Q4 2021 Accenture PLC Earnings Call
Okay.
[music].
And ladies and gentlemen, thank you for standing by and welcome to the Accenture fourth quarter fiscal 2021 earnings conference call. At this time all participants are in listen only mode. Later, we will conduct conduct a question and answer session. If you wish to ask a question. Please press one then zero on your tech.
I want to keep at turning them up yourself from Q. Please repeat the women's Europe command. If you should require assistance during the call. Please press Star then zero as a reminder, today's call is being recorded.
I would now like to turn the conference over to our host Angie Park, managing director and head of Investor Relations. Please go ahead.
Thank you operator, and thanks, everyone for joining us today on our fourth quarter and full fiscal 2021 earnings announcement as the operator, just mentioned I'm Angie Park, managing director head of Investor Relations on today's call you will hear from Julie Sweet, our 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 both the fourth quarter and full fiscal year Julie.
He will then provide a brief update on our market positioning before KC provides our business outlook for the first quarter and full fiscal year 2022. 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 et cetera are subject to known and unknown risks and uncertainty.
Teeth, 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 Dot com 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 Angie and everyone for joining us before diving into our results. Thank you to our 624000 incredibly talented people around the world, including over 8500 managing directors.
This past fiscal year, your hard work and dedication to creating value that matters for our clients with unwavering despite the ongoing and sometimes quite extreme challenges of COVID-19.
We've had a truly extraordinary year as reflected in our outstanding financial results and in the 360 degree value we deliberate beyond our financials.
From the over 120000 promotions and over 31 million training hours, an increase of 43% for our people.
Two increasing our workforce by approximately 118000 people, creating significant employment opportunities in our communities.
Two achieving 46% women on our way to our goal of gender parity by 2025.
Two our top three ranking in the vicinity of global diversity and inclusion index for the fourth consecutive year.
To the number one position with our largest ecosystem partners to be exciting accomplishment of 50% renewable energy now powering our offices and centers globally to the donation of $54 million in Covid surge relief.
In December we will publish our first ever annual 360 degree value reports to more fully describe the FY 'twenty one value we created in all directions, and we'll report against three additional key ESG frameworks Sotheby T C F D and <unk>.
I B C.
We believe that the trust, we have from our clients and partners, our continuous innovation and our ability to consistently attract the best people, including the 56000 net new hires this past quarter.
Are directly linked to our commitment to measuring our success by how well we create this 360 degree value for all our stakeholders clients people partners shareholders and communities and on our culture of shared success.
Here are some key financial highlights of the year, which positioned us strongly as we begin FY 'twenty two.
FY 'twenty, one demonstrated our leadership in helping our clients achieve compressed transformation with 72 clients with bookings greater than $100 million compared to 53 last year and 229 diamond clients, our largest client relationships compare.
Two 216 last year.
[laughter].
With the 20% increase in bookings to $59 billion, we have strong momentum across all dimensions of our business across geographic markets industries and services.
Reaching revenues of $55.0 billion, a significant milestone representing 11% growth we added $8.0 billion in revenue this year, gaining significant market share with 40 basis points of operating margin expansion, demonstrating yet again our ability.
To grow profitably and at scale, we achieve this profitable growth, while investing at a higher level than ever before with $6.0 billion in acquisitions $1.1 billion in R&D and asset platforms and industry solutions, including growing our portfolio of patents and pending.
<unk> to more than 8200, and total training investment of $900 million and according to brand Z our brand value increased 56% to over $64 billion ranking us number 27 on the prestigious brands. These top 100, most valuable global.
Brands list.
Finally.
I wanted to highlight cloud and our ability to move with agility to serve our clients' needs and capture momentum in the market.
At the beginning of FY 'twenty, one after investing in cloud for a decade, we saw that the pandemic will dramatically accelerate our clients move to the cloud more than technology. The move to the cloud would be about the adoption of a new operating system for the future enterprise a dynamic continuum of capabilities from <unk>.
<unk> two edge to everything in between opening up radically new ways for companies to work compete and drive value.
Just over one year ago, we created Accenture cloud first to capitalize on this momentum, bringing together all of our capabilities from migration to cloud native development data AI industry talent and change Accenture cloud first was the biggest driver of our overall cloud business growth from $12 billion.
To $18 billion, 844% increase KC over to you.
Thank you Julie and thanks to all of you for joining us on today's call. We were very pleased with our results in the fourth quarter, which completes an outstanding year for Accenture and reflect broad based momentum across all dimensions of our business. Once again, our results reflect our relentless focus to deliver.
Across our three key imperatives for driving superior stakeholder value.
So let me begin by summarizing a few of the highlights of the quarter.
Revenue growth of 21% in local currency at the top end of our guided range reflects double digit growth across all markets all industry groups and all services. We also continue to extend our leadership position at an accelerated pace with growth significantly above the market.
Operating margin was 14, 6% an increase of 30 basis points for the quarter, reflecting and 40 basis points of expansion for the full year.
We delivered this expansion, while investing significantly in our business and in our people to position us for long term market leadership.
We delivered very strong EPS of $2, 20, which represents 29% growth compared to adjusted EPS last year.
And finally, we delivered free cash flow of $4.0 billion, which was driven by continued strong growth and profitability.
Now, let me turn to some of the detail new bookings were 15 billion for the quarter with a book to Bill of 1.1 consulting bookings were 8 billion with a book to Bill of one one outsourcing bookings were $8.0 billion with a book to Bill of 1.2.
We were very pleased with our new bookings, which represents 7% growth in U S dollars with 18 clients with bookings over $100 million.
We were also pleased with the strength of bookings across all services with a book to Bill of one and strategy consulting 1.2 in technology services and one point wanted operations.
Turning now to revenues revenues for the quarter were $17.0 billion, a 24% increase in U S dollars and 21% in local currency slightly above our FX adjusted range as the FX tailwind was 3% compared to the 4% estimated last quarter.
Consulting revenues for the quarter were $10.0 billion up 29% in U S dollars and 25% in local currency.
Outsourcing revenues were $7.0 billion up 19% in U S dollars and 16% in local currency.
Taking a closer look at our service dimensions strategy and consulting technology services and operations all grew very strong double digits.
Turning to our geographic markets in North America revenue growth was 22% in local currency driven by double digit growth in consumer goods retail and travel services software and platforms and public service.
In Europe revenue grew 18% in local currency led by double digit growth in consumer goods retail and travel services.
Industrial and banking and capital markets looking closer at the countries Europe was driven by double digit growth in the UK, Germany, France and Italy.
In growth markets, we delivered 21% revenue growth in local currency driven by double digit growth in consumer goods retail and travel services.
Banking and capital markets and high Tech.
From a country perspective growth markets was led by double digit growth in Japan, Australia and Brazil.
Moving down the income statement gross margin for the quarter was 33, 3% compared with 31, 8% for the same period last year.
Sales and marketing expense for the quarter was 11, 3% compared with 10, 6% for the fourth quarter last year.
General and administrative expense was seven 4% compared to six 8% for the same quarter last year.
Operating income was 2 billion in the fourth quarter, reflecting a 14 six operating margin up 30 basis points compared with Q4 last year.
As a reminder, in Q4 last year, we recorded an investment gain that impacted our tax rate and increased EPS by <unk> 29 cents for the quarter.
The following comparisons exclude this impact and reflect adjusted results.
Our effective tax rate for the quarter was 25% compared with an adjusted effective tax rate of 28, 4% for the fourth quarter last year.
Diluted earnings per share were $22.0
Compared with adjusted EPS of $71.0 in the fourth quarter last year.
Days services outstanding were 38 days compared to 36 days last quarter and 35 days in the fourth quarter of last year.
Free cash flow for the quarter was $4.0 billion, resulting from cash generated by operating activities of $6.0 billion net of property and equipment additions of $236 million.
Our cash balance at August 31 was $10.0 billion compared with $12.0 billion at August 31 last year.
With regards to our ongoing objective to return cash to shareholders in the fourth quarter, we repurchased or redeemed 3 million shares for $915 million at an average price of $366.0 per share.
Also in August we paid our fourth quarterly cash dividend of 88 per share for a total of $558 million and our board of directors declared a quarterly cash dividend of 97 per share to be paid on November 15th at 10% increase over last year and approved three.
Of additional share repurchase authority.
Now I would like to take a moment to summarize our outstanding year.
We are extremely pleased with the performance of our business in fiscal year 'twenty one.
Greatly exceeding all aspects of our original outlook that we provided last September.
We delivered $59 billion of new bookings, a 20% increase in U S dollars over last year, which positions us well as we begin fiscal year 2002.
Revenues increased a record $8.0 billion, hitting the $50 billion, mark reflecting growth of 11% in local currency for the full year. This result, which is more than double the revenue growth we anticipated at the beginning of the year showcases our agility.
And ability to quickly scale to deliver value and outcomes for our clients.
Operating margin of 15, 1% reflected a 40 basis point expansion over fiscal year 'twenty above the top end of our original guided range, even after making continued significant investments in our business and our people.
Adjusted earnings per share were $8.80, reflecting 18% growth over adjusted FY 'twenty EPS EPS and was well above our revenue growth as a reminder, we adjusted earnings for both years to exclude gains on our investment.
Free cash flow of $12.0 billion was significantly above our original guided range, reflecting a free cash flow to net income ratio of one 5% driven by strong profitability in.
And finally, we significantly exceeded our original guidance for capital allocation by returning $14.0 billion of cash to shareholders, while investing roughly $6.0 billion across 46 acquisitions to acquire critical skills and capabilities in strategic high growth areas of the market.
So again FY 'twenty, one was truly an outstanding year.
Momentum continues into fiscal 'twenty two.
And we are laser focused on capturing the market opportunities coupled with a disciplined execution that you and we expect of US now let me turn it back to Julie.
Yeah.
Thanks Casey.
Turning to the demand environment compressed transformation underpinned by cloud and digital continues to drive strong double digit growth across our business, including for applied intelligence cloud industry ex intelligent operations interactive intelligent platform services security and transformational change management.
Technology is the single biggest driver of change in companies today, and the depth breadth and scale of our technology capabilities across our services is unmatched we.
We see the demand environment shaping up for FY 'twenty two to be more of the same while digital leaders seeking seeking to widen their competitive advantage.
And companies seeking to leapfrog their cloud and digital transformation are driving momentum in our business. The vast majority of companies are early in their transformation and whether digital leader leapfrog or laggard or in between all face multiyear journeys ahead of them.
Because the re platforming in the cloud and use of new technologies across the enterprise is a once in a digital era.
Got profound transformation.
Simultaneously, we have ongoing exponential technology change that is accelerating and will create new opportunities disruptions and change for our clients. In addition growth in parts of our business are by their very nature continuously evolving for example interact.
It now a $17.0 billion dollar business growing 15% continues to set a new standard for customer experience connection sales and marketing at the intersection of data creativity and technology, and it's tied to the ever changing needs and preferences of BDC and B to B.
Customers.
Similarly security now a $8.0 billion business growing 29% is driven by needs related to an ever expanding digital threat landscape.
And with our managed services is providing much needed protection and talent to our clients.
Our clients value the depth and breadth of our services for the entire enterprise across strategy and consulting interactive technology and operations and industry and functional expertise across 13 industries plus the.
<unk> to deliver tangible outcomes as well as our strong track record of investing ahead of our clients to anticipate their needs needs and drive our next wave of growth such as our early moves in digital cloud and security.
There remain entire parts of the enterprise, which digitization and the move to the cloud has only just begun.
In particular, both the things companies make and the way they make things are being dramatically changed by technology and that is the focus of our industry X business, which we believe is the next big digital frontier in fact, a 2021 Gartner survey of board of directors.
That 93% expect that the number one business priority that we will see transformational improvement from digital technology is manufacturing distribution and supply chain.
We have invested for nearly a decade and industry acts and are now at approximately $5 billion in revenue growing 36%. We look forward to welcoming the spore thousand 200 industry, leading engineers and consultants of whom loud when the acquisition closes in October.
Similarly sustainability is a critical area for which technology is still evolving we believe that every business must be a sustainable business and yet companies are at very early stages of figuring out how to make this shift.
Last year building on years of investment and experience, we've launched our sustainability services under our new Chief responsibility officer, and global sustainability services lead.
We are continuing to accelerate our focus in this expanding and changing market and are proud of the work, we're doing with leading partners like Mastercard as we enhance its ability to track and analyze the carbon emissions of their suppliers and help decarbonize the U K energy system with clients such as national grid.
We do see a shift in the nature of the demand for our managed services across a T security and operations with these services emerging as one of our most strategic differentiators.
As companies simultaneously seek greater resilience Chase a war for talent.
The need to rapidly digitize and cost pressures strategic managed services are increasingly a C suite priority with Accenture as a trusted partner of choice and increasingly integrated as part of their talent strategy.
Table Stakes for managed services, our efficiency resiliency and reliability. We further differentiate in our managed services because they are uniquely informed by our strong strategy in consulting capabilities and deep industry and functional expertise and they benefit from our strong level of investment for digital platforms like sin.
And my Wizard and the seamless integration with our ecosystem partners as well as due to the incredible pool of talented people our clients can access quickly when partnering with us.
For example, we are partnering with Olympus, a leading manufacturer of optical and digital precision technology to help them drive their transformation to become a global medical technology company as part of this partnership we have acquired their Japanese I T subsidiary company, which we will transform to deliver significant cost savings to Olympus.
Well its upskill their people combining their knowledge with our talent and technology to lead Olympus is digital transformation.
Now, let me bring to life some more of the demand we are seeing all of these examples bring together to the diverse capabilities across accenture to create tangible value.
We are a leader in cloud because we're able to serve our clients across the cloud continuum and create business value.
We are partnering with Kubota, a Japanese multinational company, providing solutions leveraging a diverse range of products technologies and services in the fields of food water and the environment to accelerate Kubota is digital transformation by creating solutions that will enhance the productivity and safety of food promote circular.
City of water resources, and waste and improve urban living.
Environments, we will help create innovative sustainability solutions in a platform applying leading edge digital technologies, including AI and Iot diverse data held across the group will be centralized for easy maintenance and use. We're also modernizing replacing are migrating legacy applications to the cloud.
And strengthening their global computer.
Security incident response team.
We are partnering with Jabal a U S based global manufacturing services company to further enhance their it infrastructure capabilities to providing infrastructure managed services for digital workplace network cloud and data center support.
We're helping affinia finish ensure it offering casualty motor and health and accident services to implement a cloud based policy administration system to improve customer service using data and automation to make sales claims payments and policy management processes more user friendly. This will allow the company to quickly respond.
On to changing market and customer demands and needed school of providing the best customer experience in the industry.
But compressed transformation is occurring across industries.
We're partnering with Unilever or one of the worlds largest consumer goods companies in their digital transformation together, we are setting a new industry standard by reinventing technology delivery with cutting edge automation delivering cloud migration at scale, the largest ERP migration to the cloud in the industry and shifting to <unk>.
Acknowledging solutions that support their growth strategy.
With Mccormack, a global leader in flavor in the food industry, where we are partnering on our strategic transformation program encompassing finance supply chain logistics and plant maintenance the new cloud based platform an innovative data driven approach will help standardize processes increase efficiencies and support their goal of doubling in <unk>.
<unk> quickly.
We're helping a European financial institution build the bank of the future and helping them become a next level innovator one that is leveraging technology and sustainability to transform multiple parts of their business drive hyper personalized customer experience and create new lines of business like wealth management and insurance, which is expected to trim.
<unk> digital sales by 2023 and improve their already stellar cost to income ratio at the same time, we're helping them deliver on their ESG initiatives, including inclusive financing green software and carbon data free data centers.
At Accenture, we're enabling new experience and growth and cost transformation across the enterprise and across industries and a key enabler to these innovative scaled service is the power of our operations capabilities.
We're helping open fiber and Italian telecommunications company design and orchestrate construction of an ultra broadband network, which will deliver fiber to 20 million households across Italy, Digitization and automation will help the construction site to proceed faster and more efficiently.
With interactive, we're helping media Markt Saturn retail group Europe, leading consumer electronics retail retailer transform their digital content capabilities with a state of the art marketing operation automation and data insights enabled by sin ops will help deliver more engaging and personalized content will driving millions in savings.
Yeah.
Our industry expertise continues to be a core competitive advantage, allowing us to bring deep industry and cross industry knowledge enterprise wide for our clients.
I want to recognize and particular, our software and platform industry, which is approximately $4 billion in revenue in Q4. This group celebrated 20 consecutive quarters of double digit growth, serving as a leading partner to our clients in this hyper growth industry Casey back to you.
Thanks, Julie now, let me turn to our business outlook for the first quarter of fiscal 'twenty. Two we expect revenues to be in the range of $13 nine to 14, three 5 billion. This assumes the impact of FX will be about positive, 0.5% compared to the first quarter of fiscal 'twenty one.
And reflects an estimated 18% to 22% growth of the currencies.
For the full fiscal year 'twenty two based upon how the rates have been trending over the last few weeks. We currently assume the impact of FX on our results in U S dollars will be approximately negative 0.5% compared to fiscal 'twenty one.
For the full fiscal 'twenty, two we expect our revenue to be in the range of 12% to 15% growth in local currency over fiscal 'twenty, one which includes an inorganic contribution of about 5% as we continue to expect to invest about 4 billion in acquisitions.
For operating margin, we expect fiscal year 'twenty two to be 15, two to 15, 4% a 10 to 30 basis point expansion over fiscal 'twenty. One result, we expect our annual effective tax rate to be in the range of 23% to 25%. This compares to an adjusted effective tax rate of 23.
1% in fiscal 'twenty one.
For earnings per share, we expect full year diluted EPS for fiscal 'twenty two to be in the range of $99.0 to.
To $28.0, or 13% to 16% growth over adjusted fiscal 'twenty one results.
For the full fiscal 'twenty, two we expect operating cash flow to be in the range of eight two to $15.0 billion property and equipment additions to be approximately 700 million and free cash flow to be in the range of seven five to 8 billion. Our free cash flow guidance reflects a very strong free cash flow to net income ratio of one one to one two.
Finally, we expect to return at least $9.0 billion through dividends and share repurchases 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. Angie. Thanks, KC I would ask that you each keep to one question and a follow up to allow as many participants.
It depends as possible to ask a question operator would you. Please provide instructions for those on the call.
Of course, and once again, if you wish to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the womens Zero command.
And today, let's see our first question.
Comes from the line of Keith Bachman of Bank of Montreal. Please go ahead.
Hi, many thanks for letting me the opportunity to ask a question I had two if I could.
Standing set of results and guidance first of all.
I wanted to ask about the cash flow, if I could guidance and even at the high end of the range.
The cash flow margin would be a pretty significant step down from 'twenty fiscal 'twenty and fiscal 'twenty, one so I just wondered.
Is there any puts and takes within the cash flow guidance that we should be aware of.
As we're doing our model. Thank you and I have a quick follow up to that.
Sure Great. Thanks, Nice to hear from me Keith Yes, so our free cash flow of seven $5 billion to $8 billion.
It reflects very strong free cash flow to net income ratio of one one to one point too and so we're really pleased with that.
And it does have slightly higher capex expense of $700 million.
So that's one slight difference from over over 21.
We did have an exceptionally strong free cash flow in fiscal year 'twenty. One at 1.5 free cash free cash flow to net income ratio and that is just exceptional performance.
It's not unusual for us to have free.
Free cash flow guidance at the beginning of the year that is a decrease over what we've done in the previous years.
And then lastly, we do allow.
For a slight uptick in DSO in our guidance for next year, which would still be you know.
Very industry, leading DSO performance.
Okay excellent excellent and then Julie made just for you.
You mentioned this year you did.
46, M&A deals and you mentioned in the guidance comments.
There's quite a bit of M&A.
I think 4 billion in M&A contemplated for this coming fiscal year. How do you think about the integration risk is accenture has I would argue a very special culture, and you're bringing in a lot of new people over the course of the last 12 months and before the next cold months, how do you think about the risk of a stimulation of these deals how do you manage this process.
Do you have a very good track record over the last 10 years, but there is a lot of M&A on the table that you bring into the company. Just wondering if you could speak to how you think about the risk associated with that.
Make sure the business keeps keeps moving forward.
Sure. So a great question and thanks, Keith So first of all as you indicated we've got a really strong track record and so the step up in acquisition comes based on years of experience, including in fine tuning integration Ah. So that's number one secondly.
Our acquisitions happen globally in the and then as I've talked about this year, they're pretty evenly balanced and why is that important when we switch to our model earlier this year of a geographic focused model from.
From a P&L perspective, one of the reasons is to allow us as well to be super close to our people and most of these acquisitions are not global right.
Or like an email out to date, but like for example project, Nevada, Nevada, and the federal business, you know very local and the vast majority are in one or two markets like there and so the integration. It's not like you have this enormous company that's trying to integrate lots of people all over the globe at the same.
Any time, we have senior leaders accountable for the acquisitions and so we really get the right balance than we ever own and so for example, when we look at this we look at market by market. How many acquisitions are we doing in this market. So how does that enable us to make sure that we can spend the time.
So this is a finely tuned approach for integration and of course, we bring on people in acquisition or not all the time and so really just focus on culture is just part of who we are.
Okay excellent. Thank you Julie.
Okay.
And our next question comes from the line of Lisa Ellis with Moffett Nathanson. Please go ahead.
Hi, good morning, Thanks for taking my question.
I was thinking about the $50 billion revenue milestone, which is pretty amazing.
Julie as Europe mapping out the path to $60 billion over the next few years can you talk about where you see the major sources of incremental revenue.
Looking out from here forward. Thank you.
Great.
Thanks, Thanks, Lisa and I talked to you first of all.
And I talked a little bit about this in the script.
We are still very early in the transformation of our companies in building just their digital core. So for example, if you look at something like S. E T.
Their stats as they pointed out you sort of have less than 20% of companies who've actually both bought and begun implementing as far jota right and we see the move to the cloud you've got sort of maybe today, roughly 25% to 30% of workloads. So theres a lot of work, which is a multiyear journey and actually build.
With digital core and then at the same time transforming the ways. They work in there. So we've got multi year ahead and even when you look at who's doing compressed transformation you have this core of leaders and leapfrog ours, but the vast majority of companies are not yet engaged and compress transformation. So just from a mall.
Your outlook on the fundamentals of re platforming and moving to <unk>.
True digital digital enabled.
Enterprises still in early stages, and then you add on top of that there are whole parts of the enterprise, where even the technologies are really new and so industry acts as a great example of that we see that as the next digital frontier and we're still very very early and so that will be.
You know kind of its own way as we look as we look forward and then areas like sustainability again technology is early every industry has to find its way on sustainability and so as we think about our own growth strategy. It starts with what our clients need so we.
To diversify the parts of the enterprise that we're serving and that enables our that's what our clients need and that enables next waves of growth for us and we continue to innovate and anticipate like in sustainability, what our clients need.
And so when you kind of take this you see both from serving the enterprise the maturity of.
For that and then you add on top of that that there are areas that are evergreen like interactive. It's all about client growth agenda. It's always gonna change manufacturing will be the same security grows as the digital landscape grows. So hopefully that gives you a flavor of how we're thinking about both our next waves of growth in just the resiliency of.
The diversity of what we do.
Mhm Yep terrific.
Then my follow up was actually on managed services, which you called out in the prepared remarks, not really used to thinking about accenture doing managed services can you just elaborate a bit on that is this primarily actually infrastructure related managed services or apps or just maybe a little bit more detail on what exactly you are doing in accenture.
Differentiation there did.
Did you think of we have consulting and outsourcing right. So so managed services as you said another term for outsourcing.
And so if you think about our operations business, which is now about $8 billion right. So all the managed services. We provide are everything from finance and accounting to industry specific like we called out in the script. The stuff we're doing in telecom, we're doing things and insurance and our board.
Our health and P&C. So we got industry specific we have marketing services or does that then of course with our powerful ICU services, we've been doing outsourcing for years right.
Europe application outsourcing is an industry term and then we have our managed services and security we bought Symantec last year and so this is a core part when you think about our revenue you know between consulting and outsourcing.
And the point that's happening now is that we've always done this but what were seeing is you know I just had a call with our Oh. The other day. He was like you started the call with like Julie I'm really having a hard time hiring people in digital right and how are you seeing companies you know help and we talked about.
How by strategically outsourcing like in security in marketing you can access to digital talent and it becomes part of their own talent strategy to address the war for talent, while at the same time digitizing faster you know I've. Another client who said look you know you had 50 things that my I T Department was about to build an order.
For us to automate and transform and I get it through your sin ops platform. The same is true on the I T and infrastructure side.
And of course, you know infrastructure managed services in the cloud growing area as well from the move to the cloud. So I think that the shifts we were calling out Lisa though is just how strategic this is at a time of compressed transformation because it's meeting the needs of the war on talent.
And the need to digitize and the need to move fast.
At the same time.
Great. Thank you thanks, a lot and congrats.
Thanks.
Okay.
And our next question comes from the line of Bryan Bergin with Cowen. Please go ahead.
Hi, good morning, Thank you.
First of all a question on bookings can you talk about the dynamic in <unk>. It looks like outsourcing ticked down for the first time in a while year over year. So just anything to call out there and then just generally how do you see the pipeline developing as you think about fiscal 'twenty two bookings levels.
Yeah, Thanks, Bryan so.
Nothing really to point out in terms of our Q4 bookings with outsourcing they can just be a little bit lumpy.
But it was very strong performance, but let me just maybe talk a little bit about overall bookings.
As we head into.
'twenty two.
So we do feel really good about the momentum in our business and as Julian went through we had.
72 clients with bookings over $100 million. This year and you can see that then helping us as we head into FY 'twenty, two Brian with the 18% to 22% that we have in the end.
Q1, and you also see that in our 12% to 15%.
Revenue range that we have for fiscal 'twenty. Two I think it's important to also note that it does include about 5% inorganic contribution but is it.
At the top end of our of our Red revenue range again, driven by driven by bookings, it's going to represent about 10% organic growth at the upper end and while we do benefit from an easier compare in the first half.
It does continue to imply strong organic growth in the second half and if you look at why is that when you Peel back bookings again pleased with a $15 billion that we had in Q4.
Strong book to Bill of 1.1.
It is.
60 billion for the whole year.
With double digit growth in consulting and I think it's important also noted consulting bookings, we had 8 billion for the last three quarters, which is terrific.
And outsourcing, which for the entire year had a very strong book to Bill of one two in all three markets.
And services.
And when you Peel it back there's really three things again, just peeling back bookings for you. There are three things that I would also note. One is that yes. We did have a lot of larger bookings that help us position us well for the future throughout FY 'twenty, two but we had a nice mix all the way through to the smaller deals which benefit near term revenue.
The second thing is that the bookings were very broad based across all of our services and that includes strategy consulting, which is which is a really good as well and lastly, you know they're lined as Julie talked quite a bit about our strategic stir.
Strategic priorities cloud industry acts and security for for example.
Okay. Thank you I'll.
Follow up here then on attrition can you just give us a sense of what you're anticipating for attrition levels factored into 'twenty. Two and then he added measures you're taking to try and drive that 19% down.
Yeah. So let me just maybe.
Talk a little bit about the numbers until we can give some some other color here, but are you know are managed attrition of 19% Brian was really the fourth quarter was in the zone that we expected.
It's 14% for the year and we've been at 19% before it's obviously, a very hot market right now, but when you Peel. It back it continues to be more of the lower part of the pyramid and it's largely concentrated in India, where we really don't have any issues in hiring.
Yeah, and I think that's important because you look at a headline number and then you'd have to really kind of understand what you know, whereas the attrition and and you know at the same time as you might imagine where we're always very focused on making sure that were attractive. So we're very.
Please that our executive retention.
Is going very well I think we are you know we very much focus on our employee value proposition and when you think about the actions you've taken like a record number of 120000 promotions.
Through our like in the U S through our our carriers.
And you know as I talked a little bit about in the script. What we find is people really care about the fact that they are working for a company that focuses on financials and all of the other what we call. It 360 degree values. So.
You know what we're doing is sustainability being a leader that we're gonna be carbon neutral by 2025 really matters and so we continue to look at how can we help our people be net better off succeed personally and professionally and be proud of a company that not only creates about value, but leads with values.
Okay. Thank you.
Okay.
And our next question comes from the line of James Faucette with Morgan Stanley. Please go ahead.
Thank you very much wanted to ask a couple of quick questions better follow up on the hiring your pace of hiring.
It's been quite stunning.
Last couple of quarters can you talk about.
A little more detail in terms of how you're finding the hiring environment, particularly for newer skill sets and I guess do you think you need to kind of sustain.
The recent pace of hiring going forward.
And I guess.
My second question I'll, just throw it in at the same time as back to Vienna.
You talked about the kind of inorganic contribution and integration but.
Is this kind of the recent pace that we've seen is this also something that you expect to need to sustain and want to sustain on a go forward basis on whether in terms of number of deals or amount that you're spending et cetera. Thanks a lot.
Okay. Thanks, I will cover the head count.
I would just first start with in this market.
With a war for talent, we're very pleased with a 56000 net additional people that we hired in Q4.
As we see strong momentum really continuing in FY 'twenty, two and you see that again in our growth rates for the first quarter, we're off to a strong start at 18% to 22% in Q1.
And the full year at the top end at 15%.
And we were able to accelerate some of our hiring.
And we plan to continue to do so in quarter, one and.
In order to have the talented people that we need to match demand in the market.
And so that's to your first question on hiring to your second question on VNA, you know well.
We I won't guide longer term into the amount of spend that we're going to do past 'twenty two and VNA.
It remains an important part of our strategy.
You know on a go forward basis.
Yeah, and I guess I think it's just remember you know taking a step back.
Two things one is on the on the people side, we made a deliberate decision to accelerate hiring you know this quarter and next quarter, which given as you said the environment and our ability to attract people. We think makes sense. So that we're not.
You know, we're not worried about being constrained with respect to people and we're able to do that and I think that's a huge differentiator for us and secondly, we made a decision last year and we've made a decision this year and DNA to.
Really invest it.
And take advantage of our ability to invest to serve our clients and you know when I go to clients one of the things that you know we talk about is and and clients really value is it when they're partnering with us. They are partnering not just with the capabilities. We have today, but because we have a track record of investing year in and year out.
And creating your own anticipating their needs and we point to the kinds of acquisitions like an umlaut like in Nevada, like Infinity works and cloud.
And that we're doing it in markets all around the world to benefit them and so we believe this is really setting us up last year and this year right for the next waves of growth.
And it's truly differentiating in the eyes of our clients.
Okay.
And our next question.
And our next question comes from the line of Ashwin <unk> from Citi. Please go ahead.
Thank you Hi, Julie Casey Andy Congratulations on the results and outlook.
First question is it seems clear we're in a very exciting time here for Iot services right.
This view for some time now that the acceleration of demand that you're seeing is.
Sustainable for several years and I don't mean to imply that's getting revenue growth is easy, but if you have to worry less about revenue growth given the investments you've already made.
Better G&A leverage.
Talks on moving to a more non linear model with solutions, maybe especially important given the stood at 620000 people.
Yeah, I'll I'll start with that I think Ashwin you know our financial model really remains the same in terms of three key imperatives that you hear us go through each year, which is grow faster than the market take share.
Modest margin expansion while investing.
You know at scale in our business and our people. So in that last part maybe just talk about op margins. So we are very proud of the 10 to 30 that we have this year that does imply obviously that we will continue to get efficiencies in how we run our business. Both in terms of how we deliver to our clients as.
As well as within the SG&A and how we run our own organization.
Yeah, and maybe just add a couple of points.
I'm glad you acknowledged that revenue growth is not easy.
Thank you for that but I.
Just taking a step back to just to make sure because I think over the last decade, you've seen a real shift in the professional services industry. The nature of the exponential technology change.
And the need to help clients move faster.
And do so more efficiently has meant that you need to be able to invest significantly. So as we think about you know moving forward like the investments we've done to build you know synopsis like two and continue to evolve it to build industry solutions as you mentioned require us to continuously.
In fact, you saw that in our I know, our IP patent portfolio and so what I would say is it's it's not that you sort of say here's the revenue and then can you just fundamentally shift because there is significant cost.
Having all aspects of our business grow like this is not simply because there's demand. It's it's a it's the solutions, we're bringing them in.
And you know as I've talked about in prior earning cloud it isn't linear today, even because we've automated so much of what we do when you look at something like our operations business. You look at you know my Wizard and we continue to do so and that's really part of the business now and.
And so I think it's important to kind of understand what's helping drive the demand for our services are the you know.
The way, we're gaining market share is is is not simply because there's a lot of demand in the market, but the solutions, we're bringing and this is our big differentiator because we can go all the way from strategy to operations right. All of the examples we're giving involve multiple aspects of our services and you can't just build that.
Overnight either right. So you know.
The fact that we're becoming integrated and talent strategy and our outsourcing in Europe.
Also called managed services is a is about being trusted and the fact that we could deliver during the pandemic.
It can be a trusted partner puts us in a very different place and then others who might be trying to build these capabilities.
Got it got it. Thank you for that and then the other question is you know over the last 18 months.
Revenue growth has absorbed the negative impact of less puny.
Is that coming back do you have updated thoughts on back to office.
What's the assumption for that you're in Europe.
So I'll, let Casey answer specifically, but I will say that.
If any of US can actually predict you know how we're going to go to the office like I'd like to meet that person. A is lets just say its been a humbling experience right. How many times if we all gotten ready to go back and I don't know about you, but like like five different things that we're gonna be in person in the next two months I've just come.
Back to zoom, so or team says so oh, it's been an interesting time, the new normal, but Casey why don't you take us through it just to see assumptions we're using.
Yeah. So ashwin just first start with revenue our revenue guidance. The 12 to 15. It does not include any specific uptick from Reimbursable travel and if that assumption changes will reflect that in our updated guidance and as Julie said just in terms of.
Increases to travel assumed in our overall P&L for 'twenty two.
It is difficult to predict but we do have an increase built into particularly in the back half of the year for some travel costs.
Got it thank you for that.
Okay.
And our next question comes from the line of Jason Kupferberg with Bank of America. Please go ahead.
Thanks, guys. Good morning, I wanted to start just with the visibility question. The reason I ask because obviously your constant currency revenue grew up here in Q4 was quite robust.
So it wasn't really above the top end of your guidance, whereas in recent quarters, you had been handily exceeding the top end of your expectations. So I'm. Just wondering is this simply because your visibility has improved so you've gotten more comfortable you don't necessarily need to put extra cushing into the guidance or did some bookings not ramp as fast as expected in the quarter and then just the.
Related question for fiscal 'twenty, two as you set the initial outlook for this year.
The change in approach versus this time last year again, perhaps because your visibility has improved.
Yes, I will answer both questions.
And really the same way, which is you know for the fourth quarter, we were slightly above our FX adjusted got a range, but we always try to aim to be in the top quadrant top part of our guided range and really it's just this year, it's been a story of an unprecedented ramp.
So we're really pleased that we were able to kind of.
Nail down where we thought we would.
And at the quarter and I'd say the same thing really for 422, its not any change in visibility its not any change in the way we're doing things, we always called as we see it. These are our best estimates.
And with the 12 to 15, all parts all all points or in a possibility. That's why they are in the range, but we continue like we always do to aim for the top quadrant and top harbor range no change.
Okay. Okay. Good to know and just a follow up what are your expectations for book to Bill in consulting and overall for.
For the first quarter and for the full fiscal year, and then just what you're thinking about for consulting versus outsourcing revenue growth. This year. Thanks, guys. Congrats.
Yeah. Thank you yeah. So we feel good about our pipeline as.
As we head into the into the fiscal year.
I would say I will just comment on you know Q1 bookings, we do feel really good about where we are you know historically, we do see some seasonality in.
Q1 end and larger deals can make things lumpy, but we feel really good about our positioning for the first quarter and in terms of revenue growth and I'll, just say that for quarter. One we see consulting continuing its strong double digits and outsourcing in the double digit range.
Okay great.
Yeah and for the full year, I mean consulting should continue to be strong double digits and outsourcing depending on where we land in the range will be high single to low double digits.
Thank you Greg.
Thanks, Operator, we have time for one more question and then Julie will wrap up the call.
Of course and that last question comes from the line of Tien Tsin Huang with Jpmorgan. Please go ahead.
Thank you so much a really impressive growth at scale here I wanted to ask on industry.
It was 5 billion in revenue.
36% I wrote down so.
Julian said, it's the next frontier.
Does this have potential to be as big as cloud I'm, just trying to think about the sizing of industry X recognizing its early but also it's important.
Yeah, I mean, I think we're not really sizing that today I mean, when you think about cloud cloud as the entire enterprise so right through.
They're hard to sort of do that what we'd say is this will be I mean, we're already at 5 billion and we consider it the next digital frontier and it's Super early write some technologies have just really been coming online in the last year or two that are cloud based and and when you look at like what we're doing for example, like Vivienne Westwood one of the largest in.
Dependent global fashion companies, we're doing a new P. L. M solution for them, we're doing so for ahlstrom, a ultimate global leader in transportation.
Were you doing the same.
And the power companies. So they can meet the range of what we're doing I mean, it is both broad based in terms of industry and so we do think of this as really a big growth driver.
For the future, but not sizing it today okay.
I just thought it was interesting because the scope of it can be quite large.
My quick follow up just I know you had you feel a lot of questions on acquisitions already did.
Digital assets are being.
<unk> valued pretty highly here across the board it looks like you're still implying a reasonable revenue multiple.
What's your inorganic contribution is have.
Have you seen any changes on the valuation side I know you still are.
Destination for many companies, but just curious if valuations have changed in any way you were thinking.
Okay C do you want to answer that.
I would say Tien tsin, you know clearly you know valuations, where we participate in the overall market and you've seen what valuations have done in the overall market, but I would just say that you know we have pretty high hurdle rates in terms of what we expect from our business cases.
And we track that very closely as you would expect of US and we're very pleased with our ongoing performance of our portfolio against the hurdle rates that we put forth in this business cases.
No. It's impressive thank you both.
Great. Thank you.
Yeah.
All right well now time to wrap up and in.
In closing I want to thank all of our people and our managing directors for what you. All do every day are you know people and actions and results in FY 'twenty, one it really put us in a terrific position as we go into FY 'twenty two to create even more value.
Our head and I know I and the entire leadership team are Super excited and confident about what's to come and I'll simply end by thanking all of our shareholders for your continued trust and support the well everyone thinks.
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