Accenture (ACN) Chairman and CEO Pierre Nanterme discusses Q4 2014 earnings results conference call held on September 24, 2014.
Edited Transcript of Accenture (ACN) Q4 2014 Earnings Results Conference Call…
Company: Accenture (ACN)
Event Name: Q4 2014 Results Earnings Conference Call
Date: September 24, 2014 8:00 AM ET
Q4 2014 Results Earnings Conference Call – Webcast audio
Ladies and gentlemen, we would like to thank you for standing by and welcome to the Accenture Fourth Quarter Fiscal 2014 Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) And as a reminder, today’s conference call will be recorded.
I would now like to turn the conference over to your host and senior facilitator as well as our Managing Director, Head of Investor Relations, KC McClure. Please go ahead.
KC McClure – Director, IR
Thank you, Steve, and thanks everyone for joining us today on our fourth quarter and full year fiscal 2014 earnings announcement. As Steve just mentioned, I’m KC McClure, Managing Director, Head of Investor Relations. With me today are Pierre Nanterme, our Chairman and Chief Executive Officer; and David Rowland, 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. Pierre will begin with an overview of our results. David will take you through the financial details, including the income statement and balance sheet along with some key operational metrics for both the fourth quarter and the full fiscal year. Pierre will then provide a brief update on our market positioning before David provides our business outlook for the first quarter and full fiscal year 2015. We will then take your questions before Pierre provides a wrap-up at the end of the call.
As a reminder, when we discuss revenues during today’s call we’re talking about revenues before reimbursement or net revenues.
Some of the matters we’ll discuss on this call, including our business outlook, are forward-looking and as such are subject to known and unknown risks and uncertainties, including but not limited to, those factors set forth in today’s news release and discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q and other SEC filings. These risks and uncertainties could cause actual results to differ materially from those expressed in this call.
During our call today we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. As a reminder our results last year included benefits from final determinations of prior year U.S. federal tax liabilities and a reduction in reorganization liabilities. We include reconciliations of non-GAAP financial measures where appropriate to GAAP in our news release or in the Investor Relations section of our website at 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 Pierre.
Pierre Nanterme – Chairman and CEO
Thank you, KC. And thanks everyone for joining us today. We are very pleased with our results for both the fourth quarter and the full fiscal year.
Starting with the quarter our strong revenue growth of 8% was broad-based across the different dimensions of our business and coming on top of our strong growth in Q3, enabled us to deliver an excellent second half of the year.
For the full year we increased market share, generated record revenues and new bookings, grew EPS faster than revenues and generated strong cash flow, all while continuing to invest to further differentiate our business and delivering significant value for our clients and shareholders.
David will provide more detail in a moment but here are a few highlights for the year. We delivered record new bookings of $35.9 billion. We grew revenues 5% for the year; we delivered earning per share of $4.52, a 7% increase. We expanded operating margin 10 basis points to 14.3%. We generated free cash flow of $3.2 billion and we continued to have a very strong balance sheet, ending the year with a cash balance of $4.9 billion. We returned $3.8 billion in cash to shareholders through share repurchases and dividends and we just announced our semi-annual cash dividend of $1.02 per share, which is a 10% increase over our prior dividend.
Our performance in fiscal 2014 clearly demonstrate that we are executing very well against our strategy and given our strong growth in the second half of the year, I am pleased with the momentum in our business as we enter the new fiscal year.
Now let me hand over to David. David, over to you.
David Rowland – CFO
Thank you, Pierre and thanks to all of you for joining us on today’s call.
Let me start by saying that we were very pleased with our overall results in quarter four as they continue to reflect positive momentum in many areas of our business and clearly illustrate the relevance of our growth strategy and the yield we are getting from important investments we have made over the past two years.
Before I get into the details, I’d like to highlight three aspects of our quarter four results which are particularly noteworthy.
First, the most distinguishing aspect of our results was clearly the strong top line growth of 8%, exceeding our expectations and landing above the top end of our guided range for the quarter. Our revenue growth is underpinned by continued improved growth rates in many areas of our business, building further on the improvements we delivered in quarter three. And overall net revenue growth was at the highest levels we have seen since quarter four of fiscal 2012.
Second, our profitability in quarter four came in as expected, yielding 10 basis points of expansion for the full year. It’s noteworthy that we achieved this result while taking actions to continue to align our headcount and labor costs in certain parts of our business. We are pleased with the progress we’re making to better position our profitability going forward.
Third, we generated strong cash flow of $1.5 billion in the quarter, putting us at the upper end of our previously guided annual range and of course we continue to return significant cash to shareholders while at the same time investing in our business. So we are very pleased with the quarter and in fact more broadly with our strong performance in the second half of the year.
With that said, let’s now turn to some of the details starting with new bookings. New bookings for the quarter were $8.3 billion resulting in $35.9 billion in new bookings for the full fiscal year which was at the very top of the business outlook range provided in June and represents an all-time high in annual new bookings.
Consulting bookings were $3.9 billion, with a book-to-bill of 1.0. Outsourcing bookings were $4.4 billion with a book-to-bill of 1.2.
Taking a closer look at our new bookings, there are several additional points worth nothing. For the fourth consecutive quarter, consulting bookings landed within our target book-to-bill range and reflected good demand for systems integration and management consulting.
For the year, consulting bookings of $17.1 billion were the highest ever with management consulting and systems integration both achieving a strong 1.1 book to bill and technology consulting also delivering a solid year at 1.0.
Solid outsourcing bookings
We continue to be pleased with another quarter of solid outsourcing bookings. Results in technology outsourcing reflected an uptick compared to quarter three and BPO bookings continue to reflect healthy demand.
Also there were a number of record highs with our new bookings results in fiscal 2014, in both consulting and outsourcing and in outsourcing, particularly in BPO which had a 1.7 book to bill, CMT Financial Services and H&PS set record highs as well.
And finally we continued our track record of winning large transformational projects with nine clients with bookings in excess of $100 million bringing the total for the year to 39.
Turning now to revenues. Net revenues for the quarter were $7.8 billion, an increase of 10% in U.S. dollars and 8% in local currency, reflecting a positive 1.5% FX impact, consistent with the assumption provided in June.
Consulting revenues for the quarter were $4 billion, up 6% in USD and 4% in local currency. Outsourcing revenues were $3.8 billion, up 15% in USD and 13% in local currency.
Looking broadly at the major drivers of growth in the quarter, outsourcing was a highlight coming in even stronger than we expected driven by strength in both BPO and technology outsourcing. In addition, we continued to be pleased with the strong contribution of our digital-related services to our overall growth.
Turning to the operating groups. The momentum in communications, media and technology continued with 12% growth, the highest in 10 quarters. Broad-based growth was driven by three notable areas: E&HT, outsourcing and the Americas.
In Products, the 12% growth was broad-based across all industries and in both consulting and outsourcing. H&PS grew 9% in the quarter, coming from both public service and more notably Health, where we continued to deliver double digit growth in consulting and outsourcing.
Financial Services grew 8%, up from last quarter led by very strong growth in outsourcing and within our banking and capital markets industries. Resources was flat in quarter four and while we still have some work to do, we were encouraged by progress in several areas. We had growth in three of the four industries while natural resources continues to be challenged globally.
Moving down the income statement. Gross margin for the quarter was 31.7% compared with 33.2% for the same period last year, down a 150 basis points. Sales and marketing expense for the quarter was 11.8% of net revenue compared with 12.6% of net revenues for the fourth quarter last year, down 80 basis points. G&A expense was 6.1% of net revenues, compared with 6.7% of net revenues for the fourth quarter last year, down 60 basis points.