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Accenture Reports Record Sales On Cloud Growth, $4.2B In Acquisitions
Joseph F. Kovar
‘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,’ says Accenture CEO Julie Sweet.
Accenture reported record sales for its most recent quarter and calendar year fueled by $4.2 billion in acquisitions and the rapid rise in cloud adoption caused by the COVID-19 pandemic.
“At the beginning of FY‘21, after investing in cloud for a decade, we saw that the pandemic would dramatically accelerate our clients’ move to the cloud,” CEO Julie Sweet told investors. “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.”
For the year, which ended August 31, Accenture recorded revenue growth of 14 percent to a record $50.5 billion, with 72 clients with bookings greater than $100 million, compared to 53 last year, said Sweet.
Sweet told investors on a conference call that she attributed that solid growth to some very investments the company made in the year.
“We achieved this profitable growth while investing at a higher level than ever before, with $4.2 billion in acquisitions, $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,” she said.
“At the beginning of FY‘21, after investing in cloud for a decade, we saw that the pandemic would dramatically accelerate our clients’ move to the cloud,” she said. “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, Accenture unveiled its Accenture Cloud First digital transformation initiative, which brought together the company’s migration, cloud-native development, data, AI, industry talent, and change capabilities, Sweet said.
“Accenture Cloud First was the biggest driver of our overall cloud business growth, from $12 billion to $18 billion, a 44-percent increase,” she said.
Compressed transformation underpinned by cloud and digital transformation is driving strong double-digit growth across Accenture’s applied intelligence, cloud, Industry X transformation services, intelligent operations, interactive, intelligent platform services, security, transformational change management, and other businesses, Sweet said.
“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,” she said. “We see the demand environment shaping up for FY‘22 to be more of the same. While digital leaders 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.”
Accenture is also seeing a big shift in the nature of demand for its managed services across IT, security and operations, with these services emerging as one of our most strategic differentiators, Sweet said.
“As companies simultaneously seek greater resilience, face 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,” she said. “Table stakes from managed services are efficiency, resiliency, and reliability. We further differentiate in our managed services because they are uniquely informed by our strong strategy and consulting capabilities and deep industry and functional expertise.”
During the question and answer period, when an analyst asked whether Accenture’s acquisition of 46 companies in fiscal 2021, along with its planned investment of $4 billion in acquisitions in fiscal 2022 could increase the risk to the company that comes from so many acquisition, Sweet said Accenture has a strong track record with years of experience, including and fine-tuning integration, as well as experienced leaders.
“We have] a finely tuned approach for integration,” she said. “And of course, we bring on people, in acquisition or not, all the time. And so, this focus on culture is just part of who we are.”
When another analyst asked where Accenture will find the incremental revenue sources needed for future growth to the $60-billion level, Sweet said that Accenture is still very early in the transformation of companies, in building just their digital core. Businesses, for instance, have roughly 25 percent to 30 percent of workloads in the cloud, she said.
“So there‘s a lot of work, which is a multi-year journey, in actually building the digital core, and then at the same time transforming the way that they work. ... [And] you have this core of leaders and leapfroggers. But the vast majority of companies are not yet engaged in compressed transformation. So, just from a multi-year outlook on the fundamentals of re-platforming and moving to a true digital-enabled enterprise [we are] still in early stages,” she said. “Then you add on top of that, there are whole parts of the enterprise where even the technologies are really new. And so Industry X is a great example of that. We see that as the next digital frontier, and we’re still very, very early.”
When asked by another analyst about Accenture’s managed services business, Sweet said that her company has consulting and outsourcing businesses, and that managed services is just another term for outsourcing.
Accenture provides managed services one everything from finance and accounting to industry-specific things in telecom, insurance, and insurance businesses, as well as general IT services, she said.
“And then, we have our managed services and security,” she said. “We bought Symantec last year. And so, this is a core part when you think about our revenue between consulting and outsourcing.”
When an analyst asked about Accenture’s hunt for talent, Sweet said the company hired an additional 56,000 net employees in its fourth fiscal quarter, and that momentum is continuing into early 2022.
For its fiscal fourth quarter 2021, which ended August 31, Accenture reported revenue of $13.4 billion, up 24 percent over the $10.8 billion the company reported for its fourth fiscal quarter 2020.
That included communications, media, and technology revenue of $2.8 billion, up 26 percent; financial services revenue of $2.6 billion, up 24 percent; health and public service revenue of $2.5 billion, up 20 percent; products revenue of $3.7 billion, up 29 percent; and resources revenue of $1.8 billion, up 17 percent.
The quarter also saw Accenture’s revenue split fairly evenly between consulting and outsourcing, with consulting revenue up 29 percent to $7.3 billion and outsourcing revenue up 19 percent to $6.1 billion.
Net income on a GAAP basis for the quarter was $1.4 billion, or $2.20 per share, up from last year’s $1.3 billion, or $1.99 per share.
For all of fiscal 2021, Accenture reported revenue of $50.5 billion, up from last year’s $44.3 billion. Net income on a GAAP basis for the year was $6.0 billion, or $9.16 per share, up from last year’s $5.1 billion, or $7.89 per share. On a non-GAAP basis, net income was $5.8 billion, or $8.80 per share, up from last year’s $4.9 billion, or $7.46 per share.
Looking forward, Accenture expects first quarter fiscal 2022 revenue to be in the range of $13.9 billion to $14.35 billion, which is up from last year’s $11.8 billion. For the full fiscal year 2022, the company expects revenue growth to be in the range of 12 percent to 15 percent. The company also expects to invest about $4 billion in acquisitions.
Accenture also expects full-year diluted earnings per share for fiscal year 2022 to be in the range of $9.90 to $10.18, or 13 percent to 16 percent growth over adjusted fiscal 2021 results.