Ladies and gentleman thank you for standing by, and welcome to Accenture's First Quarter Fiscal Year 2007 Earnings Call. At this time all participants are in a listen-only mode. Later we'll conduct a question and answer session. (Operator Instruction). As a reminder this conference call is being recorded. I'd now like to turn the conference over to our host, [Mr. Richard Clarke], Managing Director of Investor Relations. Please go ahead.

Thank you operator, and thanks everyone for joining us today on our first quarter fiscal year 2007 earnings announcement. As the operator just mentioned I'm Richard Clarke, Managing Director of Investor Relations. With me this afternoon are Bill Green, our Chairman and Chief Executive Officer; Pam 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. Steve will add some operational prospective. Pam will then provide our business outlook for the second quarter and for the full fiscal year 2007. And Bill will close the presentation before we could take questions. As a reminder, when we discuss revenues today during our call, we are talking about revenues before reimbursements or net revenues. Some of the matters we will 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. It 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 press release and discussed under the risk factors portion of the business section of our annual report on Form 10-K and other SEC filings. Accenture assumes no obligation to update the information presented on this conference call. During our call today, we may reference certain non-GAAP financial measures which we believe provide useful information for investors. And you can find reconciliations of those measures to GAAP on the investor relations page of our website at accenture.com. So now, let me turn the call over to Bill.

Thanks Richard. Good afternoon everyone and thank you for joining us today. As you've seen, we've had an outstanding quarter, we are off to a terrific start to our new fiscal year and we are absolutely delighted with the growing momentum in our business. Pam and Steve will provide the details on their respective areas in a moment. But here are some highlights. First, we achieved the highest revenues of any quarter in our history with record revenues in each of our operating groups and geographic regions. Consulting and outsourcing revenues were each at their highest in any quarter with double digit increases in both types of work. Next, we significantly increased operating income, we expanded operating margin 50 basis points, and we operated with SG&A costs at 17.2% of net revenues. We grew EPS by 28%. Our balance sheet continues to be very strong. And importantly for the future, new bookings were 5.5 billion and included a record high 3 billion in consulting, demonstrating the tremendous momentum we continue to see in this part of our business. At the same time we continue to grow headcount, attrition remains stable and utilization in the first quarter was our highest ever, well above 80%. Our first quarter results are further evidence of the strength of Accenture's business, our broad based growth, our business leverage and our confidence in fiscal 2007 and its outlook. With that let me pass it over to Pam, who will provide more detail on our financial performance in the quarter.

Thank you, Bill. Happy holidays to you all and thanks for listening today. I am pleased to tell you more about our outstanding results in the first quarter of fiscal 2007. Our quarterly revenues hit a record, our earnings were strong and our bookings were in line with our outlook. In short, the fundamentals and momentum in our business continue to be very robust. Let me take your through some detail behind the numbers in our income statement, balance sheet and cash flow. Net revenues for the first quarter were $4.75 billion, an all time quarterly record. Net revenues increased 14% in US dollars and 11% in local currency over the first quarter of last year. Our net revenues in the first quarter exceeded our previous outlook by approximately $100 million, primarily due to higher demand for consulting services and a higher than expected foreign exchange lift. Consulting revenues were a record $2.91 billion, an increase of 13% in US dollars and 10% in local currency. Outsourcing revenues were $1.84 billion, an increase of 16% in US dollars and 13% in local currency. Moving down the income statement, gross margin was 30.1% compared to 31.7% for the same period last year. SG&A costs for the first quarter were $817 million or 17.2% of net revenues compared with $802 million or 19.2% of net revenues for the first quarter last year. GAAP operating income for the quarter was $610 million, reflecting 12.8% operating margin. This compares to $513 million or 12.3% operating margin in the same period last year for an increase of 50 basis points. There are several key factors that are reflected here. First, we did a very good job, covering our salary increases that went in to effect at the beginning of the fiscal year with corresponding price…

Thank you, Pam. Let me just take a few minutes to provide some inside in to our operational highlights along the three dimensions of our business, our operating groups, growth platforms and geographies. I'll also touch on several key operational metrics, important to understanding our strong business performance this quarter. First we are delighted that three out of our five operating groups Financial Services, Products and Resources delivered outstanding double digit revenue growth. For the third consecutive quarter our Financial Services team delivered strong results with revenue growth of 25% in US dollars and 21% in local currency. Financial Services also reached $1billion in revenue for the first time and delivered a solid bottom line. We saw strength globally in our Banking and Insurance industries, with business consulting in high demand, especially in CRM and Post-merger Integration. Financial Services is also seeing strong demand for Systems Integration and BPO dominates the outsourcing space with solid activity in procurement, Human Resources, finance and accounting and learning. The Products operating group delivered revenue growth of 17% in US dollars and 14% in local currency. We see strong demand for consulting primarily in ERP, Global supply chain and CRM. Human Resources and Procurement BPO were key to our outsourcing growth in products and it's also worth noting that products led the five operating groups in bottom line profitability. Resources also delivered revenue growth of 17% in US dollars and 14% in local currency, with both energy and utilities making strong contributions to our growth in Q1. I also want to point out that globally seven of our top ten countries delivered double digit growth in local currency. Moving to our growth platforms, in business consulting we are seeing very strong growth in two areas. First, the large number of companies across all industries…

Thank you, Steve. As a reminder, each quarter we provide an update on our annual outlook for the full fiscal year. We also provide outlook for the next quarter for revenues, but not for earnings per share. For the second quarter, we expect revenues to be in the range of $4.6 billion to $4.8 billion. Now let's turn to the full fiscal year. We continue to target new booking in the range of $22 billion to $24 billion. We continue to expect our revenue growth to be in the range of 9% to 12% in local currency. Given our strong performance in the first quarter and our projections for the rest of the year, we have increased our outlook for EPS for the year by $0.03 to a range of $1.80 to $1.85. We continue to expect operating margin for the full year to be in the range of 12.6% to 13.1%. Given the seasonality of our business you should continue to expect some fluctuations quarter-to-quarter. Related to cash flow, we continue to expect operating cash flow to be in the range of $1.95 billion to $2.15 billion. Property and equipment additions to be $335 million and free cash flow to be in the range of $1.6 billion to $1.8 billion. To complete the annual outlook for fiscal 2007, we continue to expect our annual effective tax rate to be in the range of 34% to 37%. In summary, our first quarter results reflect those of a healthy, robust business which clearly demonstrated momentum for continued growth and profitability. We have a portfolio that is broad based across industries, across the different types of work we do and across all the geographies where we do business. We remain confident that we will continue to maintain and expand our strengths in the market that we serve. So, here is Bill to close before we take your questions.

Thank you, Pam, and before we would open it up for questions, let me just summarize quickly. We delivered exceptionally strong results in the first quarter, demonstrating both growth and leverage. We continue to see strong demand for all of our services, with particular momentum in Consulting, where we have been able to built capabilities that are truly second to none. One of the keys to differentiation is specialization. Across the board, we have the scale, the breadth, the depth to specialize and to further differentiate ourselves in the marketplace. And lastly another key to differentiation is superior execution and our Global Delivery Network truly continues to set us apart. Our first quarter results illustrate how we continue to build on our unique leadership position. So with that, now let's take some questions.

(Operator Instructions). And our question comes from the line of Adam Frisch, with UBS. Please go ahead.

Thanks, nice quarter guys and Pam if my math is correct, you are one for one, so don’t let Bill take all the credit here.

Adam.

Hello.

Thanks Adam.

You guys here me okay?

Yes.

Okay. On the gross margin line, Pam, lower than we were expecting but the operating margin is slightly higher. Want to get a feel for how you're mapping the numbers? Your cogs are up, I am assuming because you took more of the annual accrual in the quarter, kind of like take a while you can while the quarter was good. But you are running the company for the operating line to show that year-over-year improvement, is that the right way to think about that?

That's the right way to think about it Adam and it is hard to understand it first. We've analyzed this fully and I'll just go through it again in a little more detail. Cost of services is largely payroll, so the first thing that we looked at in gross margin was to make sure that we fully absorbed our salary increases that went into effect on September 1. And we did this very well, so at a raw level gross margin was very good. The next thing to think about here is utilization. As you have heard, our utilization was very high and thus we saw a higher payroll in cost of services and lower payroll in SG&A. And then if you mentioned strong result also allowed us to accrue a good amount of annual bonus and the annual bonus follows payroll went into books, so it substantially went to cost of services. So, as you said, day-to-day we drive the business to operating income at the bottom line and we did at the expansion in operating margin.

Okay, I don’t think people have a problem that given the upside in EPS and the buybacks and dividend, so good explanation there. Turning to revenue for a minute, our second half revenue growth was greater than the first half largely because you had much easier comps in the second half. But the strong first quarter and strong outlook for the second quarter offers two possibilities about the back half. One, there is going to be a follow-up which is kind of hard to believe because of the booking strengths or two, you're being conservative. So, being kind of new in your seat, which one should we take there?

Well, I think one thing that you should think about here Adam is FX, because FX is coming in higher than we had projected and so that is having an impact next quarter in terms of the guidance that were given for revenues. The consulting demand is also very strong right now, so that’s also reflected in there.

How much do think FX is added in the quarter?

This past quarter?

In terms of percentage of the growth?

About 3%, for the quarter that we just had.

Okay, and that was what versus budget?

It was a probably a point or more above what we had, we had about --

Okay so netted added a point basically.

Yes, at least. May be a point and half.

Okay, okay, I think that’s it nice quarter.

Thank you.

Thank you. And our next question comes from the line of Julio Quinteros with Goldman Sachs, please go ahead.

Hi, thanks. Real quickly on the -- if actually Steve, can you just go back through the comment about the asset write-down in the Government Services, I just went back through the old transcripts and haven't seen that before, I just want to make sure I understood what that was all about?

Yes, we are not going to disclose the specific client. The only think I can tell you that Julio, on a quarterly basis we review each one of the long term assets on each one of our contracts to ensure that we have got, we can recover their value and if we need to, we take a write-down, but we are not going to disclose the individual account. That’s exactly what happened this quarter.

Okay, that was, -- I just wanted to confirm that it was a new disclosure though?

Yes.

Okay got it, and then for Bill, as we have been looking at the consumer, sorry the CEO Confidence Data that had come out recently by one of the firms that publishes that information, I just wanted to correlate that back to your sort of view about the demand environment and how things are going in your discussions as we go into 2007. There's a lot of puts and takes about expectations for the demand environment, and clearly it sounds like you guys have good time by just wanted to kind of get your feel as it relates to sort of CEO confidence in the beginning of the year.

I think, I spend two days of the business round table, so, for the US component of our business, people are pretty bullish. I think its interesting that CEO's have learned to deal with an environment that’s a little more uncertain than they were used to dealing within the past. So, as we have changes in certain governments statistics, changes in interest rates, changes in energy prices and all that, people have learned to sort of roll with the punches and recognize as they got to invest in their business for the long haul, and I think when we look at the activity in the market, when we look at the pipeline and when I frankly meet with dozens of CEO’s of our clients in prospects; people feel good about their businesses and they believe they need to invest in order to compete for the long haul. So, I still feel good about everything we see outside.

Good, and just finally just as a follow-on to that Bill, the relevance of large deals, can you just sort of walk us through your thinking on that. Because clearly we sort to get caught upon the fact that there aren’t as many large deals as there used to be. But, this isn’t showing up in your numbers, you guys are still kind of knocking the cover of the ball. Can you just kind of, just make sure we understand what the relevance of that is, it doesn’t seem like much at this point?

No, it isn’t. I think we have moved along as a business. It used to be that people all stood around waiting to see if the large deal was going to close, when that was going to close and tracked it, life expectancy from birth to death. I think importantly now as there is a lot more stability in the market, because all those mid sized and the smaller deals just give you a lot more durability, a lot more stability and when you do get the big deals, they sort to come on top of your existing book-of-business. So, we have got our company right now sort of engineered to operate growth trajectory that includes the portfolio of business that's out there, and from time-to-time one of these large wins will come along and it'll only sweeten the pot, frankly.

Great, thanks guys. Thanks for the stock and stuff here.

And our next question comes from the line of Rod Bourgeois with Bernstein, please go ahead.

Hi there, Rod Bourgeois here. Listen, the gross margin dropped 1.6 percentage points year-over-year, clearly the bonus was a piece of that and I'm assuming the contract write-down might have been a piece of that. Is there a way to mention what portion of the 1.6 came from bonus versus contract write-down versus something else?

Well Rob this is Pam. As I mentioned the -- what we look at is in terms of our raw growth margin, which is before you get the bonus, that was actually very good. And so it is largely bonus.

Okay and then the SG&A was huge savings there, at 200 basis points year-over-year. Is there any lumpiness to that improvement or is that sort of a run rate that can be sustained. I assume that that's going to be a tough run rate of year-over-year improvement to sustain. So can you talk about how that SG&A savings might play out over the course of the year?

Yes, I mean that was clearly better than we had targeted. As you know, we've been on a journey to reduce SG&A year-on-year or several years now. That run rate is better than we were targeting for this year, so I think that your point about lumpiness can be expected.

Okay great, and then the consulting bookings group, you had a tough comparison, but you still did 8% year-over-year growth, looks pretty impressive. Can you talk about where the consulting booking strength came from? Is it pretty balanced across business consulting versus Systems Integration, or was there a certain spot within consulting that was particularly strong.

Yes, Rod this is Steve. I think its focused in the Systems Integration area but with healthy growth in Business Consulting as well, and if you looked at it geographically, I would say that we had a heavier focus in EMEA than in the US or Asia Pacific. Still strong in the Americas but EMEA really carry a lot of the growth there. If you looked at the OG breakdown, you did look at resources and financial services both bringing on some real strong consulting growth, primarily in Systems Integration with some Business Consulting, so.

Okay, and one other question. You mentioned the salary increase has been given and that you are offsetting that essentially with price increase. Last year you kind of indicated that the price increase exactly offset the salary increase. Can you give the numbers, I mean was it a 6% salary increase this year consistent with last year, can you quantify that a little bit?

This is Steve again. In '07 our average compensation increase was about 8% and that translated into rough average compensation cost increase of 3% to 4%. So, it's slightly up over '06.

Okay, so, what that means is that pricing is up around may be 3% to offset that?

At least 3% to 4%.

Okay alright, got it. Thank you guys very much?

Thank you, and our next question comes from the line Andrew Steinerman with Bear Stearns.

Hi, it's Andrew. When talking about the NHS transition cost, which I think you said was $125 million over two quarters and quite the majority of it being is second quarter. Which line do we find those NHS charges, and is that a cost of goods sold and how much of that was absorbed in the quarter.

Yes, Andrew, it is in cost of services and won’t give an amount to what was in the quarter, but you can expect that the bulk of the 125 million will flow in the second quarter.

And the same comment about the payment which I think that was a cash payment of a $120 million, is that next quarter or was that already this quarter.

That’s schedule for next quarter.

Got it, and share count, given them out to share count redeemed or bought back, just want to check out did it comeback more, but I know there is a lot of puts and takes to that, just based on what you already disclosed, what would be a good share count going forward?

It will come down slightly this year.

Okay, thank you very much.

And our next question comes from the line of Tien-Tsin Huang, with J.P. Morgan. Please go ahead.

Thanks, nice quarter. I had a follow-up question on the share count, actually on share repurchases in general. Given the under subscribed tender, how are you thinking about share repurchase. Is there a greater advertise for open market repurchases or may be another tender.

Well, I think all the options they are open to us at this point since and that is -- we are going to be continuing with our normal repurchases from senior executives and we will also be considering what to do with possible further discounted transactions as well as the open market.

Okay, so will stay tuned for that. Then on I guess on free cash flow which was quite healthy this quarter. You kept your guidance on free cash the same despite raising your EPS forecast, what is driving the delta there?

Well, we looked at if of course and although we see a slight up tick in cash flow, we were still within the range that we guided to, so we stuck to it.

Okay, fair enough. And then lastly a piece on the Global Delivery Network, how was this performing versus plan and could you give us some sense of revenue growth out of the global delivery network?

Well we don’t break out the revenue growth specifically for the GDN (inaudible) but I will you that we are -- even in the first quarter we are well in advance of our recruiting plans and in fact we've increased our overall target for growth for the year because of demand and not only in India but in the Philippines, Eastern Europe, and in South America, so.

Great. Thank you, nice job. Happy holidays.

Thanks. Operator we'll take one more question.

Very well. And our final question comes from the line of Bryan Keane with Prudential.

Yes hi, good afternoon. Just a couple of clarifications. First, Pam, the 24.4 million shares repurchased, I guess helped me out to understand why that this thing go down more. What are the puts that make it kind of stay more stable?

You mean for the year?

Or just for the quarter.

Alright give me a second here. We were -- our fully diluted at the end of the quarter was 875, right?

Yeah.

We had 881 at the end of Q4 that's what you're looking at.

Right so the 24 million, I guess unless you purchase them all the at the end of the quarter. I would assume that I know the number doesn’t go all the way down but I’m just trying to understand, make sure understand why it doesn’t go down?

Because most of these repurchases were later in the quarter so as you know when you do that waiting right it doesn’t necessarily impact Q1 as much as it will Q2.

Okay so Q2 will see a substantial drop in share count?

You will se a drop.

Okay. And then on the SG&A, obviously that number was lowered than a lot of us expected. I guess what exactly is going on there and why isn't that, why aren't you able to carry that forward in the future quarters?

Well, I think that there is some good G&A efficiency in there and we are very pleased with that. I think when it comes to the payroll, given that utilization was so high, there was less payroll in SG&A than we expected, and so that’s why we think there will be some lumpiness in the SG&A going forward. I mean we are obviously expecting it to come down as we plan to do year-on-year. But it did come in lower this quarter than we expected.

Bryan this is Steve, I would just add to Pam's point, in the GNA point we are spot on. On the sales piece, I can see us having increasing sales cost moving into the next two quarters specifically to drive the bookings numbers. So, that why I think Pam is saying what she is saying in terms of the lumpiness there.

Okay and then just finally Steve, the big -- or the asset write down in Government, I guess did you disclose how big that was and then secondly did that linger on as we go forward into the quarters, is that kind of a one and done type thing?

No, we didn't disclose the amount and no there's no lingering amount.

Okay so its, we won't have a recurring issue with that contract.

Correct.

No.

Okay great. Well thanks a lot and congratulations on a great quarter.

Thanks.

Okay let me just wrap up here in quick closing, I just want to say a couple of things. First of all we are obviously very pleased with our performance in the quarter. It’s a terrific way to start and kick off the new fiscal year and we are moving into the rest of the year with a great deal of confidence. We remain intensely focused on our growth agenda, capitalizing on opportunities for growth and capturing market share in the major geographies around the world. We are fortunate to have the world's most successful enterprises as our clients, helping them achieve high performance and providing them with huge value for money allows us to grow a predictable, a durable and profitable business. And lastly, we are even more fortunate to have the best people in the business who are responsible for producing these results. But, thank you very much for joining us today and thanks for your continued support of Accenture.

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