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Accenture

4th Quarter Fiscal 2021 Conference Call

Conference Call Transcript

September 23, 2021 / 8:00 a.m. Eastern

CORPORATE PARTICIPANTS

Angie Park - Managing Director, Head of Investor Relations

Julie Sweet - Chair & Chief Executive Officer

KC McClure - Chief Financial Officer

Accenture Q4 Fiscal 2021 Conference Call

September 23, 2021 / 8:00 a.m. Eastern

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PRESENTATION

Angie Park

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 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, as such, are subject to known and unknown risks and uncertainties including, but not limited to, those factors set forth in today's news release and discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q and other SEC filings. These risks and uncertainties could cause actual results to differ materially from those expressed in this call.

During our call today we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures, where appropriate, to GAAP in our news release or in the Investor Relations section of our website at Accenture.com.

As always, Accenture assumes no obligation to update the information presented on this conference call.

Now, let me turn the call over to Julie.

Julie Sweet

Thank you, Angie, and everyone for joining us.

Before diving into our results, thank you to our 624,000 incredibly talented people around the world, including over 8,500 managing directors. This past fiscal year, your hard work and dedication to creating value that matters for our clients was unwavering despite the ongoing, and sometimes quite extreme challenges of COVID. We have had a truly extraordinary year- as reflected in our outstanding financial results and in the 360-degree value we delivered beyond our financials-from the over 120,000 promotions and over 31 million training hours, an increase of 43%, for our people… to increasing our workforce by approximately 118,000 people, creating significant employment opportunities in our communities… to achieving 46% women on our way to our goal of gender parity by 2025… to our top 3 ranking in the Refinitiv Global Diversity and Inclusion Index for the fourth consecutive year… to the number one position with our largest ecosystem partners… to the exciting accomplishment of 50% renewable energy now powering our offices and centers globally… to the donation of $54 million in COVID-surge relief.

Accenture Q4 Fiscal 2021 Conference Call

September 23, 2021 / 8:00 a.m. Eastern

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In December, we will publish our first-ever annual 360-degree value report to more fully describe the FY21 value we created in all directions, and will report against three additional key ESG frameworks-SASB, TCFD and WEF IBC.

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 56,000 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 position us strongly as we begin FY22.

  • FY21 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, compared to 216 last year.
  • With a 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 $50.5 billion-a significant milestone-representing 11% growth, we added $6.2 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 achieved this profitable growth, while investing at a higher level than ever before:
  1. With $4.2 billion in acquisitions;
  1. $1.1 billion in R&D in assets, platforms and industry solutions, including growing our portfolio of patents and pending patents to more than 8,200; and
    1. Total training investment of $900 million.
  • And according to BrandZ, our brand value increased 56% to over $64 billion, ranking us number 27 on the prestigious BrandZ's Top 100 Most Valuable Global Brands list.

Finally, I want 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 FY21, after investing in cloud for a decade, we saw that the pandemic would 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 public to 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, a 44% increase.

KC…over to you.

KC McClure

Thank you, Julie-and thanks to all of you for joining us on today's call.

Accenture Q4 Fiscal 2021 Conference Call

September 23, 2021 / 8:00 a.m. Eastern

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We were very pleased with our results in the fourth quarter, which completes an outstanding year for Accenture and reflects 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 continued 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, resulting in 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 $2.2 billion, which was driven by continued strong growth in profitability.

Now, let me turn to some of the details.

New bookings were $15.0 billion for the quarter, with a book-to-bill of 1.1.

  • Consulting bookings were $8.0 billion, with a book-to-bill of 1.1.
  • Outsourcing bookings of $7.1 billion, with a book-to-bill of 1.2.

We were very pleased with our new bookings, which represent 7% growth in USD 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 1.0 in Strategy & Consulting, 1.2 in Technology Services, and 1.1 in Operations.

Turning now to revenues…

Revenues for the quarter were $13.4 billion, a 24% increase in USD 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 $7.3 billion-up 29% in USD and 25% in local currency.
  • Outsourcing revenues were $6.1 billion-up 19% in USD and 16% in local currency.

Taking a closer look at our service dimensions-Strategy & Consulting, Technology Services, and Operations all grew very strong double-digits.

Turning to our geographic markets…

Accenture Q4 Fiscal 2021 Conference Call

September 23, 2021 / 8:00 a.m. Eastern

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  • In North America, revenue growth was 22% in local currency driven by double-digit growth in Consumer Goods, Retail & Travel Services, Software & Platforms, and Public Service.
  • In Europe, revenues grew 18% in local currency, led by double-digit growth in Consumer Goods, Retail & Travel Services, Industrial, and Banking & 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 & Travel Services, Banking & 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 7.4% compared to 6.8% for the same quarter last year.

Operating income was $2.0 billion in the fourth quarter, reflecting a 14.6% 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 $0.29 for the quarter. The following comparisons exclude this impact and reflect adjusted results.

Our effective tax rate for the quarter was 25.0%, compared with an adjusted effective tax rate of 28.4% for the fourth quarter last year.

Diluted earnings per share were $2.20, compared with adjusted EPS of $1.70 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 $2.2 billion, resulting from cash generated by operating activities of $2.4 billion, net of property and equipment additions of $236 million.

Our cash balance at August 31st was $8.2 billion, compared with $8.4 billion at August 31st last year.

With regards to our ongoing objective to return cash to shareholders…

Accenture Q4 Fiscal 2021 Conference Call

September 23, 2021 / 8:00 a.m. Eastern

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Accenture plc published this content on 23 September 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 September 2021 22:41:06 UTC.