnot. Do you feel like in this is again a question? Cuz I know you're in client meetings all day everyday. Do you feel like the shift to digital happening right now because of the pandemic is kind of similar to those situations and that that the you know, you know that that we're seeing sort of that level of dislocation or change at the Enterprise level in terms of their investments in technology wage. Yes, I mean and at least if that's exactly what's happening cuz remember before crisis there was exponential technology change, right? I mean just in January were talking about the big inflection point I was back in 2013 that we first said every business is a digital business. So that was happening pre

Re platforming a global business, right? It is hugely significant. And that's why having invested since 2014 when we first creating a digital in these capabilities is what's helping us as you as you say do so well in this incredibly difficult, you know challenging macro environment.

Great. Thank you Lisa.

We'll go next to the line of Jason kupferberg of Bank of America, please go ahead. Yeah, good morning guys. I just like kind of a two-part question to be asked about the front office just if we look at the growth in the new hearing Q4, it was up low single-digits and and it was less of a premium and the growth rate their relative to the overall corporate growth and we saw last quarter. I just wanted to get a sense of whether or not that was in line with your expectations. And then can you just more broadly comment like across Consulting and Outsourcing what you're seeing in terms of the pay sucks converting bookings to revenue and how that's factoring into your thought process, especially for the Outlook in the first half of fiscal 21. Thank you. Yes. Hi Jason. Nice to hear from you. Let me let me cover the first question in terms of the growth of the news. So so it did hold up very well and it really came in as we had expected right so remember

New now is 70% of our business and when we talked about the noon you remember this. Well, when we put this in the point of it really was to make sure that we were you know, resilient and the space of change and if you go through and look back at what we did in 2015 where it's one third of the business. It's now 70% of our business and that really has provided us with, you know, a position of strength in which we were able then to when we talked about our new growth model in March 1st that we invented digital everywhere. So that's all now the core of our business. So, we we did come in where we expected it to be an overall. We feel very good about our positioning in the new so in the second question around how are things kind of bleeding in to take your questions about how our our bookings bleeding into our Revenue? So, let me just cover that in terms of maybe first looking at our bookings in terms of the mix. So if you look at the mix of what we're selling

which was very

Strong in the fourth quarter $14 of bookings very strong in Tech very strong and operations. And I mentioned lower a lower bookings and stretching confirm which we expected. So given that the lower percentage of the mix of our strategy of our bookings our strategy Consulting and as you know, they tend to be shorter the overall duration of our booking took a little bit longer. So, you know when you think about our revenue and when it's going to start coming into our bookings and when it's going to start coming in the revenue think it's important to really take a look at what's been happening a business since it so when we talked about our business was really impacted and we hit our Lowe's in April and May and we were very pleased that down into four. We improved from those lists, right and we came in, you know at where we expected within our guidance range. We also Jay Smith.

About 2% headwind from reimbursable revenues. So that's also has a 3% impact in Consulting. So that's also very unique and unusual to this to the situation. And the third thing is just to confirm you to remember is that Dynamic that we saw we talked in Q3 about the higher the more impacted Industries being where we at 20% failing a little bit more pressure on growth am going to play out. Very Slimmer play. Very similar to 4 and we see that playing out very similar in the beginning part of H one and the year, but we will build back.

Our business from 1 to 2 based on our guided range that we provided. So just again to be very clear the guy that range for q1 of negative 320 imply stability from the growth that we the bill back that we had in Q4 stability at the bottom end and Improvement at the any with us in the range and we continue to see that build happening in Q2 through the first half of the year.

Okay. Thank you.

Thank you. We'll go next to the line of Brian King of Deutsche Bank, please go ahead.

Hi, good morning. You know I had kind of a a similar question and and so let me ask you to a different way the dichotomy between strong bookings up 9% in Q4, but revenues dropping down 1% in constant currency that Gap is the biggest I recall, you know in the company's history cuz bookings are so strong, but it doesn't quite translate the revenue wage other factors. I'm thinking about is, you know potentially pricing and was there any cancellations and then maybe there's a high amount of renewals in there. Just thinking about for the quarter itself that dichotomy maybe you can count on that. Yeah and let me just take I hope you're doing well. It's it's good to talk to you. I'm going to just take your question and I want to just talk about, you know, connecting the point of okay booking and the top line revenue growth. So I talked a little bit about the duration. You know what I was talking with Jason on his question. So let me run it up. I just kind of stepping back and looking at how we yep.

all of these bookings connected

Into Revenue growth. So I did touch on already what happened in Q3 and how we you build back from April and May in Q4 and I've touched quite a bit on H1, you know, where how we see that place out where we're going to continue to build back in our business. So you're you see those bookings Brian start coming back into q1 and Q2, Although. Our growth rates are going to be in the similar range. We are building our business, but let me just talk a little bit about the second half cuz it's going to get a little bit more to probably your question on bookings. So we do see a different growth dynamic in a second half of fiscal a.m. And we expect to connect with higher growth and when we see higher growth at the bottom of our range that's high single-digits at the top and it's low double digits there really four main drives that we see for connecting with us higher-level growth in the back half. So the first assumption that we have is we do expect some improvement the macroeconomic environment, which doesn't so we don't assume. Yep.

Macroeconomic shock the second thing that we see and it gets to your question is we will see more the benefit from the significant transformation deal that we sold over the last couple of quarters in the back half of the year. But then the third point is at the same time. That's when we expect strategy in Consulting to reconnect with growth and I think Julie gave just terrific color wage and why it is that we see that coming back in the second half and then the fourth point is that we will have in the back half of the year is all of you know, the benefit of an easier compared and with that I just want to suck at a couple of things. We're going to anniversary the reimbursable revenue head went cuz so that's been you know, 2% in the first half of the year, but not only we we anniversary of that but we should adjust to this new reality of less travel as of our clients. Oh, of course, we are meeting with clients. And yes, we are returning to some clients sites. But rh2 Revenue assumption does not include a significant dead.

Increase in travel so along with a 2% you know in organic contribution for the year which which aligns to about 1.7 billion acquisition found that gives you kind of the full picture of how we shaped our guidance how the bookings are going to come in when they're going to come in and drive our top-line growth and based on the current environment while I'm going to continue to pay for this for quarter one in for the full fiscal twenty one that all of our range isn't play we will connect with strong level growth and H two so you can consider that, you know, look at the impact of this and Julie talked about turning the page the pandemic it was really an H2 of FY twenty impact on our business were building back up at 6:21. And we're going to connect with growth that we believe is a strong level of growth is characterized by at least High single-digits and the second half of the year, which yep

flight in the low end of our guidance

Okay, great. Super helpful. Stay healthy.

You too. Thanks Brian. Thank you. Her. Next question will come from the line of Ashwin. Sure by car a city, please go ahead. Thanks. Hi, Julie. Um so good results. Hey, um, good results and comments redirection a consistent with what we what we sent me said, um, and and and thank you for that clarification with regards to just the trajectory. Um, I just want to put maybe a couple of finer points on it. If you don't mind so essentially saying on both of those elements the step of the demand for the new you're already seeing in terms of conversations bookings pipeline building all of that the name of it can potentially basically kick in when budgets are nailed down by our clients next calendar year because it just takes time for large Enterprises to do to move from home.

You know they plan to do something or five seven years to do do do it or three to five years right that that's in any clarification on that is Consultants traveling on projects with clients. You do not expect it to come back. Is that more of a fiscal twenty one thing or is that just like the new reality? Yeah. So let me take just the last question and I'm a point of the first question. I'm handed over the Jolly. So maybe Ashwin a point of your first question. So let me talk about how we see demand in terms of our Pipeline and and and and bookings in FY twenty one. So Thursday we have strong. We have a strong pipeline coming into the year even after doing the 14 billion dollars of bookings in Q4 and just as you know as we look at how that's going to play out over the year. We do see if she she won being a little bit lighter and building throughout the throughout the year, which is our typical pattern. And then on the last Point what I would say is I just want to be clear on the assumption that I've made dead.

On you know what we have in Revenue in the back half of the year. We've been talking it's very, you know about this revenue headwind from travel. So I just wanted to be really clear about the assumption that I'm making and revenues that we are not as strong and uplift in the back half of the year.

Yeah, which means of course H one we've got still got the headwind. Yep. It's a the chimeric but yeah sunsets and but we're not we're not saying hey, we're just going to get on we're going to get an uplift. I'm not taking any uplifting could be an upside down. So but just on the demand side you you do have it right Ashwin in that there's what's happening right now is you got certain things we're doing immediately and then you have these bigger, you know, these bigger conversations that are doing that's how you saw Seventeen, you know, uh clients last quarter. We were continuing to shape, you know, a lot of these bigger things, but if you take like supply chain, for example, you know with one client. We you know, they needed immediate forecasting help because it's a farm a client that had to get PPE so we worked quickly with sap to put it integrated business planning help forecasting decrease, um, you know, critical shortages while we're talking about a broader transformation of supply chain, you know, same thing for a leading health and personal life.

Hair company they needed transportation management system, which we partnered with blue yonder to put in to it immediately address the issues about getting goods different places, but we're talking about shaping.

And an entire transformation of the supply chain to build in the resilience get the data and the analytics right? And so and that's and that's what you're starting. You know, we're doing kind of everywhere where we bought the agility to quickly. And by the way the critical ecosystem Partnerships to do that. Well at the same time we're shaping the larger, the conversations that's happening in Cloud. Well, right, what's why we're doing Accenture Cloud first, you know, we're oftentimes doing some immediate things, but we're shaping these bigger Transformations working with the public hypercloud hyperscale. Took the hybrid Cloud working with a hyper scalars as well. As you know, the hpe VMware redhat Cisco Cisco's of the world who are incredibly important Partners as we shape this

Okay, got it. And then the second question on cash flow. It's solid in the quarter continues to be projections look pretty good for next year. And I know cash flows always been a strong point for Accenture but these levels of cash conversion are still quite impressive. So I had to ask if something changed or is it perhaps related to single factors like lower variable cam. Is it sustainable this level? Yeah. So thanks for the question. I'm free cash flow. You're right. I mean we had record free cash flow of 7.6 billion and the year and and it's surpassed even our expectations for the year. And and why is that really it's due to just Stellar billing and collections this year. So that's you know, we have industry-leading DSO, right, you know as well. So we're usually eat around 40 days 41 days. We we closed at 35 days. All right, so which is we haven't seen those. Yep.

Level since fiscal 2015 and we did all that during liquidity crisis during a pandemic. Right? So I think it's just very impressive and it just goes to the discipline that our team has and how we run the business office and you know, that was a 1.5 free cash flow than income ratio. So that's when just you know, you're you're used to how we do guide free cash flow, you know how strong you know how strong we perform it's it's typical for the bottom end of our range to be a decline the in what you see this year is that we have all of our ranges of decline if we did last year and just want to give you some just you know context in this as you know, when we when we go back to what is still industry-leading DFO, we've added at least 5 days to get back into 40 days of DSO the way free cash flow works is it's not a change of five days and that's almost a billion dollars, you know, it's like eight hundred million plus of a change in free cash flow. Just getting ourselves back to that level. So there's nothing other than just dead.

Stellar free cash flow this year and then going back to what it's still Superior cash management next year.

Thank you.

Thank you. We'll go next to the line of James faucette of Morgan Stanley, please go ahead great. Thank you very much. Just two quick questions for me. First took a lot about the engagement with customers and and what they're looking for from Accenture, but wondering if you can provide any color as to what we're seeing in terms of decision cycles and and often times around those if those are seeing any Improvement et cetera, and and my second question is related to inorganic contribution. I think you mentioned that you're expecting some level of analog contribution is built into your guidance. Can you just want to clarify what that looks like and I I guess more importantly as we think about all of the change and and the type of work you're doing for your clients. We expect that level of inorganic contribution to to persist into the future Beyond fiscal year 21. Thanks a lot.

So thanks for the question. So I'll just take the just clarify and confirm that for next year. We do have 2% in organic Revenue contribution factor of our Guidance with a up to one point seven billion dollars of spend. I'm not you know, you know, we won't don't got into future years in terms of what we're going to do. But obviously the V&A is a key part of our Capital location. We have no plan changes at all to our Capital allocation approached and handed over the Joel evenings to talk a little bit about any other color on the decision-making what's happening is what you'd expect to happen, right? Everyone had to make really fast decisions and how to navigate the crisis. So there are some things that are happening at lightning speed right when you have to figure out your supply chain or you know, get up on you know teenage you do that. We've seen some acceleration and the transformation deals, right because they're like, hey, we we got to move faster to kind of get to that and then you have other places where you know, they've slowed down things. Yep.

Clients where we had three, you know three things TWP and they're like, let's do this one and then let's wait and see you know on these others and so I I would just say it's it's you know, it's it's very contextual right now and it's just, you know, also by industry and of course we're now going into kind of budget for the end of the you know for as you normally know doing The Fall season, so that'll be you know metal. We'll see how that plays out as well.

Okay operator we have time for one more question. And then Julie will wrap up the call. Thank you. And that will come from the line of Brian Bergen of please go ahead.

Hi, good morning. Thank you. Just got one here for you. So on margin how should we be thinking about your comfort level in your typical margin expansion range? And can you also comment how work from home and patients May plan to that?

Okay. Yeah, so thanks for the question. So obviously, you know, one of our key financial imperatives is to expand give you more modest margin expansion while investing at scale in our business and in our people and we did this we saw Brian even if fiscal year twenty with lower rent ranges of Revenue growth. And so, you know, we feel you know comfortable that we can continue to create the flexibility in the investment. We do our investments and talent to do the investments in the business. Julie talked quite a bit about how excited we are cloudburst. So, you know, I would say it's the normal where your discipline that we need to bring their business to create that margin capacity to invest back. Well keeping within our ten to Thirty basis points of expansion.

Yeah, no remote on the work from home, right? We that's you know, I talked about the new reality and we're going to be worth.

Things differently, but it's going to be constantly evolving. So for example, we've got about fourteen hundred clients worldwide. Where are people are back at the clients. Uh, we're encouraging people to come into the offices with respect to doing collaboration. We're back to you know, approving travel now, it's massively restricted cuz you know, you're not going to go someplace where your life warranty meaning. We've got some people, you know who have child care issues have got some health issues and that is the reality right? And so we're going to continue to navigate that and this of course is where we already were so wrong that were really good at being able to navigate that but that's all about you know, the new reality.

Okay, thanks. And Casey. You said 2% inorganic for fiscal twenty one was that was it 1 or 2% in fiscal twenty as well? Yeah, it was just sent in fiscal twenty.

Okay, great. Thank you.

Great.

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