Q1 2025 Accenture PLC Earnings Call
Good day and welcome to the Suntrust first quarter fiscal 'twenty to 'twenty five earnings conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal our conference specialist that's actually and historically you followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question.
Question You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Please note today's event is being recorded.
Speaker Change: I would now like to turn the conference over to Katie O'connor managing director head of Investor Relations. Please go ahead.
Katie O'connor: Thank you operator, and thanks, everyone for joining us today on our first quarter fiscal 2025 earnings announcement as the operator, just mentioned I'm Kitty O'connor, managing director head of Investor Relations.
Katie O'connor: Today's call you will hear from Julie Sweet, our chair and Chief Executive Officer, and Angie Park, our Chief Financial Officer.
Katie O'connor: Hope you've had an opportunity to review the news release, we issued a short time ago, Let me quickly outline.
Katie O'connor: For today's call Julie will begin with an overview of our results and she will take you through the financial details, including the income statement and balance sheet, along with some key operational metrics for the first quarter. Julie will then provide an update on our market positioning before Angie provides our business outlook for the second quarter and full fiscal.
Speaker Change: The year 2025, we will then take your questions before Julie provides a wrap up at the end of the call. 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.
Speaker Change: And discussed in our annual report on Form 10-K, and quarterly reports on form Form 10-Q, and other SEC filings. These risks and uncertainties could cause actual results to differ materially from those expressed in the call.
Speaker Change: 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 dotcom.
Speaker Change: As always Accenture assumes no obligation to update the information presented on this conference call now, let me turn the call over to Julie.
Julie Sweet: Thank you Katie and everyone joining and thank you to our nearly 799000 people around the world for their extraordinary work and commitment to our clients, which resulted in a strong quarter of financial results, creating 360 degree value for all our stakeholders I'm very pleased with our performance this quarter as we delivered on our strategy.
Julie Sweet: To position Accenture for strong growth in fiscal year 'twenty 'twenty five.
Julie Sweet: Here are a few highlights of the 360 degree value we created.
Our clients continue to prioritize large scale transformations and weird there reinvention partner of choice as reflected in our bookings of $18 $7 billion, including 30 clients with quarterly bookings greater than $100 million.
Julie Sweet: Grew 8% in local currency this quarter with revenue of $17 7 billion approximately $240 million above the top end of our guided range and continue 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.
Julie Sweet: He had another milestone quarter, and Jenny I with $1.2 billion in bookings and approximately $500 million in revenue.
Julie Sweet: Operating margin was flat compared to adjusted operating margin last year EPS grew 10% over Q1, adjusted FY 'twenty four EPS, while we continued to invest in our business and our people with $242 million deployed primarily across five acquisition and with approximately 14 million training hours this quarter.
Julie Sweet: And to help us bring the latest in solutions and technology to our clients provide our people with marketable skills and reinvent our services using Jennie I. This averages 19 hours per person.
Julie Sweet: We increased our data and AI work force to approximately 69000, continuing progress against our goal of 80000 by the end of fiscal year 2026.
We are proud to be recognized by fortune as one of the world's best workplaces jumping from number 10 to number six this recognition is important as it is based on feedback from our people around the world.
Julie Sweet: An essential part of our strategy is having access to the best people and being an attractive workplace is critical to our success.
Julie Sweet: And in recognition of our strong brand we are proud to earn our highest brand value to date on Instagram prestigious best Global brands list, increasing to $21 $9 billion in ranking number 31.
Julie Sweet: We continue to invest in creating and maintaining thriving communities, which are long term growth depends on this quarter. Among other things Accenture has partnered with the NGO Instituto per way in Brazil to help transform the lives of low income users by providing them with digital skills to enter the workforce.
Julie Sweet: I'm very pleased with our results this quarter and a return to broad based growth due to our strategy to be our clients' reinvention partner of choice. We also have a resilient business model with diversity across markets industries and the types of work our clients come to us for consulting type of work and managed services over to U N G.
Thank you Julie and happy holidays to all of you and thanks for taking the time to join US on today's call. We were very pleased with our results in the first quarter, which exceeded our expectations and reflect momentum across our best yet.
Speaker Change: We are particularly pleased with our strong revenue growth, which was broad based across geographic markets industry groups and consulting and managed services demonstrating we are a leader in the market as a trusted reinvention partner for our clients.
Speaker Change: Based on the strength of our first quarter results, we are increasing our full year revenue outlook, which I will cover in more detail later in our call.
Speaker Change: So let me begin by summarizing a few highlights from the quarter revenues grew 8% in local currency above the top end of our guided range with six of our 13 industries growing double digits and we continued to take market share we delivered EPS in the quarter of $3.59, reflecting 10.
Speaker Change: [noise] percent growth over adjusted EPS last year.
Speaker Change: Operating margin was 16, 7% for the quarter consistent with adjusted Q1 results last year and includes significant investments in our people and our business.
Speaker Change: Finally, we delivered free cash flow of $870 million and returned $1 8 billion to shareholders through repurchases and dividends. We also invested $242 million, primarily attributed to five acquisitions in the quarter.
Speaker Change: With those high level comments, let me turn to some of the details starting with new bookings new bookings were $18 $7 billion for the quarter, representing 1% growth in both U S dollars and local currency with an overall book to Bill of one one consulting bookings were $9 $2 billion with a book to bill of one.
Speaker Change: Oh managed services bookings were $9 $5 billion with a book to Bill of one one.
Speaker Change: Turning now to revenue.
Revenues for the quarter were $17 7, billion% to 9% increase in U S dollars and 8% in local currency approximately $240 million above the top end of our guided range.
Speaker Change: The foreign exchange impact for the quarter was approximately positive 1% compared with the positive one 5% estimate provided last quarter <unk>.
Consulting revenues for the quarter were 9 billion up 7% in U S dollars and 6% in local currency managed services revenue were $8 $6 billion up 11% in both U S dollars and local currency driven by double digit growth in technology managed services, which.
<unk>, our application managed services and infrastructure managed services and high single digit growth in operations.
Turning to our geographic markets.
Speaker Change: In the Americas revenues grew 11% in local currency growth was led by industrial software and platforms banking and capital markets and consumer goods retail and travel services revenue growth was driven by the United States and Argentina.
Speaker Change: In EMEA revenues grew 6% in local currency led by growth in public service life Sciences, and health, partially offset by a decline in banking and capital markets revenue growth was driven by the United Kingdom, and Italy, partially offset by a decline in France.
Speaker Change: In Asia Pacific, We delivered 4% revenue growth in local currency driven by growth in utilities, industrial and health, partially offset by a decline in chemicals and natural resources.
Speaker Change: Revenue growth was led by Japan, which represents approximately half of Asia Pacific, partially offset by declines in Singapore and Australia.
Speaker Change: Moving down the income statement gross margin for the quarter was 32, 9% compared to 33, 6% for the first quarter of last year.
Speaker Change: Sales and marketing expense for the quarter was 10, 2% compared with 10, 5% for the first quarter last year.
Speaker Change: General and administrative expense was 6% compared to six 4% for the same quarter last year.
Speaker Change: Before I continue I want to note that in Q1 of last year, we recorded $140 million and costs associated with our business optimization actions, which decreased operating margin by 90 basis points and EPS by <unk> 17.
Following comparisons exclude these impacts and reflect adjusted results.
Speaker Change: Operating income was $2 $9 billion in the first quarter, reflecting a 16, 7% operating margin consistent with adjusted operating margin in Q1 of last year.
Speaker Change: Our effective tax rate for the quarter was 21, 6% compared with an effective tax rate of 23, 2% for the first quarter last year.
Speaker Change: Diluted earnings per share were $3.59 compared with adjusted EPS of $3.27 in the first quarter of last year, reflecting 10% growth over adjusted EPS in Q1 last year.
Speaker Change: Days services outstanding were 50 days compared to 46 days last quarter and 49 days in the first quarter of last year.
Speaker Change: Free cash flow for the quarter was $870 million for <unk>.
Speaker Change: <unk> from cash generated by operating activities of $1 billion net of property and equipment additions of $152 million.
Speaker Change: Following the completion of our 5 billion inaugural debt offering our cash balance at November 30th was $8 3 billion compared with 5 billion at August 31st.
Speaker Change: With regards to our ongoing objective to return cash to shareholders in the first quarter, we repurchased or redeemed two 5 million shares for $898 million at an average price of $355.03 per share.
Speaker Change: November 30th we had approximately $5 9 billion of share repurchase authority remaining.
Speaker Change: Also in November we paid a quarterly cash dividend of $1.48 per share for a total of 926 million. This represented a 15% increase over last year and our board of directors declared a quarterly cash dividend of $1 48 per share to be paid on February 14.
Speaker Change: 14th at <unk>.
Speaker Change: 14% increase over last year.
Speaker Change: So in summary, we are very pleased with our Q1 results and we are off to a strong start in FY 'twenty five and now let me turn it back to Julie.
Speaker Change: Thank you Angie.
Starting with the demand environment, we saw more of the same our clients are focused on reinvention, which means large scale transformation.
Speaker Change: We do not currently see an improvement in overall spending by our clients, particularly on smaller deals when those market conditions improve we will be well positioned to capitalize on them as we continue to meet the demand for the critical programs our clients are prioritizing.
Speaker Change: As expected building with strong digital core required for reinvention was a strong driver of our growth this quarter.
Speaker Change: <unk> continues to be a catalyst for reinvention across the enterprise and building out the data foundation necessary to capitalize on the AI is an increasing part of that growth theme.
Speaker Change: Seems around achieving both cost efficiencies and growth continue across the demand we're seeing.
Speaker Change: Through the examples from Q1, you can see both our strategy to be the reinvention partner of choice and how we are bringing together our services, our ecosystem relationships and our skills investments in cutting edge platforms, like Synopsys and Jen lizard as well as technologies like Jenny I to drive value for our clients.
Speaker Change: We are helping our clients build their digital cloud core including in the cloud, which saw double digit growth. This quarter Accenture Federal services is working with the U S Air Force the nation's military Air Service Air branch on a cloud monetization journey to manage its complex I T environment. So that military personnel can maintain their competitor.
Of edge, we will develop a multi cloud ecosystem using services from multiple providers to create a robust secure and integrated infrastructure. This will enhance had different systems and devices work together and communicate to quickly implement cutting edge tools and technologies. We also provide managed services that foster collaboration.
Speaker Change: Asian, and enable personnel to quickly make data driven decisions about their cloud usage and costs, while adapting to changing mission requirements. This partnership will enable the U S Air force to get the most out of their cloud investments to achieve real time cross cost transparency accelerated cost savings increased efficiency and.
Speaker Change: Proved our agility.
Speaker Change: Our industry expertise is critical to building the right digital core we are partnering with the BCC at courtyard group, Italy's largest cooperative banking group through a joint venture with its I T subsidiary on our reinvention journey to help over 100 affiliate affiliated thanks.
Speaker Change: Our managed services will modernize the I T platform and migrate applications to the cloud enhancing resiliency stability and service quality. We will also consolidate data and build an integrated cloud platform for advanced analytics and AI strengthening their digital core Jenny I will be applied to increase internal I T efficiency.
Speaker Change: And reduce customer response time on digital interaction channels, we will expand digital offerings employee onboarding and payments using our suite of shared finance services solutions.
Speaker Change: Change management Communications program will offer targeted upskilling and reskilling opportunities to ensure employees use new technologies and methodologies effectively together, we will help D. C. C. Ikra group reduce costs and drive innovation, enabling the banking group to be more competitive and bring new products and services to market.
Speaker Change: <unk>.
Speaker Change: Security is an absolutely essential component of every company's digital core and we again saw very strong double digit growth. We are the partner of choice in part because we bring both the understanding of cross industry threats and industry specific threats with her deep experience across 13 industry groups.
Speaker Change: We are supporting a leading aircraft manufacturer and its cyber security across aerospace and defense on critical infrastructure and production systems. We will provide managed services and solutions for their cyber security capability, leading to a more powerful and secure program, bringing security by design and industrial assets in the extended enterprise are.
Speaker Change: <unk> will help provide improved security and meet regulatory compliance.
Speaker Change: We are also helping with the digitization of manufacturing and supply chain industry X grew double digits this quarter.
We are continuing to evolve our long time partnership with a global leader in tire manufacturing to revolutionize the way factories operate and to reduce time to market for new products accelerating innovation.
Speaker Change: We will build a hybrid data foundation and the cloud integrating millions of data points.
Speaker Change: We'll also implement advanced analytics, AI and digital twin technologies to optimize operations processes, such as quality checks. This will enable the company to trace the root cause of a failed batch of tires back to a machine or process in minutes instead of days and predictive maintenance will pinpoint what parts of their process of machinery maybe.
Speaker Change: Be impacting quality and productivity, preventing costly downtime engineering teams will benefit from machine learning and simulation tools to generate and optimize the design of new products.
Speaker Change: We'll also implement new ways of working to attract tech savvy talent and cultivate a learning culture, where employees in over 100 factories are up skills on the AI powered tools. The company will look to increase growth opportunities and support their digital first strategy all while remaining competitive in the market.
Speaker Change: We are partnering with Pune, India, a leader in sports lifestyle products to reinvent their supply chain and distribution network. This will meet the ever evolving customer demand for order delivery in a highly competitive omnichannel market, where quick commerce is becoming the norm.
Speaker Change: Use data and AI to identify and set up localized fulfillment centers optimizing their size and location based on customer sales.
Speaker Change: Digital twins of these facilities will stimulate various process designed physical automation scenarios to identify bottlenecks. This will help redefine warehouse layout and improve material flow for more efficient order in return processing deal.
Speaker Change: Living orders up to 70% faster with express delivery for online orders expected to double.
Speaker Change: Supply chain costs are also expected to decrease by up to 10% and additional features like solar power and EV charging stations at fulfillment centers will further reduce costs and support sustainability goals Houma.
Speaker Change: OMA, India will be the first amongst sports brands in the region to build this type of cutting edge operating model enhancing customer loyalty to drive future growth.
Speaker Change: We are reinventing all things customer through song, which grew high single digits. This quarter, we have the ability to integrate creative data and AI tech and strategy, while leveraging our industry and operations expertise to unlike marketing as a growth enabler for our clients while delivering efficiencies.
Speaker Change: We are helping Spotify optimize its advertising business by finding opportunities to drive efficiency as it scales globally.
Speaker Change: Our marketing operations managed services support there had operations under a single roof touching a significant amount of their AD revenue across 150 markets. We've infused automation across their operational workflows to help significantly reduce the time and effort required to launch advertisers campaigns getting them to market more quickly to help ensure revenue.
Realization and advertiser satisfaction.
Speaker Change: We continue to expand beyond AD operations actively launching these capabilities across analytics and insights data integrity and enrichment customer support and more our partnership helps Spotify to focus on its core competencies. So it can achieve long term relevance and growth in an increasingly competitive market.
Speaker Change: We are collaborating with Kasha bank, a leading financial group in Spain on their plans to enhance customer and employee experiences, we will increase productivity and efficiency by leveraging AI and Jenny I to build multiple solutions such as the banks Chatbot, which has significantly reduced response times and improve the quality of answers for client.
Speaker Change: And in employee assistant tool that utilizes natural language conversations and solutions searches. He will also build a customer service claims solution that analyzes documents and supports agents and lawyers and proposing the right responses, reducing processing time and assisting specialized teams. This will help kasha bank reinvent with Jennie O.
Speaker Change: And we are creating real value from Jenny I across industries and countries. We are partnering with Vale Brazilian mining and logistics company to transform its environmental licensing program speeding up permit applications and expanding its sustainability goals, we created smart licensing and end to end licensing.
Speaker Change: And platform that uses Jennie O I to scan application materials and environmental studies to promote compliance with regulatory and environmental requirements. This creates actionable summaries, reducing internal document reviews from days to minutes. We've trained over 500 people to use smart licensing and established a changed management team to combine previously.
Minute teams, helping Vale plan and execute more efficiency, while further reducing environmental impact.
Speaker Change: We are partnering with induce that additional telecommunications company and its subsidiary when to start up a leading provider of data communication Internet and IP services to watch Indonesia's first sovereign AI cloud platform. This will accelerate their AI, driven digital transformation and support the country's vision of becoming a digitally.
Speaker Change: Empowered nation by 'twenty, 'twenty, one and 45.
Speaker Change: The collaboration will initially focus on AI solutions for Indonesia, The financial services sector, one of the key pillars of our country's economy eccentric AI refinery platform will provide scaled AI capabilities with prebuilt solutions that have a modular architecture to meet clients' needs wherever they are at in their AI journey significantly.
Speaker Change: Are you seeing time to value.
Speaker Change: This partnership will help Indonesian companies to drive reinvention by harnessing the power of scaled Jenny I propelling innovation operational efficiency and sustainable growth in a competitive market.
How it continues to be at the top of the agenda for Ceos and governments and our learn vanished services position us to be able to help clients invest in their workforce, our partnership with S&P global a leading provider of financial data analytics and ratings is driving Jenny I innovation across the financial services industry empowering their workforce to it.
Speaker Change: Jenny I at scale to enhance productivity and deliver revenue growth. They are equipping nearly 40000 of their employees with the necessary skills leveraging accenture learn vantage services a comprehensive journey I learning program. This program includes curate and customized content to drive absolute fluency and address the industries.
Speaker Change: Falling talent requirements.
Speaker Change: Finally, a quick look at how we're continually using our investments and acquisitions to drive our future growth.
To continue to scale learn vantage, we acquired award solutions in the U S, which expands our learning offerings tailored to the unique needs of the network leaders network operations and performance engineers and professionals in the telecom space.
Speaker Change: To enable us to scale faster and health a $70 billion addressable market growing approximately 6% we acquired consensus health <unk> health, a leading German health care management consultancy.
As an industry is still early and digitalization and our investments are positioning us for continued growth we see over the next several years and supply chain continues to be an early and Digitization and we are investing to continue to drive growth. This quarter, we acquired Camelot.
International S. A P focused management and technology consulting firm from Germany with specific strength in supply chain data and analytics and Joshua tree group in the U S supply chain consulting firm specializing in distributions and our performance.
Speaker Change: Back to you Angie.
Speaker Change: Thanks, Julie now, let me turn to our business outlook for the second quarter of fiscal 'twenty five we expect revenues to be in the range of $16 two to $16 $8 billion. This assumes the impact of FX will be about negative two 5% compared to the second quarter of fiscal 'twenty.
Speaker Change: Sure.
Speaker Change: Next an estimated 5% to 9% growth in local currency for.
For the full fiscal year 'twenty five based upon how the rates have been trending up for the last few weeks, we now assume the impact of FX on our results in U S dollars will be approximately negative 0.5% compared to fiscal 'twenty four for.
Speaker Change: For the full fiscal 'twenty five we now expect our revenue to be in the range of 4% to 7% growth in local currency over fiscal 'twenty, four which includes an inorganic contribution as a bit more than 3%, which we expect will be about 4% in the first half and about 2% in the second half.
Speaker Change: And we continue to expect to invest about $3 billion in acquisitions this fiscal year for.
Speaker Change: For operating margin, we continue to expect fiscal year 'twenty five to be 15, 6% to 15, 8% a 10 to 30 basis point expansion over adjusted fiscal 'twenty four results.
Speaker Change: We continue to expect our annual effective tax rate to be in the range of 22, 5% to 24, 5%. This compares to an adjusted effective tax rate of 23, 6% in fiscal 'twenty four.
Speaker Change: We now expect our full year diluted earnings per share for fiscal 'twenty five to be in the range of $12 43.
Speaker Change: The $12 70 979.
Speaker Change: Or 4% to 7% growth over adjusted fiscal 'twenty, four result, reflecting the rays and our revenue outlook and adjusting for the revised FX assumptions for.
Speaker Change: For the full fiscal 'twenty five we continue to 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 $9 5 billion, our free cash flow guidance continues to reflect.
Speaker Change: Our free cash flow to net income ratio of one one to one that chip.
Speaker Change: Finally, we continue to expect to return at least $8 $3 billion through dividends and share repurchases as we remain committed to returning a substantial portion of our cash to our shareholders.
Speaker Change: With that let's open it up so that we can take your question Katy.
Speaker Change: Thanks, Angie I would ask that you.
Speaker Change: 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: If you would like to ask a question. Please press Star then one on the telephone keypad.
Speaker Change: If you're using a speaker phone.
Speaker Change: First up your handset before pressing the keys.
Speaker Change: Definitely I mean, you're talking to your question has been addressed we would like to withdraw your question. Please first stores them too.
Speaker Change: Today's first question comes from Tien Tsin Huang.
Speaker Change: J P. Morgan. Please go ahead.
Speaker Change: Thank you good morning, it's really encouraging to see the <unk>.
Speaker Change: Revenue came in above the guidance range I think that's the widest margin and nearly.
Speaker Change: Two years, Joe you said that the demand environment is more or less the same so I'm curious what your true.
Speaker Change: Pattern, two and if market conditions are may be improving underneath here.
Speaker Change: Any comments.
Speaker Change: Thanks, Tien tsin.
Speaker Change: This is the strategy that we've been outlining for the last few quarters, where last year. When we saw the constrained spending, particularly on the smaller deals we.
Pivoted to really focusing on getting winning more reinvention partners of choice. So increasing the number of our deals that were over $100 million in a quarter, you'll remember last year, we actually had 125 of those and the idea was to increase.
Speaker Change: <unk> well go after the demand which is in the larger reinventions and if that would position us to get back to a strong growth in 'twenty five as those deals begin to layer in and so what you're seeing as a result of you know we're really proud of was quite a bit of agility last year that when the market.
Speaker Change: Changed.
Speaker Change: We change because as you know these are not easy deals to do it quickly and we quickly pivoted last year went after the demand and then put ourselves in this position and that's why we did underscore that the market environment has not changed. This is the result of the strategy, we executed, which we're uniquely able to do because.
Speaker Change: We have all the skills and capabilities, we have the mix of consulting and managed services and so this is what we were talking about last quarter. When we said you know we're going to get back to strong growth based on execution of the strategy and of course. These are these are super critical strategic programs and so when you know.
Speaker Change: Spending does come back in the market does improve we're at the heart of our client's business and we should be well capitalized to pick up on that spending.
Speaker Change: Yes.
Speaker Change: I suppose the board short term stuff comes back.
Speaker Change: See that pretty quickly as well on top of this so good thanks and my follow up just had to ask it I get a lot of questions on the U S Federal government.
Speaker Change: And Accenture is exposure there I think it's about 8% of revenue based on some of your annual report disclosure. So just curious.
Speaker Change: Even some of the change of administration in this discussion around efficiency have your expectations or are you going to change your strategy here on the on the U S. Federal government side any comments there would be terrific. Thanks for the time.
Speaker Change: Yeah, well, we're really excited because you know our core competencies in federal raid are around driving efficiencies there around helping our keep our country secure you know we're working with the U S. Federal agency on securing critical infrastructure right and unchanging citizen services, we work across <unk>.
Speaker Change: Very important agencies and so we believe that we're super well positioned to continue to help the mission of the federal government to secure itself to help citizens and to.
Speaker Change: And to drive more efficiencies, which will be tied very much to cloud data and AI and what really makes us uniquely positioned is that we believe that there's going to be even greater appetite of taking commercial solutions to the federal government and we are very uniquely positioned because we have a strong government.
Speaker Change: Expertise, but we've got commercial.
In private sector solutions, we're the leader with every major ecosystem partner.
Speaker Change: And you saw that you know I was talking today about the U S Air Force and what were due on the cloud modernization and our work is mission critical I mean, the vast majority of what we do is mission critical to the federal government. So we see a real opportunity to continue to partner with the New administration as we've partnered.
Speaker Change: With all administrations and also with.
Speaker Change: All of the leaders in the Federal government, who every day are waking up to really drive those three things. So I'm really really feel good about where.
Speaker Change: Where we are positioned in the federal government to help this agenda.
Speaker Change: Awesome. Thank you.
Speaker Change: Thank you and our next question today comes from Jason Kupferberg with Bank of America. Please go ahead.
Speaker Change: Good morning, guys happy holidays, I know that last quarter you indicated the high end of the initial revenue guide for this fiscal year did not require any material movement.
Speaker Change: And consulting I'm just wondering if that's still the case as you are now raising the top end a little bit or are you now assuming any improvement in consulting since youre almost four months into the new fiscal year.
Speaker Change: Yeah, Hi, Jason Good morning, and I will take that you know for us and with the raise in to four to seven for the full year, there's really no change in what what we shared with you before which is that at the top end of the range. We continue to see more of the same whereas at the bottom of the range, we see a bit more.
Speaker Change: We allow for a little bit more deterioration so no change there yeah and our over deliver I mean, we're very pleased obviously with consulting and managed service growth this quarter and these large deals came in a little bit better which is how we over delivered and are now raising the guidance.
Speaker Change: Yes.
Speaker Change: Great to hear and then just looking at the net head count adds cumulatively over the past few quarters I think we're almost 50000 and that was a pretty big step up from what the prior trend looked like so can you give us any sense of how much of that was from acquisitions versus organic and I guess is there any reason to not look at this accelerated hiring.
Speaker Change: It's kind of a bullish indicator.
Speaker Change: So let me take that question and as it relates to them that the net people adds that we had in Q1. So we did add about 24000 people in the first quarter, which is really reflective.
Speaker Change: At the momentum that we see in our business and you know managing supply and demand is a core competency of ours and what you see is the continued high utilization rates at around 90%. Looking ahead, we will continue to hire for the demand that we see and the skills that we need them and I would give you a little bit more context.
Speaker Change: That at the hiring that we saw this quarter similar to last with that it was concentrated in India, Yeah, and I would just say that you know underlying our guidance are you seeing organic momentum right. So are you now at the high end of our guidance.
Your you know for the year, we're going to we're going to exit at for you now.
Speaker Change: The range of organic growth in our guidance as wonder for right. So yeah. I think that is a it is a positive sign that we're hiring and some of it's coming from acquisitions, but we are seeing organic momentum.
Speaker Change: In our business.
Speaker Change: Thanks for the comments.
Speaker Change: Thank you and our next question comes from Bryan Keane with Deutsche Bank. Please go ahead.
Speaker Change: Hi, guys congrats on the solid results and happy holidays.
Speaker Change: Kind of asking the guidance question, a little bit differently, the 4% to 7% constant currency revenue guide for the fiscal year 'twenty five is a touch below just the first quarter got our number of 8% on a constant currency basis. So just trying to think about if there's any reason why the growth would decelerate off the first.
Speaker Change: <unk> level as we get more into fiscal year 'twenty five.
Speaker Change: Yeah, Hey, Hey, Brian Happy holidays to you as well and let me give you an.
Here's how we were thinking about our guidance for the full year and the race to 4% to 7%.
Speaker Change: If you think about where we are we had a strong start in Q1, we have strong guidance in Q2, which was really driven it was broad based and driven by our organic growth.
Speaker Change: Growth at the same time, you heard Julie say the macro remains the same there is no change in the overall environment.
Speaker Change: And I want to reinforce importantly, what I, what what they said and what I said earlier, which was you know we do expect we continue to expect inorganic contribution of about a bit over 3% and one of the things that we provided to you with the how that will come and so each one we expect somewhere.
Speaker Change: Around about 4% second half about 2% and that will give you more of an understanding of how we see organic playing out for the year and we will continue to see organic throughout this fiscal year and then as it relates to you know if you think about it we're one quarter and we've got one quarter under our belt, we've got three more to go.
Speaker Change: And as Julie said earlier, we're executing on our strategy and you can count on us to continue to do so.
Speaker Change: Got it got it that's helpful. And then maybe you guys could you just talk a little bit about the industry group of financial services, a lot of times that kind of leads out of economic.
Speaker Change: Economic slowdowns.
Speaker Change: But it sounds like banking and capital markets was a little bit softer, but some other areas of strength and just trying to figure out where that is in the industry right now because we're kind of getting mixed messages from some of the other IP service providers. Thanks, so much.
Speaker Change: Yeah. So you know.
Speaker Change: And I think it's a little bit different by market right. So you know we're seeing the results of its different by market I will say by the way that we were pleased to see the UK as you might've heard is coming back as we reposition the U K.
Speaker Change: But you know with the dynamics in the U S market, where it's a little bit better in EMEA. It was a little bit worse than you've got a mixed picture on the interest rates and what the expectations are and so you know I'd say that.
Speaker Change: And you know that it's probably not.
Speaker Change: Not a surprise yesterday, probably complicated that a little bit in the U S right and so you know on the one hand, where we're seeing a lot of interest for example in banking capital markets on things like Jenny I on the other hand, there's a lot that's being you know kind of processed with what's going to happen with interest rates and and that and so.
Speaker Change: You know I E. We we see you know obviously, it's getting better but it is a mixed picture by by region.
Speaker Change: And just as a reminder, Brian and you know as we look at financial services. Overall, we exited Q4 last year with a minus two and we saw the uptick.
Speaker Change: In the first quarter at 4% globally, which reflects the dynamics that Julie was just describing which really plays to our strength because you think about the diversity of our business across markets and industries.
Speaker Change: Great. Thanks again.
Speaker Change: Thank you and our next question today comes from Darrin Peller of Wolfe Research. Please go ahead.
Speaker Change: Guys. Thanks, Great results can we just touch on your potential for visibility this year until budgets at the time and you would expect again.
Speaker Change: I think earlier this year was generally in the January February timeframe, we should be back up a little bit, but do you still anticipate that kind of visibility.
Speaker Change: That part of the year, where we could get a better picture on whether discretionary is really going to pick up or down and then maybe just as adult tail on that.
Speaker Change: Maybe just conversations are happening right now around AI for next year, obviously, the bookings keep looking really strong for you guys would describe any more.
Speaker Change: Specifics on where youre seeing it incrementally improve.
Speaker Change: Thanks, guys sure yes.
Speaker Change: You know.
Speaker Change: A great understanding of Accenture January is you know sort of January February is where we really see what the client budgets gonna be looking at so that's where we get the most visibility.
Speaker Change: And and so you know we'll be reporting more on that in the next quarter. So you're absolutely right. We do anticipate getting that visibility in January February and then with respect to AI.
Speaker Change: Are you continuing to see in our conversations you know and I'm, probably I, probably touched 30 Ceos in the last two months right. So it's been a lot of time and also around the world. So it's been a it's been a busy travel quarter, you know I've been in Europe, and in Southeast Asia, Australia. The U S. So and pretty consistently you know clients.
Speaker Change: Clients are seeking to do more in AI, but they're in such different places I mean, I'll be with one bank, where we're talking about what is Jenny I AI why does it matter and the fact that theyre not yet in the cloud I wont be talking to another bank, where they've been fully in the cloud and they want to be the.
Speaker Change: First out to use Jenny I.
Speaker Change: And so I think it's hard to generalize you you're still seeing that because the overall spending environment is the same that their price that those who really want to go into a AR and AI are more prioritizing spending as opposed to spending more rate, where we see the biggest opportunity when income.
Speaker Change: You start to get more confident to spend more is going to be in moving faster with their data foundation that fuels AI and then AI, but right now it's still generally feels more like a prioritization within current budgets and so we'll see what happens in January and February and that's why.
Speaker Change: Our strategy has been to pivot there right. So to go after more than our fair share of those budgets.
Speaker Change: Alright, Thats really helpful and then Jim.
Speaker Change: When we look at the opportunity for what your hardware. Your IRA you mentioned, India, but we've heard a lot a lot of customers are starting to think about a little bit even more onshore and so just maybe talk a little bit more about the Mexican.
Speaker Change: Gone for a while more offshore and looking for better price optimization, but.
Speaker Change: Where are we on that right now are you seeing any evidence of the shift that you're sure onshore. Thanks again guys great job.
Speaker Change: No no big trend what I'd say is you know we focus on the G 2000, and so a lot of our you know of our companies are global and so they really are looking for optimization of.
Right skills, because you know are a.
Speaker Change: A big piece of why people for example use India is about skills right 10 years ago. It was about labor arbitrage right today, its about like the ability to get these skills at scale.
Speaker Change: I would say is that we had accenture are continuing to develop more because in some cases, it's language right as you're as you're gonna doing more transformation in new parts of the enterprise, where you want maybe range with skills or time zones. So we have a global network and you know with 100 centers around the world in the.
Speaker Change: U S. For example, we've been all opening some new centers and underserved environments. We just we opened a center in the Bronx Ah recently so.
Speaker Change: But all of it is kind of aimed at being very sophisticated and we see ourselves as part of the integrated talent strategy of our clients and they say great skills right time zone right price you know continues to be the.
Speaker Change: The guiding with I would say an emphasis on skills.
Speaker Change: Great.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: It sort of sounds from Jim Schneider with Goldman Sachs. Please go ahead.
Speaker Change: Good morning, Thanks for taking my question.
Speaker Change: Truly understand your your outlook not really.
Speaker Change: Are you seeing any differences on the on that revising your outlook sort of.
Speaker Change: <unk> had great growth, but could you maybe discuss a little bit about when you talk with clients.
Speaker Change: Through a range of outcomes for discretionary increases into.
Speaker Change: The 2025 Bucks outlook, and you know how big a factor.
Speaker Change: Rates, specifically as a macro impact when they are thinking about that and do you think that changes materially given the fed's message yesterday.
Speaker Change: The rates.
The only depends on industry right. So if you're a more capital intensive industry or you're an industry that wants to grow more in acquisitions. The rates you know there's lots of puts and takes in doing the range and I think it's just too early you know based on yesterdays than a lot of speculation I mean, our business is very much focused on like when theirs.
Speaker Change: Change and it doesn't matter what the change is good or bad change, that's where we really partner with our clients successfully because if they've now got new constraints because the rates are higher than they want more you know opportunity to Ah you know two to cut costs. If the rates are going to fuel you know things like capital.
Speaker Change: <unk>, we've got our capital projects business Street, So what we focus on and I think what we're so successful as we have these deep relationships with our clients you know our top 100, we've been with over 10 years, we understand them and we are always looking at this and saying, okay. What does that mean anticipating what theyre, helping so I you know that.
Speaker Change: Yes, so whatever the changes that's where accenture really can help them pivot and it's part of our strength that we're so relevant to both growth and cost.
Speaker Change: Okay.
Speaker Change: That's helpful. Thank you and then with respect to the AI work, usually talked about some of the context of the quiet conversations youre, having but quantitatively or are you seeing any kind of major changes in terms of the size and scope of the individual projects and what are clients, saying about through.
Speaker Change: Their pivot or when they might pivot toward larger more transformative projects within G&A.
Speaker Change: Now we're already starting to see that rate, we're starting to see that clients.
Speaker Change: And then the characteristics are pretty clear if you have a client that's been investing in their digital core including security and data for many years and we have many of those that we've helped they're now able to start to scale and we're and we're starting to do that and we're seeing those partnerships, where you have clients, where we've been helping them prove it and maybe ski.
Speaker Change: And a part of the business, but they really Havent got their data foundation, where they're not moving into the cloud than what they're working with US is how do we accelerate that and what you probably heard as you know we were talking through some of the examples today is if theres a lot of data foundation now being built along with getting into modern cloud platforms and so.
Speaker Change: We are seeing an acceleration of the data work, which is absolutely fundamental to using Jennie O.
Speaker Change: Thank you.
Speaker Change: Thank you.
And our next question today comes from Ben Herbert with Baird. Please go ahead.
Speaker Change: Yeah, Hey, guys, great job and I guess my question just on the fiscal Q2 guide.
Speaker Change: Historically Q2 has been a pretty flat sequential quarter.
Speaker Change: And you're guiding I believe to down about one to one 5 billion sequentially. This quarter I know a little of that maybe a few hundred millions FX I get that but you know what was there anything in Q1, that's kind of naturally falling off in Q2. This year, that's a little on normal or some sequential pattern, that's a little different.
Speaker Change: Yeah, David a happy holidays, and good morning, and you know as we think about our Q2 guide of five 5% to 9%. It's a it's a very solid guide based upon what we see.
And Theres nothing unique in in Q2 that I would call out and in fact, you know just anchoring back to them.
Speaker Change: Our over delivery that we saw in the first quarter. It was really a function of the larger deals.
Speaker Change: Coming online a bit better than we expected and we continue to see that which gave us confidence in driving and in raising our guidance for the full year, so nothing to call out for Q2.
Speaker Change: Got you Yeah, you definitely crushed Q1, and then I guess, one just a nerdy kind of financial question, but now that you fully have like the debt in place should we think about a sequential pick up in interest expense I think it was $30 million in Q1 does that go to like $50 million in Q2 or something like that.
Speaker Change: And yes, a different and giving you the specific numbers in terms of how to think about it. Yes that is that is correct because when you theres certain things of course that we see in our and Ah.
Income below operations and what you saw there was the interest the net interest income was lower as a result, we did have average lower our cash balances also lower interest rates and and then we also had the interest expense from our long term debt. So.
Speaker Change: But all of that has been factored in the guidance that we've given and so and it's in there.
Speaker Change: Got you thanks, guys great job.
Thank you.
Speaker Change: And our next question comes from James Faucette with Morgan Stanley. Please go ahead.
Great. Thank you very much.
Speaker Change: Wanted to just quickly ask a follow up on on capital structure and allocation it sounds like youre still quite committed to pursuing bolt.
Speaker Change: Acquisitions as well as capital return loss.
Speaker Change: Sure.
Speaker Change: We did some essentially debt raise to help fund those priorities.
Speaker Change: Where are we.
Speaker Change: That perspective, or do you feel like we're in a pretty good overall cash position and continue to be able to do that or should we expect that at some point.
At least over the next couple of years, we could see further.
Speaker Change: And that.
Speaker Change: Raising to fund the capital allocation priorities.
Speaker Change: Yeah, Hey.
Speaker Change: Nice to talk to you why don't I start and we were pleased to add.
Speaker Change: And execute our inaugural bond offering of $5 billion, which we did and in October and when we look when we step back it was really a routine review of our capital structure, where we tap the long term debt market to increase our liquidity for general.
Speaker Change: General corporate accounting purposes, and what it does is it ultimately it optimizes our capital structure and reduces our capital our cost of capital that said, let me just reinforce for you. There is no change to our capital allocation strategy, which also includes how we look at any use DNA.
Speaker Change: This year, we're going back to kind of more of a business as usual.
Speaker Change: Do you think it's going to be somewhere around 3 billion, but as we've always said.
Speaker Change: If there's opportunities or not we've got the balance sheet. So we could raise debt, but there's no strategy increased debt, but we might if you know we had the right opportunities I mean last year, we had a great opportunity to double down on strategic acquisitions, and it's served us well as we've gone into this year, but you know this year we're back to.
Speaker Change: Kind of standard around 3 billion, which is kind of the <unk>.
Speaker Change: Percentage. So you know we'll communicate as we go we always have that flexibility and I think that's the strength. If you think about accenture is having a strong balance sheet and to have the flexibility to go after opportunities in the market to drive long term growth and that's how we think about the decisions about whether or not to do that or not.
That's great color there and then I wanted to ask about the consulting bookings seeing nice growth and acceleration there.
I'm wondering and I know, it's hard given the breath of Accenture customer base, but I'm wondering if you can help us maybe generalize what youre seeing in the consulting bookings and if there's a change there and I guess I'm wondering if.
Speaker Change: We're seeing a focus on cost control versus potential revenue generation or new technology evaluation or households into.
Speaker Change: Any color you can provide on what the tenor of those consulting bookings look like right now.
Speaker Change: Yeah. So maybe just keep in mind that what were generally bringing to our clients our multi service solutions. So you might do.
Speaker Change: As we talked about we're doing managed services in security and that requires industry consulting as a part of it to make sure that we're doing all the work a lot of the reinvention is a lot of process that so I think I would anchor on there are really our two seems that at least and when they come to us they want cost.
Speaker Change: Efficiency every industry wants a cost efficiency now and they're looking for growth or other outcomes speed to market.
Speaker Change: You heard a lot when we talked about you know like what we're doing with like Cassia Bank that was both speed to market as well as efficiencies and so that's one of the things that we focus on and that really gives us is our unique differentiation because we've got things like song that's everything about customer and we can put to that we under.
Speaker Change: And the industry. So it's the twin themes here is cost efficiency and growth.
Speaker Change: Great. Thank you so much.
Speaker Change: Great. Thank you.
Speaker Change: Our next question today comes from Keith Bachman with BMO capital markets. Please go ahead.
Speaker Change: Hi, good morning, many thanks, and happy holidays to everyone.
Speaker Change: My first question I wanted to ask is around pricing dynamics.
Speaker Change: And you've indicated that the macro backdrop fairly steady you're gaining share through skills.
Speaker Change: And I wanted to ask specifically about some of the legacy areas such as application maintenance, maybe the PPO or one of your competitors have suggested that pricing is pretty challenging because there aren't enough deals a lot of folks chasing those deals, but could you specifically address what youre seeing is pricing dynamics dirt.
Speaker Change: The quarter any changes.
Speaker Change: It's a it's a very competitive market, which is what we've been saying every quarter and we did see lower pricing across the business, which has been pretty consistent what I would say is you know that which makes sense right youre in a constrained you know as we said that continues.
Speaker Change: The clients have constrained spending, particularly on small deals and so you would expect it to be a constrained what I would say, though that a M. Essex set application managed services is not legacy if you do it the way we do it right. So what we offer to our clients is we have the talent the full stack engineers that.
Speaker Change: <unk>, we have a platform called Gen Wizard and so clients are coming to us not to say Hey can you take off my old applications are coming on us to modernize while taking costs down and you see that you know for in what the work we're doing it's very advance and <unk>.
Speaker Change: How we're doing it so we are basically call it run to the nail right is like all of US help you run your applications in order to rotate to the new so we see this as a critical way that we are at the heart of their business and modernizing our digital core it's not legacy same thing with our operations business.
Speaker Change: Yeah, Okay that makes a ton of sense. Thank you Julian My follow up question is and some of our recent discussions and to be fair with software companies.
Speaker Change: Have suggested that Europe's softened in the last 30 45 days.
Speaker Change: And.
Speaker Change: Which makes sense. If you just read the newspapers about what's going on in Europe, but have you guys seen any change in the dynamics underpinning Europe and or change the perspective that you may have as it relates to European demand over the next 12 months.
Speaker Change: That's it for me many thanks, again and happy holidays.
Speaker Change: Thanks, So well so our view of European demand is over the next 12 months is baked into our the rise of in our guidance right and you know we're all reading the same papers.
Speaker Change: Europe is definitely more middle East, obviously different Europe is definitely.
Speaker Change: In a more challenging environments.
Speaker Change: And you see that with you know our growth rate is there on a relative basis as well, but we feel very good about we have an excellent business in EMEA, we're very relevant to our clients and so we feel good about the US you know our demand environment and that sort of fully reflected in the raise in guidance that we just gave you.
Speaker Change: Okay.
Speaker Change: Thank you.
We have the next person.
Speaker Change: Operator.
Speaker Change: Question, and then Julie will wrap up the call.
Speaker Change: And our final question comes from Bryan Bergin with Cowen. Please go ahead.
Speaker Change: Hey, guys. Good morning, happy holidays, I wanted to ask on the service line. So can you comment on performance across strategies consulting Tech services and operations.
Speaker Change: Yeah, all of you know very strong this quarter.
Speaker Change: Yeah, Brian that the thing that I would add to that is we did see broad based growth and if you look at it from a consulting and it managed services.
Speaker Change: Type of for our perspective, we had mid single digit growth in consulting and a 11% growth in maintenance services and as you think about the raise that we have for the year, which is 4% to 7% and underneath that we see consulting now in the mid single digit range growth and managed services in the mid to high.
Speaker Change: Range growth.
Speaker Change: Okay, and then a follow up here on the workforce and in contract profitability. So you know the most head count was added across India could you just comment on what Youre seeing there as far as wage inflation dynamics, just given most services companies and <unk> been leaning in and particularly amid the competitive pricing environment just talk about the levers you have here to mitigate gross margin pressure.
Speaker Change: Sure.
Speaker Change: Yeah, I'll start and Brian No real change in terms of the market dynamics of what we see reflected around wage inflation and of course, we are always paying market relevant pay based upon the skills and the locations of our people.
Speaker Change: And and and we continue to see that the same and then as it relates to pricing as Julie mentioned it is it.
It is it continues to be highly competitive at the same time as you know with US right. We're managing at we're focused on pricing.
Speaker Change: As well as on our differentiation and were focus on costs and delivery efficiencies in our business and how we operate.
Speaker Change: Yeah.
Speaker Change: Alright understood happy holidays.
Speaker Change: Thank you Brian.
Well in closing I want to thank all of our shareholders for your continued trust and support in all of our people for what you do every single day I wish everyone, a very happy and healthy holiday season. Thank you for joining us today, and we look forward to being back here in a quarter. So thanks, everyone.
Speaker Change: This concludes today's conference call. We thank you all for attending today's presentation.
So much Ron and I have a wonderful day.
Speaker Change: [music].