Accenture plc — FY2022 Form 10-K
Reporting period: Fiscal year ended August 31, 2022. The filing also reports fourth-quarter results; this is an annual report, not a standalone quarterly filing. Accenture is a global professional-services company operating across Strategy & Consulting, Technology, Operations, Industry X and Song.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $61.59 billion | $50.53 billion |
| Operating income / margin | $9.37 billion / 15.2% | $7.62 billion / 15.1% |
| Net income attributable to Accenture plc | $6.88 billion | $5.91 billion |
| Diluted earnings per share | $10.71 | $9.16 |
| Cash from operating activities | $9.54 billion | $8.98 billion |
| Cash and cash equivalents at year-end | $7.89 billion | $8.17 billion |
- Revenue increased 22% in U.S. dollars and 26% in local currency. The stronger U.S. dollar reduced reported growth by approximately four percentage points.
- Gross margin declined to 32.0% from 32.4%, primarily reflecting higher compensation and subcontractor costs. Operating margin nevertheless expanded 10 basis points.
- Cash used in investing activities was $4.26 billion, including $3.45 billion for businesses and investments. Cash used in financing was $5.31 billion, including $4.12 billion of share purchases and $2.46 billion of dividends. Cash returned to shareholders was $6.6 billion.
- Year-end debt was $55 million; $4.86 billion of borrowing facilities were available and undrawn. Lease liabilities totaled approximately $3.27 billion. The filing states management expects working-capital and general funding needs to be met by operating cash flows and, if needed, borrowing facilities or future financing.
Fourth-quarter snapshot
Fiscal Q4 revenue was $15.42 billion, operating income was $2.27 billion, net income was $1.69 billion and diluted EPS was $2.60. The filing does not provide a clear Q4 operating-margin figure in the presented quarterly table.
Changes versus the prior year
- Revenue rose across all geographic markets and industry groups. North America generated $29.12 billion, Europe $20.26 billion and Growth Markets $12.21 billion. Consulting revenue grew 25% in U.S. dollars; outsourcing grew 19%.
- New bookings increased 21% to $71.7 billion (25% in local currency). Bookings are not equivalent to revenue or remaining performance obligations, and many contracts may be terminated or reduced by clients.
- Diluted EPS increased 16.9%. FY2022 included a $96 million loss on the disposal of the Russia business, reducing EPS by $0.15. FY2021 included an after-tax investment gain that increased EPS by $0.36; excluding that gain, FY2021 diluted EPS was $8.80.
- The effective tax rate rose to 24.0% from 22.8% (23.1% for FY2021 excluding the investment-related tax effect), mainly because of lower benefits from final determinations of prior-year taxes.
- Workforce grew to more than 721,000 from approximately 624,000. Annual voluntary attrition increased to 19% from 14%, while utilization decreased to 91% from 93%.
Outlook, commentary and risks
- Management described demand as very strong, citing client digital transformations, cloud adoption, security, operational efficiency, automation and growth initiatives. Remaining performance obligations were approximately $24 billion; about 71% was expected to convert to revenue in FY2023. This measure includes only the non-cancelable portion of contracts.
- The filing does not provide a quantified full-year FY2023 revenue or EPS forecast in the supplied text. Assuming exchange rates remain within recent ranges, management estimated FY2023 U.S.-dollar revenue growth would be approximately six percentage points below local-currency growth.
- Compensation costs were rising faster than in prior years. Pricing improvements and changes in workforce mix and technology helped manage the impact, but may not fully offset cost increases or protect contract profitability.
- Material risks include economic and geopolitical uncertainty affecting client spending; currency movements; competition and pricing pressure; attracting and retaining skilled employees; cyber incidents and data privacy obligations; complex contract delivery and performance targets; acquisition integration; and tax audits and regulatory changes.
- Accenture reported $1.47 billion of unrecognized tax benefits; transfer pricing and other intercompany tax matters were identified by the auditor as a critical audit matter. The company also disclosed a putative class action related to the Starwood/Marriott data incident; management stated it did not expect the matter to have a material financial effect.
- Other items to monitor include $2.84 billion of non-cancelable or termination-fee commitments, principally for cloud hosting, software subscriptions and IT services; and the Russia disposal loss. Management assessed legal contingencies, net of accruals and insurance recoveries, as not expected to materially affect results or financial condition.
Important facts for investors to verify
- Whether local-currency growth continues to translate into reported U.S.-dollar growth given exchange-rate exposure.
- Whether labor-cost inflation, elevated attrition and lower utilization affect margins, staffing capacity and contract delivery.
- How quickly bookings and remaining performance obligations convert to revenue, considering termination rights and the limitations of bookings as a measure.
- Developments in tax audits and transfer-pricing positions, cybersecurity and privacy exposures, and the Marriott-related litigation.
- Capital allocation, including planned share repurchases, the increased authorization to $6.13 billion, and the declared quarterly dividend of $1.12 per share for November 2022.