ACN
#Thank you, <UNK>, and thanks, everyone, for joining us today.
This was another strong quarter for Accenture.
We delivered revenue growth in the upper end of our guided range and again gained significant market share.
I'm particularly pleased with our very strong new bookings for the quarter and year-to-date, which demonstrate that our services and capabilities continue to be both highly relevant to our clients and very differentiated in the marketplace.
We generated very strong cash flow for the quarter and returned substantial cash to shareholders, all while continuing to make significant investments to drive future growth.
Here are a few highlights for the quarter.
We delivered excellent new bookings of $9.8 billion.
We grew revenues 7% in local currency to $8.9 billion with broad-based growth, once again, across the different dimensions of our business.
We delivered earnings per share of $1.52 on an adjusted basis, an 8% increase.
Operating margin was 15.5% on an adjusted basis, consistent with the third quarter last year.
We generated strong free cash flow of $1.7 billion, and we returned approximately $1.4 billion in cash to shareholders through share repurchases and the payment of our semiannual dividend.
So we had another good quarter, and as we enter the fourth quarter, I feel very confident that we are well positioned to deliver our business outlook for the year.
Now let me hand over to <UNK> who will review the numbers in greater detail.
<UNK>, over to you.
Thanks, <UNK>, and thanks to all of you for joining us on today\
Thank you, <UNK>.
Our strong results for the quarter and year-to-date demonstrate that we continue to execute very well against our growth strategy.
We are successfully driving the business transformation of Accenture while, at the same time, consistently delivering above-market performance.
Today, the breadth of capabilities we provide end-to-end is truly unique in the marketplace, and we are well positioned to compete at scale in each of our 5 businesses, driving synergies across them to deliver value and business outcomes for our clients.
We continue to rotate our business to "the New", digital, cloud, and security-related services, which again grew at a very strong double-digit rate in the quarter and now account for 50% of total revenue.
I am absolutely delighted that we have achieved this significant milestone for our business so rapidly.
Our rotation to these new high-growth areas, the differentiation of our capabilities in the market and the diversity of our business has enabled us to continue to gain significant market share.
The need to go digital remains a top priority for our clients, and we\
Thank you, <UNK>.
Let me now turn to our business outlook.
For the fourth quarter of fiscal '17, we expect revenues to be in the range of $8.85 billion to $9.10 billion.
This assumes the impact of FX will be negative 1/2% compared to the fourth quarter of fiscal '16 and reflects an estimated 5% to 8% growth in local currency.
For the full fiscal year '17, based upon how the rates have been trending over the last few weeks, we now assume the impact of FX on our results in U.S. dollars will be negative 1% compared to fiscal '16.
For the full fiscal '17, we now expect our net revenues to be in the range of 6% to 7% growth in local currency over fiscal '16.
For operating margin, on an adjusted basis, we now expect fiscal year '17 to be 14.8%, a 20 basis point expansion over fiscal '16 results.
We now expect our annual effective tax rate on an adjusted basis to be in the range of 22.5% to 23.5%.
For earnings per share, on an adjusted basis, we now expect full year diluted EPS for fiscal '17 to be in the range of $5.84 to $5.91 or 9% to 11% growth over adjusted fiscal '16 results.
For the full fiscal '17, we continue to expect operating cash flow to be in the range of $4.6 billion to $4.9 billion, property and equipment additions to be in the range of $600 million and free cash flow to be in the range of $4 billion to $4.3 billion.
We continue to expect to return at least $4.2 billion through dividends and share repurchases and also continue to expect to reduce the weighted average diluted shares outstanding by slightly more than 1% as we remain committed to returning substantial portion of cash to shareholders.
And finally, for the full year, we now expect to invest in the range of $1.8 billion in acquisitions.
With that, let's open it up so we could take your questions.
<UNK>.
Yes, we feel good about our bookings position in the fourth quarter, and we expect to have another very good quarter of bookings.
So we think that momentum does continue.
No.
I would say on that front, it\
Well, I think, and we've talked about this before, Ed, that we are fortunate that in that with the strength of our overall financials including our balance sheet, we have a lot of levers at our disposal as we manage our business really for many years to come.
When we look at our need to acquire critical skills and capabilities in important growth areas in the market, we don't see that changing certainly over the next 3 years, and so we think that's going to continue to be an important part of our investment strategy.
We think it'll be an important part of an engine for growth overall, and ultimately, for us as you know, this is all about quickly assimilating these capabilities and driving organic growth over time.
So we really see more of the same with our acquisition strategy going forward, and we think we have the financial flexibility to accommodate that while also returning cash to shareholders.
Yes, I mean, not much to add.
I think we have an extremely clear strategy at Accenture, which is all about rotating to "the New," and in order to enable this strategy, we set very clear financial context we shared with all of you on how we\
Thanks for the question because it was clearly when we decided our new strategy of rotating to "the New", that was clearly a big question we had in front of us.
We benefited from Accenture from a very strong culture, you know very well based on what we\
Yes, we carefully manage the retention of the people in these companies that we acquire, and our performance of really over the last 3 years in terms of retaining talent has been very good.
As "the New" becomes majority share of your business, how should we think about potential changes in corporate revenue trajectory or particularly margin expansion.
Do you foresee any inflection in either over the medium term.
We\
Okay, just a follow-up then.
Just as far as expanding addressable markets, interactive business I thought was a great example of getting new access into an area within the same office.
Are there other areas that you're potentially looking at within client wallets that are logical extensions that you might be targeting.
Security is another one with the business resulting with Accenture Security.
Clearly, we are expanding our access to new leaders.
Given the depth and breadth of our services, you're absolutely right.
It is our ambition to increase the coverage of the leaders we might serve with clients from the CEO, the CFO, the COO, the CIO, now the Chief Digital Officer with the launch of Accenture Digital.
They are new leaders under this terminology, and we want to be the partner of choice for the newly appointed CDOs, which should be a quite a natural act.
You mentioned the CMOs with what we are doing with Accenture Interactive.
So again, we have all the business leaders in the different part of the business.
So if I'm looking at Accenture, we have now certainly with the 5 businesses we have, but in these businesses, you have other activities such as Analytics, Interactive, Mobility, Cloud, Security.
I could mention Accenture Credit Services we have in the U.S., which is providing access in banks to credit part of the organization, and I mentioned [loss].
So I guess, and I would claim that we are certainly the organization in professional services, which today the broader access to any client leadership group.
Yes, maybe I can start with providing you our strategic direction on this.
We\
Double digit.
Is double-digit and as well is driving significant growth in Accenture Technology and our platforms.
If I\
Absolutely right, and I think we see ---+ and I\
Thank you, <UNK>.
Yes, I think when you ---+ I\
Yes, that does materially change the number because obviously we were acquiring these.
Let's say that increases more in the back of the last 3 months of the year.
So that has more of an impact on '18 than it does this year.
Having said that, we still think we're going to be at roughly in the ballpark of 2% for the full year.
Previously, I said the back half of the year would be 2.5%.
It will be just incrementally kind of above that, but not materially above that.
So clearly.
.
Clearly, it's consistent with what I said before, slightly higher in the back half of the year than the 2.5%.
Yes, in that zone.
I was wondering if you can maybe comment on the North America piece of the business, what you're just hearing from clients just broadly speaking.
Can you maybe just kind of give us a sense about whether the North America slowdown was purely isolated to the Health & Public Service or what are you hearing from clients generally and whether you expect that to kind of be a one-off, 1 quarter thing or it's something that could continue for a couple of quarters.
Yes, first of all, as it relates to our expectations and then <UNK> may add some comments as well, but let me just deal with the results relative to our expectations.
So we had seen slower growth in H&PS in quarter 1 and quarter 2.
You'll remember quarter 2 was at 2%, which is where we ended up in quarter 3.
We had expected, not based on hope, but based on what we felt was kind of tangible evidence in the second quarter, that we were going to see an uptick in growth in the third quarter and the second half of the year and that's what I called out 90 days ago.
What we saw was that, that uptick, if you will, or that freeing up of initiation of new projects and let's say a return to more normal decision-making patterns on contracting new work, that just simply did not improve as we had expected.
And so if you look at North America and the difference between where we landed and where we expected to land, the difference is the vast majority of that is in Health & Public Service for the reasons I mentioned in the script.
It's the difference between North America growth being at 3% and 5% order of magnitude and it was the difference ---+ it was probably a point of growth.
It was a point of growth at the Accenture level in total, so it was meaningful.
Having said that, we have a very strong Health & Public Service practice, and at some point, the logjam will break and work will be initiated and we'll be right there in the game when that happens.
And of course, broadly in North America, we feel that way as well.
Yes, no, absolutely right, and I understand you\
And as I said, it's a perfect illustration though of the power of the diversity of our model where Europe and the Growth Markets, combined, in the third quarter grew double digits 10%.
And so that's ---+ that is intentionally the way our business is constructed for this exact reason and so it is working as designed.
And it's interesting to see ---+ sorry to elaborate, but I think it's important for all the people listening to the call because you might wonder is why things are going so well in Europe.
We have 9% growth and it's been vibrant, but I think in Europe, you have less uncertainties now.
I think we had ---+ having good prospect that probably Germany might re-elect Angela Merkel, so it's a pole of stability.
I guess, the election of Emmanuel Macron in France has been recognized and celebrated by the market because he's pro-European, so it has created a very positive impact around whether Europe will disappear or not.
Having Germany and France being extraordinary pro-business is recreating a very solid coalition.
And the Brexit thing is moving at its pace, but at least we know it's going to happen.
So it's not an uncertainty.
The uncertainty is what exactly, is it going to be hard, soft, gentle.
Probably, the European will figure out as they have all been figuring it out over centuries.
But it's interesting.
If you take China, China, I guess, not much uncertainty.
The President is very clear on what it is he wants to achieve.
He's driving this 5 years reform program.
So you see what I mean.
It's interesting that if there is one place, and it's a big place in the world where you have this kind of wait for the reforms to happen, it is currently in the United States, but I'm personally feeling very good that these reforms will happen and the business will pick up again.
That's helpful.
And just as a quick follow-up, going back to the M&A question for a second.
If you look at the run rate for M&A that you're doing in Q4 of this year, would you expect that to accelerate incrementally from here heading into fiscal '18.
And then I think, <UNK>, you made an allusion to using the balance sheet for M&A.
Does that imply you're willing to put some debt on the balance sheet to finance more M&A at this point.
I think as it relates to your last question, we said consistently for as long as I remember that we always ---+ I mean, we're well aware of that being an option, and given the right circumstances, we're ---+ we would have no concern about doing that.
We would, as we always do, we would make very smart decisions as to when and at what level we do that, but that is certainly an option that is open to us and we have no concerns at all about using that option given the right circumstances.
First of all, when you look at overall growth and when we provide a guidance of 5% to 8% at the beginning of the year, and of course, we're going to land very solidly within that range, we had said that growing double digits each and every year is just an unrealistic expectation.
We work hard to drive as much growth as we can, but each and every year, we're not going to drive double-digit growth.
And we think that we look at our growth rate against what the market is growing, and in a market that, let's say, generally has grown, let's say, anywhere in the 2.5% to 4% range, let's say, if you look over the last 2 to 3 years, if we're growing 7% as we are this year, we're growing 2x the rate of the market growth.
And so, yes, are we lower than where we were double-digit growth the last 2 years.
We are, but we're growing 2x the rate of overall market growth, which is clearly, clearly the indicator of a leader in the sector.
And so that's what we're all about and growth in the 5% to 8% range and where we've got it to for the full year, 6% to 7% growth, is actually quite strong growth in the market.
Right in the zone.
Then the question might be is 7% good or not.
The only way to understand whether 7% is good or not is to compare with the rest of the market.
Yes.
And we believe that at 7%, we\
