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Accenture plc (ACN)

F2Q10 (Qtr End 02/28/10) Earnings Call Transcript

March 25, 2010 4:30 pm ET


Richard Clark – Managing Director, IR

Bill Green – Chairman and CEO

Pamela Craig – CFO


Adam Frisch – Morgan Stanley

George Price – Stifel Nicolaus

Karl Keirstead – Kaufman Bros.

Rod Bourgeois – Bernstein

Bryan Keane – Credit Suisse

Julio Quinteros – Goldman Sachs

Jason Kupferberg – UBS

Joseph Foresi – Janney Montgomery Scott

Tien-Tsin Huang – JPMorgan

Tim Fox – Deutsche Bank

Reik Read – Robert Baird & Company



Ladies and gentlemen, thank you for standing by and welcome to Accenture’s second quarter fiscal 2010 earnings call. At this time, all lines are in a listen-only mode. (Operator instructions) And as a reminder, this conference is being recorded. I’ll now turn the conference over to Richard Clark, Managing Director of Investor Relations. Please go ahead, sir.

Richard Clark

Thank you, operator. And thanks, everyone, for joining us today on our second quarter fiscal 2010 earnings announcement. As the operator just mentioned, I’m Richard Clark, Managing Director of Investor Relations. With me this afternoon are Bill Green, our Chairman and Chief Executive Officer, and Pamela Craig, our Chief Financial Officer.

We hope you have had an opportunity to review the news release we issued a short time ago. Let me quickly outline the agenda for today’s call. Bill will begin with an overview of our results. Pam will take you through the financial details, including the income statement and balance sheet along with some key operational metrics. Bill will then provide some insights on what we are seeing in the market and how we are positioning our business for the upturn and future growth. Pam will then provide our business outlook for the third quarter and full fiscal year 2010, and then we will take your questions.

As a reminder, when we discuss revenues during today’s call, we are talking about revenues before reimbursements or net revenues. Some of the matters we will discuss in this call today are forward-looking, and you should keep in mind that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, general economic conditions and those factors set forth in today’s news release and discussed under the Risk Factors section of our Annual Report on Form 10-K and other SEC filings.

During our call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of those measures to GAAP in our news release or on the Investor Relations section of our website at As always, Accenture assumes no obligation to update the information presented on this conference call.

Now let me turn the call over to Bill.

Bill Green

Thank you, Richard, and thanks, everyone, for joining us today. We are very pleased with our results in Q2. We delivered a solid quarter, driving our business with discipline while positioning it for growth. And importantly, we are beginning to see positive signs and increasing demand for many of our services.

Here are some highlights from the quarter. We generated revenues of $5.2 billion within our expected range of $5.1 billion to $5.3 billion. Operating margin was 12.6%. We delivered earnings per share of $0.60. We achieved very strong new bookings of $6.5 billion, with consulting and outsourcing each exceeding $3 billion. We generated $616 million in free cash flow, and we continue to have an exceptionally strong balance sheet with a cash balance of more than $4 billion. In short, a very good performance.

In addition, we just announced a dividend of $0.375, which is our first semi-annual dividend in part of our ongoing commitment to return cash to shareholders. While there are still uncertainties and challenges in the global environment, we are seeing signs of positive momentum in the market, as our clients are once again looking to the future. We are very well positioned to benefit accordingly with the return to positive growth.

We are staying close to our clients helping them with their most important initiatives. We have enhanced our offerings for today’s demands and we are recruiting high quality talent aggressively to ensure that we have the breadth and depth of capabilities to capitalize on future growth opportunities.

With that, I will turn the call over to Pam who will provide some more detail on the numbers.

Pamela Craig

Thank you, Bill. And thanks to all of you for listening today. I’m pleased to tell you more about our second quarter results. Before I get into these results in detail, let me provide some perspective on how our business is trending right now. First, we were pleased with the trajectory of new bookings. Consulting bookings came in at a strong level, similar to Q1, and total bookings were up 19% in local currency over Q1.

Second, net revenues on a year-over-year basis are now just about through the cycle of negative year-over-year comparisons. Our consulting business continued to strengthen during the second quarter and reflected sequential growth on a per net workday basis compared with the prior quarter. We believe that the outsourcing revenue comparison reflects the bottom of the impact of last year’s terminations and that outsourcing revenues will turn up next quarter. Lastly, we continued our strong cash flow delivery through the quarter.

Now let’s get to the numbers. Unless I state otherwise, all figures are US GAAP, expect the items that are not part of the financial statements or that are calculations. New bookings for the quarter were $6.52 billion and reflect a positive 6% foreign exchange impact compared with new bookings in the second quarter of last year.

Consulting bookings were $3.39 billion, and outsourcing bookings were $3.13 billion. This level of bookings was the highest in three quarters. On bookings, good, steady demand for our services and our consulting business continued. In management consulting, our bookings were broad based and strong around the world and across four of the five operating groups. Demand continues primarily in strategic sourcing and customer relationship management in addition to risk management and post merger integration. While cost take-out remains a priority, we did see an uptick in demand for projects focused on strategies for revenue growth.

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