Accenture PLC Earnings Call Insights: Revenue Guidance and Consulting Outlook

Accenture PLC (NYSE:ACN) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Revenue Guidance

Tien-Tsin Huang – JPMorgan: Pam, congrats on the retirement, thanks for everything. I definitely enjoyed working with you. Congrats to David as well on the new role. Let me start by asking, obviously the bookings were very, very solid. I think you said the bookings are going to track to the higher end against the revenue at the lower end. So is it safe to say that the primary driver of moving revenue guidance to low-end, is it really just to slower consulting revenue conversion? Is there something else that we should consider there?

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Pamela J. Craig – CFO: There really isn’t. It is – that’s important Tien-Tsin in a sense that the consulting is jump ramping more gradually. There is fewer of the smaller deals in there and that converged after and that trend has continued even beyond where we thought it would. So we do need more bookings actually. So we are trending and we are indeed trending toward the upper end of the range.

Tien-Tsin Huang – JPMorgan: So just as my follow-up, just a couple of smaller. Just can you help us what the book-to-bill trend and as we sort of exit this fiscal year going into next just directionally is there something different we should consider, especially in consulting? Then also just in the second half for consulting revenue. Can we expect return to positive growth in the third quarter and something higher in the fourth quarter? Given what you see today…

Pamela J. Craig – CFO: So first on the book-to-bills. Just based on this complexion of the consulting revenue, we are – we do believe we need to be higher in that range of 1.0 to 1.1 that we’ve talked about with you for years. So right now, we are looking and it is this quarter 1.1. Of course if the smaller shorter-term stuff comes back into the mix and a greater proportion at some point then it might move around in there, but you’re right at this point that’s what we see. In terms of the consulting revenue growth rate, we really do think the way we’ll eke out positive consulting growth in Q3 and then it will be at least low positive single-digits and that trend would continue in Q4.

Tien-Tsin Huang – JPMorgan: Congrats again.

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Consulting Outlook

Rod Bourgeois – Sanford Bernstein: Pam I definitely wish you the best, very impressive career at Accenture and you’ve definitely put together a world-class finance organization. I’m sure everybody there will miss you and I think the Street will as well. So thanks again.

Pamela J. Craig – CFO: Thank you Rod.

Rod Bourgeois – Sanford Bernstein: So question here on the consulting outlook. It sounds like the small deals are still soft, and I’m wondering whether that is purely a function of softness in the market or if there are competitive dynamics that are playing an increased role in being able to win some of the smaller less transformational type consulting deals that are out there.

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Pamela J. Craig – CFO: It does. Rod, to us it is a market phenomenon. We see it primarily in Europe, where we traditionally had particularly in some operating groups like Financial Services a lot of that kind of smaller consulting work. So it’s not that it’s going down at this point, it’s actually staying pretty stable, but just as a proportion of the bookings, it is smaller and we do see it primarily as a market phenomenon more that clients just don’t sort of gravitate to that stuff as much as other things.

Pierre Nanterme – Chairman and CEO: To just add a color around this, I mean, indeed (indiscernible) volume is remaining for Accenture stable and so (it’s not) the proportion we see changing, but we are starting to be encouraged by the healthy pipeline for this type of opportunities. So we’re starting to see some things happening. Again, volume stable, proportion a little bit lower, it is not shrinking at all and the pipeline is showing some good signs…

Pamela J. Craig – CFO: Particularly in management consulting.

Pierre Nanterme – Chairman and CEO: Correct.

Rod Bourgeois – Sanford Bernstein: We have had a lull in management consulting, so it’s good to see that looking up. So on the booking side, given the strong bookings in the February quarter, I should ask if duration rose meaningfully on a year-over-year or quarter-to-quarter basis and if you could answer the duration question for both the consulting segment and the outsourcing segment? Then I’ve got a quick question about the May quarter bookings outlook.

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Pamela J. Craig – CFO: Yes, the duration has stayed pretty stable Rod and in the sense we were sort of looking in all those metrics, aging, velocity et cetera and it’s all pretty stable.

Rod Bourgeois – Sanford Bernstein: You had a very strong August quarter 2012 bookings. You had some softness in November, because you were seemingly replenishing the pipeline and then it looks like that pipeline replenishment paid off in February with the stronger bookings. How do we think about the May quarter? Is the May quarter another quarter of pipeline replenishment or are you still seeing deals right to be signed with another strong May quarter on the horizon here?

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Pamela J. Craig – CFO: Well, we do have the pipeline replenishment and that’s been going well during this month. So I mean if I just wanted to give you just some sense, I think the bookings will be higher than they were in Q1 and not as great as they were in Q2.

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