Q4 2024 Accenture PLC Earnings Call
Thank you for standing by welcome to Accenture as fourth quarter fiscal 2024 earnings call. At this time, all participants are in a listen only mode.
Later, we will conduct a question and answer session. If you wish to ask a question. Please press one and then zero on your Touchtone phone you will hear a tone.
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Speaker Change: Host Katy O'connor, managing director head of Investor Relations. Please go ahead.
Katy O'connor: Thank you operator, and thanks, everyone for joining us today on our fourth quarter and full fiscal 2024 earnings announcement as the operator, just mentioned I'm TD O'connor managing director head of Investor Relations on today's call you will hear from Julie Sweet, our chair and Chief Executive Officer KC Mcclure.
Speaker Change: For our current Chief Financial Officer, and Angie Park, our incoming Chief Financial Officer, We hope you've had an opportunity to review the news release, we issued a short time ago. Let me quickly outline the agenda for today's call Julie will begin with an overview of Barbara adult KC will take you through the financial details, including the <unk>.
Speaker Change: Income statement and balance sheet, along with some key operational metrics for the fourth quarter and full fiscal year. Julie will then provide a brief update on our market positioning before Angie provides our business outlook for the first quarter and full fiscal year 2025, We will then take your questions before Julie provides.
Julie: To wrap up at the end of the call.
Speaker Change: Some of the matters, we'll discuss on this call, including our business outlook are forward looking and as such are subject to known and unknown risks and uncertainties, including but not limited to those factors set forth in today's news release and as discussed in our annual report on Form 10-K, and quarterly reports on Form 10-Q and other SEC.
Julie: E filing.
Julie: These risks and uncertainties could cause actual results to differ materially from those expressed in this call.
Julie: During our call today, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures, where appropriate to GAAP in our news release or in the Investor Relations section of our website at Accenture Dot com as always accenture.
Julie: Assumes no obligation to update the information presented on this conference call now, let me turn the call over to Julie.
Thank you Katie and everyone joining and thank you to our 774000 people around the World who've worked every day to be at the center of our clients' business and delivered 360 degree value for all our stakeholders.
Our performance this year clearly demonstrates the resilience and agility of our business model the power of our scale and reinvention inaction.
Julie: Slide 24 was marked by a challenging market environment, and we have rapidly shifted to where our clients are buying large reinventions that utilize the scale of century's expertise and ecosystem relationships and we have yet again put reinvention into action at Accenture with our significant investment and alert yearly leadership and what we believe.
Speaker Change: It'll be the most transformative technology of the next decade journey I.
Speaker Change: As a result over the last four quarters, we have successfully positioned accenture for strong growth in FY 'twenty five when market conditions improve we will be well positioned to capitalize them.
Speaker Change: In FY 'twenty four we continued to deliver on our enduring shareholder value proposition should grow faster than the market and take share deliver earnings growth and margin expansion, while investing at scale with strong free cash flow disciplined capital allocation and significant cash return to shareholders.
Speaker Change: Turning to our results and the foundation for growth, we have built for FY 'twenty five.
Speaker Change: With our clients prioritizing large scale transformations, we doubled down on our strategy to be the reinvention partner of our clients. Our success is reflected in our full fiscal year bookings of $81 billion.
Speaker Change: Representing 14% growth in local currency, including 33 clients with quarterly bookings greater than $100 million in the fourth quarter, bringing the total of such bookings to 125 for the year 19 more than last year.
Speaker Change: We are proud to now have 310 diamond clients, our largest client relationships an increase of 10 from last year, expanding our base of deep client relationships and the vantage point, we have on the market.
Speaker Change: We delivered revenues of $65 billion for the year, representing 2% growth in local currency, while continuing to take market share on a rolling four quarter basis against our basket of our closest global publicly traded competitors, which is how we calculate market share.
Speaker Change: We expanded adjusted operating margin by 10 basis points and delivered adjusted EPS growth of 2%, while continuing to significantly invest in our business and our people with $6 $6 billion in strategic acquisitions, $1 $2 billion in R&D and $1 $1 billion in learning and development.
We generated free cash flow of $8 $6 billion, allowing us to return $7 $8 billion of cash to shareholders.
Speaker Change: We completed the business optimization actions, we announced in March 2023 to reduce structural costs.
Speaker Change: For the full fiscal year, we had $3 billion of new journey, I bookings, including $1 billion in Q4 and for the full fiscal year, we had nearly what $900 million in revenue.
Speaker Change: The magnitude of this achievement as seen in the comparison to FY 'twenty, three where we had approximately $300 million in sales and roughly $100 million in revenue from Jenny I. This was an area where our clients continued to buy small deals and we focus on accelerating our growth here.
Speaker Change: We have continued to steadily increase our data and AI workforce, reaching approximately 57000 practitioners against our goal of 80000 by the end of FY 'twenty six.
Speaker Change: We invested in our people to continue to develop their marketable skills and to help us reinvent our services using Jennie I. Our people had approximately 44 million training hours. This year, representing an increase of 10% predominantly due to Jenny I training.
Speaker Change: In addition to being a talent creator through our investment in learning.
Speaker Change: Our talent strategy to succeed over the next decade is to have the best access to talent and to unlock the potential of our talent through among other actions ensuring our people feel they are net better off for working at Accenture accenture across four dimensions marketable skills working for a purpose.
Speaker Change: Wellbeing financial mental and physical and relationships, where our people feel they belong and can thrive.
Speaker Change: In addition, our leadership in the market requires that we lead in innovation, which in turn requires access to broad pool of talent that provide the variety of perspective, all three observations and insights which are essential to continuously innovate.
Speaker Change: These strategies depend on us fostering a diverse and inclusive workplace and our superior execution of these strategies is demonstrated by our global recognition for the third year with the number one spot on the F. T. S E global diversity and inclusion index and objective measurement of over 15000 organizations.
Speaker Change: And our recent achievement of having 50 50 gender equality in our advanced technology centers in India, which have over 220000 people.
Speaker Change: Our long term growth depends on thriving communities and we continued to successfully create value in the communities, where we operate such as our work helping address the United Kingdom digital inclusion gap partnering with tech. She can on a new program regenerative AI. It aims to empower people and soucy socio economically disadvantaged communities across the.
Speaker Change: Tree to build their digital skills.
Speaker Change: Finally, I want to acknowledge how proud we are to have earned the number two spot on times world's best companies list in the top spot on the world's best management consulting firms list by force ever do you Casey. Thank you Julie and thanks to all of you for joining us on today's call.
Speaker Change: We're very pleased with our results in the fourth quarter, which were aligned to our expectations and reflect improvement across all dimensions of our business.
Speaker Change: We continue to invest for long term market leadership, while delivering significant value for our shareholders. So let me begin by summarizing a few highlights for the quarter.
Speaker Change: Revenue grew 5% in local currency driven by mid single digit growth or higher and seven of our 13 industries, including public service industrial software and platforms Health, Hi Tech energy and life Sciences, we had growth in all three markets all three services.
Speaker Change: As well as return to growth in consulting type of work for the first time in six quarters organic revenue improved as well just slightly positive growth.
Speaker Change: We continue to take market share.
Speaker Change: Adjusted operating margin was 15% an increase of 10 basis points over Q4 last year.
Speaker Change: We continue to drive margin expansion, while making significant investments in our business and our people we.
Speaker Change: We delivered adjusted EPS of $2.79, which represents 3% growth compared to adjusted EPS last year.
Speaker Change: And finally, we delivered free cash flow of $3 2 billion and returned $1 4 billion to shareholders through repurchases and dividends.
Speaker Change: With those high level comments, let me turn to some of the details your bookings were $20 1 billion for the quarter, representing 21% growth in U S dollars and 24% growth in local currency with an overall book to Bill one two <unk>.
Speaker Change: Solid bookings were $8 6 billion with a book to Bill of one managed services were $11 6 billion with a book to Bill of one four turning now to revenues revenues for the quarter was $16 4 billion above the midpoint of our guided range, reflecting a 3% increase in U S dollars and 5% in local currency.
Speaker Change: Revenues for the quarter were $8 3 billion up 1% in U S dollars and 3% in local currency.
Speaker Change: Managed services revenue were $8 1 billion or 5% in U S dollars and 7% in local currency.
Speaker Change: Taking a closer look at our service dimensions technology services and strategy and consulting both grew mid single digits and operations group low single digits.
Speaker Change: Turning to our geographic markets in North America revenue grew 6% in local currency driven by growth in public service and industrial.
Speaker Change: In EMEA revenue grew 2% local currency led by growth in public service and life Sciences, partially offset by a decline in banking and capital markets.
Revenue growth, where it's driven by Italy, and the United Kingdom, partially offset by a decline in France.
Speaker Change: And growth markets revenue grew 9% local currency led by growth in banking and capital markets software and platforms and industrial revenue growth was driven by Argentina and Japan.
Speaker Change: Moving down the income statement gross margin for the quarter was 32, 5% compared with 32, 4% for the same period last year sales and marketing expense for the quarter was 10, 7% compared with 10, 8% for the fourth quarter last year.
Speaker Change: General and administrative expenses were six 8% compared to six 7% for the same quarter last year before I continue I want to note that results in Q4 of FY 'twenty four and FY2023 include costs associated with business optimization actions, which impacted operating margin and EPS. The following comparisons.
Speaker Change: Exclude these impacts and reflect adjusted results.
Speaker Change: Adjusted operating income was $2 5 billion in the fourth quarter, reflecting a 15% adjusted operating margin up 10 basis points compared with Q4 last year.
Speaker Change: Our adjusted effective tax rate for the quarter was 26, 2% compared with an adjusted effective tax rate of 27, 4% for the fourth quarter last year.
Speaker Change: Adjusted diluted earnings per share were $2.79 compared with adjusted EPS of $2 71 in the fourth quarter last year.
Speaker Change: Days services outstanding were 46 days compared to 43 days last quarter and 42 days in the fourth quarter of last year.
Speaker Change: Free cash flow for the quarter was 32 was $3 2 billion, resulting from cash generated by operating activities of $3 4 billion net of property and equipment additions of $214 million.
Speaker Change: Our cash balance at August $31, 5 billion compared with 9 billion at August 31 last year with regards to our ongoing objective to return cash to shareholders in the fourth quarter, we repurchased or redeemed two 1 million shares for $628 million at an average price of $303.07 per share.
Speaker Change: Also in August we paid our fourth quarterly cash dividend of $1 28 per share for a total of $808 million.
Speaker Change: And our board of directors declared a quarterly cash dividend of $1 48 per share to be paid on November 15th% to 15% increase over last year and approved $4 billion of additional share repurchase authority.
Speaker Change: Now I'd like to take a moment to summarize the year our fiscal 'twenty four results illustrate the diversity and durability of our business as well as our ability to continue to manage our business with rigor and discipline.
We delivered record bookings of $81 2 billion, reflecting 13% growth in U S dollars and 14% growth in local currency with a record 125 quarterly kind bookings over $100 million, which positions us well as we begin FY 'twenty.
Speaker Change: Revenue of 64.9 billion for the year reflects growth of 2% local currency before I continue I would note that results for the full fiscal year 'twenty four in fiscal 'twenty. Three include costs associated with business optimization actions in fiscal 'twenty. Three results also reflect the gain on investment in Duck Creek technologies, which impacted operating margin our tax rate in <unk>.
Speaker Change: The following comparisons exclude these impacts and reflect adjusted results.
Speaker Change: Adjusted operating margin of 15, 5%, a 10 basis point expansion over FY2023 adjusted earnings per share or $11 95, reflecting a 2% growth over adjusted FY2023 EPS free cash flow of $8 6 billion reflected a very strong free cash flow to net income ratio of 1.2.
Speaker Change: And with regards to our ongoing objective to return cash to shareholders. We returned $7 8 billion of cash to shareholders, while investing approximately $6 $6 billion across 46 acquisitions.
Speaker Change: In closing we feel good about how we manage our business, while navigating a challenging macro environment in FY 'twenty four and we remain committed to delivering on our enduring shareholder value proposition, while creating 360 degree value for all our stakeholders and now back to you Julie.
Casey: Thank you Casey.
Julie: Our FY 'twenty four growth was driven by our clients seeking to reinvent using tech data AI and new ways of working reinvention requires a strong digital core in FY 'twenty five a significant driver of our growth will continue to be helping our clients with digital transformation, including building out their digital core and then you.
Julie: Using it to drive productivity and growth, we see the advent of Jenny I and its tremendous potential acting as a catalyst for reinvention, our clients turn to us for our unique combination of services across strategy consulting song industry X technology and operations, our strategists and deep industry.
Speaker Change: <unk> functional customer and technology consultants work hand in hand, with our clients and across services to shape and deliver these reinventions.
Speaker Change: Our investments in our advanced platforms, our assets and solutions our process expertise the insights from our scale and diversification and our ability to both design and build the solutions combined with our managed services are key differentiators for us.
Speaker Change: At the same time, we see AI as the new digital like digital AI is both a technology and a new way of working and the full value will only come from strategies built on both productivity and growth.
Jenny: And it will be used in every part of the enterprise. We believe the introduction of Jenny I Cigna signifies a transformative era that is set to drive growth for us and our clients over the next decade much like digital technology has in the last decade and continues to do so.
Jenny: As part of that we expect that the work to prepare enterprise data, which is the fuel for AI will be an increasing part of our growth.
Speaker Change: To accomplish reinvention and take advantage of AI businesses need to focus on talent their ability to access the best people at the right time placement cost the ability to be a talent creator to keep their people market relevant.
Speaker Change: And their ability to unlock the potential of their talent is critical we see talent as a top C suite agenda item.
Speaker Change: Today, our managed services are an important part of our clients' long term talent strategy.
Speaker Change: Our ability to harness AI is helping them close talent gaps and our strong expertise across a talent change HR and organizations differentiate all our services.
Speaker Change: Our launch of learn vantage, which provides comprehensive technology learning and training services helps our clients Reskill and upskill their people. So they can be a talent creator.
Speaker Change: Let me give you a few examples of the types of Reinventions, we are doing.
In financial services banking and insurance are on their reinvention journey, while retirement services, a $15 billion global addressable market growing at about 6% has lagged behind we have invested to grow our capabilities and talent to capture. This next wave of growth we are working with T. I a.
A the largest U S provider of lifetime income to accelerate the transformation of the company's retirement recordkeeping capabilities and operations leveraging the power of AI automation in the cloud we are helping the company implement new technologies, making record record keeping processes more efficient over time and easier for their customers through this.
Speaker Change: Strategic partnership we are supporting parts of Ti as record keeping operations, including backend processes and technology.
Speaker Change: For example retirement plan sponsors will experience faster a planned channel changes and participants will find it easier to initiate account openings and investment selection.
Speaker Change: Together, we are making retirement planning more accessible efficient and personalized for individuals and clients, helping T. I a needed submission of a more secure and retirement for more Americans.
Today, we work with 75% of the world's largest communications services providers with our strong industry and technology expertise, we are modernizing our global telecoms core it operations to drive growth through our managed services program, we are consolidating vendors increasing productivity by them.
Speaker Change: Estimated 60% and reducing cost by half. We're also infusing our journey I tools to enhance the software development lifecycle and automate manual tasks, such as resolving technical issues with customer orders invoices are service availability.
Speaker Change: Now this will free up employees to focus on strategic growth initiatives and improve the overall customer experience. We are also implementing new ways of working and then we'll train and Upskill. The team to use the new journey I tools more effectively helping to create more profitable outcomes for the company. These changes will create a stronger management framework and prepare the company for <unk>.
Speaker Change: Spansion enter new markets.
Speaker Change: Security continues to be one of the fastest growing parts of our business, reaching $9 billion in revenue this year, representing 23% growth.
Speaker Change: We are partnering with the Kuwait government Central agency for information technology to revolutionize the security posture of its public services and National critical infrastructure, we are implementing and managing a scalable platform powered by Jenny I, enabling me an agency to act on evolving cyber threats up to 60% quicker than with traditional.
Speaker Change: Gs, including detection response and containment model.
Speaker Change: In the past security analysts manually researched threats with limited information before handing the incident to the impact of government entity, losing valuable time as attack progressed, but now using a new platform when analysts open a potential incident. They can quickly drill down into details about the users systems under attack type of attack and more with <unk>.
Speaker Change: One click.
Speaker Change: <unk> ability to process significant amounts of data and automatically elaborate context as a threat is detected we are supporting our experts and making faster decisions with confidence as we progressively onboard over 60 government entities and while we also develop local talent the strategic collaboration underscores our commitment to safeguarding kuwait's digits.
Speaker Change: Assets and empowering the nation's journey towards enhanced cyber security resilience.
Speaker Change: A key area for companies to seek reinvention is in marketing with the potential to use tech data and creativity to drive growth drive tangible outcomes for the enterprise. We are very proud to be working with HP, an American multinational information technology company and a new global partnership to develop the right datasets technology and creative.
Speaker Change: Could there be to be powerhouse business and brand fulfills their goal to move away from the traditional agency model to true marketing capability transformation to significantly improve the impact efficacy and efficiency of their marketing investment with the ability to drive tangible business results.
Jenny: In every industry, there was a challenge or opportunity that Jenny I can now uniquely solve our deep understanding of both the industry and the technology positions us to be the best creating real values from Jenny I with our clients.
Speaker Change: For example in insurance companies can't typically process, 100% of their coverage submissions. This creates a bottleneck for revenue growth the ability to leverage Jenny I do read 100% of submissions allows insurance companies to better assess risks as well as quote and write more policies and do it all more quickly and cost effectively.
Speaker Change: Utilizing a new set of solutions, we created we're working with <unk> insurance group, a multinational insurance company headquartered in Sydney to scale industry, leading AI powered underwriting solutions replicated across multiple lines of business to help the company to make faster and more accurate business decisions.
Series, a board executive level, an all employee learning sessions were conducted to help drive the design and build the solutions that annualized new business submissions for completeness appetite check and risk evaluation insights. They can now process, 100% of submissions received from brokers greatly accelerating market response time after nine.
Speaker Change: Month's end market. These solutions are winning multiple industry innovation awards and early results indicate an increase in both quote to bind rate and premium. This collaboration will enable <unk> insurance group to identify and select risk more effectively improved broker and customer experience and support growth.
We are collaborating with a major integrated downstream energy provider to drive significant improvements in safety sustainability and operational performance with three new Gen. AI powered solutions. We aim to continue to improve safety by using proactive insights from Jenny I to inform planners are potential incidents instead of reactively waiting for specific.
Speaker Change: Warning signs to appear.
Speaker Change: This means 90% faster data access reducing planning time from hours to minutes per test. Another solution will help detect methane leaks in real time and prioritize the resolutions. We also helped build a smart solution for operators and process engineers to drive customer insights to optimize refinery performance and reduced downtime.
Speaker Change: The energy provider is on a path to set a new industry standard for innovation and refinery operations.
Speaker Change: One of the most powerful impactful uses of Jennie O today across industry isn't consumer experience transformation, we're working with <unk> International a world leader in snacking with known well known brands like Oreo Velveeta, and Cadbury to transform their marketing organization with Jenny I to help drive consumer behavior as part of this program we're standing up.
Speaker Change: Our refreshed operating model with a primary focus and upskilling their employees in Jennie O technologies. We're also helping enable a new capability to scale content creation and generate personalized text images and videos across markets. This means exceptional created can be developed in hours not weeks, allowing content to be catered to consumers quickly.
Speaker Change: Demand has changed the strong digital core we establish also allows the company to collect and process real time data using Jennie I to create new contextualize insights that can be easily accessed shared and used by decision makers across the company. This work will increase the effectiveness and efficiency of messaging to create more impactful experiences.
Speaker Change: Now, let's turn to our acquisitions over the last decade, we have built a finely tuned acquisition capability, becoming known in the market as a good home with approximately 70% on average of our acquisitions sole sourced well our ability to identify and evaluate our acquisitions is critical it is our ability.
Speaker Change: To integrate them successfully that has made our acquisition capabilities or so formidable.
Speaker Change: As we look forward, we're excited about the opportunity to better serve our clients and differentiate differentiate in the market to the acquisitions. We've made this last fiscal year.
Speaker Change: As a reminder, we do acquisitions ultimately to drive our organic growth, our global footprint deep client relationships across industries as well as strong ecosystem gives us a unique perspective on growth opportunities, we use acquisitions to scale scale quickly in growth areas to build new skills.
Speaker Change: In adjacent markets and to deepen our technology industry and functional expertise.
Speaker Change: Over the years acquisitions have built major areas of growth like what we call song today in our security practice.
Speaker Change: Here are a few examples of where we are investing now to lead in the next waves of growth star.
Speaker Change: Starting with capital projects and over 440 billion dollar addressable global market growing approximately 5%.
Speaker Change: In FY 'twenty two globally, we had approximately $300 million in capital projects revenue, we entered the U S market in FY2023 with the acquisition of answer advisory.
Since the beginning of FY 'twenty four we expanded our reach into Canada with content in Q1, and this Q4, we acquired Basel and in EMEA, we recognized over $800 million in revenue on capital projects. This fiscal year 'twenty four.
Speaker Change: Health as an industry is still early and Digitization, where we see significant opportunity over the next decade. It is a 70 billion dollar addressable global market growing approximately six 6%.
Speaker Change: This year, we added cognizant <unk> in the U S, creating a new federal health portfolio in our federal services business. We also acquired novelists consulting in the U K, a digital consultancy specializing in electronic patient records, and we announced our intent to acquire consensus constant health a health care consultancy in Germany that offer serve.
Speaker Change: <unk> ranging from medical strategy, and patient management to procurement and logistics infrastructure management and construction planning services.
Speaker Change: And in Europe public service, an industry that is early and Digitization with significant investment allocated for transformation, our acquisitions are accelerating our growth and setting us up to take share and a $46 billion market that is growing approximately 5% we acquired arens Arris in Germany at technology services provider.
Speaker Change: Supporting the public sector transformation across Europe.
Speaker Change: In Italy, we acquired intolerance consulting one of Italy's main professional services providers operating the public administration and health care sectors, and customer management, I T and surfing P. A jointly owned Consultancies supporting the public sector and specializing in justice and public safety.
Angie Park: It gives me great pleasure to hand over to Angie Park, who will become our new CFO in December 1st who will take us through our guidance for FY 'twenty five Angie.
Angie Park: Thanks, Julie now, let me turn to our business outlook for the first quarter of fiscal 'twenty five we expect revenue to be in the range of $16 85 to $17 four 5 billion.
This assumes the impact of FX will be approximately positive one 5% compared to the first quarter of fiscal 'twenty four and reflects an estimated 2% to 6% growth in local currency.
For the full fiscal 'twenty five based upon how the rates have been trending over the last few weeks. We currently assume the impact of FX on our results in U S dollars will be approximately positive one 5% compared to fiscal 'twenty four for.
Angie Park: For the full fiscal 'twenty five we expect our revenue to be in the range of 3% to 6% growth in local currency over fiscal 'twenty, four which includes inorganic contribution as a bit more than 3% and.
Angie Park: And we expect to invest about $3 billion in acquisitions this fiscal year.
Angie Park: For operating margin, we expect fiscal year 2005 to be $15, 6% to 15, 8% a 10 to 30 basis point expansion over adjusted fiscal 'twenty four result.
Angie Park: We expect our annual effective tax rate to be in the range of 22, 5% to 24, 5%. This compares to an adjusted adjusted effective tax rate of 23, 6% in fiscal 'twenty four.
Angie Park: We expect our full year diluted earnings per share for fiscal 'twenty five to be in the range of $12 55.
$12, 91, or 5% to 8% growth over adjusted fiscal Q4 results.
Angie Park: For the full fiscal 'twenty five we expect operating cash flow to be in the range of $9 four to $10 1 billion property and equipment additions to be approximately 600 million and free cash flow to be in the range of $8 eight to nine five film.
Angie Park: Our free cash flow guidance reflects a free cash flow to net income ratio of one one to one got you.
Angie Park: We expect to return at least $8 3 billion through dividends and share repurchases as we remain committed to returning a substantial portion of cash to our shareholders.
Angie Park: Finally, as part of our routine review of our capital structure, we expect to tap the long term debt market in the near term to increase our liquidity for general corporate purposes, as we look to optimize our capital structure and reduce our cost of capital we expect to raise a modest amount of debt.
Angie Park: In connection with that there would be no change to our capital allocation strategy, which includes how we looked at and he's beginning or our strong credit ratings and our net leverage will remain low we have incorporated the potential for long term debt into our guidance, including the <unk>.
Angie Park: Interest expense.
Angie Park: With that let's open it up so that we can take your question Katy.
Katy O'connor: Thanks, Angie we will now take your questions I would ask that you each keep to one question and a follow up to allow as many participants as possible to ask a question operator would you provide instructions for those on the call.
Speaker Change: Thank you if you wish to ask a question. Please press one zero on your Touchtone phone you will hear an acknowledgment that you've been placed into Q as you can.
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Speaker Change: We'll go to the line of Tien Tsin Huang of Jpmorgan. Please go ahead.
Speaker Change: Okay. Thank you so much.
Speaker Change: Yeah really strong bookings I wanted to.
Speaker Change: Think about how that translates into revenue visibility. If you don't mind I know accenture doesn't normally talk about HCV.
Speaker Change: But can you maybe comment on the current relationship between <unk> and <unk> and how that's evolving it seems really important to us as we as we think about revenue and visibility duration looks like it's up but you also have a lot of large deals converting as well. So can you comment on that.
Tien Tsin: Hey, Tien tsin good morning.
It's a N G. So let me let me cover guidance because maybe it will help to paint the picture of how we're thinking about the full fiscal year I think it's really important let's start with how we ended Q4.
Speaker Change: About the 5%.
Speaker Change: That we posted in the fourth quarter, what we highlighted was that we did have slight growth in organic which is important as we exit the year.
And as <unk>, just talked about over the last few quarters, we've really pivoted our business to what our clients are buying which are the large transformation deal and what that does is it positions us better.
<unk>: When compared to the same time last year on the revenue that we've already sold.
Speaker Change: From an inorganic contribution I do want to highlight that the overall, we expect a bit over 3% for the year.
Speaker Change: Which would imply with our guidance of 3% to 6% that on the bottom and the range organic is flat and then at the top in the range, we're growing 3% and organic growth.
Speaker Change: And then if you Peel it back and you look at the.
Speaker Change: The the revenue growth that we see it is broad based and we saw that coming out of Q4, we see it across markets and across all of our industry groups and then as and when we look at it by type of work as well what we see right now is that and both consulting and managed services, we see load.
Speaker Change: To mid single digit growth rate for the year is this stepping back with the color and how were looking at our guidance. We're very pleased with how we have set ourselves up and positioning ourselves.
Speaker Change: For fiscal 25, yeah, and so it's you know what that means is we're not commenting specifically on HCV in TCP, because as you said that isn't but the way to think about the confidence level in going to the year right is that we told you that we had a strategy to have more mega as we've shared with you that we had 19 more of these bookings than last year.
Speaker Change: $400 million are more so you can see there's a big quantum and so as you think about going into the year.
Speaker Change: Got a bigger base of revenue coming from these larger deals coming online than we did going into fiscal year 'twenty four and so that's really how we're trying to help you all think about it as buying being clear about that strategy and how you know in the quantum of that and that's how we then think about the year. So hopefully.
Julia: That gives you some more insights together with the the view on the guidance no. It does and its very reasonable as well just to say that out loud just on the acquisition side Julia I think I asked it last quarter. So I'll ask again I know you've been very busy I like the examples that you gave around the productivity you're getting from some of the deals and the examples you gave again, but how about <unk>.
Julia: Just overall appetite this year are you.
Speaker Change: Still seeing good opportunities can we see a step down or a pause in the short term or anything else to add.
Andrew: Yes, so what I would say is it is as Andrew just said we are inorganic plan for the year like in terms of if you think about revenue guidance kind of going into the year with nearly 3% and we think will right now the plan for us a little bit above 3% is what we're seeing for fiscal year 'twenty five and that reflects.
Speaker Change: Unexpected plan right now of about $3 billion of deployed capital So a step down from last year.
Speaker Change: And probably more back end loaded you know as we look at our pipeline now obviously, we always have the ability to flex up or down we only tie it to the opportunities in the markets, but that's how we're seeing this year as we think about our investments.
Speaker Change: Perfect. Thank you well done thanks.
Speaker Change: Thank you.
Speaker Change: We'll go next to the line of James Faucette with Morgan Stanley.
Speaker Change: Great. Thanks for taking our question guys. This is antonio on for James.
I wanted to actually dig into the technology segment I know cloud is a big component of this could you talk through how clients spend on these cloud migration projects has been trending over the last 90 days and how we should think about cloud growth going into fiscal year 'twenty five.
Speaker Change: And then I have a follow up after.
Antonio: Hi Antonio.
Speaker Change: You know I'm not going to think about it. The last 90 days is just think about like sort of.
Speaker Change: You know, where we've been and where we think we're going right. So yes in cloud you still have a lot of migration that's happening, but on more of the high performance compute applications, so things things like mainframe right. So.
Speaker Change: And you also still have some clients who are very very early in their cloud journey and one of the things I.
Talked about in our in the script for example was like retirement services like that's an entire segment, where they're very very early in their cloud journey and so at the same time you've got.
Speaker Change: Companies that are very early just starting their cloud journey you have those who are farther along who are now getting to the harder applications like mainframe and then we still have a lot of modernization because what happened in the pandemic as people who were trying to get to the cloud to get the infrastructure savings have not.
Yet done the modernization and that modernization of course feeds into all of the things we do right brings the industry and functional expertise and so as we look going into FY 'twenty five we continue to see those strengths that we can we expect that cloud is going to continue to be a significant driver of growth, but on all of those dimensions right in the high performance.
Speaker Change: <unk> compute as well requires very deep industry knowledge like doing mainframe in the context of health is very different in the context of banking.
Speaker Change: So hopefully that helps you.
Speaker Change: Got it no that's helpful and then I wanted to ask on the.
Speaker Change: Our organic had counted actually it looks like that ticked up quite a bit could you comment on on your hiring strategy and in what geographies, you're sort of looking to shape that.
Speaker Change: Yeah.
Speaker Change: Why don't I start and then Julie.
Julie: Any additional comments as well so as you can see I mean, I wanted to start with how we're exiting the year with.
Julie: Thought slight organic growth in Q4, and we see that momentum into FY 'twenty side. You will have also seen that we added about 24000 people. This year in Q4, which is reflective of the momentum that we see in the business and as always right. Looking ahead, we will always have.
Julie: Higher for the skill and the demand that we see and just more broadly I would just remind us that as you think about us as a business our core competency is balancing supply managing supply and demand.
Julie: That through our utilization rates, which continue to be in the 90% range and we're hiring from a talent strategy right. We are hiring primarily in India. So a lot of that hiring is technology in India and of course also addresses you know we are refreshing our pyramid at this time, so you've got kind of a new college graduates coming in so.
Julie: There's really no change you know in our talent strategy, we hire all over the world and in technology, which is a big driver of the growth that we're seeing now and going into FY 'twenty five that is a lot of hiring in India.
Speaker Change: Great. Thank you both.
Julie: Yeah.
Speaker Change: Well go next to the line of Jason Kupferberg with Bank of America.
Jason Kupferberg: Good morning, guys. Thanks, I wanted to pick up on the commentary about the consulting outlook for fiscal 'twenty. Five you said up low to mid single digits. I think that's very consistent with the exit rate of 3% coming out of fiscal 'twenty. Four so does that imply that you are not building much of a discretionary spending recovery into this initial.
Speaker Change: Twenty-five God.
Speaker Change: Yeah, Hey, Jason Good morning, how are you and let me just give you a little bit of color on that as you think about the types of work and the question that you just asked what do you think about our range overall, so we're at 3% to 6% and for the full year and what this assumes it at the top and we see more.
Speaker Change: More of the same right in terms of the discretionary spending environment.
Speaker Change: Bottom and it allows for further deterioration in the discretionary spend environment over what we experienced in FY 'twenty four.
Speaker Change: Okay. That's very helpful. And then maybe one for Julie I just wanted to get your broad take on the macro backdrop I mean, I guess what are decision makers, telling you right now versus three months ago, what are they waiting to see to open.
Julie: Open the discretionary budget a little bit more.
Julie: Well the environment is really more of the same and you know that environment has been kind of a cautious environment right now theyre going into budget season. So as always we will really see in January and February but there hasn't been much of a change right. The macro is kind of the same obviously, there's some events going to come up in the fall that you know people are thinking about.
Julie: But but there's not like a big tone change right and I think because if you look at the macro economic environment FY 'twenty five you know its going to click down. So you know in the U S. Maybe a little bit better in Europe, but overall not a lot of improvement. So we're not hearing I'm not hearing from Ceos and I'm talking to them almost every day some big like Hany.
Julie: Now we're ready to go spend more right and discretionary spending so it's really just more of the same and by the way one of the changes that we made this last fiscal year 'twenty four was normally we do for decades, our big promotion period was in December and then a small one in June and so in fiscal year two.
Julie: Four we switched these right. We said we have a lot more visibility in our business in January or February because that's where budgets are set. So we did that this past year and had a really big promotion of very nice promotion I would say not really vague, but very nice promotion in this past June we've now permanently shifted that promotion cycle.
Julie: So we will do our big promotion cycle in June and our smaller one in December to better match when our clients are setting their budgets and we have better visibility and that's what we're seeing again the justification for that is clear that we'll really know it spending and spending on our services in <unk>.
Julie: And the budgets in January February.
Julie: Thanks for all the color.
Julie: Thanks.
Julie: Well go next to the line of Keith Bachman with BMO.
Keith Bachman: Hi, Good morning. Thank you very much I wanted to revisit on M&A, if I could.
Keith Bachman: And just get some clarification.
Keith Bachman: And in FY 'twenty for you spent as you noted $6 6 billion, which was up about 160% year over year.
Speaker Change: We sort of do the math on what what your normalized.
Speaker Change: Multiples hard of revenue it looks like you're starting the year.
Speaker Change: FY 'twenty five with three points of M&A help.
Speaker Change: And so I just wanted to stand it is that the right way to think about it and then Julie you had indicated that you plan to spend 3 billion more in M&A. This year and it will be as you said back end weighted but I'm just struggling why M&A is that 3 billion numbers, even second half weighted why M&A isn't.
Speaker Change: 4% or more for the year.
Speaker Change: And.
Speaker Change: Hey, Keith let me just start with peeling back in our inorganic contribution a bit as we look at the deals that we closed in 'twenty four it's nearly 3% contribution right and so with a back end loaded.
Julie: In our capital deployed we do see a bit over three and that's just the math it just timing right, it's not quite 3% coming in because a lot of those closed at the end of Q4 right and so it's just it's timing right.
Speaker Change: And it's the way, we see our pipeline developing right because we have we have a view of what we're going to we think we're going to spend in Q1, and Q2 and how that rolls in.
Julie: Okay.
Speaker Change: Let me transition to bookings then as you think about.
Speaker Change: FY 'twenty five and I know you don't guide to bookings, it's more of an output but any.
Speaker Change: Puts and takes that you want us to think about it.
Speaker Change: The book to Bill ratio.
Speaker Change: In FY, 'twenty, five that might be higher or lower any any kind of cadence there.
Speaker Change: And if you don't mind was there an M&A help in the August quarter bookings as well are signings excuse me.
Speaker Change: Why don't I start and Purion says and the way to think about our bookings we were super pleased with the $81 billion of bookings that we had for the year, which was 14% growth, which included the 125 quarterly client bookings over $100 million.
Speaker Change: And so I think that that we were super pleased with and you saw that in our book to Bill in our growth rate in managed services, which is driven by our large transformation deals for US you know.
Speaker Change: Overtime over four trailing quarters, we're always looking for our consulting book to bill to be a one <unk> or better and for our managed services to be one two or better than that and nothing has changed there.
Speaker Change: And there was nothing in Hereford.
Speaker Change: Nothing in M&A about our bookings in Q4.
Speaker Change: Okay. Many thanks.
Speaker Change: Okay.
Speaker Change: Well go next to the line of Bryan Keane with Deutsche Bank.
Bryan Keane: Good morning, Julie I, just wanted to ask about G&A I think bookings were up almost about $300 million in the third quarter sequentially up about $100 million. This quarter anything about the cadence there of journey II and fall through there that that you can help us understand.
Speaker Change: Sure. So yes. So we ended with 3 billion bookings for the year and we'd expect in FY 'twenty five another healthy increase I mean, there is clear demand, we're starting to see more of our clients move from proof of concept to you know sort of larger implementations, which is important so you know the side.
Speaker Change: Are those bookings is kind of is cooking up in.
Speaker Change: And also we're continuing to see kind of at least every other one has got data pull through and even that is kind of moving up. So you know we're kind of going into the year, we would see we'd expect another healthy increase.
Speaker Change: And our bookings and our revenue from that and also that data will continue to kind of be a bigger and bigger part of that building out of the digital core.
Jennie: One of the biggest limitations on using Jennie I today, and why it's going to take a while is our client needs it needs data and.
Jennie: Our clients have a lot of work to do on data, which is of course, a big opportunity for us.
Speaker Change: Got it got it and then just a clarification on the guide I know the fourth quarter organic growth was positive and.
We're talking about fiscal year 'twenty five revenue guide of three to six on a constant currency basis, and if you back out the acquisitions I think you guys said on the low end, we're talking about flat organic growth.
Speaker Change: That would be a slight step down from the fourth quarter, which would be a little surprising given some of the momentum that you guys are seeing in bookings and in head count growth. So just wanted to make sure I understood what that low end might employ and why would there necessarily be a step down from where the fourth quarter kind of ended.
Speaker Change: Yeah.
Yeah, no and the way the way, we're thinking about it right, we're going into the year with momentum.
Speaker Change: <unk> executed on the strategy around the bigger deals. So we have a stronger base of revenue we've got the acquisitions and so on the bottom end of the range. What we would see like the most likely reason to be there is if there was a deterioration in the discretionary spend environment right. So we're trying to just kind of give some flexibility.
Speaker Change: You know, we're not seeing that right. We saw more of the same this quarter and so as we kind of go into the year at the top end of the range. Its the current environment going forward and at the bottom of the range. You know if you had asked me today what is that mostly accommodated is if there was a tiered carriers <unk> and spending right. So because of kind of the way we are.
Speaker Change: Positioned ourselves.
Speaker Change: Great. Thank you.
Dan <unk>: Thanks, well go next well go next to the line of Dan <unk> with Mizuho.
Dan: Hi, Thanks for taking my question, Great results and Doug Great guidance here for <unk>.
Speaker Change: On <unk> are you seeing more of your conversation.
Speaker Change: Being a.
Speaker Change: Replacement and reallocation.
Speaker Change: And purely incremental.
Speaker Change: And then I have a follow up.
Speaker Change: Yes.
Speaker Change: Well I think it starts with we're not seeing a change in what our clients are spending on E rate. So, but what we are seeing is a continued trend of trying to save money on I T to free up the spending.
Speaker Change: On areas of Gen AI, so on the one hand.
Speaker Change: Right now we haven't seen a change in overall spending we'll see what the budgets come in January February, but we're not expecting a big change.
Speaker Change: But what we also are seeing is that as they're saving money they want to invest it in things like Gen AI and data. So that's really the dynamic that's going on and you know save to invest but we havent seen signs of overall change.
Speaker Change: Got it and then a quick follow up on margin can you maybe touch on the Gen AI services margin how it stands versus your.
Speaker Change: Traditional.
Speaker Change: So I think that would be really helpful for investors. Thank you.
Speaker Change: Yeah.
Speaker Change: You mean, our journey on margin and sort of is that different from when we're doing gen AI versus other board joining technology.
Jenny I: Correct Jenny services versus your traditional consulting group.
Speaker Change: You know look.
<unk> still a small part of our business and I wouldn't really think about it as having a particularly different margin profile at this time and as you probably heard in our.
Speaker Change: In my script that a lot of times, we're starting to embed jet AI in our larger deals and so we're not really thinking about it as like a sort of a separate way. So I wouldn't I wouldn't think about it too differently than our usual business.
Speaker Change: Got it thanks, Bill great momentum thank you.
Speaker Change: Thanks.
We'll go next to the line of Jim Schneider with Goldman Sachs.
Jim Schneider: Good morning, Thanks for taking my question very helpful commentary on the client outlook on limited discretionary spend but can you maybe help us understand or unpack a when you talk to them what are they looking for to relief discretionary spend is it more macro factors whether that be relates rates election or regulatory.
Speaker Change #100: Or is it more micro factors tied to their it budgets and if it's the latter what are the things they're looking for in terms of getting increased clarity on those priorities going into 2025.
Jim Schneider: Sure.
Speaker Change #101: Good question and it's really.
Speaker Change #102: Overall, there is a sense of the macro right because if you look at the lot of our clients are global if you look at the macro economic there isn't a big change there.
Speaker Change #102: You know kind of going into next year like the U S, which is a big market you know it looks like it's going to be down a little bit Europe's up a little bit, but still not great and so kind of you start with they're not seeing a big change in the macro but then you really have to look at it industry by industry because each industry has factors. So for example, you know in the.
Speaker Change #102: Energy industries, they're super focused on how much investment they have to do and you know in the change the shift in climate change in renewables. So theres a big appetite for major investment. So there's no catalyst that says Oh, you know like I've got a ton of thought they've got a lot of big investments right. If you look at consumer goods, where a lot of the consumer.
Speaker Change #102: Goods companies are not able to get pricing they've got to get up volume, which means they've got a drive down there.
Speaker Change #102: They're efficient they've got to improve their efficiency and their manufacturing costs and that takes big investments because no manufacturing. Our latest research says like two thirds of the journey and Digitization is still to come and so those are big investments.
Speaker Change #102: So I can kind of take you through industry by industry.
Speaker Change #102: The reality is I mean, it's obviously good growth for US is the Digitization journey is still very early and many many industries. That's like public service is another Great example, so they've got big transformations going and at the end of the day, if you're a big enterprise like the deals you know that our smaller right. They do not move the knee.
Speaker Change #102: And when you've got big investments, that's where they're focused because they see now the potential of things like Jenny I and everyone's like we got to get going that's really what's driving it. So that's why we're not having a bunch of discussions about like I can't wait to unlock that spending our discussions are entirely on help us move faster with our bigger transformation that's real.
Speaker Change #102: The what we're focused on.
Speaker Change #103: That's very helpful. Thanks, and then maybe a follow on you referenced several verticals there can maybe as you prospectively looking into fiscal 'twenty five call. It maybe one or two verticals, where you expect the most improvement and maybe one or two where you see potential risk of deterioration. Thank you.
Speaker Change #103: Yeah, Hey, Jim Nice to talk to you I think that you know as we look at cost and FY.
Speaker Change #104: FY 'twenty five.
Speaker Change #104: Our overall guide of three to six.
Speaker Change #105: We see broad based growth across it it really broad based across all of our industries as well as our services.
Speaker Change #105: And market.
Speaker Change #106: Great. Thank you.
Speaker Change #107: Operator, we have time for one more question and then we'll wrap up the call.
Speaker Change #107: Thank you and that will come from Bryan Bergin with T D Cohen.
Bryan Bergin: Hi, good morning, Thank you.
Bryan Bergin: <unk> can you give us a sense of the size of some of these largest individual programs have reached and then as it relates to internal productivity progress maybe any comment on any of the service lines, where you're seeing the earliest impacts as it relates to productivity or any metrics that you can share in more advanced programs.
Sure you know I don't want to start like getting tons of data on this but like you went from deals that were in Gen. AI that were you know on average kind of sub 1 million right that you've now got some that are you know above $10 million right. So that's still the smaller end because you're sort of moving into production.
And scale, but you're starting to see these things move from from POC to larger bookings and then with respect to internal productivity and.
Speaker Change #109: And our guidance of course takes into account what we're seeing you know as ive been talking about is.
Speaker Change #109: Is it the first area that we anticipated remember, we're trying to embrace Jenny I fastest because we think it's a big differentiator with our clients and so in our managed services is where we're seeing the most because that's where we have plants platform. So you'll all remember we used to talk about my Wizard now we talk about Gen Wizard right, but what we're seeing is that the techs.
Speaker Change #109: <unk> and the productivity is like similar ways before so if you go back to 2015 2016, when we first.
Speaker Change #109: Introduced my Wizard right. So it's not really different than the kinds of productivity that we've been experiencing and here of course, there's an added wrinkle in that journey II in order for us to use it with our clients they have to allow us to use it and they have to prioritize and they have a lot of other areas, where they want to use <unk>.
Speaker Change #109: Necessarily in their technology productivity, where there are already many of our clients are using our platforms are using AI et cetera. So there's a lot of factors that kind of go into the pace of how quickly we can use it even if we are ready to use. It you know are now in.
Speaker Change #109: Many places so hopefully that's helpful. Because it is a little bit different in that sense of you know because our clients have to prioritize where they want to use Jenny I too.
Speaker Change #110: Okay. Okay. That's helpful. Thank you and then I appreciate your commentary on capital returns in the balance sheet and understanding. This is overall been a tougher environment, while M&A outlay has been on the upper end, but just curious how we should be thinking about the potential magnitude of leverage in the model going forward just any guardrails, we should consider.
Speaker Change #109: Yeah.
Speaker Change #111: A couple of things that I would say around that.
Speaker Change #111: Indicated, but it's going to be modest.
Speaker Change #112: We will maintain our strong credit ratings and net leverage will be low and so in <unk> and.
Speaker Change #113: And included in our guidance that we provided to you. We have also allowed for the potential.
Speaker Change #113: For the interest expense and in our overall guidance, which is in addition to the variability that we may see an operating margin throughout the year.
Speaker Change #114: Okay. Thank you.
Speaker Change #114: Great well. Thank you everyone for joining us before I wrap up I want to thank Casey who's been an amazing partner and friend. These last five years, they've been quite some five years as we all know just a few things in the environment that we've gotten two together together work with and so I'm really.
Casey: Excited for Casey in her next chapter and Casey would you like to say a few words I would thanks, Julie I just want to offer my sincere. Thanks.
Casey: Investor and analyst community for the decade, plus of counsel and support it's really meant a lot to me, it's really been I. Appreciate it thanks, a lot and best wishes to all of you.
Speaker Change #115: So I want to thank everyone for joining us and thank all of our people what you do everyday allowing us to create 360 degree value and giving us a lot of confidence in our success in FY 'twenty five and thanks again, Casey and welcome Angie to your new role and we will see all in the next quarter.
Speaker Change #116: Thank you.
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