Ashwin Shirvaikar: Understood. I want to ask also about operations performance. It did decelerate meaningfully. I think it was high-single-digit growth, and now it’s flat. Is that also a reflection you mentioned just now, maybe a pivot from cost savings to revenue generation maybe is beginning? Is that what’s happening or are there other factors in here?
KC McClure: Yeah. Maybe just in terms of the quarter performance, operations came in as expected. As we talked about at the beginning of the year, Ashwin, we do have some impacts in CMT that impact operations, and so we’ll see that growth may fluctuate as we go throughout the year. As part, though, of our overall guidance for the full year of managed services continuing to be mid-single to high-single-digit growth for the year.
Julie Sweet: Yeah. And in fact, I would say, it’s the opposite. Operations, which was impacted, by the way, by CMT, for example, look, it’s going to build similar to the way Accenture is going to build over the course of the year. Actually, the sweet spot of operations is that it does both cost and growth. So, the BBVA example includes operations, Fortrea includes operations. So, these are — our managed services are highly strategic because they are typically able to do both. Think about IT transformation. Our managed services are as much about modernizing. So, in IT, modernized tech is what drives growth. So, we really see our strength being that our managed services are strategic. And one of the reasons is that we do them in the context of understanding the industry and the function. So, we’re not back office. We’re bringing that strategy and consulting expertise to make sure that it isn’t just a cost play. And that’s an important differentiator for us.
Ashwin Shirvaikar: Got it. Thank you both.
Julie Sweet: Thank you.
Operator: Your next question comes from the line of Bryan Bergin from TD Cowen. Please go ahead.
Bryan Bergin: Hi, guys. Good morning. Happy holidays. I wanted to start on your some of the expectations around shorter cycle and discretionary work within S&C and SI. Do you have a sense of stabilization forming there or cuts still occurring in those areas? And maybe can you give us a sense on how you expect consulting to do in the second quarter?
Julie Sweet: Yeah. So, look, we’re — as KC said earlier, we’re operating kind of the same environment we have for the last few quarters, right? Discretionary spend is down. And we’re right in the middle of the budget cycle, so next quarter, we’ll have a much better view of what’s there. But if you sort of look around in the environment, there aren’t a lot of green shoots on the economic side. And obviously, the volatility on the geopolitical side continues. And so, as KC said, we’re not planning right now for kind of a change in the macro, which means that we’re not planning for a change in discretionary spending. We just don’t see that being meaningfully different as we go into 2024. And obviously, we’ll update you. But that’s why when you think about the question earlier on revenue conversion, our level of smaller deals is just down.
It’s going to stay down for a while, which means that how revenues going to — how sales are going to bleed into revenue is going to be consistent with what we’ve been seeing. So — and then, you want to comment?
KC McClure: Yeah. Just in terms of, Bryan, on the overall growth, there’s no change from what we said at the beginning of the year in terms of our full-year outlook for consulting type of work. We see low-single-digit positive growth for the full year. That’s in our 2% to 5%. And Q1 came in as we expected, which was negative 2%.
Bryan Bergin: Okay. That’s helpful. And then, just a clarification around the M&A. So first, I don’t know if you mentioned M&A in the first quarter, the contribution to growth, and we’re saying greater than 2% for the full year. Just to be clear, that’s just rounding around 2% or upwards of 3%? Thanks.
KC McClure: Yeah. So, we’re saying more than 2% for the full year, and it can fluctuate by quarter, so we really just stick to our guidance for the overall year.
Julie Sweet: Right. And if we get close to 3%, we’ll talk about that. But right now it’s more than 2%.
KC McClure: More than 2%.
Julie Sweet: Right. Because we gave you guidance, so it’s down definitely more than 2%. And remember, we only do deals that we think are good deals. So, what we see right now is a lot of good deals that is going to get us to above 2%. And if that — we have a lot of financial flexibility, so if that changes, we’ll update if it gets above 3%.
Bryan Bergin: Thanks. Happy holidays.
Julie Sweet: Happy holidays.
KC McClure: Same to you.
Operator: Your next question comes from the line of Dave Koning from Baird. Please go ahead.
Dave Koning: Yeah. Hey, guys. Thanks so much. One thing I noticed, I guess, gross margin growth, year-over-year expansion in gross margin was the strongest in about nine quarters or so. Is that just lower attrition, offshore shift? Maybe walk through why that’s gotten nicely better.
KC McClure: Yeah. Hey, Dave. Thanks for the question. So, as you know, we run our business to operating margin, which we did 20 basis point expansion this quarter. And I will mention that if I didn’t already, that the 10 basis point to 30 basis point that we have for the year, we might see more variability as we go throughout the quarters. But now back to gross margin, you’re right, we did see expansion this quarter, but it’s really hard to look at that in isolation. And why is that? Well, there’s various things that can go in and out of gross margin in terms of increased or decreased spend. So, for example, one would be acquisitions. There’s a lot of — some of the investment acquisitions, some of that spend will go into gross margin, and that can be lumpy as we go throughout.
