Q3 2022 Accenture PLC Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by welcome to Accenture <unk> third quarter fiscal 2022 earnings call. At this time all participants are in a listen only mode. If you would like to ask a question. Please press. One then zero on your telephone keypad, you will hear acknowledgment that your line.
Has been placed in Q, you may remove yourself from the queue by repeating the one zero command as a reminder, this conference is being recorded I would now like to turn the conference over to Angie Park, Managing director head of Investor Relations. Please go ahead.
Thank you operator, and thanks, everyone for joining us today on our third quarter fiscal 2022 earnings announcements as the operator, just mentioned I'm Angie Park, managing director head of Investor Relations on today's call, you'll hear from Julie Sweet, Our chair and Chief Executive Officer, and KC Mcclure, Our Chief Financial Officer, We hope you've.
<unk> had an opportunity to review the news release, we issued a short time ago. Let me quick outlook quickly outline the agenda for today's call Julie will begin with an overview of our results KC will take you through the financial details, including the income statement and balance sheet, along with some key operational metrics for the third quarter. Julie will then provide a.
Brief update on our market positioning before KC provides our business outlook for the fourth quarter and full fiscal year 2022. We will then take your questions before Julie provides a wrap up at the end of the call them at 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.
The 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.
Nation for investors. We include reconciliations of non-GAAP financial measures, where appropriate to GAAP in the 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 thank you everyone for joining and thank you to our 710000 people around the globe for their extraordinary work and commitment to our clients, which resulted in delivering another very strong quarter of financial results and creating significant 360 degree value beyond our financials for all our states.
Holders.
Here are a few highlights of the 360 degree value we created this quarter.
Charting with our people, we continue to invest in their skills and they completed 10.6 million training hours, which averages to 16 hours per person. This quarter. We are incredibly pleased to be recognized as a top 10, great place to work for 2022 and countries, representing 76% of our people Argentina, Brazil.
<unk>, France, India, Japan, Mexico, the Philippines, U K and the United States.
Specifically on the U S list, we are particularly proud that accenture jumped 38 spots in one year to rank number six overall. This is the 14th consecutive year that Accenture has been recognized by great place to work also of particular note in India, not only where we ranked number 10 by great place to work business today recognized India.
Accenture in India is number four of the best companies to work for marking our 11th consecutive year on the list all of these recognitions reflect a tangible demonstration of our commitment to our people.
The strong demand for our people and services and trust from our clients are once again seen in our strong bookings of $17 billion, which represents 15% growth in local currency.
Compress transformation continues with another 18 clients with bookings over $100 million, bringing the total year to date to 74, which is 20 more than the same time last year, we had revenue growth of 27% in local currency continuing to take significant market share growing nearly three times the market will do.
Delivering margin expansion of 10 basis points.
Our ongoing investment in our communities where was reflected this quarter and how we are leveraging our expertise in digital learning and collaboration partnering with Unicef's generation unlimited on the new passport to earning platform program to equip 10 million Young people ages 15 to 24 with digital skills across 10 countries to prepare them for.
Work. This program went live this quarter in India, the first and largest country of the 10.
As always well as always we are staying close to our clients and our ecosystem partners to help them succeed today and to anticipate the needs of the future and our very strong financial results. This quarter reinforced the trust our clients and partners have in our ability to do so.
You Casey.
Julie and thanks to all of you for taking the time to join us on today's call.
We delivered very strong overall results in the third quarter, reflecting very strong double digit revenue growth across all dimensions of our business as well as continued operating margin expansion as we continue to invest at scale in our business and our people.
We continue to lead the industry with these results demonstrating the relevance of our services and our trusted climate and ecosystem partnerships.
We continued to deliver on our shareholder value proposition, including both our financial results and creating 360 degree value for all our stakeholders.
Let me summarize a few of the highlights for the quarter across our three financial imperatives.
Revenue grew 27% in local currency.
We're above the top end of our guided range driven once again by broad based over delivery across all market services and industries with all 13 industries growing double digits.
We once again extended our leadership position.
Adding an incremental $9 billion in revenues year to date with growth estimated to be nearly three times the market, which refers to our basket of publicly traded companies.
Operating margin of 16 point.
1% for the quarter was an increase of 10 basis points.
We continue to drive margin expansion, while making significant investments in our people and our business.
We delivered EPS of $2 79.
Which represents 16% growth over fiscal 'twenty one results.
And include 15th fence or 6% negative impact related to the disposition of our business in Russia.
Finally, we delivered free cash flow of $2 9 billion and returned $1 6 billion to shareholders through repurchases and dividends.
We have made investments of $2 2 billion in acquisitions, primarily attributed to 27 transactions year to date.
And we now expect to invest about $2 5 billion in acquisitions. This year with another $1 billion that we expect to close in Q1 given required regulatory approvals.
With that let me turn to some of the details.
New bookings were 17 billion for the quarter and overall book to Bill data.
Consulting bookings were $9 1 billion with a book to Bill of one.
Outsourcing bookings were $7 8 billion with a book to Bill of 1.1.
We were very pleased with our bookings this quarter, which represent our second highest ever and we are aligned to our expectation.
Our bookings reflects 15% growth in local currency and 18 clients with bookings over $100 million.
Looking forward, we continue to have a strong pipeline.
Turning now to revenue Rec.
Revenues for the quarter were $16 2 billion, a 22% increase in U S dollars and 27% local currency, reflecting a foreign exchange headwind of 5% compared to the 4% headwind provided in our business outlook last quarter.
Adjusting for the actual foreign exchange impact, we were $116 million above our guided range.
Consulting revenues for the quarter were 9 billion up 24% in U S dollars and 30% in local currency.
Outsourcing revenues were $7 1 billion up 19% in U S dollars and 23% local currency.
Taking a closer look at our service dimensions strategy and consulting and technology services. Both grew very strong double digits and operations grew strong double digits.
Turning to our geographic markets.
In North America revenue growth was 23% local currency driven by double digit growth in consumer goods retail and travel services public.
Public service.
Software and platforms and communications <unk> media.
In Europe revenues grew 30% local currency led by double digit growth in industrial and consumer goods retail and travel services and.
In banking and capital markets.
Looking closer at the countries Europe was driven by double digit growth in Germany, the UK, France and Italy.
In growth markets, we delivered 30% revenue growth in local currency driven by double digit growth in consumer goods retail and travel services.
Banking and capital markets and public service.
From a country perspective growth markets was led by double digit growth in Japan and Australia.
Moving down the income statement gross margin for the quarter was 32, 9% compared with 33, 2% for the same period last year.
Silicon market expense for the quarter was 10, 3% compared with 10, 6% for the third quarter last year.
General and administrative expense was six 5% compared to six 6% for the same quarter last year.
Operating income was $2 6 billion in the third quarter, reflecting a 16, 1% operating margin up 10 basis points compared with Q3 last year.
Our effective tax rate for the quarter was 27, 1% compared with an effective tax rate of 25% for the third quarter last year.
Diluted earnings per share were $2 79.
Including a 15% or 6% negative impact related to the disposition of our business in Russia compared.
Compared with diluted EPS of $2 40.
In the third quarter last year.
Days service outstanding were 44 days compared to 41 days last quarter and 36 days in the third quarter of last year.
Free cash flow for the quarter was $2 9 billion, resulting from cash generated by operating activities of $3 1 billion net of property and equipment additions of $195 million.
Our cash balance at May 31st with $6 7 billion compared with $8 2 billion at August 31.
With regards to our ongoing objective to return cash to shareholders.
In the third quarter, we repurchased or redeemed $3 1 million shares for $972 million at.
At an average price of $313 43 per share.
As of May 31, we had approximately $3 7 billion of share repurchase authority remaining.
Also in May we paid a quarterly cash dividend of <unk> 97 per share for a total of $614 million.
This represents a 10% increase over last year.
And our board of directors declared a quarterly cash dividend of 97 per share to be paid on August 15th a 10% increase over last year.
Finally, turning to the 360 degree value we are creating for all our stakeholders.
We were very pleased to be ranked number 13 on three B L. Medias 100, best corporate citizens in the United States report, which recognizes outstanding ESG transparency.
And performance against the Russell 1000, which are the largest companies in the U S equity market.
For more information on the 360 degree value we are creating go to Accenture 360 degree value reporting experience, which reflects new information each quarter.
So in summary, we are extremely pleased with our results to date and are now very focused on Q4 and closing out another very strong year now, let me turn it back to Julie.
Thank you Casey.
As we shared at our recent Investor and Analyst Day. We believe there are five courses that our clients must harness over the next decade that and that in turn will drive our growth total enterprise reinvention talent sustainability, the metaverse continuum and the ongoing Tech Revolution.
Today, we continue to see strong demand across our market services and industries, which is being driven primarily by two of these five forces total enterprise reinvention, which involves transformation of every part of every business leveraging technology with new ways of working and engaging with customers and employees and new.
Opportunities for growth and talent, which requires every business to be able to access talent be it talent creator not just the talent consumer and to unlock the potential of their people.
Press transformation continues with our clients seeking to execute bold programs an accelerated timeframe.
Often spanning multiple parts of the enterprise at the same time when in the past they may have taken a more sequential approach. This desire for speed with strong execution is driving our growth as clients partner with us because of the breadth and depth of our capabilities the insights that come from our scale globe.
<unk> footprint, and our deep functional industry and cross industry expertise.
And they partner with us because they trust us and because we are trusted partners with the technology ecosystem, which are also critical to our clients' transformation.
While the current macroeconomic environment effects industries and markets differently. The common theme across our clients is that all strategies whether for growth cost of resilience lead to technology, particularly cloud data and AI and our clients turn to us to be able to effectively use technology to achieve.
<unk> their goals.
Let me bring this demand environment to life, we help our clients execute total enterprise reinvention by helping them build their digital core optimize operations and accelerate growth Clough.
Cloud data and AI are fundamental to our strong digital core we are working with the Clorox company, a leading multinational manufacturer and marketer of homecare households, and health and beauty products for consumers as well as products and technologies for professional customers.
The company is undertaking a broad digital transformation that will touch every aspect of the enterprise, we will help the company modernize business processes streamline their operating model leverage advanced data and analytic insights and establish a future ready technology foundation to deliver new levels of customer and consumer experiences accelerate go to market active.
Cities and enable a more agile and resilient supply chain. So they can lead and shape the consumer goods industry.
We are helping new look a global fashion retailer migrated its existing e-commerce platform to the cloud and strengthen its technology foundation to enable a seamless experience across stores online mobile and social media.
AI and machine learning will create greater efficiency increase sales and provide the flexibility to scale for growth and overcome industry disruption. The company is committed to infusing sustainability into their transformation roadmap using innovation as an accelerator toward their own 2040 sustainability targets all of which <unk>.
This is to keep the company in step with the store of the future the speed of the fashion industry and the demands of their stakeholders.
And as we build the digital cores of our client's security is more important than ever our integrated capabilities from identity to threat intelligence to managed security services to incident response are critical as our clients respond to increasing risks and expand their digital footprint.
We are helping a large healthcare services provider assessed their cyber security and business resilience levels with much of their growth coming through mergers and acquisitions technology and security have become more challenging to manage with multiple security providers Datacenters environments. We helped design a cloud strategy and secure their backups in the cloud.
With an end to end cyber security approach that will provide flexibility as they continue to acquire more companies. We're also providing a managed security service from cyber resilience to threat intelligence to monitor their infrastructure and their security products, improving their ability to protect against future attacks.
Our clients value our unique combination of capabilities from strategy and consulting to technology to managed services because it enables us to deliver holistic solutions and expands our access to digital talent, we are helping Infinera holdings, a Japan based infrastructure concert construction services company.
Digitally transform operations and finance and HR through a data driven approach through our managed services capabilities and our synapse platform. We will help the company shift to intelligent operations by standardizing and automating key business processes, driving efficiency and productivity, reducing operating costs and providing greater opportunity.
<unk> for their people.
To focus on high value in strategic growth areas, such as business design and digital experience.
Shifting to the next digital frontier in the enterprise our industry X capabilities are digitizing engineering and manufacturing to re imagine the products, our clients make and how they make them and to build a greater resiliency productivity and sustainability.
We are partnering with a German multinational corporate manufacturer of luxury vehicles to develop an in car software platform that will power the central intelligence unit for personalized driver interaction information convenience functions and entertainment. The platform provides a continuous flow of customer data to the automaker.
Enabling it to enhance vehicle functionality and create the superior customer experience at the automaker is renowned for.
We are helping all broth the largest producer of primary aluminum in Brazil to increase its productivity energy efficiency and minimize greenhouse gas emissions by creating a new smelter control system operated over our new Iot architecture that utilizes cloud platforms for data storage and machine learning.
Ada insights will enable better visibility of gas emissions around the clock, allowing operations to be proactively managed leading to increased energy efficiency and operational safety as well as additional sustainability strategies to reduce their carbon footprint.
Sustainability one of the five forces shaping the next decade continues to be a growing priority area for our clients and they value our ability to help them achieve their sustainability goals as part of their larger transformations such as the <unk> example, and directly as part of sustainability focus engagements such as the work we're doing for <unk>.
Hospital ages for HUD, the national operator, running Malaysia's largest postal and parcel delivery network, we are helping Pos Malaysia, Bernhardt berhad to embrace a data driven approach to reducing emissions cutting waste and upgrading its employees digital skills.
Best in class solutions for environmental social and governance benchmarking plus a sustainability implementation roadmap and his skills for the future program will lead to dramatic reductions in direct waste in scope, one and two carbon emissions along with rapid progress on workforce Upskilling.
We continue to build our capabilities in this area both organically and Inorganically. We are pleased that this quarter, we announced three new sustainability acquisitions, Greenfish, Exxon Te Exxon Te and of Veeco, extending our reach and enhancing our ability to deliver deep skills and expertise to client.
And ESG measurement and nonfinancial reporting net zero strategy and regulation and real time data analytics.
Our unmatched ability to access create an unlocked talent is valued by our clients is a key component of their compressed transformations, such as possible Asia per head in.
In other cases, we help provide our clients access to talent through our managed services and we help them become talent creators by having their shared services groups join Accenture, where.
Where they can benefit from our ability to transform of skill and provide new career pathways. For example, we're working with <unk>, a leading Italian banking group and subsidiaries being P. Paribus on a compressed transformation just 18 months from start to finish that will leverage our synapse platform.
As our clients existing talent and reduce total cost of ownership, we will consolidate data to provide deeper analytic insights and a better customer experience with tailored services and faster fulfillment times for customer requests as part of this transformation more than 500 people from their team will move to Accenture, where we will lever.
Their industry specific skills, while also providing opportunities for professional development, enabling being out to focus on strategic growth and benefit from the sub scaling we.
We also do work with our clients. It is primarily focused on their talent agenda. For example were collaborating with a large utility who's creating thousands of clean energy jobs in areas like renewable electricity generation energy saving homes and buildings and sustainable transportation.
They are doing so for unemployed underemployed and low to middle income residents, we're developing a recruitment employment and tracking platform that matches people skills with available positions leveraging AI and market insights. This solution reduces hiring time improves the candidate experience and unlocks talent potential.
To create jobs, the underrepresented residents who need the most.
We are uniquely positioned to help our clients drive cost efficiencies and their growth agenda. As you may have seen Accenture interactive will now go to market is accenture song to reflect a fundamental change in the way companies must engage with customers and the incredible speed at which they need to operate and innovate.
Song is uniquely operating at the intersection of creativity technology and intelligence to help our clients reinvent connections and meaningful experiences, including sales commerce marketing new business platforms in the meta versus continuum.
We are helping our north American multi brand retailer scale their digital business and accelerate growth, while reducing operational costs up to $100 million over the next five years.
Together, we are designing and implementing a new multi product platform to improve the customer experience and enable the use of data and insights to drive increased engagement and better business performance overall.
While still very early we are seeing our clients look to take advantage of the net of the meta versus another of the five forces. For example, we are collaborating with an international property developer MQ D. C to develop their business model and design their customer experience in the meta versus <unk>.
As you can tell this continues to be an exciting time for accenture as the depth and breadth of our business allows us to help our clients with innovative and impactful work.
Back to you Casey thanks.
Thanks Julie.
Turning to our business outlook for the fourth quarter of fiscal 'twenty. Two we expect revenues to be in the range of 15 to $15 5 billion.
This assumes the impact of FX will be about negative eight compared to the fourth quarter of fiscal 'twenty, one and reflects an estimated 20% to 24% growth in local currency.
For the full fiscal year 'twenty two.
Based on how the rates have been trending over the last few weeks. We now expect the impact of FX on our results in U S dollars will be approximately negative four 5% compared to fiscal 'twenty one.
For the full fiscal 'twenty two we now expect our revenue to be in the range of 25, 5% to 26, 5% growth in local currency over fiscal 'twenty one.
Which continues to assume an inorganic contribution of roughly 5%.
For operating margin, we continue to expect fiscal year 'twenty two to be 15.
<unk> 15, 2%, a 10 basis point expansion over fiscal 'twenty one results.
We now expect our annual effective tax rate to be in the range of $23 five to 24, 5%.
This compares to an adjusted effective tax rate of 23, 1% in fiscal 'twenty one.
For earnings per share, we now expect our full year diluted EPS for fiscal 'twenty two to be in the range of $10 61.
To $10 77 or.
Or <unk>, 21% to 22% growth.
Adjusted fiscal 'twenty one results.
This guidance range reflects a negative 14% impact from the updated FX guidance.
Largely offset by the increase in revenue guidance.
For the full fiscal 'twenty two we continue to expect operating cash flow to be in the range of $8 seven to nine 2 billion.
Our operating equipment additions to be approximately $700 million.
And free cash flow to be in the range of 8 billion to $8 5 billion.
Our free cash flow guidance continues to reflect a very strong free cash flow to net income ratio of one one to one two.
Finally, we continue to expect to return at least $6 5 billion through dividends and share repurchases as we remain committed to returning a substantial portion of our cash to shareholders.
With that let's open it up so we can take your questions Angie.
Thanks, KC I would ask that you each keep to one question and a follow up to allow us many participants as possible to ask a question operator would you provide instructions for those on the call.
Certainly ladies and gentlemen, once again, if you would like to ask a question. Please press one then zero on your telephone keypad.
One moment please for the first question.
And our first question is from Tien Tsin Huang. Please go ahead.
Thank you so much good morning, good results here I wanted to ask on the let.
Let me ask on bookings, which came in line with your expectations.
And the book to Bill Mcwhirter look like.
More like 10 pre pandemic levels on tough comps so.
I heard the strong pipeline comment just wondering can we expect book to bill above one, but maybe below the 1.1.
Or higher that we saw during the pandemic just trying to better understand how the pace of bookings might be changing here beyond the comps.
Yeah. Thanks, Tien Tsin. So let me just start with anchoring to what we saw this quarter and bookings in our pipeline and I'll talk then a little bit about what we expect for Q4. So as you as you mentioned, we were really pleased with our book to Bill this quarter.
You talked about are tough comps, we did 30% growth in consulting and we have year to date, a one one book to Bill in consulting through Q3, we're very pleased with that and.
And outsourcing, we did 23% revenue growth again over tough comps from last year in the quarter and we will want to year to date book to Bill.
So as we look ahead to Q4.
We do see continued.
Strong revenue growth of 20% to 24%. So you heard that in our guidance.
And we do think bookings and outsourcing bookings for both associated revenue for both consulting and outsourcing both going to be in that range. So we have another strong quarter.
In consulting and outsourcing revenue growth.
And on top of that tissue, we do see another strong bookings quarter in Q4.
And we feel good about both our consulting.
And our outsourcing outsourcing pipeline, so hopefully that gave you enough color.
Where we see bookings.
And the rest of the year play out.
Got it so balanced across.
<unk>, which is great. So maybe my quick follow up everyone's been asking so I thought I'd ask you guys Julie.
Specifically here, maybe for you just how recession ready as Accenture right with what the stock market is telling us how how is accenture different or maybe similarly position to what we see.
In past down cycles any quick comment on that thank you.
Sure. Thanks, Tien tsin so.
We don't predict the macroeconomic so what we do is really focus on what has helped us be successful.
And obviously you know every every financial situation is going to be different the pandemic. We don't know how this is gonna be versus what was happening a decade ago and so let me just focus on why we are in a strong position and that is you know first of all.
Oh, the whats driving today as total enterprise reinvention.
And so that means companies are trying to transform using tech data and AI around the enterprise and we've been investing for a decade to be in the position that were relevant to the enterprise and so we can do everything as you saw you know in our examples from.
HR and finance to you know.
Fax shrink rate too in the insurance industry underwriting and claim rates. So.
And it's really the entire enterprise that we're relevant to and that'll gives us a huge power to help our clients and you see that's happening right now.
With the inflationary environment, you've got consumer goods company is focused very much on cost as well as growth and we're able to help them do both for eight a M.
And on the other hand, you've got say the energy companies that have had a really rough cycle, who now have the ability to invest more continuing on their cost discipline, but trying to also drive there.
Transition to clean energy right into events, there digital's digitization and so our diversity in both what we can do and our diversity and industries is extraordinarily helpful. And then as you think about why we're a leader today I just wanted to make sure people understand the power of the fact that we.
Can do everything from strategy to consulting to managed services. So if you just take a consumer goods company one of the biggest areas of spend is in marketing we have amazing strategists that accenture right. It's a huge group, it's a really really relevant and what they bring is not simply here, let's go ask your marketing spend.
It looks like the biggest spend what they can say us and let me explain to you that the trend is to digitize to use hubs to not be as geographic specific and let me show you, where we actually executed that and are managing that service for some of the leading companies that fit our strategy.
<unk> can uniquely bring and we can talk to our clients and say and we can either help you build the capability, where we can do it on your behalf because we can access the talent, we can move more quickly and so as we think about why are we strong.
You know today and how do we deliver on our enduring shareholder value proposition of growing faster than market delivering margin expansion returning to shareholders and delivering 360 degree value. It's really based on this unique set of capabilities. These very strong trusted relationships and then of course all.
Of this underpinned by technology, where we're a powerhouse and we are the leading partner of the largest and you know technology companies in the world.
Okay.
That's great. Thank you for your comments.
Thanks.
Operator next question.
Okay.
I apologize I was talking with my mute on we will next go to the line of Lisa Ellis with Moffett Nathan. Please go ahead.
Hi, Good morning, Thanks for taking my question I.
I guess I'll take the.
The attrition one it looked like attrition you know after coming down a bit the last couple of quarters re uptick a bit this quarter can you just talk about perhaps any color.
Color, there or any underlying dynamics and how is how is the attrition environment.
Looking going forward. Thank you.
Yes, it surely sent me usually we see an uptick in attrition from Q2 to Q3 are.
We actually also see seasonally another uptick in Q4, which we will expect to see so you know this is kind of in line with prior patterns and again, it's primarily driven by India at the lower end of our pyramid, which is highly competitive at the same time, you know we're able to.
Higher for the demand, we see and so and also as we've commented before our overall executive retention, which is the people who are driving our business every day.
It continues to be high so not a lot of change and these are really seasonal upticks.
Okay got it and maybe a follow up on that and then also on Tien <unk> question related to the R word assertion word.
What are the types of steps can you just remind us like if you do start to see a slowdown in the business kind of what are the adjustments that accenture makes or can make quite quickly to react to.
Two.
Changing demand environment.
Realizing that you know you're often at the kind of front end of the spear on that given the you know given your strength in consulting and a lot of short shorter duration projects.
Sure I mean as you know at the core of our business is how we manage supply and demand right and so you know where our ability to we do have high attrition rates. So our ability to not for example, when I say high attrition, meaning our industry has a higher high attrition so our ability.
<unk> to not hire to replace that attrition rate so.
Our core competency is managing supply and demand and you know we have an ear to the ground with our clients, but we also have a lot of analytics around what we're seeing in open demand what we're seeing in our pipeline. So.
We manage our business with great rigor and discipline and we'll continue to do that.
The cycle and of course I just wanted to make sure we're not walking past.
An incredible quarter from revenue and bookings and as KC said.
We see continued strong demand going into the next quarter with another strong bookings quarter and another strong revenue quarter.
Yep got it terrific. Thank you.
Okay.
And next we go to the line of Jason Kupferberg with Bank of America. Please go ahead.
Good morning, guys just wanted to start with a clarification on the full year EPS guidance. It sounds like you are now absorbing an extra 29 cents a headwind relative to where you were last quarter or the 15 from exiting Russia in 2014.
From incremental FX headwind is that accurate.
So Jason that is accurate in that the 15th for Russia, That's absolutely accurate and then we have an additional 14 cents from the updated from the guidance that we gave you last quarter that we are absorbing so you are correct.
Right right, so you're still maintaining the lower half.
The EPS guidance from last quarter, despite absorbing an extra 29, okay. I just wanted to make sure. That's right I mean, I think the key thing that you're asking are the key point I want to make sure that they're getting it crosses that theres no change to our business fundamentals and our business performance.
We actually had a bit of an increase in our revenue guidance, which helps us.
Partially offset the 14th cent drag that we have from FX. So really strong we continue to see really strong. The separations. We just can't absorb completely all of that large FX movement that we saw from last quarter to this quarter at all.
Of course of course, and I guess, it's encouraging to hear that there doesn't seem to really be much change at all in the demand environment. Obviously, there is theres been a lot of.
Worry and wonder about that but can you maybe just talk to us about like nuances of how client conversations have been evolving over the past three months you know any change in client decision, making patterns or are clients doing more recession preparation on their end.
Sure.
First of all as always we call it like we see it. So today, we see strong demand and we're not seeing a change in decision making what.
What we are seeing is a shift depending on the industry and the market on what clients are asking for it. So for example in the industry is like a consumer goods industry, you're seeing a lot more focus on costs than a year ago right with C O, saying he truly know how I always used to talk to you about.
Growth can we talk about growth and cost right Youre seeing more investment going into help me do more with less and you know at the core of that is cloud data AI. You also see a big focus on can we go faster and I was just meeting with it.
Oh last week, who said Julia I just can you just look at our you know our strategy and are we being transformational enough right are we challenging ourselves to go fast enough and this is where the experience that we have of doing this particularly over the last two years, where we saw this.
<unk> transformation is so important I was just speaking with an energy company last week, where they you know like a lot of companies early on with digital transformation started 256 years ago in the front office they've been doing a bunch of experiments of digital twins around and they're saying to US Okay. Julie help us understand where are we going to get the most.
Value, but how do we scale and that's a unique combination we have like we can understand from a strategic perspective, whereas the biggest value, but I can then take let me take you. This company over here different industry. That's been doing digital twins that we've just been massively scaling over the 18 months let's.
Share with you the lessons learned on how to do that because it's it is the next digital frontier there isn't as much experience and now will help you go faster. So the the context is different depending on the industry. I mean every Ceos of course focused on the macroeconomic and people like to use that as a key.
Catalyst for doing some of the harder things around cutting costs and what we do is accenture because we can help on all aspects of that we also can embed in our growth conversation. He saw the example, we used other big retailer in in an earnings where we're helping them grow.
Were taken out $100 million in costs at the same time right and that's what makes us so unique and that's why we will just continue to stay very focused and we're doing a lot in supply chain that those conversations accelerated in Europe for obvious reasons, but there really is a global phenomenon and we're doing a ton.
And of course, as we think about our business when we look at the demand. We also look at do we need to Upskill any place because we're seeing more demand say in supply chain or more demand in a particular industry and that's where the agility of our learning as you may recall in the first six months after the pandemic.
We reached we Upskill the 100000 people to shift to cloud and collaboration technologies. So that's how we stay very close and then we you know use. These other tools, we have like our ability to upskill to make sure that we are responding to what our clients need.
That's great color thanks for the comments.
Okay.
And our next question is from Ashwin sure Vikar. Please go ahead.
Thank you.
Good quarter folks.
Demand trends still seems strong I appreciate the quantity to remark on the on the revenue focus scorsese cost focus we.
Already saw taken down here in the percent of revenues from consulting as well.
The question is around whether you believe that.
<unk> outsourcing balance, Mike maybe get get back down to 50 50.
It's a bit of an air pocket down the road because outsourcing work just tends to have longer ramps could you kind of talk through that.
Yes, sure Ashwin happy too and so just in terms of I will start with the last part first of in terms of just our our mix right, we and I'm not going to guide anything into next year, but if you just look historically at our mix it can move around one or 2% between consulting and outsourcing, but it's generally been as you know for years.
In the zone of like about 55% consulting at about 45% outsourcing so that.
And we're seeing the same this year. So that's the first point.
And then in terms of consulting.
We are really pleased with our performance to date and as you know.
When we gave.
Gave you some I gave guidance for consulting for Q4, but just a reminder, that our book to Bill was really strong for the for the year and consulting and anything as you know.
Over one or around one <unk> book to Bill in consulting we consider consider strong but we also look at it over a trailing four quarters right so but.
But I will give guidance for you in September of.
Timber for next year, and that's where we can give you some sense of what the outsourcing is consulting type of work will be next year, but but note that you can look at our pattern to say, it's about 50 545.
Got it got it.
And I guess the follow up is on M&A.
My dimension in the.
In the past quarter that gear.
M&A spend target. This year was closer to 4 billion. It looks like you might not get there any color around.
That valuations easing.
What's sort of going on.
Cards too.
Sort of the strategic approach to M&A are you now looking is that also changing given the revenue versus cost focus or is that just a longer term view, perhaps around that would be great.
Yeah, I'll, let Julie talk about the strategy, but just to recap what I did say youre right. We had previously said we thought it would be about $4 billion.
We now think it's going we've done $2 2 billion to date 27 transactions year to date, we now think it'll be about $2 5 billion and that's because there's about 1 billion ashwin that that is going to go into next year because of required regulatory approvals. So that really is the biggest difference between the two and a half of the $4 billion that we talked about.
Yeah and from a strategic point of view, we consider continue to believe that the B M.
The acquisition VNA as we call. It is critical to the way we grow and there's three big reasons right. The first is we will do it for scale. So you saw us do a lot of cloud acquisitions. For example, because we wanted to capture the momentum in the market and to build scale in area in countries like we did a big one and two.
France for example, where you didn't have the scale and we had a lot of market momentum. The second reason, we do it is to move into Adjacencies. So you saw us build Accenture song man interactive over years, we've used that very effectively with industry Act. So you saw that in love Big acquisition last year for example, and that continues.
And you're starting to see that now in sustainability, we just announced three acquisitions, so where we're really.
Going into new areas with new skills and capabilities and then third we're always looking to sort of continue to add in our industry and functional expertise and that strategy has served us well and we continue to you know to.
To believe that that's an important part of our growth going forward.
Thank you.
Work.
Thank you.
Our next question is from Bryan Keane with Deutsche Bank. Please go ahead.
Hi, guys. Good morning, and congrats on the results I wanted to specifically ask about Europe .
Continues to show robust growth, 30% growth I think you called out Germany, France, UK, Italy show lots of concern about the unfortunate situation in war and Ukraine is there anything that you guys are seeing that could be in the go forward impact in Europe .
Because right now we're not seeing any weakness in those in those results.
Yeah, we're we're.
We're not seeing any weakness in those results and and so we continue to really stay close to our clients. There is a as I talked a little bit about earlier, there's a shift in focus in many of the more impacted industries and across the board around things like energy efficiency.
And so our strengths in for example, manufacturing and sustainability is helping us drive our.
You know conversations in helping our clients get more energy efficient for obvious reasons, given the background in Europe supply chain, a lots going on in supply chain as you think about.
What we're doing there we're doing everything from you know.
Helping them have greater insights. So we're working with a food retailer for example to understand how they can anticipate disruptions better than earlier using data and analytics. So.
Supply chain is a big topic.
And then you know costs because everyone's anticipating.
At at least a continuation of the inflationary environment that we're seeing globally and so cost becomes a big focus. So it's today again, all roads lead to not just technology data and AI, but how do you use it to transform the business, which is our sweet spot right that is what we do we partner with the technology.
<unk> companies and our clients to help them use these technologies to get results and and and that's what we're doing today and.
That's the and that's the environment that we're seeing our clients need.
Got it no. That's helpful. And then maybe just as a quick follow up can you see any.
Thoughts on the latest one pricing and it centers ability to maintain or even get pricing.
Creases in some different areas, where the demand is strongest thanks, so much and congrats again.
Okay. Yes. So we were we were pleased that we did see again improvement Brian in our pricing.
And again reminder, that pricing when we talk about pricing at the margin on the work that we sold.
And we really need to continue to focus on that which is what we are doing to offset what we're continuing to see wage inflation in our business, which as we all know is an all industries. It really is across the globe. So we are and we are seeing some improvement coming from pricing in our P&L. So I'm pleased with that and at the.
Time as you would expect we're changing the mix of people.
On our contracts and also using technology to help offset the impact of wage increases. So again very focused on pricing. That's the biggest lever that we have but there. They all of these improvements together are still lagging the compensation increases.
We're still very very focused on it.
Thank you.
Great.
And our next question is from Bryan Bergin with Cowen. Please go ahead.
Hi, good morning, Thank you.
A follow up here on bookings any changes in bookings profiles as it relates to contract duration and are you seeing any uptick in the interest of clients to sell captive operations here I'm curious if that type of transaction is picked up.
There really is.
No change at all in terms of the profile of our bookings as it relates to duration.
Yeah.
I'd say on the captive side, it's more of a steady kind of state. It's been steady I Oh, I don't I don't think I'd say ticked up are not ticked up.
It's been steady for the last couple of years.
Okay and then just a question on Accenture song can you talk about some of the operational changes that have been reported in that business as it relates to the consolidation of agency brands and what that does for you.
I think a couple of things I'd start with the rebranding is really more around reflecting what we're doing today.
In Accenture interactive and that brand was kind of old because it started a decade ago, right, where and it doesn't really reflect kind of the particularly post pandemic, which is you know.
Really a complete you know use of technology, bringing creative using data and AI and moving very very fast. So this is where you've got a you know examples like we've given in the past with like a Jaguar land Rover, where they're using managed services to personalize experiences and they're moving very very.
<unk> and so song just really captures better what in fact, we are doing there and from an operational perspective.
It was just a natural evolution to bring together some of the brands that we've acquired over the years you know we built a accenture song through a very deliberate M&A strategy and so you know I think of it more of just kind of a natural evolution.
Great.
Operator, we have time for one more question and then Julie will wrap up the call.
Very good that will comes from James Fawcett with Morgan Stanley . Please go ahead.
Great. Thank you very much and thanks for all the details this morning I.
I wanted to ask a couple more nuanced questions AMR around expenditures operations right now.
First starting with the bench how would you characterize your bench right now or are there pockets of resources that are underutilized versus over utilized.
And how much of a nonoperational impact.
Could that be having right now if any.
Yeah, Jeff. Thanks for the question I'll, just maybe just focus on the key.
Key metrics that we look at it and we report every quarter as it were.
I could talk about are our people and the usage of our people our clients were at 91%, which is really in the zone of utilization.
<unk> that we like to be in it.
Running a little bit hot sauce.
Year, and a half since the pandemic and we're at 91. So that's that's a very healthy range that where we are with goodwill.
Okay.
Got it and then just.
Then a lot of the conversation I was wondering obviously is focused on on macro and demand et cetera, but.
Are there any industry groups.
Service dimensions that you're expecting to accelerate versus decelerate, especially as the.
The customers seem to be at least modifying a little bit the conversations we're having to focus a little more on cost versus growth et cetera.
Other key parts of that.
Those different industries and segments.
Changes as a result.
Maybe I'll just anchor to what we saw this quarter and I can give you of as Julie to give a little bit of color on that but we did see.
All 13 industries this quarter of double digit revenue growth.
Right and when we talked about bookings, we had strength across all of our markets services and industry.
Yeah, and I would just add that I remember in industry isn't a model. It right. So you had coming out of the pandemic in almost every industry you had some percentage that we've talked about this who went really fast now you've got others, who are saying wait a minute we're seeing the impact of some of the leaders moved faster.
And their digital transformations.
And so you know for example, those who moved early to the cloud.
We're now talking about the next phase of how do you utilize the cloud to drive new things remember a little formula cloud is.
The.
<unk> cloud as the foundation data as the driver and AI is the Ah is a differentiator and so you know if you've moved to the cloud.
Now you're using the data and that differently right as opposed to those who still need to move to the cloud like we're very early in the transition and so the way we think about it is if you have a total enterprise we walk our clients through what's the digital core you need to have where are you on the maturity scale and how do you prioritize and so while we look.
At the industries is growing double digits, what's actually happening within the industry really depends on where you are on the maturity curve and that's what drives our business right. Because we can help the clients who are leaders to go to the next level and we're helping the ones that are behind you know try to leapfrog and so I think it's important to tend to look at it and that's in that.
Our sense is that you need to have granular deep understanding of the industries and help our client and we help our clients with that to know where to go next.
All right well thanks, everyone.
Great. Thanks, James I in closing, we really appreciate everyone for joining us today and thank you again to all of our people and our leaders for another outstanding quarter in every dimension from our financial results to our 360 degree value beyond our financials and thank you to all of our <unk>.
Our holders for your continued trust and support we will work hard every day to continue to earn it all the best.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.
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