Ladies and gentlemen, thank you for standing by. Welcome to Accenture’s First Quarter Fiscal 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to our host, Managing Director, Head of Investor Relations Ms. KC McClure. Please go ahead.

Thank you, Greg. And thanks to everyone for joining us today on our first quarter fiscal 2016 earnings announcement. As Greg 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 the first quarter. Pierre will then provide a brief update on our market positioning before David provides our business outlook for the second quarter and full fiscal year 2016. 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 reimbursements 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. 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.

Thank you, KC, and thanks everyone for joining us today. We had a strong first quarter, and I’m very pleased with our results and the continuing momentum in our business. Our revenue growth was again broad-based across the different dimensions of our business, including double-digit local currency growth in three of our five operating groups, and in North America and Europe, our two largest geographic regions. I’m particularly pleased with our results in digital-related services, where we delivered very strong revenue growth of more than 20%. Here are a few highlights for the quarter. We delivered $7.7 billion in new bookings, which were in line with our expectations. We grew revenues 10% in local currency, gaining significant market share. We expanded operating margin 20 basis points to 15.2%. We delivered earnings per share of $1.28 which includes a negative impact of $0.07 from a higher tax rate in the quarter. We generated solid free cash flow of $517 million. And we returned approximately $1.4 billion in cash to shareholders through share repurchases and the payment of our semiannual dividend. So, we hope to have a good start in fiscal year ‘16. And given our strong performance, we have raised our outlook for revenue growth for the full year. Now, let me handover to David. David, over to you.

Thank you, Pierre. Happy holidays to all of you. And thank you for taking the time to join us on today’s call. Let me start by saying that we were very pleased with our overall results from the first quarter, especially as it relates to our strong and broad-based top line growth. Our differentiated growth strategy which focuses on five businesses delivered in an industry-relevant context continues to resonate with the market and yield strong value for our clients and our shareholders. Before I get into the details, let me comment on a few of the highlights this quarter. Strong local currency growth of 10% represents the fifth consecutive quarter of double-digit growth, as we continue to outpace the market and take share. The durability of our growth model is evident in our results with double-digit growth in three of the five operating groups in both Europe and North America. Digital-related services, continues to be the dominant growth theme as we continue to be a market leader in the rotation to the new. Operating margin of 15.2% reflects 20 basis points of expansion, consistent with our objective to expand margins while investing significantly in our business and our people. Free cash flow came in as expected at just over $500 million and at the same time we returned roughly $1.4 billion to shareholders through repurchases and dividends. And we continue to invest at scale in our business, closing four acquisitions in the quarter with invested capital of over 600 million, which represents a great start towards our fiscal ‘16 objective to invest as much as $900 million to a $1 billion to add scale and capabilities in key growth areas. With that said, let’s now turn to some of the details starting with new bookings. New bookings were $7.7 billion…

Thank you, David. Our strong results in the first quarter demonstrate that we continue to execute very well against our growth strategy. At our Investor and Analyst Conference in October, we provided an update on the actions we have taken and investments we have made to position Accenture to lead in the new, which we define as digital, cloud and security related services, all enabled by new and innovative technology. In the first quarter, we continued to rapidly overtake our business to the new with digital, cloud and security revenues combined, already approaching 40% of our total revenue. So, the investments we are making in these areas are clearly differentiating Accenture in the marketplace and driving significant growth. Let me bring this to life with a few examples. Digital is all about enabling our clients to unleash the power of digital technologies to create new sources of value. We continue to see very strong demand in this area and are leveraging our digital capabilities with clients in nearly every industry around the world. We are working on a five-year digital transformation with a European aerospace company, bringing our capabilities in mobility, analytics and the Internet of Things to drive productivity improvements. We are helping a global pharma company, improve its supply chain by leveraging our advanced analytics capability including the Accenture Insights platform, giving patients and doctors access to the diagnostics and medicine they need faster than ever. Cloud is increasingly becoming a starting point for clients who want to create new services faster and get access to computing capabilities in a more cost effective way. We are working with a leading U.S. energy company to deliver a new operating model, underpinned by the Accenture cloud platform and our hybrid cloud solution. With this new as a service model, the…

Thank you, Pierre. Let me now turn to our business outlook. For the second quarter of fiscal ‘16, we expect revenues to be in the range of $7.5 billion to $7.75 billion. This assumes the impact of FX will be a negative 6% compared to the second quarter of fiscal ‘15 and reflects an estimated 6% to 9% growth in local currency. For the full fiscal year ‘16, based upon how the rates have been trending over the last few weeks, we now assume the impact of FX on our results in U.S. dollars will be negative 5% compared to fiscal ‘15. For the full fiscal ‘16, we now expect our net revenue to be in the range of 6% to 9% growth in local currency over fiscal ‘15. For operating margin, we continue to expect fiscal year ‘16 to be 14.6% to 14.8%, a 10 to 30 basis points expansion over adjusted fiscal ‘15 results. We continue to expect our effective tax rate -- our annual effective tax rate to be in the range of 25% to 26%. For earnings per share, we continue to expect full year diluted EPS for fiscal ‘16 to be in the range of $5.09 to $5.24 or 6% to 9% growth over adjusted fiscal ‘15 results. Turning to cash flow, for the full fiscal ‘16, we continue to expect operating cash flow to be in the range of $4.1 billion to $4.4 billion; property and equipment additions to be approximately $500 million; and free cash flow to be in the range of $3.6 billion to $3.9 billion. We continue to expect to return at least $4 billion through dividends and share repurchases. And now expect to reduce the weighted average diluted shares outstanding in the range of 1.5% as we remain committed to returning a substantial portion of cash to our shareholders. With that, let’s open it up, so that we can take your questions. KC?

Thanks, David. I would ask that you each keep to one question and a follow-up to allow as many participants as possible to ask a question. Greg, would you please provide instructions for those on the call?

Thank you. [Operator Instructions] Your first question comes from the line of Bryan Keane from Deutsche Bank. Please go ahead.

Consulting was a little bit stronger, obviously than I thought, but outsourcing was a little softer, came in -- I think it was 5% constant currency that was down from 9% in the fourth quarter. Just trying to figure out any one-timers or anything going on there in outsourcing and what the outlook is going forward in outsourcing?

Yes, there is nothing -- there is certainly nothing unusual in terms of one-time events. I mean when you pull outsourcing back the -- as a type of work and then related to our business -- our five businesses, a large part of operations, the significant portion of operations is part of the outsourcing type of work and then the application maintenance piece of application services is part of the outsourcing type of work as well. Within operations, the core driver is BPO. And I’ll say, we continue to feel very good about our BPO business. The growth rates have been such that we have continued to take significant share. And if you look at our operations business overall, our expectation for growth remains the same, no different from what I communicated at IA Day where we think our operations business will grow very well in the upper single to low double-digit range, and of course BPO is a key anchor to that. If you look at the other component of outsourcing which be application maintenance within application services, let me say that for application services, we now see mid single-digit growth. As we’ve talked about, there is kind of two components in application services there is the maintenance of the existing kind of legacy applications for our clients, which is an important function. And then on the other end of the spectrum, there is the investment in new technology and the deployment of new technology. So, when you look at our services, we see extremely strong growth in the project-based work in application services that work related to deploying and building new technology; that is reflected in our consulting type of work which is why you see consulting type of work growth so strong. What we see is clients are looking to reduce their cost of ownership of their existing applications. So therefore, there is relatively less investment in the maintenance piece in lieu of higher investments in the development piece.

Okay. And then, when we look at the full year now, the 6% to 9% constant currency guidance, if you spilt that between consulting and outsourcing, what kind of growth ratio we see in both those segments?

Yes. So for consulting for the full year -- I am talking about consulting type of work to be clear, we see low double-digit growth. For outsourcing, we see mid single-digit growth. And then underneath that you’ve got the components of operations and the maintenance piece of services as I described.

And we are very pleased with that mix.

Yes.

Your next question comes from the line of Tien-Tsin Huang from JPMorgan. Please go ahead.

Similar question to Bryan’s, I guess just on the outsourcing side with the book-to-bill below one. I heard the answer, but is there simply just a mixed shift going on towards consulting from both your side as well as from the clients? And I am curious, if also you’ve been able to have some tougher comps as you’ve had from large 100 plus million dollar deals earlier in the year; how was the pipeline on bookings as well as; did you give the 100 million plus number of contracts this quarter? Thanks.

I’ll just mention quickly that we had six clients with bookings over a $100 million. Let me just mention a couple of data points and then let Pierre add some commentary as well. We feel very good about our pipeline. And if you think about our pipeline and the type of work view, if you will, we feel good about our pipeline pretty much across the board. And we’ve seen good expansion in our pipeline. We see a lot of market activity, at least from our perspective, and good dialogue with our clients across those consulting and outsourcing. So, we feel good about our pipeline. Again, we expect that we will see an uptick in bookings in the second quarter and are very encouraged by what we see.

Yes, just to add on this and as well answer to Bryan. I feel extremely comfortable with where we are, with outsourcing and consulting business. The uptick on outsourcing is lower because consulting is doing extremely well and that is why we have the results we are. And it’s all our ability indeed to take advantage of any move or shift of the budget of our clients from indeed outsourcing type of work to consulting investments. And this is exactly the opportunity we are taking to grow. And if you look at our rotation to digital and to the new, the part of the consulting business in this rotation is more important than the outsourcing part of it. So, it’s explaining that consulting is back with a strong growth and we are pleased with the growth we have in outsourcing. So from my standpoint, I have zero concern.

Make sense, consulting was very strong. Just quick follow-up and just the Navitaire timing, and I know always ask about Navitaire, forgive me. But just when should we expect that to come out of the P&L?

Yes, so Tien-Tsin, we can’t -- I wouldn’t run the risk of predicting the timing. What I can say again is that the deal has already been approved in the U.S. and in Brazil. We have been in the process of cooperating with the European Commission, as they go through their review process. And it will conclude when it concludes. Timing is hard to predict.

So, probably nothing explicit in the guidance?

Yes, right.

Your next question comes from the line of Dave Koning from Baird. Please go ahead.

Hey guys, nice job. And I guess first of all, just acquisitions have ramped and you’ve talked about how that might contribute I think 1.5% to 2% to res. Is that largely in consulting? Since half of res is consulting, is that maybe benefiting right now by 4% from the acquisitions, while outsourcing isn’t benefiting from acquisitions?

Answer is yes. Indeed our acquisitions are creating more impact in our revenue growth in consulting compared to outsourcing. So, it is another driver explaining the difference between both businesses.

And is that maybe -- is maybe 90% of acquisitions, or maybe what’s the mix between how much of those acquisitions are benefiting consulting relative to outsourcing?

I would say if you look currently and in recent quarters, it’s a very high percentage. And of course, it reflects the market opportunity in a way our business is evolving. If you went back let’s say a year, year and a half ago, two years ago, they would have been more outsourcing oriented but it’s a very high percentage. And you are correct to identify that the overall inorganic contribution is in the 2% range and you are correct to identify that the majority of that is reflected in our consulting type of work growth.

Yes, to be clear, the vast majority of our acquisitions contributing to consulting business.

And your 4% is in the right zone, to be clear.

And just as a follow-up then, revenue per billable employee, that’s been declining a little bit; it’s now probably in the mid single-digit declines on a constant currency basis; so, it’s gotten a little -- I guess you did say worse. But is that really just you significantly ramping hiring kind of in anticipation of what has been and probably continues to be really good growth; is that the right way to think of it or maybe you could just kind of outline what’s happening there?

Yes. Certainly, if you look at the last two quarters, that influence of that metric which I look at obviously as well. So, if you look at it, and let’s say in the recent two quarters, you have the impact that we have very intentionally built bench in key still areas, key growth areas. And you have seen that our utilization, let’s say in quarter one of this year compared to quarter one of last year, was down about a 1% and that reflects that building a bench. And so that does go into that calculation when you look at it all in, as you do.

Your next question comes from the line of Jason Kupferberg from Jefferies. Please go ahead.

Thanks good morning guys. I am just curious …

Hi, Jason.

Hey, how are you?

Fine.

So, on the guidance raise for the year, the 1% increase, how much of that is from some of the incremental acquisitions, because I know you did spend a bit there in Q1 versus how much is just kind of pure organic?

Yes, it’s really no change in the incremental acquisitions. We still see about 2% for the year. And you may remember at -- I guess it wasn’t the earnings call but I think it was IA Day, I said it explicitly that the bills that had signed that we anticipated closing in the first quarter which have ultimately closed, we had reflected that in our initial guidance. So, this is -- I mean you could interpret this as an increase in our organic revenue outlook.

Okay, good to hear. And just for a follow-up, I had a question on cash flow. I know it can obviously be lumpy on a quarterly basis, and you did reiterate the full year outlook here, but Q1 at least relative to our model was somewhat light. Maybe you can just remind us as far as timing of bonus payments, which quarter that will fall and was there anything in the cash flow performance this quarter that makes you feel any less confident reiterating the full year target? I mean I looked at on bills, it seemed like those grew a little faster than revenue in the quarter. Was that just timing or anything or any other factors that might cause that dynamic to continue?

Yes. So, one of the factors was the increase in DSO in the first quarter. We had signaled, I think both at IA Day and probably the fourth quarter earnings call that our cash flow guidance allowed for the possibility of on an uptick in DSOs that’s what we have seen. On one hand, we are very happy with 41 days; on the other hand, we always are working to do better. We have a very cash is king kind of culture. And so, we did have an uptick. That reflects in the first quarter results. And then the second factor that influences -- there are actually three or four factors but the second one what I call -- that I would call out would be the timing of tax cash payments. Those can ebb and flow across the quarters of a year. And that was a factor in the first quarter this year compared to the first quarter of last year, doesn’t change our expectation for the full year. It just means that we had a higher percentage of tax cash payments in the first quarter this year relative to the first quarter last year. Those are really the two drivers of tax cash payments and DSO.

Your next question comes from the line of David Togut from Evercore. Please go ahead.

The digital-related services growth was very strong at 20% plus but down from the 35% you generated in FY15, which was an extraordinary result. Can you give us a little more color on why the magnitude of the slowdown in growth? And in the new guidance you provided today, what is your embedded assumption about digital-related services revenue growth?

Yes. So, I’m going to get the first part of the answer. And I’m delighted with the growth of our digital-related services over 20%; this is exactly the zone where we expect our digital-related services to grow. As you said, fiscal 015 posted some extraordinary growth and beyond our expectations, if you will. And so, we are now planning our investments and the growth of digital-related services to be in that category of growth. And we are very pleased with that. It doesn’t signal any form of slowdown. I mean we’re growing on back of big numbers. If you remember, last year, our digital-related services that do represent $7 billion, what we call in digital and this is where we measure our digital rotation. So, growing double-digit on back of that base is what I would qualify tour de force.

And David, just to add, this is entirely consistent with what we expected and signaled. We see the outlook for digital for the year and continued strong double-digit growth. I think we mentioned again at IA Day that while we were incredibly pleased with the growth in ‘15, it was much higher than we would have expected and it’s higher than it would be prudent to assume, as we plan our year. Having said that, one of the things about our model is the flexibility and our know-how to ramp up resources as we need to if the growth opportunity presents itself strong, even stronger than we expected. So, we’ll see how it plays out. But, if we have digital growth above 20, we’re doing a heck of a job executing our strategy.

Especially as the vast majority of this growth is organic.

Yes.

A quick follow-up, are you able to get differential pricing for digital related services from your clients?

We do see some differentiated -- well, first of all it’s hard to talk about. In that context, it’s hard to talk about digital overall because as you know, we have digital work that we do in Accenture Strategy, Accenture Consulting, Accenture Technology, meaning app services and operations. I would say, as a general statement, we have favorable economics in digital. And I can assure you, we are always pushing whether it’s digital or any other part of our believe where there is a high value service offering in the marketplace and where we have highly differentiated skills and capabilities that plays in our favor from a pricing standpoint and we try to get the yield from that.

Your next question comes from the line of Rod Bourgeois from DeepDive Equity. Please go ahead.

I just wanted to talk a little bit about where your partners are spending their time, because I wonder if some of the variations in growth rates across your business are really a function of where they’re devoting their attention. Right now, you’ve got your growth markets, which currently looks a little bit like misnomer, right? Your growth markets are going at half the rate of the U.S. and Europe and consulting even on an organic basis is growing a lot faster than outsourcing. Is that partly a function of where your partners are spending their time in the pipeline and it’s really -- it wouldn’t be feasible for us to expect you to grow outsourcing and consulting at this sort of double-digit pace, because your partners can only spend their time on certain things in one given quarter?

I think I understand your question. Let me just start with the growth markets, as you characterized it as a misnomer. I think it is important to kind of peel that back, and you’ll understand that growth markets is appropriate when I say this is that we’ve talked about the cyclical challenges in energy and natural resources which is reflected in our resources operating group results. I can tell you that if you look at growth markets, absent the resources operating group, which are attributed to the cyclical challenges that we know and understand in energy and natural resources, the rest of the Accenture business is growing double digits in the growth markets. And so, it’s important to peel that one layer back, so that you can be exposed to the fact that we actually have a very vibrant business in the growth markets. On the other -- I think the essence of your question is that we have a fixed capacity of partners in the channel. And if they direct their focus to our Accenture Strategy, Accenture Consulting and the development part of application services is a simply a function of if our capacity is focused on one part of our spectrum of our five businesses, does that mean by design that outsourcing goes down. And I would say not necessarily at all. I do think that there’s a lot of activity in the consulting type of work, which is strategy consulting and the development part of app services. There is a lot of market activity and a lot of demand, and I think that’s what the growth reflects. It’s not so much about partners spending time on activity A versus activity B?

Absolutely, I mean we have clear and differentiated strategies for our three regions. We have clear leaders in the regions, Julie Sweet in North America; Gianfranco Casati in Growth Markets and Jo Deblaere in Europe. They are executing their strategies. So, there is not [indiscernible] or some biased views on this. Indeed in the growth market, the explanation of the growth slowing down compared to prior quarters is all coming from this cyclical impact of energy and natural resources, otherwise we are very pleased. I mentioned Japan, part of our growth market, again putting a double-digit growth for I think eight quarters now in a row, which is frankly a fabulous result. And we are taking opportunities in each and every market as per our strategy in outsourcing and in consulting. I think we did comment the difference between outsourcing and consulting momentum because of the digital related services nature of the business, which is more around consulting than outsourcing, which is just the demonstration that budget from our clients up a bit moving from this outsourcing type of business to the consulting type of business. And as you see, in Europe, with 12% growth, we are defiantly putting our act together to create our own growth almost against the economic condition of the markets.

Yes. And I want to say again, so it doesn’t get lost. Operations and BPO within operations, we are very pleased with that growth, very good growth and growing above the market taking share. That is a very vibrant business for us.

And then the follow-up is especially given that your demand today is very weighted towards consulting, do you expect any budget uncertainties as we move into early calendar ‘15? And has your guidance accounted for the potential that the year gets off to a slow start as we’ve seen sometimes in other years, particularly when demand is coming from consulting, the early calendar year budget can be somewhat of an uncertainty. And I just wondered, to what extent that’s accounted for in the guidance?

Well, we have -- of course our range, Rod, is three points to cover scenarios like that on the down side. So, we’ve accounted for it to the extent we have three-point range. We don’t have any evidence of any notable change in client budgets to the worst, which is your question. We don’t have any evidence of that through our channels. And again, our pipeline looks very good, which is indicative of the level of client discussions that are underway currently.

Your next question comes from the line of Jim Schneider from Goldman Sachs. Please go ahead.

Relatively to the financials vertical, I was wondering if you could maybe talk a little about what you are seeing there, which seems to be stronger than almost all of your peers, which -- some of which seem to be talking about a little bit of downtick in the business. Can you maybe talk about the specific elements or the subareas where you are seeing strength there and particularly, as we head into ‘16 with rate hikes, whether you think your clients are messaging a little bit even more optimistic spending expectations next year than this year?

Your question was about financial services, the financial services operating group, correct?

That’s right. Yes.

Okay. So commenting on FS, I mean we continue to be pleased with the results. I mean we see again double-digit growth in financial services. This is an industry, if you look altogether, which is one of the largest. I think we mentioned at the IA Day that if you put together capital markets and banking would be one of the largest, the largest industry at Accenture. And of course this is an industry historically and currently investing in technology and in transformation. So, we continue to be very pleased with the opportunities offered by financial services. They have to transform. And of course digital-related services are extremely relevant in financial services, almost by definition, it’s a B2C and it’s enabling a lot digital native [ph] technologies to maximize, I mean the connectivity with the clients as well as digitalizing the portions. This is an industry where historically we made the right investments. I am talking about the investment we made in insurance where we are extremely well-positioned with our software solutions. I am talking about the investments we made in credit services where we are now building a leading independent mortgage processor in the U.S. and very pleased with the momentum we getting in Brazil where we are expanding our services and credit services to again take [indiscernible] position. We just announced this quarter a very niche but very good acquisition in Boston on asset management called Beacon. I’m very pleased with that adding super deep expertise. So overall, we are very pleased with what we’re doing in FS, which is quite broad-based across the different regions as well, if you look at North America, if you look at especially Europe where we are doing very well, excellent results in growth markets. So, this is the industry where I am coming from and this is one I love the most.

That’s helpful, thanks. And then as a follow-up, to the earlier question on headcount, billable headcount increased, I think the fastest growth rate we’ve seen in quite a few years. Can you maybe first talk about how much of that is driven by the M&A that closed? And then specifically within this, any specific areas outside of digital where you are seeing a lot of uptick in the headcount growth and I guess more broadly speaking, I assume that says something pretty positive about the outlook you see for the business for the next few quarters?

I mean in the context of the overall Accenture organization, the acquired headcount is just not that -- it’s an important skills that we are acquiring but in the context of the overall headcount, to your question, it’s just not that material. And we see growth in headcount really across our business including by the way in our GDN. You will see in the statistics that a high percentage of the headcount is in our global delivery network. And again I think the theme that underpins it, whether you are talking about strategy consulting, application services or operations, the common theme is this digital rotation and the services and the type of work we are doing in that regard, really is a driver of the skills we are acquiring as a general theme.

Your next question comes from the line of James Friedman from Susquehanna. Please go ahead.

David, in your prepared remarks, you had called out the timing of bookings to rev rec. I was wondering are there any other operating groups of business dimensions where the revenue recognition is faster than others.

I would say, as a general rule, if you look at Accenture Strategy, Accenture Consulting and the project-based work in Application Services, which is deployment of new tech and let’s just say packaged software even more broadly. The turn to revenue is -- in all of those cases is faster than let’s say the rest of our business that I didn’t call out, and that’s just -- those are just structural differences. And so, when you see such strong growth rates in our consulting type of work business that just reflects bookings that convert to revenue faster than let’s say certainly the typical operations contract would or an application maintenance contract would.

And then, I had a housekeeping question in response to one of your prior answers. I want to make sure I heard this right. When you were mapping the two sides application services between application maintenance, and I think you would describe it as application modernization, did I hear that right that part of it goes towards outsourcing and part of it goes towards consulting in terms of the disclosures?

That is correct. So, application services has what we have traditionally called application outsourcing, which is -- or application maintenance work, that maps to our outsourcing type of work. The rest of application services, which is really about fundamentally development work, application development work whether it be new tech or could be development around existing legacy applications, packaged software deployment et cetera, that is what we would have historically referred to as systems integration. And that maps to the consulting type of work.

Your next question comes from the line of Joseph Foresi from Cantor Fitzgerald. Please go ahead.

I was wondering if you could provide a little bit more color on just as digital is becoming a bigger part of your business, what the margin profile is for the digital work that you are doing? And is it fair to categorize its bookings realization as a faster rate than the rest of the business?

Yes, we are not going to comment specific -- I mean not in specific terms on margin for each dimension. I think we have said before that the nature of digital, just as a general statement, tends to be high demand. We have unique and differentiated skills and capabilities and arguably, positioning in the marketplace. And all of those things lend itself to better economics. It’s our job to deliver on that, but it certainly creates the right environment for better economics. Your last question was -- the other part of the question was digital economics…

It was on the bookings; is it a faster realization rate…

There is to the extent that a high percentage of our digital bookings are consulting and consulting has a higher velocity.

And then just as a follow-up, we have heard some commentary in the market of maybe some pricing issues within outsourcing. Has that increased or changed at all as the pricing -- I know it’s always difficult and some of the maintenance stuff, but I am just wondering if you have seen any changes in the market?

Specifically I think you are referring to the application maintenance, application outsourcing piece of application services. What I would say is that there is no doubt that that is -- continues to be a highly competitive market. When we comment on pricing, we comment on pricing in terms of the profit percentage on work that we sell. And in that part of our business, we see stable pricing.

Your next question comes from the line of Lisa Ellis from Bernstein. Please go ahead.

I was hoping to get a little bit more color around your shift to the new operating units. It’s been I guess 15 months or 18 months now that you’ve started this transition to strategy, consulting, operations and technology with digital, as an overlay. How deeply is that plumped in the organization, I guess either now or you’re planning to, meaning are these truly distinct business units at this point as labor fundable [ph] across them or do the staff sort of reside within a business unit and do they have different investment profiles, pricing models, can you just give a little bit more color around that?

Yes, absolutely. Happy to comment on this, because I truly believe that we are proposing to the marketplace organizing Accenture in a very unique and differentiated way, and I tend to believe that none of our competitors yet could match the capabilities and the organization we’re putting in place. First indeed, we have created five Accenture Strategy, Accenture Consulting, Accenture Digital, Accenture Technology and Accenture Operations, all at scale, always highly differentiated skills, a very different positioning compared to the competitive environment, different economics. And to your question, indeed they are run as a business with the objective of being top-class in their own categories. But of course where we differentiate in the marketplace is our unique ability to combine our services to deliver what we are calling the end-to-end services, because we truly believe that more and more clients are buying an outcome more than an effort. And if you want to deliver an outcome, you need to contribute and participate to the design and planning, typically done by Accenture Strategy and Accenture Consulting, the high value services and consulting which you will, then you move in to building solution with absolutely leading and cutting edge solutions, exactly the job of Accenture Digital for digital may continue solutions and Accenture Technology for the leading platform solution or application packages. And when you have been building solution, you’re moving to Accenture Operations, the part of Accenture where we could operate on behalf of the clients, either their business process; their cloud operation or their security operation. This depth and breadth and kind of operating model is absolutely unique in the marketplace and is a great source of differentiation for Accenture. And on top of that indeed, Lisa, we’re putting our rotation to the new. Each of the five have a clear mandate to rotate their business to new type of services where Accenture Strategy is going to be being cutting edge in developing digital technologies and creating new business model for clients. Accenture Technology will now unbed [ph] very innovative ways of doing development, what we’re calling liquid, intelligent and connected. Accenture Operations will be extraordinarily analytics rich in the way we are developing operations. And in security with the acquisition of FusionX, we are absolutely top of the game in term of simulating cyber attacks. So, all these architecture we’re putting in place, and I said that with a lot of passion and energy during that call, is indeed unique in the marketplace, Lisa.

Lisa, let me just add to what Pierre said, and address another part of your question. A key component of what Pierre just said is that our talent strategy is aligned with our five businesses. And so, we have talent that is managed, nurtured, developed specific to Accenture Strategy. Those people tend to work, essentially exclusively on Accenture Strategy work. We have people that are identified as Accenture Consulting, developed, nurtured, et cetera. Those people tend to work for the most past, exclusively on consulting work. By the way that includes our client account leads, people who are predominantly deployed to our operating groups that really not only delivers a consulting services but are also the integrator of Accenture capabilities to serve the clients need. We have operations where again we have talent model for operations. Mike Salvino and Debbie Polishook manage that workforce for the most part work, exclusively in operations. And then you have Accenture Technology. And Accenture Technology is a little bit different. In that, they have a unique talent model, but yet some of those technology people support the development type work, the new tech, some of those people may actually even be part of consulting project delivery. We also have some of those people that at points in time maybe part of our operations project delivery. So, they work a little bit more across the organization. But beyond technology, we also have the innovation labs and things like that. But excluding technology, the other businesses are very specific and fit for purpose in terms of the talent model and the types of projects those people work on for our clients.

As a follow-up, as you are in discussions with your major clients about their budgets for 2016, can you characterize the magnitude of the shift in their budgets from the old to the new, like 5%, 20%, 1%?

I can’t characterize. I can characterize only the trend is clear that you see a shift from investment in the legacy, if you will, to investment of the new. I tend to believe that the shift is increasing and as reflected, growth in digital related services. Now I don’t have any market data that would characterize the percentage of the shift. There it’s getting bigger and indeed we could take advantage of this shift in term of budget, as reflected with our 20% plus growth in digital related services.

But where you are sitting right now, it feels stronger now than it did at this time last year.

On balance, yes.

Greg, we have time for one more question and Pierre will wrap up the call.

Okay. That question comes from the line of Keith Bachman from Bank of Montreal. Please go ahead.

Hi, many thanks. David, I wanted to go to one area that you mentioned is the growth of your global GDN. Over the last seven quarters, it’s been pretty steady in terms of increasing as a percent of total headcount by almost 1 point a quarter and it’s now just hovering below 73%. Is there a point at which you need to have local presence, it’s an impediment to the total number? In other words, how high can the global GDN go as a percent of your total headcount? Because I would think that’s been a significant contributor to the strong margin performance you’ve had over the last couple of years?

Yes. So, first of all, we still have room to expand our GDN headcount in our model. And certainly, we don’t see that we’ve reached the destination and we wouldn’t go any further. Having said that, one of the things that highly differentiates Accenture is our deep industry expertise and our client account teams that are at the client site each and every day, working shoulder-to-shoulder with our clients. And so the thing about our model is that we have a very strong presence in each of the geographic markets around the world where we operate. That’s a vital part of what is distinctive about Accenture. And then we extend that and complement that with arguably the best technology global delivery network in the world. To your question, we have the opportunity to take that further, and we will see how the market evolves and then we will respond accordingly.

Then maybe I will just quickly submit my follow-up, if I could. The free cash flow guidance for the year, not the quarter but the year, is a little slower than certainly the growth of net income or the EPS context. And I was just wondering, if you could call out some of the puts and takes there. I assume that the days cycle I think is a headwind; in addition it looks like CapEx is a little bit. But could you also address how currency might be impacting the growth of cash flow for the year? And that’s it from me. Thanks very much everybody.

I will just say -- I can’t really do justice to the question, so I will just share a couple of quick points. First of all, the free cash flow guidance is still above 1.0 in terms of free cash flow to net income, so very healthy level of free cash flow. A couple of things that influence that, one is the DSOs; the other is timing of tax cash payments that not only impacts a particular quarter but can be different fiscal year to fiscal year; and the third is CapEx, just to name those three because you call them out. And we do anticipate a higher level of capital spending this year as compared to last year. So that’s in the mix as well.

Okay, certainly time now to wrap up. And I want to thank you again for joining us today. With our first quarter behind us, clearly we have created strong momentum in our business, especially with investments we’ve made in digital, cloud and security services which we are now calling at Accenture, the new. And that makes me really confident in our ability to continue to successfully grow business and gain market share. I want to take this opportunity to wish all of you, our investors and analysts and our Accenture people who are hopefully listening to the call, a very happy holiday season and all the best for the New Year. We look forward to talking with you again next quarter. In the meantime, if you have any questions, please feel free to call KC. All the best to all of you and the best for the New Year.