Accenture Ltd. (ACN)
Q3 2009 Earnings Call Transcript
June 25, 2009 4:30 p.m. ET

Executives

Richard Clark - Managing Director, Investor Relations
Bill Green - Chairman and Chief Executive Officer
Pam Craig – Chief Financial Officer
Steve Rohleder – Chief Operating Officer

Analysts

Jason Kupferberg - UBS
George Price - Stifel Nicolaus
Rod Bourgeois – Sanford Bernstein
Julio Quinteros - Goldman Sachs
Bryan Keane - Credit Suisse
Ed Caso – Wachovia Capital Markets
Tien-Tsin Huang - J.P. Morgan
Karl Keirstead – Kaufman Bros.
Tim Fox - Deutsche Bank
Elizabeth Buckley – Arete Research

Presentation

Operator

Ladies and gentlemen thank you for standing by and welcome to Accenture''s third quarter fiscal 2009 earnings conference call. (Operator Instructions) At this time all lines are in a listen-only mode. Later we’ll conduct a question-and-answer session and if you’d like to ask a question during today’s conference you can press * then 1 on your touchtone phone. And as reminder today’s conference is being recorded. I would now like to turn the conference over to our host, Managing Director of Investor Relations, Mr. Richard Clark; please go ahead.

Richard Clark – Managing Director of Investor Relations

Thanks Gary. Thank you operator and thanks everyone for joining us today on our third quarter fiscal 2009 earnings announcement. As the operator just mentioned I am Richard Clark, Managing Director of Investor Relations. With me this afternoon are Bill Green, our Chairman, and Chief Executive Officer; Pamela Craig, our Chief Financial Officer; and Steve Rohleder, our Chief Operating 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 how we are positioning our business for the future. Pam will then provide our business outlook for the fourth quarter and full fiscal year 2009 and Bill, Pam and Steve 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 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 10K and other SEC filings.

During our call today we will reference certain non-GAAP financial measures which we believe provide useful information for investors. You can find reconciliation of those measures to GAAP on the Investor Relations section of our website at www.accenture.com. 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 – Chief Executive Officer

Thank you Richard and thanks everybody for joining us today. I am pleased with our performance in the third quarter given the environment we are now operating in. While our revenues declined they were within our expected range and the disciplined management of our business enabled us to expand operating margins and deliver solid profitability and strong cash flow. In addition, we continue to see demand for our services demonstrated by strong new bookings in both consulting and outsourcing.

Here are a few highlights from the quarter. Revenues were $5.15 billion, within our guided range of $5.1 billion to $5.3 billion. We expanded operating margin to 14.2% even with lower revenue production which is a real accomplishment in this environment. We delivered earnings per share of $0.68. We delivered new bookings of $6.6 billion with consulting and outsourcing bookings each exceeding $3 billion. Finally, we generated free cash flow of $971 million, raised our free cash flow outlook for the full fiscal year and continued to have a very strong balance sheet with no debt. While the environment remains very challenging, we believe that the actions we have been taking to respond as well as position ourselves for recovery will continue to serve us very well. With that let me now turn the call over to Pam who will provide some more detail on the numbers.

Pamela Craig -- Chief Financial Officer

Thank you Bill and thanks to all of you for listening today. Given the significant and continuing challenges in the macro economic environment globally, we had overall very good results in the third quarter of fiscal 2009. As I mentioned last quarter we remained focused on managing the business we have and driving growth where we can and are committed to delivering strong margins, cash flow and earnings with that business. Let me take you through some detail behind the numbers in our income statement, balance sheet and cash flow and some key operational metrics.

Unless I state otherwise, all figures are GAAP except the items such as new bookings that are not part of the financial statements, or that are calculations. New bookings for the quarter were $6.6 billion. This included consulting bookings of $3.2 billion and outsourcing bookings of $3.4 billion. They reflect a negative 13% foreign exchange impact when compared with new bookings in the third quarter last year. These bookings in Q3 show that there is continued overall demand for consulting and outsourcing services. In management consulting the demand we experienced was driven by our clients’ focus on cost reductions and operational improvement projects notably in supply chain optimization. In systems integration we continue to see a push toward our Global Delivery Network as clients continue to make selective investments in ERP and CRM applications. In outsourcing as well, clients’ needs to reduce costs and improve IT operations drove good bookings in applications outsourcing and infrastructure outsourcing. These bookings do reflect a moderately higher proportion of contract extensions for revenue beyond fiscal year 2010.

As we look ahead at the outsourcing revenue we have under contract, both financial services and to a lesser extent resources, have experienced a year-over-year decline as a result of lower new bookings and higher new contract restructurings and cancellations. Even with these reductions, Accenture’s future revenues under contract in outsourcing are up about 9% year-over-year in local currency.