Ladies and gentlemen, thank you for standing by. And welcome to Accenture's Third 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 and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, KC McClure. Please go ahead.

Thank you, Roxanne. And thanks everyone for joining us today on our third quarter fiscal 2016 earnings announcement. As Roxanne 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 third quarter. Pierre will then provide a brief update on our market positioning before David provides our business outlook for the fourth 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 are very pleased with our third quarter financial results and the strong momentum we have built in our business. I am particularly pleased that we again delivered double-digit revenue growth in local currency, gaining significant market share. Our research clearly demonstrates that we are executing our strategy very well, further differentiate Accenture in the marketplace. Here are a few highlights from the quarter. We delivered strong new bookings of $9.1 billion, bringing us to $26.4 billion for the year to date. We generated very strong revenue growth of 10% in local currency. Operating margin was 15.5%, an expansion of 10 basis points from adjusted operating margin in the third quarter last year. We delivered earnings per share of $1.41, up 8% from adjusted EPS in the third quarter last year. We generated strong free cash flow of $1.5 billion. And we returned $1.2 billion in cash to shareholders through share repurchases and dividends. So, we have delivered excellent third-quarter results. And as we enter the fourth quarter I feel very good about our business and I am confident in our ability to deliver our business outlook for the year. Now let me hand over to David. David, over to you.

Thank you, Pierre and thanks all of you for joining us on today's call. As you heard in Pierre's comments, our third quarter results were strong across almost every dimension of our business. Once again our results demonstrate the power of our highly differentiated growth strategy which is built on five businesses, delivered in an industry relevant context and focused on being the market leader and helping our clients rotate to The New. Looking out our results at a high level, there are few major themes which I think are important to note. First, 10% local currency growth marks the 7th consecutive quarter of double-digit growth. These results were strong indication of the durability of our growth model, which is underpinned by our focus on achieving market leading scale across our key industries and geographic markets. This is best illustrated by our broad based growth in the third quarter which reflected double digit growth in 8 industries and 8 geographic markets. And strong double digit growth in The New especially in digital related services continue to be a key driver of our results. Second, operating margin of 15.5%, 10 basis points higher than last year's adjusted results was consistent with our objective to deliver modest margin expansion while investing significantly in our people and our business. Our profitability agenda is enabled by our drive to achieve fit-for-purpose economics across each of our five businesses. We're pleased with our progress year-to-date which has yielded 10 basis points of operating margin expansion and 10% growth in EPS on an adjusted basis, while at the same time creating the capacity to make important investments for long term market leadership. Third, as expected we generated strong free cash flow in the quarter of $1.5 billion and return roughly $1.2 billion to shareholders through repurchases…

Thank you, David. Our very strong results in the third quarter demonstrate that we are executing the right growth strategy and that we are providing highly relevant services to our clients. We are benefiting from the investments we've made to rotate our business to The New, digital, cloud and security-related services, which together now account for approximately 40% of our total revenues. Let me share a few examples of how we are leading in The New. We continue to see true demand for our digital capabilities. And we were very pleased that Accenture Interactive was recognized by Advertising Age magazine as the largest and fastest-growing provider of digital marketing services. Through Accenture Interactive, we are bringing our unique combination of design and customer experience capabilities to 70 companies in the Fortune Global 100. In cloud we are focused on building strong platforms for key industries such as our life science cloud for R&D. This truly innovative solution to collect, share and analyze clinical data is now being used by seven top pharma companies, including Pfizer, Merck, GSK and Lilly to accelerate drug development and improve patient outcome. In security, we're expanding our capabilities with the acquisition of Maglan, a cyber security Company based in Israel with strong expertise in cyber defense. And we just opened a new Accenture Lab in Israel that is dedicated to cyber R&D in threat intelligence, incidence response and internet of things security. This is all about helping clients become more resilient in today's digital world. We continue to see strong demand from clients to help them with their most complex mission-critical issues. In Accenture Strategy, we have developed a unique approach to help clients make sustainable improvements in their enterprise-wide performance. We are now a leader in this space, with a totally new zero-based methodology…

Thank you, Pierre. Let me now turn to summarize our business outlook. For the fourth quarter of fiscal 2016, we expect revenues to be in the range of $8.25 billion to $8.5 billion. This assumes the impact of FX will be negative 1% compared to the fourth quarter of fiscal 2015 and reflects an estimated 6% to 9% growth in local currency. For the full fiscal year 2016, 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 4.5% compared to fiscal 2015. For the full fiscal 2016, we now expect our net revenue to be in the range of 9.5% to 10.5% growth in local currency over fiscal 2015. For operating margin, we now expect fiscal year 2016 to be 14.6%, a 10 basis point expansion over adjusted fiscal 2015 results. As a reminder, we closed our Navitaire transaction last quarter which lowered the full year FY 2016 tax rate by approximately 1.5% and increased diluted earnings per share by $0.74. Our guidance for fiscal 2016 excludes the impact of this transaction. We continue to expect our adjusted annual effective tax rate to be in the range of 24% to 25%. For earnings per share, we now expect full year diluted EPS for fiscal 2016 to be in the range of $5.29 to $5.33 or 10% to 11% growth over adjusted fiscal 2015 results. Turning to cash flow, for the full fiscal 2016, 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 continue to be in the range of $3.6 billion to $3.9 billion. Finally we continue to expect to return at least $4 billion through dividends and share repurchases and also continue to expect to reduce the weighted average diluted shares outstanding in the range of 1.5% as we remain committed to returning the substantial portion of cash to our shareholders. With that, let’s open it up so that we can take your questions.

[Operator Instructions] Our first question is from Bryan Keane, Deutsche Bank. Please go ahead.

Hi, good morning. Operating margin guidance to start the year, I think was 10 to 30 basis points, which has been your historical practice. This year it sounds like you will only do 10 basis points expansion. Just want to make sure I understand why the low end this year. And does that change anything going forward about your historical typical practice of 10 to 30 basis points of expansion.

So Bryan if you look at the 10 to 30 as you well know and the others know that has been kind of our target range for many years now. And if you look at our results over the last five years, we covered the full scope of that range including having been at 10 basis points expansion at least once if not twice in that period, and I think one year been at 30 basis points. So, we've covered the expense of that range and so coming in a 10 basis points this year isn't in consistent with kind of our historical performance. Having said that, if you look at where we are year-to-date, we’re at 10 basis points of expansion through the first three quarters and so at this point based on what we see, it just feels very clear to us that we are trending in that direction. I think the important point to note and this is different about this year versus other years where we've been at 10 basis points of expansion is that we embarked on a journey especially a few years ago to really raise our gain in the investments that we’re making in our business including but not limited to the significant capital investments that we've made an acquisitions which also flow through our P&L. And so when you look at the 10 basis points, it really is a direct intention of what we’re trying to accomplish by positioning our business for the long term by investing at a scale that is truly differentiated in our sector and positions us for long term leadership. And so we’re actually very pleased with the 10 basis points of expansion and that it on one hand supports - we believe double digit growth in EPS but on the other hand underneath it, it represents significant investments that we're making in our business and our people. And last comment that I’ll make is that, if you were to look at our underline margin expansion, excluding the investments, the underlying margin expansion is quite healthy and would compare very favorably to what we've done in any previous year. So, we feel great about the economic leverage in our model and we feel great about the - the focus that we’ve had on investing.

Okay, great. And then just a quick follow-up. At the Analyst Day I think you mentioned the potential to hire around 100,000 gross heads. It doesn't look like you are on track for that. I was looking for an update on gross hires for the fiscal year. Thanks to much and congrats on the quarter.

Thank you, Bryan. I think last year we commented that our hiring was going to be over 100,000, this year it will be less than a 100,000 and I might add that we are quite pleased with that result. We view that as a positive outcome in the way we are able to - let’s say moderate our headcount growth in recent quarters well at the same time supporting continued strong topline growth, I mean that's an equation that we like.

Thanks so much.

Our next question comes from the line of David Grossman, Stifel Financial. Please go ahead.

Hi, good morning, thank you. I was wondering if we could look at the overall business. Recently we've talked about the ebb and flow of the business and the shifting priorities, which has favored consulting growth versus outsourcing. Can you help us understand whether that trend continues at the same rate or whether that's beginning to equalize?

As you look at our business and indeed these last few years, all the industries in all the markets are under significant transformation. They want to transform their business and the different industries, what we call, rotate to The New in all the digital space. They want as well to improve their operational efficiency and they want to implement new capabilities. So at the end of the day, if you look at the nature of the transformation of our industries, they are more related to consulting type of services. This is the nature of the demand because of the unique nature of the transformation in the industries. If you look back a few years ago where outsourcing was going to be stronger, it was absolutely linked to the fact that you have less need for true industry transformation and innovative play. And the industries were more looking for straightforward efficiency gains. And to some extent, to a great extent, the natural answer we provided at Accenture to straightforward efficiency gain through around the outsourcing arbitrage, more productivity, tackling the cost in operation and in IT. So I feel this natural shift from a bit of outsourcing, a bit less of outsourcing, to a bit more of consulting is reflecting the true nature of the transformation in the industries. And by the way, we feel extremely good about our positioning in this rotation, if you will, based on our industry image based on the investments we made in rotating to The New. Based on the fact that we still have significant capability at great scale to tackle the cost efficiency programs from our clients.

So no real material change in the pace, Pierre, of how that is migrating to the market?

We see that trend continuing, yes.

Definitely, we see that trend continuing. You have cycles. We are in a cycle of transformation for all the reasons we all know are on the call. And I guess the cycle will continue as long as the industries will be in this transformational phase.

Very good, thanks. Just one quick follow-up. I wonder if you could quickly contrast your comment about IT and how you view IP at Accenture versus perhaps how a product company views IP.

Yes, very pleased. For us, IP is very important. That's why I wanted in that call to put the attention on our IP population. It's something we've been talking about, we have so many things to discuss with all of you. But we've been very active from an IP standpoint and especially as, again, we are in a phase of reinvention and in a phase of innovation. Reinvention, innovation, equals intellectual property building. And for us we are building intellectual property is in many things - and you're right - it's more than products or sometimes we feel that IP equals software or application product. And IP could be behind processes, operating models. There are a lot of things you can - methodologies, approaches, part of solutions and this is all what we do. And I was quite impressed recently when I've been reviewing the IP portfolio with our 5,000 patents or patent-pending activities. I felt that it would be good for me to share that with all of you as, again, an element where Accenture is quite on top of its game in order to drive innovation and to perfect, more important, our innovation inside Accenture for the benefit of our clients and for the benefit of our investors.

Very good. Thank you.

Our next question is from the line of Joseph Foresi, Cantor Fitzgerald. Please go ahead.

Hi, my first question here is what are the challenges in growing digital at this point? Do you think the growth rate can keep up there? And are you finding enough talent? And maybe even some color on the margins in that business would be great

Good question. So far, so good. It's every day we're working on it at Accenture. And as you see, we've been extraordinarily active these last few years, certainly three, four years. Every day we are taking actions. These actions are to grow, if you will. In order to lead in The New, you need skills and capabilities and we've been very active from a talent standpoint. All the credit to our operating group leads, but as well to Ellyn Shook, I would like to recognize during the call here our Chief HR Officer leading all our talent agenda, and we are very active. I would like as well to recognize Roxanne Taylor from a brand standpoint because brand is absolutely key in attracting talents. That's why I wanted as well in that call to put some emphasis on the brand because it's very important in our strategy to attract talent. Of course, we've been very active from an acquisition standpoint. You've seen us raising our game these last four years and this is our objective, to continue with that pace moving forward as long as we could find relevant companies, relevant acquisitions, that will bring their capabilities. But we need to continue as well to invest on an organic standpoint. We developed our own platforms. I'm thinking about Accenture cloud platform. I'm thinking about Accenture currency platform in analytics, in marketing and so forth. So we are very active across the patch of digital. Of course, as you will see, our digital is covering interactive, mobility, analytics, cloud, security. We are even now considering the next play. I'm thinking about artificial intelligence. So far I feel good. You're right to ask the question. It's a everyday commitment from Accenture to invest in The New and to lead in The New. And I'm pleased with the momentum we are creating and I see that continuing.

Okay. And as my follow-up, to go back to the margin question, with acquisition activity being strong over the last couple of years and you needing to invest in digital, which is obviously growing very well and driving the business, should we expect a moderation in that 10 to 30 basis points typical margin expansion target? Or is that still the case going forward? Because it seems like you're in a heavy investment mode and I was wondering how to think about that going forward. Thanks.

Well first of all, certainly I’m not going to provide guidance on this call and I will come back to that question if I can just ask for your patience, I will come back to that question in more detail at the Investor Analyst Day in October. What I will say is that our focus on investing at scale doesn't end this year. This is a cycle that we’re in but I will also tell you as I mentioned the last two investment, analyst days and I referenced again in the script we are very focused on this journey of managing our business in a fit for purpose way which is really our platform for creating underlying profitability improvement in our business to both support our ambition for higher investments but also support our ambition for margin expansion as a way to support our goals to grow EPS. And I would say the general rule, the economic leverage that we have in our model hasn’t changed and in fact I might say in some ways, we have new and exciting opportunities as we think about this move to fit for purpose focus and how we manage and drive our business. But I will get more specific on all of that in October.

Okay. Thank you.

Our next question is from the line of Jason Kupferberg, Jefferies. Please go ahead.

Good morning guys. Hey, David. Just wanted to get a quick clarification on one of the answers you gave to - I think it may have been Bryan's question about headcount growth this year, new hires. It sounded like you were alluding to nonlinear dynamics perhaps, between headcount growth and revenue growth, if I heard you correctly. And I just wanted to clarify that, because it looks like billable headcount year-to-date has actually grown faster than revenue. But I just wanted to clarify what you were referencing there.

Yes, what I was referencing was first of all just the fact that we will hire fewer people this year than we did last year is one point. The second thing I was referencing is it, if you look at our sequential growth in headcount and recent growth quarters, it’s certainly moderated over let’s say the prior 7, 8 quarters and probably beyond. The third thing I was referencing although I didn’t say it specifically is that it is true if you look at our headcount growth in the third quarter year-over-year, it was at a rate above our revenue but that rate above our revenue was less than what you’ve seen in recent quarters. And so there is without getting overly specific, there are three things that factor in to that, one would be our focus on automation as an example and the mix although as we said, that is early days but yet a big focus for us going forward, things like chargeability around the mix, things like attrition levels around the mix, when you consider at hiring number and of course, the revenue yield that we're getting for billable head is also in the mix. And that can be influenced by things like the mix of work that we're doing across the five business mix of work by geography and it can also include pricing. So, all of those things are kind of in the mix and in some way all of those are contributing to what it has been a more moderate growth sequentially in our headcount and that's really all I was pointing out.

Okay, that's super helpful. Maybe just to pick up on that point around utilization, I think you've been running at 90%-plus for seven straight quarters after never having been at those levels prior to last fiscal year. So do you feel like this is a new normal and that we're unlikely to see this slip below 90%? And would it also be fair to say that you're maxed out at this 90%, 91% range? Or could there be further head room, depending on how the revenue mix evolves over time?

I guess I won't declare that it's maxed out. There are things that could work in our favor going forward that could influence that metric further. If you look at our historical norm, we are at the higher level of that range for sure. And we are running hot and I think that reflects the activity in the market. We could come down a click or two in different quarters. And a lot of times that happens with periods in the year where we tend to bring on, let's say, more heads. So for example, in the fourth quarter we have a lot of our new joiners, campus hires that will start with us in the fourth quarter and early in the fall. So the simple answer is that no doubt we are running at a very high level of utilization, reflecting the dynamics that we see in the market. But we're in a zone right now that we feel very comfortable managing but it could also be a click lower and we wouldn't be worried about that.

Okay, I appreciate the comments. Thanks.

We have a question from the line of Lisa Ellis, Bernstein. Please go ahead.

Hi. Good morning, David. I have a question. In the market it looks like you're seeing that demand for the new digital security services, cloud services, is if anything accelerating. And yet, as I guess a number of folks now have called out, a lot of your forward indicators have decelerated a bit. Headcount growth, the pace of M&A, even though it's still elevated, has slowed down since last year. So can you comment on that disconnect or how you're thinking about that? Because if anything, it seems like the demand is accelerating, not decelerating, out there.

I can speak of that. Good morning, Lisa. On the point you're mentioning around deceleration of some of our capabilities, when you're talking about acquisitions it might very well be that we're going to make less transactions than last year, a few. But on the other hand, we will certainly deploy a bit more capital than last year because we expect to close the year with a bit more than $1 billion being deployed. So I guess it's - so we are not slowing down at all our acquisitions agenda, at least in terms of volume of capital deployed. By the volume of capital deployed it means the capabilities we are bringing back in Accenture. So I do not see on digital, anything in Accenture which would reflect a kind of slowing down of our appetite to grow, of our appetite to invest, and of our appetite to accelerate in The New. From a net standpoint I will let David comment again.

Lisa, one thing I would point out is that - really, to get underneath your question, you would have to get into the more granular details of our business which are not practical for us to get in externally but let me just make the point that as the business is rotating overall, we are also rotating a lot of talent within our headcount. And so what is not apparent by simply looking at the overall numbers is the talent rotation that is taking place. And I can assure you that our pace of investing and acquiring headcount specifically focused on driving this new agenda, and the digital-related services agenda as part of that, has not slowed down at all. In fact, I would say the demand for talent in The New and talent in digital-related talent as one example, but also including cloud and security in our business has never been higher. And it is - as Pierre referenced earlier for Ellyn Shook, that is job number one for her, is managing the talent supply side to fuel The New. And I think our pace of activity is not slowing, if anything, our appetite for that talent is increasing. But it's underneath the overall number that we communicate. So we feel like our indicators are positive indicators right now.

Yes, to build on this, because this is a very important question you're raising, coming back to talent, I know that we have a lot of questions regarding the total headcount. And we're working that very carefully with David to see that we've been able to grow more our revenues with a little bit less hiring of people, which on balance we will all recognize, is a good direction. If you look from a managing director standpoint, so all of the leadership of Accenture, I just would like to reconfirm that this year in fiscal 2016 we promoted much more managing directors than ever these last 4 years. And I think from a recruiting of leaders, managing directors, we've never been so active in the market in recruiting new leaders. So it's important to segregate the leadership we are hiring and promoting at scale, because the leaders are driving the business, from the total headcount which we all expect will continue to grow less, a bit less than our revenues moving forward, due to the factor of automation and productivity in our operations.

Terrific, thank you. That's great color, thanks a lot.

And our next question is from Dave Koning, Baird. Please go ahead.

Hey, guys, thanks for taking my question. First of all, the digital business, you talked about, it's about 40% of revs, growing about 30%. That would imply that the other 60% is maybe flattish to down. Maybe you can talk a little bit about that. And then is this the formula that digital keeps growing in that range and the rest of the business is more flattish? Is that the formula going forward?

I think the formula going forward is very simple. We want to grow. That's our goal in life is to grow and to grow more than the market. In order to grow more than the market, we believe at Accenture and this is at the heart of our strategy, that it's going to be by leading in the digital-related services. To be clear, we want to make Accenture the leading professional services company in digital-related services. This is what we're working on these last few years and we will continue moving forward. We have evidence that this rotation to The New is happening at big scale. So the most significant part of our growth will come from digital-related services because this is our strategy, first and second, this is where the demand is. Now, that being said, we want to continue making our core, if you will, extremely competitive in the marketplace. I just mentioned in the call that we invested in our new intelligent delivery platform called Accenture myWizard which is bringing a lot of success in Accenture. So of course we're growing much less in the core than in The New, which is exactly reflecting our strategy. Now, the core is still positive, growing less, but it's still positive. And I believe that on the core Accenture is growing more than the competition at the end of the day which has always been our value proposition, is to grow more than the market in The New and much more. And is to grow more than the market in the remaining core which is what we do, of course, at a much lower level and lower pace, but still positive. Right, David?

It is. And David, let me also clarify some subtleties in the way we talk about digital-related services and The New, just to remind you and the others as well. So, we initially started talking about digital-related services, which was defined specifically to include Accenture Interactive, mobility, and analytics. And digital-related services is what I referenced was growing in the range of 30%. Following introducing digital-related services several quarters ago, we rolled forward, kind of evolved that, to talk about The New, which includes digital-related services, cloud-related services and security. With The New, we commented that it is now about 40% of our revenues. We did not comment on the growth rate for The New. But I will say that digital-related services of the three components of The New, is the fastest growing. So that helps you as well. We talk about The New and digital-related services and it's important to just reinforce the understanding of the definitions.

Got you. Okay, that's helpful. And then I guess the one other question I had, the growth markets grew 6% and then North America and Europe were more like 11% to 12%. I would have thought a few quarters ago that maybe China and Brazil, the gap would have been - the slower growth would have happened but it actually seems like now that gap, the growth markets are growing quite a bit slower than the others. Maybe you can just comment on that a little bit.

Yes, happy to comment. Fact of the matter is growth markets are growing lower than the other two, maybe just because the other two are growing exceptionally well and especially Europe at 12%, which of course is a remarkable achievement. Now when you look at the growth markets, needless to say that it's a mixed bag of very different situations when we're talking our growth markets. First, we are extremely pleased that we continue with our double-digit growth with Japan. By the way, I don't know and maybe we provide information, how many quarters now we've been growing double-digits in Japan, but it's starting to be spectacular, and of course is a very large market for Accenture. Not only for the - still what we're calling the growth market, but for Accenture as a whole. So I'm extraordinarily pleased with the turnaround we've been driving in Japan, with the momentum we are making in Japan and with the acquisition we have made of IMJ in order to accelerate the rotation to The New in Japan. I am very pleased with the new momentum we are creating China this year, together with India and Mexico. Now, as you know, in the growth markets there are two factors impacting the growth markets. First is these markets are more vulnerable to the commodity markets in terms of energy and natural resources. There are significant countries very dependent on natural resources and energy. And of course they are affected by the commodity price going down, and accordingly we are affected with this factor. Secondly, the situation in Brazil. We all know what's happening in Brazil. So our growth has been slowing down in a market which is very important for Accenture. That being said, I love being public on this, because I would like to recognize the incredible leadership of Roger Ingold and now Leonardo Framil leading our practice in Brazil, where we're doing more than resisting. When I say more than resisting, it means on a year-to-date standpoint we are growing in Brazil, which is probably according to any standards, a remarkable achievement. Now, of course we're growing less in Brazil than we used to grow in the past. So on balance, it's a 6% reflecting very different dynamics. This is what - is something I like a lot in Accenture, is our diverse portfolio of businesses where, indeed, when you look at the growth markets, when Brazil is a bit under pressure, all commodity markets, we benefit from growth elsewhere and on balance 7% is pretty good from my perspective.

Yes. If you isolated chemicals and natural resources and energy and then looked at the underlying growth in growth markets, it would be very similar to what we see in the other areas. It has that unique dynamic as well as the other points Pierre mentioned.

Got you, great. Well, thank you.

And our next question is from the line of Jim Schneider, Goldman Sachs. Please go ahead.

Good morning, thanks for taking my question. I was wondering if you could talk a little about financial services. It's an area where you've talked about previously being driven by transformation and that pace continues be pretty strong. Can you give us any sense about whether you're seeing any tone change from your financial services customers, either in banking or elsewhere in terms of the overall IT spending outlook and that would suggest that we are seeing any slowdown in that pace of change, change-driven services in particular?

Yes. I probably could take this one, David, from my prior role. It seems that all my life I will comment on Europe [indiscernible], but very happy to. First, let's start with the beginning. We're pleased with where we are with financial services overall. If you look at the results we posted this last few quarters, we had good momentum in financial services. Second, it's an industry which is ongoing some significant rotation to The New for obvious reasons. It's a B to C industry and we have a lot of activities in terms of rotating to The New and creating digital capabilities in financial services. This is as well an industry where we see a lot of potential in what we're calling automation, if you will, to create more automated processes, bringing virtual agents to provide financial advisory services. So that's the path which is creating some momentum. However, on the other side of the coin, if you will, it's an industry which is still under pressure, especially in Europe, for all sorts of reasons. Negative interest rates have been good, especially in that industry for their commercial business. The regulatory constraints are high, as you know, with all - especially in Europe with all the Basel legislation and all the constraints which have been put on the banks and so the profitability of the banks been affected these last few years. So at the same time they need to rotate to The New, but at the same time they need to work on their cost. So there is a bit of this story with our financial services clients, investing in The New but being extremely cautious about their cost play. That's why after this good momentum we have in financial services, we might see some moderation of our growth with our verticals in Europe a bit. Nothing we are over-worried about because we believe the potential is still there, but it's an industry which is under cost pressure.

That's helpful, thank you. And then maybe one for David. DSOs edged back up to 41 and I guess have been on a little bit of an upward trajectory over the last four, six quarters. Can you give us a sense about whether that says anything about the overall cash flow trends for the business and whether that, in fact, is a longer term trend?

Yes, I would say, to be completely transparent, it was a little higher than I would have wanted in the quarter, but yet we still generated very strong cash flow. We are very focused on managing our DSO and I'm hopeful that we will see it click down at the end of the fourth quarter. As I've said before, first of all, even at the levels that we're at, as you know, you hear us say all the time, we're still very much industry-leading. I do think that we are in the zone of what I think could be a reset, new normal and, let's say, in that 40-day plus or minus zone. And so we'll continue to focus on it as one of our key operational priorities. And I'm hopeful we can continue to manage it in that zone.

Thank you.

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

So the last question is from the line of Tien-tsin Huang, JPMorgan. Please go ahead.

Good morning. Forgive the noise, I'm at the airport. Just a couple quick ones. What exactly is driving the revenue raise in the guidance here? What areas specifically are running better than expected?

Really the revenue raise is just a reflection of posting roughly 11% growth year-to-date. And if you look at the guidance range of the 6% to 9%, we just simply did the math. If you do the mathematical extension of that, you get to the 9.5% to 10.5% range. I think in terms of what's driving it of late, products is very, very hot right now. And the thing that is impressive about products, which also happens to be our largest operating group, is that their growth is broad-based across every industry in that operating group, as well as each of the three geographic areas. And so I would say that what is driving us to a strong close to the year, if you will and hence raising the revenue 0.5 point on the upper end, you would start with products and the strong story there. Health and public service is another strong story. Very good growth in the third quarter and very strong momentum as we look to the fourth quarter. I would say our business in North America is another source of momentum. If I had to name, let's say, three big drivers, I would pick those two operating groups and North America. And then of course underneath that, as Pierre covered very well, is the ongoing continued momentum in digital and The New, which we certainly will continue into the fourth quarter. So those are some of the big themes in terms of driving what we hope will be a good strong close to the year.

Okay. That's helpful, Pierre, thanks. I also wanted to follow up, I think it was David Grossman's question on IP and software and how the deconsolidation of Duck Creek, that action there, how does that fit in the strategy of owning IP and platforms, any comments? Thanks.

Yes, elaborating a bit on what I said before. So we're working on our IP from, again, from a process standpoint, a metallurgy standpoint, from part of solutions standpoint, and of course, in the context of working with our partners. And it might very well be that we are creating IP on top of some market solutions, which is where we are making the bridge with your question around software, not software. We are, in our business, we are working with software companies. And the job of Accenture for many years has been to bring an industry expertise, an industry wrapper on top of these solutions. And on this wrapper we are bringing, we're working on protecting our own IP when appropriate and when possible. This is where at Accenture we make the bridge with the software providers. The software providers are all our friends and we're working with the best possible companies. They are coming to Accenture, that's why we are a good partner to bring industry expertise. And this is on the industry wrapper we could build IP.

Pierre, you want to comment on Duck Creek? He also asked about Duck Creek and how that fits in with our strategy.

Yes. And Duck Creek is clearly a good illustration of what we are doing. Duck Creek is a fantastic company, an excellent solution. We certainly believe this is the best in the marketplace in policy administration, in insurance policy administration in some markets including the United States. We want to invest more in Duck Creek to establish an even stronger leadership in the different markets of Duck Creek. And we believe that the right way of doing it was to partner with someone who would bring some strength in terms of investing together with us, in that case, Apax Partners. And we're very pleased that Accenture, together with Apax will be able to invest behind Duck Creek and move Duck Creek solutions to the next level and establish a stronger leadership. This is all about the new Accenture. At Accenture, we will look always at all the ways to invest, to bring the right solution, to be smart, to be thoughtful and mindful about our capital allocation and at the end of the day, to lead in the market and to lead in The New.

Okay.

Okay, thanks again for joining us on today's call. Let me close with a few thoughts on Accenture's long-term performance, which I believe unites all of us, investors, analysts, Accenture leaders and all of our people. Next month on July 19 we will celebrate the 15-year anniversary of Accenture's IPO. We have performed extremely well over the years by continually reinventing our business. Since our IPO we have delivered compound annual growth of 8% in revenues and 14% in adjusted EPS, creating significant value for our shareholders, for our clients and for our people. So I want to thank all of you for the support you've been bringing to Accenture over so many years. We look forward to talking with you again next quarter. In the meantime, if you have any questions, please feel free to call KC. And all the best to all of you.

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