Accenture: Achieves numbers in FY22 as per guidance; outsourcing booking grows 41% in Q4, 18% in FY22

What's Buzzing 

Accenture reported 16% YoY growth in outsourcing revenues (proxy to Indian IT companies) for Q4FY22 while for FY22, it reported 18.6% revenue growth. New order bookings in outsourcing business were up 18% in FY22 and 41% in Q4. 

Context 

Overall revenue for the company grew 15.0% YoY in US$ and 22.4% in local currency to US$15.4 billion (bn) in Q4 while it grew 22% in US$ terms and 26% in local currency to US$61.6 bn. Outsourcing business, (proxy to Indian IT companies, 46% of the revenue mix in Q4) grew 16% YoY in US$ and 23% YoY in local currency to US$7.1 bn. New bookings (net new order book) were at US$10 bn for the quarter for outsourcing business, which grew 41.1% YoY while that of FY22 was at US$33.9 bn, up 18% YoY. The company’s net adds were at 10,947 for the quarter, while it added 97,111 people in FY22 taking its global headcount to 721,000. For FY22, geography wise, North America market (47% of revenue mix) continue to be growth driver as it grew 22.9% while Europe (33% of revenue mix) reported growth of 21%. Utilisation declined 100 bps in FY22 to 91%, continued to be at a healthy level. Attrition in FY22 was at 19% vs. 14% in FY21. Cloud revenues were at US$26 bn, up 48% and now forms 42% of mix. Operating margins improved 10 bps in FY22 to 15.2% while it expects margins to improve by 10-30 bps in FY23. The company is guiding 8-11% revenue growth in FY23 in local currency while for Q1, it expects revenue growth to be in the 10-14% in local currency, after taking into consideration of 8.5% negative impact of forex. 

Our Perspective 

The company has delivered on revenue and margins for FY22. Key highlight of the quarter was bookings in the outsourcing space (proxy to Indian IT companies), which saw a strong jump in Q4 and also grew handsomely in FY22 despite high base in FY21. It indicates that outsourcing growth in FY23 will continue to be strong. Considering last five to six year’s historical book to bill average on overall company’s bookings, we believe the guidance given by the company of 8-11% seems to be in the fair range. If bookings continue to grow at the current rate, we will not rule out increasing guidance in the coming quarters. What brings in confidence for Indian IT companies is there are no signs on any slowdown on the tech spending so far. We believe the net adds would be aligned in FY23 as per growth visible and peak seems to be behind now. Stability on attrition is also a good sign, which also reflects in margin expansion guidance.