Earnings Call: Q3 2010

Jun 24, 2010

Ladies and gentlemen, thank you for standing by and welcome to Accenture's Third Quarter Fiscal 20 10 Earnings Conference. I'd also like to remind you that today's I'll now turn the conference over to Richard Clark, Managing Director of Investor Relations. Please go ahead, sir. Thank you, operator, and thank you, everyone, for joining us today on our Q3 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'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. 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 and how we are positioning ourselves with business for future growth. Pam will then provide our business outlook for the 4th 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're talking about revenues before reimbursements or net revenues. Some of the matters we'll discuss on this call 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 under the Risk Factors section of our Annual Report on Form 10 ks and other SEC filings. During our call today, 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 accenturedot com. As always, Accenture assumes no obligation to update the information presented on this conference call. Now, let me the call over to Bill. Thank you, Richard, and thanks everyone for joining us today. We're very pleased with our performance in Q3, which showed positive growth, strong overall results and building momentum in our business. Equally exciting, we see increasing demand for many of our new services and offerings across both management consulting and technology. Here are some of the highlights from the quarter. Revenues were $5,600,000,000 squarely within our expected range of 5 point $5,000,000,000 to $5,700,000,000 We grew operating income 10% and increased operating margin to 14 point 4%. We delivered earnings per share of $0.73 an increase of $0.05 over Q3 last year. New bookings were strong at $6,400,000,000 with consulting and outsourcing each exceeding $3,000,000,000 We generated more than $900,000,000 in cash flow and we continue to have an exceptionally strong balance sheet. Everywhere you look at it, a very good performance. While there are still pockets of uncertainty in the global economy, we continue to see signs of positive momentum as clients are again looking to their future and focused on improved growth and business performance. We are right there working closely with them and are helping them shape and launch their initiatives, which create exciting opportunities for Accenture. We continue to make targeted investments in new offerings and services and are aggressively recruiting high quality talent to ensure we have the breadth and depth of capabilities to serve our clients today as well as tomorrow. I believe that as a company, we have never in our history been better positioned for growth and expansion than we are today. With that, I'll turn the call over to Pam, who will provide some more detail the numbers. Thank you, Bill, and thanks for listening today. I am pleased to tell you environment. And as we wind down the year, we are delivering. We are driving the business and getting the results. Our pipeline has strengthened considerably since the start of the year. We are aggressively recruiting talent and bookings are coming through well. We have the revenues we projected, some margin expansion, exceptional cash flow and a rock solid balance sheet. In this environment, this is an excellent result. Now let's get to the numbers. Unless I state otherwise, all figures are U. S. GAAP, except 4 Consulting bookings were $3,180,000,000 and outsourcing bookings were 3 point $2,500,000,000 Looking at how consulting bookings have trended over the last couple of years, I believe we have reached a new level with the volume and consistency of consulting bookings. Even with contract sizes trending smaller, we are consistently booking $3,000,000,000 or more suite, but also from the suite, but also from the downstream work that originates from consulting. Particularly strategic sourcing, customer relationship management, risk management and post merger integration. We also see a pickup in demand for offerings around revenue growth and talent and organization performance. In technology consulting, we see robust demand with record bookings for the Q2 in a row. Clients' demand continues to be for what makes their technology more and effective through infrastructure consolidation, virtualization, security and IT governance projects. In systems integration, we see a broad pipeline of opportunities. Bookings continue to reflect demand for custom work as well as for ERP rollouts, country expansions and new modules. We see custom development on multiple next generation platforms, both on premise and cloud based. The bookings sparked solid SI revenue growth in some of our larger countries during the quarter. We are aggressively leveraging our global delivery network to broaden our footprint at existing clients and at the new clients we are adding to our portfolio. And to all clients, we are delivering more value for money. Turning to outsourcing. Our outsourcing bookings a steady recovery. In Q3, we closed 5 contracts in excess of $100,000,000 each. We saw solid demand for technology outsourcing offerings and technology consulting is helping to drive the design build run of next generation infrastructure and the consolidation and renewal of application platforms in order to drive value for our clients. In addition, we are seeing demand build in our BPO business, particularly in products and communications and high-tech. So in summary, we had a bookings quarter that was strong across the consulting and outsourcing dimensions of our business. Now turning to revenue. Net revenues for the Q3 were $5,570,000,000 an increase of over 8% in U. S. Dollars and almost 4% in local currency over the same period last year. These revenues, which reflect a rounded foreign exchange impact of positive 5% compared with Q3 last year, were solidly in our guided range of $5,500,000,000 to $5,700,000,000 Consulting revenues were 3.22 $1,000,000,000 an increase of 9% in U. S. Dollars and 4% in local currency. Outsourcing revenues were 2.3 $5,000,000,000 an increase of 7% in U. S. Dollars and 3% in local currency. As we expected, year over year revenue growth turned positive in local currency in Q3, led by products, financial services and financial services and resources. Financial services net revenue growth was 7% in local currency with notable capital markets. As clients grapple with the dynamic environment, we are providing services related to post merger integration, core banking replatforming, risk and regulatory compliance and business model transformation. Products net revenue growth was a strong 9% in local currency. Consulting growth was led by consumer goods and services as we respond to client demand for cost management and post merger integration around the world and notably in the emerging markets. Outsourcing revenues increased significantly across all geographic regions and in most of our industry groups. Resources net revenue growth was 5% in local currency with strong consulting growth in the Americas coming from all industry groups and driven by demand for global operating models, CRM and ERP. We also saw an uptick in post merger integration and smart grid related projects. Outsourcing revenues also increased as we saw strong growth in our energy industry group. Communications and High-tech revenues reflected a decline of 3% in local currency. Our consulting revenue declines moderated significantly since the A modest decline in outsourcing revenues reflects the impact of last year's cancellations. The activity building in communications and high-tech is largely focused on next generation networks, strategic sourcing, content delivery and innovations in marketing and customer service. Health and public service revenues were flat in local currency. We are seeing growth in our outsourcing business led by increased volumes at existing clients in our US Federal and our health practices. We experienced declines in consulting revenue in the public sector as continued uncertainty and challenges in the public sector remain, particularly in the U. S. And the U. K. We are seeing strong growth in emerging markets, such as Brazil and Mexico. Moving down the income statement. Gross margin was 34.7 percent compared with 32.5 percent for the same period last year, reflecting a 220 basis point improvement. Sales and marketing expense was $714,000,000 or 12.8 percent of net revenues compared with $525,000,000 or 10.2 percent of net revenues for the Q3 last year, an increase of 2 60 basis points. The 220 basis point improvement in gross margin was offset by a corresponding increase in sales and marketing expense due to the implementation of our sales effectiveness model put in place at the at the with $411,000,000 or 8.0 percent of net revenues for the Q3 last year. So while G and A dollars were flat year over year, they were down as a percentage of revenues. We continue to hold the line and work our G and A cost down as a percentage of net revenues. Operating income was 804,000,000 dollars reflecting a 14.4 percent operating margin. This compares with $732,000,000 or 14.2 percent operating margin in the Q3 last year, an increase of 20 basis points. Our financial services and financial services and resources operating groups posted growth in operating income and operating margin compared with the Q3 last year. This was due primarily to revenue growth, to revenue growth, notably consulting revenue growth, which also brought higher utilization. Health and Public Service operating margin declined in the Accenture, we achieved an expansion of 20 basis points in operating margin. As you know, we manage our business operating margin and are pleased with this result. Our effective tax rate for the quarter was 29.8 percent compared with 28.2 percent for the Q3 last year. Net income was $564,000,000 for the 3rd quarter compared with $537,000,000 for the same quarter last year, an increase of 5%. Diluted earnings per share for the quarter was $0.73 compared with $0.68 in the Q3 last year, an increase of 0 point 0 $5 Here's how that breaks down. A $0.03 increase from higher revenue and operating income in local currency, a 0 point 0 $2 increase from a lower share count and a 0 point 0 $3 increase from a 0 point 0 $3 increase from favorable foreign exchange rates compared with the Q3 of fiscal 2019, offset by a $0.01 decrease from lower non operating $0.01 decrease from lower non operating income and a $0.02 decrease from a higher effective tax rate compared with the Q3 last year. This strong earnings performance reflects our rhythm of continued disciplined management of our business and positions us well. Now let's turn to some key parts of our cash flow and balance sheet. Free cash flow for the quarter was $903,000,000 resulting from cash generated by operating activities of $961,000,000 net of property and equipment additions of $58,000,000 This very strong cash flow reflects the continued focus on managing our industry leading DSOs. Turning to DSOs, our days services outstanding were 28 days, down from 30 days in the second quarter and consistent with 28 days at the end of last $300,000,000 of share repurchases and $824,000,000 of dividends paid year to date through the Q3. Turning to some key operational metrics. We ended the quarter with global headcount of more than 190,000 people. In Q3, our utilization was 88%, still higher than our targeted level. We are therefore very focused on where we need talent and we are on our way to hire more than 50,000 people around the world this year. Attrition, which excludes involuntary terminations, was 17%, compared with 15% in Q2 this year and 8% in Q3 last year. This is higher than we would like, but not uncommon for when we come out of a downturn. Before I turn things back to Bill, I'll comment on our ongoing objective to return cash to shareholders through dividends and share repurchases. May was the first time we paid dividends to our shareholders on a semiannual basis. As I mentioned last quarter, the dividend payment of $0.375 per share was exactly half of our previous annual dividend of $0.75 per share. Also in the Q3, we repurchased or redeemed approximately 11,000,000 shares for $447,000,000 at an average price of $41.97 per share, including approximately 5,000,000 shares repurchased in the open market. At May 31, we had 3,600,000,000 of share repurchase authority remaining. In summary, our strong Q3 results reflect the to keep executing. Thanks to the focus and determination of all of our people around the world, we delivered great results this quarter and are on our way to achieving our full year business outlook. Finally, I would also like to mention that we the preliminary list for inclusion in the Russell 1,000. Now let me turn the call back to Bill. Thank you, Pam. Before Pam takes you through the outlook for Q4 and the full year, I just wanted to take a moment and talk about where we are and how we're positioned for the future. We uneven as you know. In spite of this, our results in Q3 show a clear return to growth for Accenture. And quite simply, we our positioning to serve them is excellent. We have managed our business very well through the economic challenges. We have also sharpened our ability to differentiate our offerings to compete, to win and to grow. Fiscal 2010 is about delivering results and getting back to the momentum and growth we are executing as planned. In April, we set out our strategy to the investment community. In short, we see growth coming from 3 dimensions. The first dimension is our core business. This includes the vast majority of consulting technology and outsourcing services we've traditionally provided to our clients. We have refreshed and renewed our core. It is alive and vibrant, incredibly differentiated and powerful. Our core business is and will continue to be our primary growth engine. The second dimension are new initiatives and businesses. This is a set of services that we are building both within and on top of our core. Things like analytics, digital marketing, mobility, smart grid and sustainability as well as new technology areas such as cloud computing and cybersecurity. We believe many of these have the potential to become new $1,000,000,000 services for Accenture. And finally, the 3rd dimension is geographic expansion. This is about taking all the elements of our business and providing those services in more places around the world. We are dialing up our focus on our 6 strategic growth markets as well as entering and expanding in new markets. We have the unique ability to provide consistent service to the world's biggest companies anywhere in the world they operate. Our core is executing well, but we still have incredible headroom even in our most penetrated markets. We are seeing real traction in our new business areas with a growing pipeline of opportunities. And our geographic expansion strategy is well underway. In fact, over the past few months, I visited Accenture offices and clients around the world, including in China, Mexico, Africa and the Middle East. And I'm excited about the Accenture are 2 things, our talent, having the best people in our industry and our superior execution, being better at what we deliver than our competitors. We continue to have an unyielding focus on recruiting and retaining the best people with the deepest and most relevant skills and breadth of experience. And we continue to instill discipline and a culture of performance excellence in everything we do for our clients and in how we run our own business. In fact, we've recently created a new role of Chief Performance Officer to further our commitment to this important area. These are among the many reasons we are better positioned than ever for the future. Now I'll turn it back to Pam, who will provide our business outlook for the Q4 and the full year. Thank you, Bill. This business outlook for fiscal year 2010 includes 4th quarter revenues and our final view on the year. For the Q4, we expect revenues to be in the range of $5,150,000,000 to $5,350,000,000 which reflects local currency growth of 5% to 9%. This revenue range assumes a foreign exchange drag of 5% for the quarter that is based on the rates over the last 3 weeks. Turning to the full fiscal year. We are now assuming a foreign exchange impact of positive 2% for the full fiscal year, which has trended down from the positive 3% assumption we provided last quarter and from the positive 4% assumption we had when we percent decline to a 1% increase in local currency. We continue to expect new bookings for the full fiscal year to land in our previously guided range of $23,000,000,000 to $26,000,000,000 Given where we are in the year and over 18 $1,000,000,000 of bookings year to date, we expect to end up toward the middle of that range. This is even with the additional 2% foreign exchange drag we have experienced since we first provided our bookings outlook in October. We now expect operating margin to be 13.5 percent for the full fiscal year given year to date performance and our projection Q4. This is 10 basis points higher than what we last communicated. We are updating our annual effective tax rate to now be in the range of 29% to 30%. We now expect earnings per share to be expect operating cash flow to be in the range of $2,500,000,000 to $2,700,000,000 with property and equipment additions to now be $240,000,000 and free cash flow to now be in the range of $2,300,000,000 to $2,500,000,000 an increase of $200,000,000 from our previously provided range. This completes our business outlook for fiscal 2010. At our Investor and Analyst Day on April 8, I provided a preliminary view into our fiscal year 2011 targets for revenue growth in local expect local currency revenue growth to be in the range of 7% to 10% for fiscal year 2011. This level of business expansion and all of the key underlying planning assumptions about our business remain the same, except of course for foreign exchange dancing around. As I also mentioned on April 8, I will provide our full business outlook, including any impact of our currency assumptions when we do our Q4 earnings call at the end of uncertainty in Europe has become center stage. We have become very agile responding to the markets around the world. We will continue to leverage the best of Accenture, our very experienced leadership team, our scale, our market position and our client relationships. Through our unique ability to combine consulting and outsourcing services, we will focus on value for money for our clients and in so doing, we do what we always Our first question comes from Raj Bourgeois with Bernstein. Okay, guys. Great. Thanks for the update here. I guess I wanted to inquire a little bit about the outlook for the next year. I'm wondering if you feel better or worse about your 7% to 10% revenue growth guidance for fiscal 2011 compared to how you felt at Analyst Day? And specifically, where we're seeing a lot of questions is in the area of Europe. Do macro issues in Europe cause you to worry a little more about that fiscal 2011 guidance? Or does having a good quarter under the belt make you still feel pretty comfortable with that range? Rob, this is Bill. It's good to talk to you. We feel good about the 7% to 10% as good or better as we felt back in April. The level of business activity, I think in the U. S, we see we're getting through the recovery and into sort of an expansion. Europe, of course, is uncertain, but we haven't seen it impact our business at all. And in Europe, we have great market penetration and great clients and we see the leading companies continuing invest for their future. So I'm sure Europe will bounce along a little bit, a little less certain than the United States and North America broadly. But on balance, we feel very good about the business and as good or better as we felt in April. Okay, great. And I guess on the margin front, I'm hoping that the fact that you're now committed to some modest margin expansion for fiscal 'ten, I'm hoping that's a reflection that Accenture is in an ongoing way committed to trying to pursue margin expansion every year rather than the idea of holding back on margins? I think that's a fair statement, Rod. All right, great. Specifically also on the margin front, I was interested that you increased your sales and marketing expenses 40 basis points to drive a better pipeline. I'm wondering if that's a function of having pulled back on your sales and marketing expenses last year given the downturn or so is it a function of an easy comparison versus last year on your expense basis? Or is it a function of seeing a better pipeline, but also a a question that there's still plenty of fighting with the competition. That will never go away. But frankly, the few basis point increase there is just in the normal course of things. Our people generate the business and then many of our people get into delivery mode and the business is very busy right now. And so that will fluctuate around a little bit, but it's certainly not engineered in any way. And we're pretty relaxed about sort of the yield we're getting from the sales and marketing effort that we're putting in. So it's not a reflection of tougher competition or a reflection of a sort of recent big jump in the pipeline? No, not particularly. Okay, great. Thanks guys. I'll turn it over. Okay. Thanks, Ron. We have Darrin Peller with Barclays. Just a quick follow-up on Europe. Would you mind giving a little more disclosure on the revenue generated from governments in Europe versus corporates and just any sentiment that they've given you? And then I'll just a quick follow on. Yes, the government or what we call public services is the smallest part of Accenture in Europe. And I think that we do see isolated impact from the UK, which is our largest market there. Okay. So there is an isolated impact being seen there at this time? Yes. I mean, the U. K, it's very public knowledge that they're scrutinizing all the public expenditures very closely. I think you got to go to the Prime Minister in order to get blessing. So as they continue to deal with their challenges, you have to have a good business case and a solid payback and a near term one that recognizes that you're going to deliver value for money. That said, there's still a lot of services that are provided and supported in the U. K. That need to go on. And so the business volume there will continue, but a lot of the opportunities for the new things, I think we could safely say are probably being put on hold in the UK and maybe 1 or 2 other countries as time goes on. All right, thanks. And then quickly on consulting book to bill came down to about 1x and would you say trends are around or basically faster revenue conversion there? Are higher quality contracts beginning to convert? And do you see more coming through in the second half? Well, the level of activity is intense, I think, as I would be the choice of words that I would use. I think we do see smaller pieces. There's no question, so the velocity is much higher. And many times, you agree it on a Friday and you start it on a Monday. So there is a lot of spin in there. And we're pretty comfortable with the 1.0. We looked at that very hard. But the thing we're excited about is sort of the level of consulting activity, particularly the new things and companies that really haven't been investing in their business over the past 12, 18, 24 months are starting to put a toe in the water or up to their knees at least in terms of new initiatives that they want to get underway so they can hit their calendar 2011 with some momentum and some new projects. That's great. All right. Thanks guys. Thank you. Next is Tien Tsin Huang with JPMorgan. Hi, Pam. Thanks so much. Just a kind of a Nick question first. What's driving the difference in revenue outlook in the 4th quarter of the 5% to 9% versus the fiscal 2011 outlook of 7% to 10%? What's driving the lower end of the range there? Well, the 7% to 10% is of course over the whole year versus the quarter. I mean I think this is just reflects how our business is ramping. It was almost 4 this quarter and it's trending up a little next. Okay. So nothing unusual? In up a little next. Okay. So nothing unusual? No, no. Okay. And then just in the quarter itself, the bookings allocation between It was right about what we expected and really pretty consistent with the way it's been over the recent past. Okay. Last one just on the gross margin. I know you said that some of the improvement was due to the sales effectiveness model Pam, but it was still the biggest year on year increase we've seen in quite a while. So I'm curious if there's anything else that's driving some of that gross margin expansion beyond the sales effectiveness? No, there's not at this time. As you know, I will never give up on that and we'll be continuing to push that in fiscal 'eleven. But for right now, we saw some very good progress with that last year, but and we'll be pushing again on it next year. All right. Good stuff. Thanks a lot. Thank you, Tien Tsin. Tien Tsin. Next we have Joseph Foresi with Janney Montgomery. Hi, Joseph. Hi, how are you doing? I guess my first question is, I guess a little bit surprising to see utilization up around the 88% range. I was wondering is that holding you back from addressing revenue opportunities at this point? And how do you manage that potentially coming down in an effort as you still try kind of raise your margins here? Well, as we have said, 88 we view as hot and we continue to hire aggressively in shovel coal and the engine, if you will, to keep the train moving down the tracks. We'd like to see that come down a little. Our supply and demand balance is in very good shape right now, but we want to continue to get great talent, which will give us more people to create new opportunities as well as learn some new skills for the the things we see in the future. But we continue to focus on that. We've been holding it at that 88% level. And if we took a few points off it, that would be talent in a smart way as best we can, but the business has rebounded and we're keeping a lot of people busy. Has there been any change in the size, length or the pricing on any of the deals over the last couple of months? Really, no. I mean, if you stand back in the law of large numbers, pricing continues to be challenging around the place. In Europe right now, it's particularly challenging. We have our places where the pricing is getting better, but on balance, it's still very competitive out there as people focus on highest quality work. And other than that, I think it's been pretty consistent for the last couple of quarters in terms of the activity and the the activity and the momentum that we see. The good news is, I think, we're getting some better choices in terms of the nature of the work. The mix of work is starting to change a little, particularly the new next generation kind of technology stuff has really taken hold, and that's been in the last quarter. And that's a place where we think we have very distinctive experience and capabilities, and we hope be able to get better pricing leverage in some of those specialty areas as we move into the next quarter or so. And just maybe my final question here. I wonder if you had to describe sort of the inning of recovery here in North America versus that in Europe. I wonder if you could maybe place that. Are we at full recovery in the U. S, maybe actually pushing new opportunities? And what inning would you consider Europe to be in at this point? Well, I don't know. They're in different innings. I don't know. I know that. I was just trying to get the best answer I can add to you guys. Through the innings, I guess, I know that a lot of you Yankees fans are. I'm a Red Sox fan. Okay. Thank you for that. No, I guess I'd look at it this way. If you look at the U. S, the recovery is solidly underway, but it is not widespread yet. But in a lot of industries, we're starting to move from recovery to expansion. And expansion takes a little off the speed, right? But it broadens the nature of things people are working on. In Europe, I think it's very safe to say that we haven't seen the recovery kick in yet. And so I think there's still plenty of runway to go in Europe. And I think Europe has been in a little bit of a pause just based on the debt situation and the euro situation as people trying to figure out like what are the economics of things and what are the decisions they're going to make. But if you look at statistically, you'll see from whether you look at the conference board, the business roundtable or whatever, you will see in North America, an increase in hiring over last period, an increase, a modest one in capital spending, and people's expectation for increases in sales. And you can't correlate the same economic look at Europe at this point in time. But just to be clear, it's a positive Europe, not a reversion companies from the local companies. Many of the global companies, you know, companies from the local companies. Many of the global companies need to compete all over the world and those companies are continuing to invest and move out because they are seeing European companies that primarily don't see is the European companies that primarily sell on a pan European basis have not seen consumer spending kick in. And so I think they're just pausing waiting to see how that's all going to unfold. Okay. Thank you. We'll next to Julio Conteros with Goldman Sachs. Hi, Julio. Hey, guys. How are you? So it sounded like Europe is more like the Celtics and the U. S. Is more like the Lakers right now? Yes. You might say they're a little bit like the Knicks. Got it. Just real quickly on the headcount plan, I think you had said 50,000 plus and just based on some quick calculations, it looks like you guys are running at least in terms of net headcount as around 10,000 for this quarter. Is that a rate that we can expect for the next, I guess, 1 or 2 quarters from here? Or how do we think about the ramp up headcounts to kind of balance that against the utilization levels today? Well, I think at least for the next quarter, I mean, we're probably something around 40,000 hires year to date and do another 10 next quarter. So I think that's at least fair for the next quarter. That gets you to the 50,000. Got it. And then the 7 to 10 for fiscal 2011 in terms of revenue growth, is there any way to sort of break that up a little bit if there's any visibility in terms of what the assumption implied in that is for Europe potentially? Is Europe I guess in other words, Europe expected to grow, is it flat, is it down? How are you guys thinking about that in that sense? Europe is expected to grow and we probably aren't going to provide that exact background bit of detail. But just to sort of complement what Bill just said, I mean, even quarter would mark a pretty big turn, right? You were down 9% constant currency and now back to flat in terms of European trajectory for constant currency growth? Right. Got it. And then just lastly, anything to the consulting numbers relative to our numbers at least the consulting revenues and the consulting bookings were a little bit lighter than what we were looking for, still pretty good in terms of the sequential improvement? Yes, I mean, I think as I mentioned, we had record bookings in technology consulting, management consulting very good. Maybe the SI bookings were a tad light, but again we had very good growth in a couple of big countries in SI and revenue. So that's really the color on that. Thank you. And next we have Adam Prisch with Morgan Stanley. Thanks. Good afternoon. Hey, Adam. I just wanted to most of my questions have been asked and answered already. I just wanted to kind of tie in maybe a couple of the questions that were asked though. If there was any blemish in the quarter, I would tell you it was maybe consulting bookings were a little bit lower than we were expecting, but you guys are speaking very bullishly. Obviously, Q4 growth is accelerating. So I just wanted to know if there was anything in this quarter's consulting bookings that were maybe kind of one time ish like a bookings that were maybe kind of one time ish like a push out, some delays or anything like that, but just wanted to know what the impetus for you guys being so bullish about the next couple of quarters are? Well, we were pleased with the bookings that we reported, but in every quarter there's some push outs, there's some things that didn't come through, things that drifted into the Q4 that we're sure we're going to get then. But I wouldn't say it was out of the ordinary. That happens all the time. So we're pretty comfortable with the bookings we have. We do like the trajectory and the momentum. And the other thing that is important to me, as you know, is sort of the nature of the work. And the nature of the bookings that we got in terms of new things, transformation with a small T, not a big one, but things that are defining engagement that will have downstream impact for the firm hopefully for years to come. And so those are the things that we feel good about the quality of the bookings. Okay. So things that we talked about also at the Analyst Day when the markets that we enter are changing going from more of a conservative cost cutting mentality to more of a growth mentality. Are you still seeing positive trends in things like shorter sales cycle, less sea level sign off required, less focus? Obviously pricing is always up there, but it's not necessarily the first thing that people look at. Are you starting to see the underlying factors ease up a little bit or is that trajectory continuing? Yes. I'd say on balance, yes. It's interesting. I don't know if it's sea level sign off, but sea level involvement. I mean, as executives are sort of starting to turn to look to the future, they're getting involved very directly in a lot of these new initiatives. So they're very close to it. In fact, they're the sponsor of half of them. And the thing that also going through our analysis, things around how do you compete on the global stage, right, has continued to be more important. And how do you focus on customer service in sort of a next generation way. It's been another thing. And we hadn't seen a whole lot of that 4 quarters ago, but that is what has turned. So there's a better mix of the cost performance and the revenue and growth enhancement in the portfolio of new bookings than there were say 2 or 3 quarters ago. Okay, great. Thanks guys. Thanks Adam. Thank you Adam. Next we have Edward Caso with Wells Fargo. Curious about how much of that comes up for renewal in the next 4 or 5 quarters? And what you're seeing as far as changing attitudes on the part of your clients? In other words, are they looking for more offshore? And is that creating a greater competitive wedge satisfied with our consulting bookings. I mean, our outsourcing bookings, I'll just start with that. I want them to be higher. I expect them to be higher. The good news is outsourcing has come back. The downturn was so severe that people just stopped doing anything. And so now when we look at the pipeline and we look at the activity levels and we look at the bookings, we see people back focused on this. But there's no question that people are looking for real value for money. And so it's incredibly competitive out there. I think what's important though, Ed, is you don't take an initiative in how to put take an initiative and how to put a better proposition on the table to extend the relationship you have. And we very much leverage our offshore capability. We now have 100,000 people in the global delivery network, 50,000 people in India as of May 31. And we leverage that in order to put a proposition on the table that improves the economics for our client and works for Accenture economically as well. And so that's the approach we pretty much taken to the anniversaries contracts. Could you give us a sense for how many points of revenue growth that takes out now that as you What do you mean by a headwind? Well, as you move from say maybe all on-site personnel to a greater percentage of people offshore, you're $1,000,000,000 contract has become an $800,000,000 contract. And just a sense for sort of the mix shift you're facing? Yes. I mean, I think in outsourcing, I think you're referring to technology outsourcing primarily, right? Technology and BPO, yes. Okay. Well, one of the things that we talked about on April 8 was that in business process outsourcing, I would say there is really not any headwind there, because really we're pretty much all the parts that can be in lower cost locations are. In application outsourcing, we're also well down that road. It's really in system integration where we have more of that to go. Thank you. Thanks, Ed. We'll go to Bryan Keane with Credit Suisse. Hi, Suisse. I'm doing well. FX, right, Bryan? Yes, curious, has your assumptions in Europe changed for fiscal year 2011 due to some of the uncertainty? Or is Europe plans the same as when you the guidance in April? Well, Brian, as I mentioned in April, and I remember you were right out of the chute with the FX question there then too. We will confirm all of this in the fall. And I think the most important thing is because we run our businesses in local currency, we plan them in local currency, we manage them in local currency and all of the key underlying business assumptions we have remained the same. And yes, I mean, foreign currencies in Europe have been jumping around. We plan for some room in our earnings per share, but really don't see any point right now in providing the FX assumptions for fiscal 2011 because it may change again come September. Yes, I was asking about constant currency in Europe. Has that plan changed? Yes. No, it has not. We haven't changed that. And the thing about one of the comments made is about agility. And we learned a lot in this last sort of 6 quarters about how to be agile and how to have the offerings the clients are looking for. And so when we look at Europe right now, we recognize there could be some changes in terms of demand patterns and things over there. But our job is to just make sure we respond to those as directly as we can. And so we feel very good about Europe broadly. I mean, we know there's going to be some bumps over there just based on everything you read. But at the end of the day, it's just you have the right offerings for the right companies and are you getting in front of all of those. And that we feel pretty comfortable with. So when we look at our business plan for Europe for next year, I mean, we intend to execute it as we had when we first conceived it. Yes. So there has not been a change since April 8. Okay. And then just two last clarifications on Europe. One is just can you let us know your exposure to kind of that pigs region and has that region been a little bit weaker? And then just to be clear, over the last month or so, have you seen Europe start to be different, kind a different trajectory in growth or it's been sluggish and it continues to be sluggish, so there's no real different change? We have not seen anything over the last month. In fact, if anything, it's been more of a sort of gradual pickup. And in terms of those countries in that acronym, we do have large businesses in Italy and in Spain. Those have always been extremely well managed businesses for us and continue today. Yes. I would just add, I mean, we see Ireland bouncing back ahead of the game in some ways in terms of a lot of Ireland has taken the medicine. And I think it's the other thing we look closely, Spain, countries. And so a lot of them, even though they happen to be in Spain, they're big global banks and they react more to the global market than they react to the market in Spain and that serves them exceptionally well and it serves us well also. Okay. And I'll just leave it with the FX question. I'm Our math would say it's a little less. Okay, great. Thank you very much. Thanks. We'll go to Karl Keirstead with Kaufman Brothers. Yes. Hi. I've got a question to follow-up on Adam's about consulting and revenue. So I'll ask it a slightly different way. Maybe it was coincidence, but in constant currency, your bookings growth in fiscal 2009 was about equal to what your constant currency revenue growth will be this year. And yet if you hit the midpoint of your bookings guidance for this year, it'll be about flat bookings and yet that needs to drive 7% to 10% revenue growth next year. So I guess my question is, is the revenue guidance dependent upon a real uptick in bookings or has something changed in the business such that the bookings this year are simply going to convert a little the bookings, things are converting faster. Things are smaller and of shorter duration, which means that you can't really make those that comparison that you made. And we do have visibility as we look forward into fiscal 2011 that's very similar to what we had at this point last year. Okay. That's good color. Thank you. Operator, we have time for one more question. Thank you. That will come from Moshe Katri with the Cowen Group. Just briefly on pricing, some of the Tier 1 offshore companies are talking about the scenario where they're actually planning to go back to their customers and trying to reprice some of the existing engagements I. E. Getting better pricing. Maybe you can touch base on that. Thanks. Well, I haven't seen one of those. I think it's a good theory. It's a good story. I do think, frankly, you look at the pricing on the new work, right, given the resources you have, given the competitiveness, given whether it's sole source or not and whether you want to open the door to people coming in. I think there is just a lot of people have taken mental possession of the pricing that's been in the market. I think fundamentally the pricing has changed. And that's why we look really hard at our cost to serve and we drive our cost to serve down all the time because that's where we create lift. We think we have opportunities to get better yield out of the stuff we do offshore, particularly the things we move from onshore to offshore than we do today, and we're going to focus on that in our 20 11. But I haven't seen a lot of initiatives of anybody repricing stuff out there. And frankly, we're looking ahead at the work, but we're not looking back at the work that we might have had. Great. Thanks. Let me just wrap up and say a couple of things in closing here. First, I'm delighted with our performance in the Q3. It's been a rough ride around the place in terms of the environment. It's been a tough environment for our clients. But what was most important to me is that we execute in 2010. And maybe more important than that, we get Accenture back on its trajectory of increasing growth and we've done that. We couldn't do that without the more than 190,000 men and women of Accenture whose focus and commitment to their work and their clients is what enables us to deliver real value not only to our clients, but our shareholders as well. So I thank you very much for joining the call today. We appreciate your continued support, and we look forward to talking to you again in our Q4 2010 earnings call in the fall. All the best. Thank you. And ladies and gentlemen, this conference will be available for replay after 7 p. M. Tonight through midnight Thursday, September 30. You may access the AT and T Executive Play back service at any time by dialing 1-eight hundred-four seventy five-six thousand seven hundred and one and entering the access code 1,000,000,000 13. International callers dial 320-365-3844 using the same access code 158,013. That does conclude our conference for today. Thank you for your participation and for using AT and T Executive Teleconference. You may now disconnect.