Accenture PLC Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tien-Tsin Huang - JPMorgan - Analyst : Thank you. Good morning. It's really encouraging to see the revenue come in here above the guidance range. I think it's the widest margin nearly two years. Julie, you said that the demand environment is more or less the same. So I'm curious what you attribute this this new pattern to, and if market conditions are maybe improving underneath here, any comments?

Question: Tien-Tsin Huang - JPMorgan - Analyst : Yeah, no, the last point is important. Short term stuff comes back. Hope you should see that pretty quickly as well on top of this. So good. And as my follow-up, just have to ask it, I get a lot of questions on the US federal government and Accenture's exposure there. I think it's about 8% of revenue based on some of your annual report disclosures. So just curious, given some of the change in administration and this discussion around efficiency, have your expectations or are you going to change your strategy here on the US federal government side? Any comments there would be terrific. Thanks for the time.

Question: Tien-Tsin Huang - JPMorgan - Analyst : Awesome. Thank you.

Question: Jason Kupferberg - BofA Global Research - Analyst : 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 improvement in consulting. Just wondering if that's still the case as you're now raising the top end a little bit. Or are you now assuming any improvement in consulting since you're almost four months into the new fiscal year?

Question: Jason Kupferberg - BofA Global Research - Analyst : Great to hear. And then just looking at the net headcount adds cumulatively over the past two quarters, I think we're almost 50,000, 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 as kind of a bullish indicator?

Question: Jason Kupferberg - BofA Global Research - Analyst : Thanks for the comments.

Question: Bryan Keane - Deutsche Bank - Analyst : Hi guys, congrats on the solid result, and happy holidays. Kind of asking the guidance question a little bit differently. The 4% to 7% constant currency revenue guide for the fiscal year '25 is a touch below just the first quarter 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 quarter level as we get more into fiscal year '25?

Question: Bryan Keane - Deutsche Bank - Analyst : Got it, got it. That's helpful. And then maybe you guys could just talk a little bit about the industry group, the financial services. A lot of times, that kind of leads out of economic slowdowns. 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 IT service providers. Thanks so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 1:00PM, ACN.N - Q1 2025 Accenture PLC Earnings Call

Question: Bryan Keane - Deutsche Bank - Analyst : Great. Thanks again.

Question: Darrin Peller - Wolfe Research - Analyst : Guys, thanks, great results. Could we just touch on your potential for visibility this year into budgets and the timing you'd expect again? I know last -- I think earlier this year, it was generally in the January, February time frame, which had moved back up a little bit. But do you still anticipate that kind of visibility at that part of the year, where we could get a better picture on whether discretionary is really going to pick up or not? And then maybe just as a dovetail on that, maybe just conversations you're having right now around AI for next year, obviously the bookings keep looking really strong for you guys, which is great. Any more specifics on where you're seeing it incrementally improve? Thanks guys.

Question: Darrin Peller - Wolfe Research - Analyst : All right, that's really helpful. And then just when we look at the opportunity for what you're -- where you're hiring, you mentioned India, but we've heard 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 mix again. It had gone for a while more offshore, looking for better price optimization. But where are we on that right now? Are you seeing any evidence of a shift back to nearshore, onshore? Thanks again guys, great job.

Question: Darrin Peller - Wolfe Research - Analyst : Great. Thanks Julie, thanks, Angie.

Question: Jim Schneider - Goldman Sachs - Analyst : Good morning. Thanks for taking my question. Julie, I understand that your outlook and you're not really seeing any differences on macro side, and your outlook reflects sort of idiosyncratic growth. But can you maybe discuss a little bit about when you talk with clients, what's the sort of range of outcomes for discretionary increases in the 2025 budget outlook? And how big a factor is rates specifically as a macro impact when they're thinking about that? And do you think that changes materially given the Fed's message yesterday?

Question: Jim Schneider - Goldman Sachs - Analyst : That's helpful. Thank you. And then with respect to the AI work, you talked about some of the context of the client conversations you're having. But quantitatively, 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 sort of their pivot or when they might pivot to sort of larger, more transformative projects within GenAI?

Question: Jim Schneider - Goldman Sachs - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 1:00PM, ACN.N - Q1 2025 Accenture PLC Earnings Call

Question: Dave Koning - Robert W. Baird & Co., Inc. - Analyst : Yeah. Hey guys, great job. And I guess my question just on the fiscal Q2 guide. Historically, Q2 has been a pretty flat sequential quarter. And you're guiding, I believe, to down about $1 billion to $1.5 billion sequentially this quarter. I know a little of that maybe a few hundred million is FX. I get that. But what -- was there anything in Q1 that's kind of naturally falling off in Q2 this year that's a little unnormal, or some sequential pattern that's a little different?

Question: Dave Koning - Robert W. Baird & Co., Inc. - Analyst : 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 pickup in interest expense, I think it was $30 million in Q1, does that go to like $50 million in Q2 or something like that?

Question: Dave Koning - Robert W. Baird & Co., Inc. - Analyst : Gotcha. Thanks guys. Great job.

Question: Keith Bachman - BMO Capital Markets - Analyst : Hi, good morning. Many thanks, and happy holidays to everyone. My first question I wanted to ask is around pricing dynamics. And you've indicated that the macro backdrop is fairly steady. You're gaining share through skills, and I wanted to ask specifically about some of the legacy areas such as application maintenance, maybe the BPO work. One of your competitors suggested that pricing is pretty challenging, because there aren't enough deals and a lot of folks chasing those deals. But could you specifically address what you're seeing as pricing dynamics during the quarter? Any changes?

Question: Keith Bachman - BMO Capital Markets - Analyst : Yeah. Okay. That makes a ton of sense. Thank you, Julie. My follow-up question is in some of our recent discussions, and to be fair, with software companies, have suggested that Europe's softened in the last 30, 45 days and 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 changed the perspective that you may have as it relates to European demand over the next 12 months? Thanks, and that's it for me. And many thanks again, and happy holidays.

Question: Bryan Bergin - TD Securities - Analyst : Hey guys. Good morning, happy holidays. I wanted to ask on the service lines here. Can you comment on performance across strategy consulting, tech services and operations?

Question: Bryan Bergin - TD Securities - Analyst : Okay. And then a follow-up here on the workforce and contract profitability. So you noted most headcount was added across India. Can you just comment on what you're seeing there as far as wage inflation dynamics, just given most services companies and GCCs have been leaning in? And particularly amid the competitive pricing environment, just talk about the levers you have here to mitigate gross margin pressure.

Question: Bryan Bergin - TD Securities - Analyst : No, I understood. Happy holidays.

Question: Bryan Bergin - TD Securities - Analyst : Thank you Bryan.