Accenture plc - Class A (ACN) — Q1 2024 Earnings Call Transcript

Thank you, operator, and thanks to everyone for joining us today on our first quarter fiscal 2024 earnings announcement. As the operator just mentioned, I'm Katie O'Conor, Managing Director, Head of Investor Relations. On today's call, you will hear from Julie Sweet, Chair and Chief Executive Officer; and KC McClure, 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. Julie will begin with an overview of our results; KC will take you through the financial details, including the income statement and balance sheet, along with some key operational metrics for the first quarter; Julie will then provide a brief update on our market positioning before KC provides our business outlook for the second quarter and full fiscal year 2024; we will then take your questions before Julie provides a wrap-up at the end of the call. Some of the matters we'll discuss on this call, including our business outlook, are forward-looking, and are thus 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 as well as 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. As always, Accenture assumes no obligation to update the information presented on this conference call. Now, let me turn the call over to Julie.

Thank you, Katie, and everyone joining, and thanks to our 743,000 people around the world for their incredible dedication and commitment every day, which is how we are able to consistently deliver 360 degree value for all our stakeholders. I am pleased that we delivered on our commitments this quarter while continuing to invest significantly in strategic areas to drive the next waves of growth, including extending our early leadership in generative AI, and we did so against a macro backdrop that continues to be challenging. Starting with our financial results, our bookings were $18.4 billion, representing 12% growth in local currency. We had 30 clients with quarterly bookings greater than $100 million in the quarter and over half were in North America, representing the trust our clients have in us to be at the center of their major programs, spending, and ongoing reinvention. We delivered revenues of $16.2 billion for the quarter, at the top end of our FX adjusted range, representing growth of 1% in local currency. We continue to take market share. As expected, we continue to see lower discretionary spending, which particularly impacts our consulting type of work, as well as slower decision-making, and our CMT industry group continues to be challenged. We remain on track with the business optimization actions we announced in March to reduce structural costs to create greater resilience. We expanded adjusted operating margin by 20 basis points and delivered adjusted EPS growth of 6%, while continuing to invest in our business and our people. Turning now to our investments, we closed 12 acquisitions this quarter for a total of $788 million in strategic areas across our geographic markets. In North America, we are continuing to build out our new growth area of capital projects, an $88 billion addressable market in North America, which we entered in August with the acquisition of Anser Advisory. In Q1, we added Comtech, a consulting and program management company for infrastructure projects in Canada. We also invested in the next digital frontier with our supply chain acquisition of The Shelby Group. We expanded our cloud capabilities with the acquisitions of Ocelot Consulting and Incapsulate, and we invested in digital marketing in the healthcare industry with the acquisition of ConcentricLife. In EMEA, we expanded our cybersecurity capabilities with the acquisition of Innotec in Spain, enhanced our business process services in the insurance industry with the acquisition of ON Service GROUP in Germany, and invested in digital healthcare and talent with the acquisitions of Nautilus Consulting and The Storytellers in the UK. Finally, in Growth Markets, we are focused on the cloud opportunity with the acquisition of Solnet in New Zealand, along with cybersecurity with the acquisition of MNEMO in Mexico, and digital marketing services with the acquisition of SIGNAL in Japan. Our ability to invest at scale to fuel our organic growth is a competitive advantage. For example, in EMEA, we are focusing on pivoting our CMT business. We are investing with Vodafone to create a strategic partnership to commercialize its market-leading shared services operations and unlock new sources of growth and efficiency, enhance speed to market, and new customer opportunities for their operating companies and partner markets. Together, we plan to create a new data and AI-driven shared services model and a scaled, commercially-driven, and more efficient organization with higher-quality services and enhanced speed to market for its portfolio of offerings. The new unit will utilize Accenture's world-class technology, transformation, and managed services such as its digital solutions and platforms and deep AI expertise. It will also tap into our well-known learning capabilities to continuously create new skilling and career paths for its people. This move speaks to Vodafone's ambition to work in new ways, reduce structural complexity, and reinvent their company and the industry. And of course, we continue to invest in learning for our people with approximately 8 million training hours in the quarter, representing an average of 12 hours per person. Turning to generative AI, our growth and investments, we continue to take an early leadership position in GenAI, which will be an important part of the reinvention of our clients in the next decade. Last quarter, we shared that we had sold approximately 300 projects with $300 million in sales in all of FY '23. Demand continued to accelerate in Q1 with over $450 million in GenAI sales. As you know, we are investing $3 billion in AI over three years. For many of our clients, 2023 was a year of generative AI experimentation. We are now focusing on helping our clients in 2024 realize value at scale. We are excited about the recent launch of our specialized services to help companies customize and manage foundation models. We're seeing that the true value of generative AI is to deliver on personalization and business relevance. This is driven by context and accuracy, data readiness, along with foundation model choices and customization, which are some of the most important steps and decisions companies will make in the next year as they pursue value. Our clients are going to use an array of models to achieve their business objectives. Our proprietary switchboard allows a user to select the combination of models to address business context or factors like cost or accuracy. We will offer rigorous training and certification programs to organizations using these new services to customize and scale GenAI solutions and transform every link in their value chain. We are also investing in AI acquisitions. For example, we recently announced our intent to acquire Ammagamma, an Italy-based firm that helps companies advance their uses of AI and generative AI technologies. With this acquisition, we will add 90 experienced AI professionals, many specializing in generative AI, along with the expertise that includes engineering, mathematics, economics, historians, philosophers, and designers, who will join our growing network of professionals in our advanced center for AI. We are progressing towards our goal of doubling our deeply skilled data and AI practitioners from 40,000 to 80,000, with an additional 5,000 practitioners as of Q1. Finally, a few additional highlights of the 360 degree value that we created this quarter: we recently achieved our highest brand value and rank to date on Interbrand's prestigious Best Global Brands list, increasing to $21.3 billion and ranking number 30. We jumped from number 17 to number 10 on the 2023 World's Best Workplaces list by Fortune and Great Place to Work. This recognition is particularly noteworthy because it is based on feedback from our people. We were recognized for the seventh year in a row on the Wall Street Journal list of Best-Managed Companies for excellence in customer satisfaction, employee engagement and development, innovation, social responsibility, and financial strength. We also received the top score for social responsibility and are among the top 10 for customer satisfaction. We continue to lead in our ability to attract people with different backgrounds, perspectives, and lived experiences. Our success is reflected in the top score on the Human Rights Campaign Corporate Equality Index in the U.S. for the 16th consecutive year for leading equitable workplace policies, practices, and benefits for LGBTQ+ people. Today, we are proud to present an update to our 360-degree value reporting experience, which is available on our website, because we believe that transparency builds trust and helps us all make more progress. Over to you, KC.

Thank you, Julie. Happy holidays to all of you, and thanks for taking the time to join us on today's call. We are pleased with our Q1 results, which were in line with our expectations and include continued investments at scale to strengthen our position as a leader in the market. Once again, our results illustrate our ability to manage our business with rigor and discipline and deliver value for our shareholders. So, let me begin by summarizing a few of the highlights for the quarter. Revenues grew 1% in local currency with mid-single-digit growth or higher in five of our 13 industries, including public service, industrial, utilities, health, and energy. As expected, we saw continued pressure in our CMT industry group, and we continue to take market share. As a reminder, we assess market growth against our investable basket, which is roughly two dozen of our closest global public competitors, representing about a third of our addressable market. We use a consistent methodology to compare our financial results to theirs, adjusted to exclude the impact of any significant acquisitions through the date of their last publicly available results on a rolling four-quarter basis. We delivered adjusted EPS in the quarter of $3.27, reflecting 6% growth over EPS last year. Adjusted operating margin was 16.7% for the quarter, an increase of 20 basis points over Q1 last year, and this includes significant investments in our people and our business. Finally, we delivered free cash flow of $430 million and returned $2 billion to shareholders through repurchases and dividends. We also invested $788 million in acquisitions across 12 transactions in the quarter. Now let me turn to some of the details, starting with new bookings. New bookings were $18.4 billion for the quarter, representing 14% growth in U.S. dollars and 12% growth in local currency, with a book-to-bill of 1.1. Consulting bookings were $8.6 billion, with a book-to-bill of 1.0. Managed services bookings were $9.8 billion, with a book-to-bill of 1.3. Turning now to revenues. Revenues for the quarter were $16.2 billion, a 3% increase in U.S. dollars and 1% in local currency, and we're at the top-end of our guided range adjusted for a foreign exchange tailwind of approximately 1.5% compared to the 2.5% estimate provided last quarter. Consulting revenues for the quarter were $8.5 billion, flat in U.S. dollars and a decline of 2% in local currency. Managed services revenues were $7.8 billion, up 6% in U.S. dollars and 5% in local currency. Taking a closer look at our service dimensions: technology services grew mid-single digits, operations was flat, and strategy and consulting declined mid-single digits. Turning to our geographic markets. In North America, revenue declined 1% in local currency. Growth was led by public service, offset by declines in communications and media, software and platforms, and banking and capital markets. Before I continue, I want to highlight that for this fiscal year '24, we have reorganized our geographic segments. Europe is now EMEA and includes the Middle East and Africa, which were previously included in Growth Markets. The reclassification for prior years can be found on our Investor Relations website. In EMEA, revenues grew 2% in local currency, led by growth in public service and banking and capital markets, partially offset by a decline in communications and media. Revenue growth was driven by Italy, Austria, and France, partially offset by a decline in the United Kingdom. In Growth Markets, we delivered 5% revenue growth in local currency, driven by growth in chemicals and natural resources, public service, and banking and capital markets, with revenue growth led by Japan. Moving down the income statement, gross margin for the quarter was 33.6% compared to 32.9% for the first quarter of last year. Sales and marketing expense for the quarter was 10.5% compared with 9.8% for the first quarter of last year. General and administrative expense was 6.4% compared to 6.6% for the same quarter last year. Before I continue, I want to note that in Q1, we recorded $140 million in costs associated with our business optimization actions, which decreased operating margin by 90 basis points and EPS by $0.17. The following comparisons exclude these impacts and reflect adjusted results. Adjusted operating income was $2.7 billion in the first quarter, reflecting a 16.7% operating margin, an increase of 20 basis points from operating margin in Q1 last year. Our adjusted effective tax rate for the quarter was 23.2% compared with an effective tax rate of 23.3% for the first quarter last year. Adjusted diluted earnings per share were $3.27 compared with diluted EPS of $3.08 in the first quarter last year. Days services outstanding were 49 days compared to 42 days last quarter and 48 days in the first quarter of last year. Free cash flow for the quarter was $430 million, resulting from cash generated by operating activities of $499 million, net of property and equipment additions of $69 million. Our cash balance at November 30th was $7.1 billion compared with $9 billion at August 31st. With regards to our ongoing objective to return cash to shareholders, in the first quarter, we repurchased or redeemed 3.8 million shares for $1.2 billion at an average price of $311.90 per share. At November 30th, we had approximately $5.4 billion of share repurchase authority remaining. Also in November, we paid a quarterly cash dividend of $1.29 per share for a total of $810 million. This represents a 15% increase over last year. And our Board of Directors declared a quarterly cash dividend of $1.29 per share to be paid on February 15th, a 15% increase over last year. In closing, we remain committed to delivering on our long-standing financial objectives, growing faster than the market and taking share, generating modest margin expansion and stronger earnings, while at the same time investing at scale for our long-term market leadership, generating strong free cash flow and returning a significant portion of that cash to shareholders. Now, let me turn it back to Julie.

Thank you, KC. As we begin our second quarter, we remain laser-focused on creating value for our clients. The pace of spending continues to be impacted by the macro environment. Our business in the UK, in particular, in Q1, saw even greater challenges than we expected last quarter. The fundamentals of our industry remain unchanged. All strategies continue to lead to technology, and companies need to reinvent every part of their enterprise using tech, data, and AI to optimize operations and accelerate growth. To do so, they must build a digital core. Strategy and consulting, which brings our deep industry and functional expertise, is critical to how we differentiate by helping our clients ensure they drive business value from their digital core. We are continuing to see significant demand in areas like cloud migration and modernization, modern ERP and data and AI, including GenAI, platforms, and security, all of which represent areas of great opportunity and are still early with more digital core to be built in the future than has been done to date. Let me bring to life the significant opportunities still ahead with examples from the quarter. Our cloud momentum continued in Q1 with strong double-digit growth, reflecting the ongoing significant market opportunity. We estimate only 40% of enterprise workloads are in the cloud, of which only 20% or so are modernized, an 80% opportunity remaining. Clients are continuing to prioritize the digital core, as evidenced by strong demand for cloud migration. We're working with a leading insurance provider to continue their cloud transformation. Together, we are migrating hundreds of applications to a cloud-based platform, enabling the company to exit their data centers by 2025. To date, we have migrated more than half of their apps to the cloud. And this is not just a migration. We are modernizing applications and accelerating automation to integrate disparate data more easily from acquisitions and help the company move into new markets. We're helping reshape their organizational mindset, drive cultural change, and find new ways of working, including the creation of a new IT service model to lead complex transformations with agility and speed. This transformation will reduce legacy complexity and technical debt, enable more cost-effective back-office operations, and drive growth and innovation, ultimately helping the company provide more affordable and personalized insurance solutions for families and businesses. For those clients who have made significant progress on their migration, they are investing to modernize and innovate across the cloud continuum, extending cloud to the edge, unlocking greater value with more opportunities still ahead. For example, we recently announced an expansion of our strategic partnership with McDonald's to help it execute their technology strategy and leverage the company's scale to unlock greater speed and efficiency for customers, restaurant teams, and employees. This new work supports McDonald's ambition to connect restaurants worldwide with cloud technology and apply generative AI solutions across McDonald's platforms. Accenture also will support the acceleration of automation innovation and the enhancement of the digital capabilities of McDonald's employees. Accenture's deep understanding of the McDonald's business, industry, and technology will help unlock opportunities in their ongoing digital investments as McDonald's reinvents the customer experience and stays ahead of their customers' changing needs. Turning to data and AI, we estimate that less than 10% of companies have mature data and AI capabilities. This is a critical part of building the digital core, and we see this embedded in our larger transformations, in work focused on data and AI modernization and in the opportunities of generative AI. We help leaders such as BBVA, a global financial services group, stay ahead of the curve by continuing to reinvent its business model with GenAI. For example, we are building a GenAI-powered financial coach assistant to help them disrupt customer centricity in the banking industry while they reinvent their digital core to also become even more efficient. This work is a continuation of our ongoing GenAI implementation, which is transforming BBVA's operations and digital marketing and is helping employees be more productive. Thanks to its strong digital core, BBVA can continue to reinvent across their enterprise by applying GenAI. We're also helping a global hospitality group support its content production capability and marketing communications across its hotel brands, tailoring content to guests' evolving needs. This new data-driven content supply chain model will create personalized, flexible, and efficient marketing communications content across every customer touchpoint, spanning both physical and digital communications. This service will be available to all marketing professionals, enabling content production management from its initial brief to performance measurement and content optimization. This will increase the effectiveness of its digital marketing programs, drive more traffic to its branded website, and deliver exceptional customer experiences, all while reducing costs. Platforms are a core component of the digital core and are critical to our clients' transformations. We estimate 60% of the opportunity is still ahead as clients upgrade their core platforms. We are working with OCBC Group, a Singapore-based multinational banking and financial services corporation, on a two-year transformation journey to modernize their human resources organization. We will shift key HR functions such as hiring, talent management, and career development to the cloud and create a next-generation HR operating model with enhanced capabilities. Together, we will drive operational efficiency with a strategic focus on future talent readiness, employee experience, and AI-driven decision-making. By providing a scalable framework to meet evolving business needs, we'll free up HR capacity to provide high-value advisory work and empower business and HR leaders with analytics and insights to facilitate better talent decisions. Security is also essential to a digital core, and we continue to see very strong double-digit growth in our security business this quarter. While the opportunity to continue to grow and expand, we estimate that currently only 36% of business leaders are confident that their organizations are cyber-resilient, representing at least 64% of untapped potential. An example of our important work with our clients to build secure organizations is Fortrea, a global contract research organization of about 19,000 people that provides clinical trial and research services for life sciences companies in more than 90 countries. We're working with Fortrea to deliver database outcomes and health-related insights, which require adherence to regional and local industry and government regulations. As they continue to grow and enter new markets, they need a partner to ensure that their cybersecurity program remains resilient and compliant with security best practices. We will co-create, architect, and operate a series of global cybersecurity services and capabilities through our managed services. Our partnership will help Fortrea grow its business, utilizing flexible risk and security strategies. We are focused on helping clients reimagine marketing and their customer experience to drive growth. Song demand continues to remain strong with double-digit growth in Q1. We are collaborating with Peugeot, a French automotive brand, to lead strategic and creative direction for its global communications. The partnership supports Peugeot's ambition to engage a younger audience and become a leader in the electric vehicle market. Accenture Song will manage global communications across all traditional and digital media channels. The first campaign will be a full 360 integrated launch of the all-new electric fastback SUV E-3008 in early 2024. Finally, we continue to see strong demand for digital manufacturing and engineering services. We estimate that only 5% of enterprises have scaled, matured digital capabilities across their organizations. Industry X grew strong double digits in Q1. We are working with a leading German multinational car manufacturer to engineer the next generation of infotainment system. Using our deep industry expertise and software engineering capabilities, we will support the implementation of a new flexible platform that enables the next level of in-car experience with cutting-edge customer features while minimizing complexity and maximizing the software we use across hardware generations. We're working with a global food manufacturer on a total enterprise reinvention strategy to modernize its supply chain, reduce operating costs, and position it for the future. We will transform key supply chain processes such as planning, procurement, manufacturing, and distribution. AI and intelligent automation will optimize end-to-end supply chain operations and achieve greater efficiency and agility. It will also help the company leverage data for better decision-making and implement portfolio optimization to ensure the right assets are focused on for investment to maximize returns and minimize risks. This self-funded program is expected to generate significant productivity gains with ongoing savings fueling further capability builds and bottom-line growth. Back to you, KC.

Thanks, Julie. Now, let me turn to our business outlook. For the second quarter of fiscal '24, we expect revenues to be in the range of $15.4 billion to $16 billion. This assumes the impact of FX will be about negative 0.5% compared to the second quarter of fiscal '23 and reflects an estimated negative 2% to positive 2% growth in local currency. For the full fiscal year '24, based upon how the rates have been trending over the last few weeks, we continue to assume the impact of FX on our results in U.S. dollars will be about flat compared to fiscal '23. For the full fiscal '24, we continue to expect our revenue to be in the range of 2% to 5% growth in local currency over fiscal '23, with the inorganic contribution now expected to be more than 2%. We continue to expect business optimization actions to impact fiscal '24 GAAP operating margin by 70 basis points and EPS by $0.56. The following guidance for full year '24 excludes these impacts. For adjusted operating margin, we continue to expect fiscal year '24 to be 15.5% to 15.7%, a 10 basis point to 30 basis point expansion over adjusted fiscal '23 results. We continue to expect our annual adjusted effective tax rate to be in the range of 23.5% to 25.5%. This compares to an adjusted effective tax rate of 23.9% in fiscal '23. We continue to expect our full year adjusted earnings per share for fiscal '24 to be in the range of $11.97 to $12.32 or 3% to 6% growth over adjusted fiscal '23 results. For the full fiscal '24, we continue to expect operating cash flow to be in the range of $9.3 billion to $9.9 billion, property and equipment additions to be approximately $600 million, and free cash flow to be in the range of $8.7 billion to $9.3 billion. Our free cash flow guidance reflects a free cash flow to net income ratio of 1.2. Finally, we continue to expect to return at least $7.7 billion through dividends and share repurchases as we remain committed to returning a substantial portion of our cash to our shareholders. With that, let's open it up so we can take your questions.

Thanks, KC. 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. Operator, would you provide instructions for those on the call?

Good morning, guys. Happy holidays. I just wanted to start with a question on the revenue guidance for Q2. The midpoint there would suggest one point of deceleration, but we do have an easier comparison, and there was a return to positive growth in consulting bookings. So, just hoping you can help us reconcile that and then maybe comment on the second half reacceleration that is continuing to be implied in the guide, maybe slightly steeper than previously thought. Thank you.

Yeah, great. Thanks, Jason. Happy holidays to you, too. So first, let me start in terms of our guidance. I'll first start with Q1. As you heard us say, we were really pleased with our Q1 performance. As you stated, our Q2 guidance is the same as Q1. A couple of things that I'll point out compared to what we thought 90 days ago: we see some differences in EMEA, particularly in the UK, where we're focused on repositioning the business back to growth, and that's going to take some time. But Jason, what is the same is that we are still operating in an environment, which is the same that we described last quarter, where the discretionary spend and the decision-making is slow. Right now, as you expect, we are talking to our clients about their '24 budgets. When we look forward into H2, to start with just what the math is, we continue to see higher growth in the back half of the year. That's going to start with higher growth in Q3. Our confidence in our H2 increased growth is based on a few things. Reiterating what we talked about at the beginning of the year versus our results in Q1, we are confident that we were able to deliver across the board as we expected in the first quarter. As Julie mentioned, we made a lot of investments in our business in the quarter, helping us pivot to higher growth areas. In addition to that, our revenue is positioned in the back half of our year from these larger transformation deals. So that has not changed. We continue to see that. We just need to continue to layer in our new sales as we get closer to the back half of the year. We are pleased to reiterate the 2% to 5% revenue guidance from the beginning of the year.

Okay. That's helpful. And just as a quick follow-up, what should we expect in terms of second quarter bookings for consulting and managed services year-over-year? I know managed services has a particularly tough comp. Thanks again.

Yeah. So, Jason, I know I've been giving color and basically kind of guiding to future quarter bookings, but as you know really well covering up for so long, bookings can be lumpy. I'm not going to give color anymore, going forward. The best way to think about demand for our business is the revenue guide that we give. We feel good about our pipeline. We have a very solid pipeline.

Hey, perfect. I just want to follow up to Jason's question just with the bookings, which is better than expected, and your large deal backlog is quite large now. Just the visibility on the timeliness of those conversions? Have you seen any signs of pushout or delays? Just trying to understand the conversion potential.

Yeah. Conversion can be impacted by the mix, right? The mix of deals that we have. Overall, we haven't seen any change in the conversion based on the mix of work. As we have lower discretionary spend, that does impact the conversion, but we have factored that into our guidance.

Understood, KC. Thanks for that. And just my quick follow-up. I know you've been really busy with acquisitions, and Julie, you listed a bunch of them. Is there a change here in the rhythm of acquisitions or your appetite? It sounds like the revenue contribution is up a nudge, but you tell me if there is any change in your thinking here on the deal.

I think our competitive advantage is our investment capacity that allows us to pivot to higher areas of growth. We're able to flex up and do inorganic to the degree that we see fit while continuing to increase our return to shareholders. So, I think it's really great.

There's no change in the strategies in the sense of we're still trying to scale in hot areas or add new types of skills. We are executing in capital projects as described; we just added Canada.

Lastly, we expect more than 2% in organic contribution for this year.

Overall, our strategies remain focused on investing to drive organic growth and position ourselves for future opportunities.

Thank you, and congratulations on the performance. Happy holidays from me. In talking to your clients regarding budget and spending priorities into next year, have you seen any shift in their discussions around GenAI? Are they treating generative AI as an incremental investment or rationalizing their expenditures?

Great question. In the market, we're having many discussions regarding how to prioritize in a cautionary environment. For most clients, it's about how to grow revenue despite the environment, and GenAI is now becoming part of those strategic discussions as companies are focused on building a digital core to enable that change.

Yeah. In terms of the consulting type work, we still see low-single-digit positive growth for the full year. Q1 came in as expected, which was negative 2%.

Did you see any stabilization in discretionary spending, or is it still being cut? How do you expect consulting to perform in the second quarter?

We've seen no change from what we said at the beginning of the year. Discretionary spending remains down. Our full-year outlook for consulting work is still low-single-digit growth, and Q1 reflected what we expected.

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

One thing I noticed is that gross margin growth was the strongest in about nine quarters. Is that just lower attrition, an offshore shift? Could you explain why that's improved?

We saw expansion in gross margin, but that's really hard to look at in isolation. There are various things that can go in and out of gross margin in terms of increased or decreased spend. We always continue to run our business to operating margin, which we achieved in the quarter.

If I calculate based on normal sequential patterns, I get to about 2% constant currency, the low-end of the guide. With good bookings, is there a scenario that progression in the back half of the year is better than normal?

When we look at guidance, we had 1% growth this quarter with strong bookings. We anticipate Q2 shaping the same way year-over-year. We expect to see fuel in our sequential growth in the back half of the year.

I wanted to ask on the UK market. What exactly happened there? What's the outlook moving forward?

The UK market has faced challenges over the last couple of years, and we are focused on repositioning the business back to growth. It's taking longer than we anticipated, especially in banking capital markets, which has been more challenged.

That does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.