Earnings Call: Q3 2021

Jun 24, 2021

Thank you for standing by, and welcome to Accenture's Third Quarter Fiscal 2021 Earnings Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. And as a reminder, This conference is being recorded. I would now like to turn the conference over to our host, Managing Director, Head of Investor Relations, Ms. Angie Park. Please go ahead. Thank you, operator, and thanks, everyone, Thank you for joining us today on our Q3 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 Chief Executive Officer and Casey 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. Casey will take you through the financial details, including the income statement and balance sheet, along with some key operational metrics for the Q3. Julie will then provide a brief update on our market positioning before Casey provides our business outlook for the Q4 and full fiscal year 2021. 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 outlooks 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 ks 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 Thank you, Angie, and thank you everyone for joining us. We had another outstanding quarter, reflecting our laser focus on creating 360 degree client value And the importance of our scale, experience, industry knowledge and trust to the world's leading companies and governments As they continue to digitally transform their enterprises, we had a record 20 clients with bookings over $100,000,000 and a total of $15,400,000,000 in bookings. We delivered 16% revenue growth in local currency, that we continue to take significant market share. Our growth was broad based across geographic markets and industries with 11 out of 13 We continue to meet our clients' strong demand, adding a net 32,000 talented people this quarter alone. We offer an employee value proposition that allows us to attract Top talent, develop our people with world class training and provide them with vibrant career paths. We are Pleased with our record 117,000 promotions year to date, including almost 1200 promotions to Managing Director. And while delivering these results, we have raised the bar again in terms of investments. We now expect to invest About $4,000,000,000 in strategic acquisitions this fiscal year with 39 acquisitions closed or announced year to date. This includes announcing this quarter 2 acquisitions with purchase prices over $1,000,000,000 each, The acquisition by Accenture Federal Services of Novetta in the U. S, an advanced analytics company, which we expect to close in August These 39 acquisitions are well balanced with 10 in North America, 17 in Europe and 12 in Growth Markets. Our level of investment demonstrates as well how scale, experience and trust matters. Scale in terms of our financial capacity, experience in terms of our track record of the successful integration Of approximately 200 companies since 2013 and the trust we have earned in the market that attracts leading companies to want to join the Accenture family. We invest in acquisitions to scale in areas where we see a big market opportunity To add skills and new capabilities and to further deepen our industry and functional expertise, all to drive continued innovation and the next waves of growth. Finally, because we believe strongly in our commitment to shared success with our communities. We recently announced that we would donate $100 for every one of our then 540,000 employees or $54,000,000 to urgently address the needs of our communities due to the pandemic, including $25,000,000 for India. Casey, over to you. Thank you, Julie, and thanks to all of you for taking the time to join us on today's call. As you heard in Julie's comments, we are We are extremely pleased with our results in the Q3, which continue to reflect very strong momentum across all dimensions of our business. Based on the strength of our Q3 results and the confidence we have in our Q4 to continue to extend our market leadership position, We are increasing our full year outlook, which I will cover in more detail later in the call. Before I get into the details, Let me summarize the major headlines of our Q3 results, which reflect continued superior execution against our 3 financial imperatives. Revenue increased nearly $2,300,000,000 reflecting growth of 16% in local currency. Results were approximately $300,000,000 above the top end of our guided range, driven by broad based over performance across the business, With double digit growth in all three markets, 4 or 5 industry groups and in technology services and operations. As we expected, both strategy and consulting and the Resources Industry Group returned to growth. These results demonstrate the power of our business model and our unique ability to seamlessly integrate our services at scale. We estimate that our growth continues to significantly outpace the market. Operating margin was 16%, an increase of 40 basis Importantly, we no longer have the margin expansion tailwind from lower travel as we anniversaried the benefit of the comparator this quarter. We continue to absorb significant investments in our people and our business as we are always focused on positioning our business for the future. And we delivered very strong EPS of $2.40 up 26% over fiscal 2020. Finally, we delivered strong free cash flow of $2,200,000,000 in the quarter $6,200,000,000 year to date, We're also continuing all elements of our capital allocation program, including returning roughly $1,400,000,000 to shareholders this quarter via dividends and share repurchases. We've made investments of $1,500,000,000 in acquisitions through Q3, And we now expect to invest about $4,000,000,000 in acquisitions this fiscal year, which does not include the Oumlaud acquisition, which we anticipate to close in FY 'twenty two. I want to take a moment to highlight that as you can see from our results and guidance this year, We are able to step up our acquisition spend and continue to expand operating margin. And while I won't comment on the Specifics of FY 'twenty two until September. Based on our current line of sight, you should think of next year's inorganic contribution in the range of 4 percent, and we expect margin modest margin expansion as we continue to run our business with rigor and discipline. With that, let me turn to some of the details starting with new bookings. New bookings were $15,400,000,000 for the quarter with a very strong book to bill of 1.2. Consulting bookings were $8,000,000,000 with a book to bill of 1.1. Outsourcing bookings were $7,400,000,000 with a book to bill of 1.2. We were very pleased with our new bookings, which represent 39% growth in U. S. Dollars and reflect a record 20 clients with bookings over 100,000,000 Each service dimension, strategy and consulting, technology services and operations delivered double digit bookings growth in local currency. Turning now to revenues. Revenues for the quarter were $13,300,000,000 a 21 15% increase in local currency. Consulting revenues for the quarter were $7,300,000,000 up 21% in U. S. Dollars and 16% in local currency. Outsourcing revenues were $6,000,000,000 up 20% U. S. Dollars and up 16% in local currency. Taking a closer look at our service dimensions. Operations grew very strong double digits, technology services grew strong double digits And strategy and consulting grew high single digits. Turning to our geographic markets. In North America, revenue growth was 18% in local currency, driven by double digit growth in public service, software and platforms and consumer goods, retail and travel services. In Europe, revenues grew 14% local currency. We saw double digit growth in consumer goods, retail and travel services and industrial and high single digit growth in Banking and Capital Markets. Looking closer at the countries, Europe was driven by double digit growth in UK, Italy and Germany. In Growth Markets, we delivered 15% revenue growth in local currency, led 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 Brazil. Moving down the income statement. Gross margin for the quarter was 33.2% compared with 32.1% in the same period last year. Sales and marketing expense for the quarter was 10.6% compared with 10.2% for the Q3 last year. General and administrative expense was 6.6% compared to 6.3% for the same quarter last year. Operating income was $2,100,000,000 in the 3rd quarter, reflecting a 16% operating margin, up forty basis compared with Q3 last year. Our effective tax rate for the quarter was 25% compared with an effective tax rate of 25.5 percent for the Q3 last year. Diluted earnings per share were compared to EPS of $1.90 in the Q3 last year. Days service outstanding were 36 days compared to 34 days last quarter and 41 Days in the Q3 of last year. Free cash flow for the quarter was $2,200,000,000 resulting from cash generated by operating activities of $2,400,000,000 Net of property and equipment additions of $158,000,000 Our cash balance at May 31 was $10,000,000,000 compared with $8,400,000,000 at August 31. With regards to our ongoing objective to return cash to shareholders, In the Q3, we repurchased or redeemed 3,000,000 shares for $835,000,000 at an average purchase price of $276.98 per share. As of May 31, we had approximately $4,200,000,000 of share repurchase authority remaining. Also in May, we paid a quarterly cash dividend of $0.88 per share for a total of $559,000,000 This represents a 10% increase over last year. And our Board of Directors declared a quarterly cash dividend of $0.88 per share to be paid on August 13, also a 10% increase over last year. So in summary, we are extremely pleased with our results to date and are now focused on Q4 and closing out a very strong year. Now let me turn it back to Julie. Thanks, Casey. I'll start with the environment. The dynamics in the market we are Seeing are not only a recovery from the lower spending pattern at the onset of the pandemic, but a more sustained growth in demand As companies race to modernize and accelerate their digital initiatives with compressed transformation, pre COVID, Our research showed a digital achievement gap with leaders growing 2x faster than laggards, and we that gap has now widened to 5 times with leaders stepping up their investment in technology and innovation And leapfrogger is taking accelerated steps to catch up. Cloud is an even more critical enabler as companies are increasing their focus on Enterprise wide transformations and rapidly moving to digital and cloud powered models. These needs of our clients are driving strong momentum in our business With an acceleration of continued strong double digit growth across Applied Intelligence, Cloud, Industry X, Intelligent Operations and Security, Let me share some color to bring this demand to life. I want to particularly highlight cloud, which continues to have very strong double digit growth rates, as well as the subset of Accenture Cloud First, where growth was even stronger and has exceeded our expectations when we formed Cloud First last September. With our cloud first services, we are helping agencies served by Concept, Italy's national procurement agency, to deliver on Italy's National Recovery and Resilience Plan. We're developing and running industry specific cloud based platforms To standardize and improve their efficiency and speed, reducing the time to launch new contracts and ultimately providing much improved services for Italy's We are using our intelligent platform services to help DuPont, a company with a rich history of business reinvention, We imagine its financial structure to coordinate operations across its large geographic footprint. After going through a strategic and deliberate restructuring Through M and A, we will now help DuPont implement a central finance processing suite that will help them to consolidate their multiple financial systems and chart of accounts to 1 and close the books faster. This will provide real time review of results for all of the business units, All in the cloud, giving DuPont more agility, speed and certainty in a complex and volatile market. We are helping Jaguar Land Rover transform its global marketing model to deliver a more personalized customer experience with creativity and We were selected for our technology capabilities, data led performance and experience led approach. We will use the strength of the experience, creative and digital capabilities of Interactive and the marketing delivery capabilities of operations With our Synapse platform, which we already use as part of Jaguar Land Rover's warranty operations, Synapse will Deliver AI powered insights and highly automated production around the world. Security is Top of mind for our clients as the threat landscape expands, our very strong double digit growth is driven by the breadth and depth of our services From advisory to cyber defense to managed security. For example, facing ever increasing cyber Threats and continued financial pressures as a result of COVID-nineteen, Accenture is helping a UKI bank by bringing together the full breadth of these Across many of these examples are our implied intelligence services. We were excited this quarter to announce Centure Federal Services Agreement to acquire Novetta, an advanced analytics company serving U. S. Federal Organizations that is demonstrating what's possible with analytics, machine learning, cyber and cloud engineering. This will augment our already strong capabilities and scale in these Critical areas, providing even more diversification across our federal business, specifically in the national security space, which is seeing substantial growth. I want to give a special recognition to our colleagues serving the public sector around the world throughout the pandemic. Your 7 consecutive quarters of double digit growth reflect your absolute commitment to the important missions of governments serving their citizens. Turning now to Industry X, our digital engineering and manufacturing services. We believe that product development, Design, engineering, manufacturing and the supply chain make up the next big digital transformation frontier. The impact of COVID-nineteen is accelerating the need to transform these core operations. And for nearly a decade, we have been to build the unique capabilities and ecosystem partnerships to combine the power of data and digital with traditional engineering services. We are very pleased with the announcement of our agreement to acquire Oomlao, which will add more than 4,200 industry leading engineers and consultants 17 countries and expand our capabilities across a range of industries, including automotive, aerospace and defense, telecommunications, energy and utilities. Some recent examples of our Industry X services include helping a German telecom company continuously develop and enhance their Internet television service By utilizing embedded engineering and their set top boxes and managing new features on the platform, Helping a large media conglomerate accelerate their primary revenue streams in digital products and advertising with our product and platform engineering expertise to design, build, test and deploy new products, services and features and working with the global automotive OEM to execute online remote software updates for their in car computer systems to allow seamless deployment of new software versions. We are also working with an American multinational manufacturer of confectionery, pet food and other food products to deploy a digital twin platform to production in its manufacturing facilities, improve margins and reduce waste. We are working with a large electric company in Japan to help their power plants to help bring their power plants into the future by digitizing their operations and standards across each department and with a large oil and gas company while supporting the company's key safety and sustainability goals throughout the use of a digital factory. Taking a step back, the examples I have provided today all require deep industry knowledge and innovation. Our breadth and depth across industry enables us to tailor industry solutions while bringing cross industry as we help our clients facing industry convergence and by using the lessons of other industries. We are proud this quarter that Fast Company recognized us for our innovation across multiple initiatives in its World Changing Ideas Awards. Our cross industry expertise is one of the powerful sources of our ability to innovate. For example, using our deep banking industry and technical expertise, we rapidly developed for a commercial Bank, which was not a traditional Small Business Administration lender, a program under the U. S. Paycheck Protection Program that allowed them to make loans to Thousands of small businesses struggling with the impacts of the pandemic. We've been pivoted to apply this approach to Stand Up Facebook's Small Business Grants Program for Black Owned Businesses, enabling the distribution of 10,000 grants to Black Owned Businesses in the U. S. This grants program is an important part of Facebook's overall commitment to invest $200,000,000 in Building Programs and Tools for Black Owned Businesses. Finally, let me turn to our incredible people. Their health and safety remain our Top priority. We are supporting our people by facilitating vaccinations, including standing up clinics in many of our offices, such as in India, Where already 50,000 of our people, their families and contractors have been vaccinated. We have been focused on Hybrid model to an omni connected experience. People will work in the office, from home and at client And it is likely many of our clients will be doing the same. So our approach focuses on the experience of connecting to continue to serve our clients The rich diversity and ingenuity of our people, from our Board of Directors to our new hires, helps us deliver 360 degree value for the benefit of all. We now have more than 250,000 women representing As you may recall, shortly after the murder of George Floyd in the U. S, on this Call, I shared with you our commitment to take 3 actions in the U. S, setting external goals to increase representation, training our people and making a bigger impact in our communities. 1 year later, I am pleased to report that we not only took each action, We have made measurable progress, including increasing our representation, having 95% of our U. S. People complete our new anti racism training and making substantial new investments in our communities. You can find a full progress update on our website because we believe transparency and accountability are hallmarks of good governance and essential to building trust. As we see the rise or continuation of all kinds of hate crimes against diverse communities, including violence against Asians, The LGBTI community, antisemitism and Islamophobia, I want to reaffirm my and Accenture's unwavering commitment to equality and justice for all and 0 tolerance for racism, bigotry and hate of any kind. KC, back to you. Thanks, Julie. Let me now turn to our business outlook. For the Q4 of fiscal 2021, we expect revenues to be in the range of $13,100,000,000 to $13,500,000,000 This assumes the impact of FX will be positive 4% compared to the Q4 of fiscal 2020 and reflects an estimated 17% to 21% growth in local currency. For the full fiscal year 2021, based upon how the rates have been trending over the last Few weeks. We continue to expect the impact of FX on our results in U. S. Dollars will be approximately positive 3.5% compared to fiscal 2020. For the full fiscal 2021, we now expect our revenue to be in the range 10% to 11% growth in local currency over fiscal 2020, including approximately negative 1% from a decline in revenues from reimbursable travel based on a 2% reduction the first half of the year and no material impact in the second half of the year. Importantly, organic revenue is the driver of the increase to our updated guidance, as we still expect the inorganic contribution to remain at about 2.5% for the full year. For operating margin, we now expect Fiscal year 2021 to be 15.1 percent, a 40 basis point expansion over fiscal 2020 results. We now expect our annual effective our annual adjusted effective tax rate to be in the range of 23% to 24%. This compares to an adjusted effective tax rate of 23.9% in fiscal 2020. For earnings per share, we now expect full year diluted EPS for fiscal 2021 to be in the range of $9.07 to $9.16 We now expect adjusted full year diluted EPS to be in the range of $8.71 to $8.80 or 17% to 18% growth over adjusted fiscal 2020 results. For the full fiscal 2021, we now expect operating cash flow to be in the range of $8,650,000,000 to $9,150,000,000 property and equipment additions to be approximately $650,000,000 and free cash flow to be in the range of $8,000,000,000 to $8,500,000,000 Our free cash flow guidance reflects a very strong free cash flow to net income ratio of 1.4 to 1.5. Finally, we continue to expect to return at least $5,800,000,000 through dividends and share repurchases as we remain committed to returning a substantial portion of our cash to our shareholders. With that, let's open it up so that we can take your questions. Angie? Thanks, KC. Operator, would you provide instructions And that comes from the line of Lisa Ellis with MoffettNathanson. Please go ahead. Hey, good morning and thank you. Great results here. Couple of questions. One is a little more tactical, one more strategic. The first one, in bookings, Casey, can you just remind us, 1, How acquisitions are or are not reflected in bookings? And then on a related note, is the composition of your bookings Changing at all? I'm just specifically thinking about these big $100,000,000 plus transformation programs. Are you seeing a notable Change in duration or anything like that? Just trying to understand the bookings number a little bit and then I'll follow-up. Thank you. Okay, great. Thanks, Lisa. So let me just decompose bookings a little bit. So we were really pleased with our bookings this quarter, like $15,400,000,000 And again, that grew 39% in U. S. Dollars, really strong book to bill 1.2%. And in terms of when you look at it, there was Very strong bookings in both consulting and outsourcing as well as all 3 geographic markets. And if you look at specifically in our V and A, which also was represented across All of those dimensions. There will be a slight impact in our bookings based on the backlog that we bring in from these acquisitions, but it's not Overall significant. But let me just peel it back in terms of when you look underneath that $15,400,000 I'd say there's really kind of 3 things I'd point out. First was that there was really a good mix of all categories of our sales. As Julie mentioned, we had a record 20 clients over $100,000,000 of sales and that, as you know, positions us really well for the future. But if you go all the way down through the categories, all the way through our smaller deals, They represented very well, and that can help us with revenue in the current quarter. The second thing that I would point out is that our bookings were very broad based Across all of our services, and that included strategy and consulting. And the third thing was that it was aligned to our strategic priorities, as we pointed out, driven by Cloud Industry X and Security, for example. So with those points, I would I'll hand it back to you to ask the second question or there's any other color that you want. Yes. Terrific. Thank you. The second one, maybe Julie, this is for you. I just wanted Hoping to comment on acquisitions. This is obviously, you've uptick acquisitions, made a couple of bigger ones than Accenture has historically done. Can you just talk about, is this just kind of opportunistic or has something kind of shifted in terms of your Willingness to do larger acquisitions or specific market opportunities you're going after? Thank you. Sure, Lisa. And so we've always said we have the capacity to do larger acquisitions, but we're very about what we will acquire. And so these were opportunities That we're very aligned to our strategic priorities. So, you know, Novetta being both Investment in public sector, but primarily all about advanced analytics, machine learning, cyber And cloud engineering and also importantly diversification for our federal business because they are in the national intelligence space. And Ooma is in engineering, which was just an opportunity. It's a company that we know very well That really is giving us an opportunity to accelerate our scale in Industry X. And we've seen the Digitization of manufacturing and engineering be a major priority post COVID. We've been investing for nearly a decade In this space, we predicted this would happen, as you can see by the number, the amount of work that we're already doing. And this was a great opportunity for a company that we know well. And our strategy continues to be, We're going to make acquisitions to scale and big market opportunities to add new skills and opportunities, as you know, that we built a lot of interactive through acquisitions, For example, those were new skills and capabilities and then to deepen industry and functional knowledge. And so this is a continuation of that. And I think the advantage we have is our financial capacity to make investments and to Increase our investment for the benefit of our clients and all of our stakeholders When we see the right opportunities and we're going to continue to have that discipline around making strategic acquisitions. Terrific. Good stuff. Thank you. Thank you. Our next question comes from the line of Ashwin Shrivankar with Citi. Please go ahead. Hey, thanks and great quarter. Congratulations on That's from me as well. The question I had is about the momentum that you are seeing in the business and it seems to have actually accelerated from what you're seeing in the past Quarters. I wanted to ask you with regards to Whether this changes how you think about managing the business in the interim In order to continue to deliver What you're seeing from a demand perspective, particularly as we see attrition go up And so on. And that's an across the board statement, not just mix interest statement. So any thoughts with regards to how you're thinking of delivery? Yes. Ashland, I'll take this and maybe I'll frame up a few things for you and hand it over to Julie as well. So let me just maybe frame up how we were thinking about you mentioned the demand in overall business and think about the quarter and our year to date from a financial perspective. And these results are really exceptional when you think about it in the context of our historical performance, I'll start there. I mean, clearly, we're benefiting from an easier Compare in a strong market demand, and we see that continuing. But even with that, bookings At $44,000,000,000 growing 25 percent year to date, and that's off a base of record sales through Q3 of last year. And then you couple that with 54 clients with bookings over $100,000,000 through Q3, which is more in the 1st 9 months of this year than the whole of last year 'twenty, FY 2020 FY 2019. And I mentioned that as you talk about things in different ways we may need to manage differently just to talk about the scale in our bookings. If you look at the scale in revenue, We grew a record $2,300,000,000 in revenue this quarter year over year. And you think about our industries, where we're clearly the leader with the breadth and depth of industries, 11 of this 13 growing double digits. And as I mentioned before in our guidance, the increase in our full year outlook, it's driven by organic revenue, Given that inorganic is contribution staying pretty much the same. And then you end that all with profitability, 40 basis points This quarter, we had very strong profitability, and we're no longer benefiting from a travel tailwind. And we continue to invest At scale in our business and our people. So with that, let me hand it over much more to Julie to round out some of the questions you had on demand and utilization. Yes. So, Ashwin, it's a great question around managing our business. And so I want to just take you all back Right before the pandemic, remember back then. And on March 1, we put in a new growth model, we call The next gen growth model and that was designed for helping us manage our Business as we saw the scale increasing, right? And that change in up in growth model was focused on Being able to have more of our leaders closer to our clients, we changed the P and L, as you recall, to the geographic. And so we've already put in place a model that is designed to allow us to continue to scale. And so this for us was anticipated, and it's exciting to see how we are very uniquely positioned As our clients' needs have accelerated, because that's what's driving the demand, right? The needs of our clients have accelerated post COVID to do transformation and we have the right operating model in place. As we think about attrition, it's ticked up to Pre COVID levels in a hot market, although not the highest we've ever seen. And so as you said, it's an industry Phenomenon and we're comfortable. I mean our core competency is about managing our supply and demand. But more importantly, Our core competency is being a great company to work for. And as you saw with our numbers this quarter, we hired net 32,000 Incredible people and that is just a testimony to our ability to attract great talent As well as continue to train our people, we've trained over 100,000 people since the pandemic started Pivoting to the areas of our clients' needs. So we feel good about it, and of course, this is what you expect from us. So we'll Continuously improve. Thanks. So that's all good points, and I agree. I guess the next question is with regards So ordinarily, I don't focus on a particular acquisition, but this umlaut seems to be I have to ask, is this the first of many as you expand into a much bigger engineering services type presence? Because that is a relatively massive end market. So strategically, how are you thinking of this? Well, so sort of big picture, we believe that the digital engineering and manufacturing Space is the next frontier for our clients, right? There's been a lot and there's still a lot to do with respect To the front office and the back office for lack of a better term, our clients are building a digital core, they're forming operations and they're trying to find new ways of growth. But the areas that have been not as digitized Over the last several years, the companies have pivoted has been in core operations, manufacturing and supply chain. Now we predicted this Just as we predicted back in 2013, that someday everybody would be a digital business. And so we've been investing. We've already made, I don't know, 7, 8, 9 Acquisitions over the last several years to build these capabilities. And you saw that with all the examples that we did in the Script. And so this is about rapidly scaling with some of the best engineers in the world, right, because We see the market opportunity, but most importantly, the need from our clients. And so you should expect that we'll continue to build these Both organically and inorganically, but obviously this is a great add in terms of scale for us. Great. Thank you. Thank you. Our next question comes from the line of Jason Kupferberg with Bank of America. Please go ahead. Thanks, guys. Good morning. I'm wondering if you can estimate for us perhaps how much the acceleration in all this enterprise digital transformation has enhanced Your structural organic revenue growth profile relative to pre pandemic levels because it certainly sounds like this trend continues to have lags. Yes. I mean, I think the way to think about it is that We're taking market share and we're really well positioned to capture The growth that's available because of the needs of our clients. And so you're obviously seeing that up Taken inorganic growth and we think this will be sustained demand. I think it's too early and we're not going to kind of get back into sort of giving sort of a view of FY 'twenty two. But what we I'd say is we do believe that what you're seeing right now in demand isn't just like a recovery because spending decreased, But actually, sustained demand and that we are incredibly well positioned to capture that because clients are looking for outcomes And the breadth of our services, they're turning to us because we can give them solutions, not just individual services. They want the innovation that we're bringing, the things like our Synops platform. They are very appreciative and focused on the fact that we care about the 3 60 degree value so that we're helping improve their own skills, as well as achieving their goals. And finally, and I think something that is really critical right now and why we are so well positioned is they see it's a And so trust really matters when you are doing major transformation. And I'll give you one example. We've had over 80 clients in the last 12 months just come and sit down with us to learn more about our diversity supplier program Because it really matters to them and they see us as a leader, right? These are the things that make us an incredibly attractive and Trusted partner. And so we think that this is really an enduring differentiation at a time when there's going to be sustained demand for Press transformation. Okay, understood. Just a quick 2 part follow-up here. Your thoughts on Q4 book to bill and what were the areas of the business that surprised you most in terms of revenue this quarter because Obviously, the overall upside was quite significant. Thank you. Yes. Jason, just in terms of how we think about the Q4, I mean, so Obviously, we've had $44,000,000,000 of bookings year to date. And even with that, we still have a strong Pipeline and we feel good about our position for Q4 as it relates to bookings. Yes, and in terms of what did better, as I mentioned earlier, it Earlier, it really was broad based. Every part of our business did a bit better. Okay. Thanks for the comments. Thank you. Our next question comes from the line of Rod Bourgeois with DeepDive. Please go ahead. Hey, guys. Hey, I just wanted to ask about the margin outlook Given the increased acquisition contribution that you'll be digesting in fiscal 2022, I'd just like to ask about the margin levers that you'll be able to pull in order to still achieve overall operating margin expansion. And also, I guess besides digesting this added acquisition content, are you also needing to Spend more on people costs given the war for talent that's out there. So question about margin levers and also The investments in people. Thanks. Yes. Thanks, Rod. So I may start with the second one first. So yes, in terms of For the people side of it, obviously, there's a lot of demand in the market. We're in a hot market right now. And historically, we've seen wages increase, and That vary by skills and geographies, and we and that's happening now. But you see that, Rod, flowing through our results already to date and through our guidance. So it's really up to us to manage our business with rigor and discipline as we always do, you know us well, Managing our pyramid, increasing the use of automation and just overall delivery efficiencies. So that's the first part on wages as related to operating margin. Just coming back to the same point on V and A. So let me just give you a little bit more color on V and A, Coupled with what I talked about a little bit earlier, and of course, I'm not going to give any specific guidance for FY 'twenty two until September. But we do expect to have a higher level of inorganic contribution next year, probably around something closer to 4%. And that's really due to the fact that we're deploying about $4,000,000,000 in FY 'twenty one, a larger portion of that's closer to So the later part of the year, and we expect to benefit from more of that revenue in FY 'twenty two. We also expect at this time to deploy we're around $4,000,000,000 in FY 'twenty two. That's including Oomla, which we expect to close next year, early in the year. And of course, as Julie said, we always had we've always said we have the ability to do more, but that's our line of sight today. But and it's up to us to manage our All the levers that we have at our disposal to continue within the parameters of clients And our overhead and structural costs to make sure that we continue to drive modest margin expansion while investing at scale in our business and our people. Great. And then just a quick follow-up on the revenue progression that's happening. Clearly, this is a big industry recovery, some of that cyclical, some of it secular. And you have certain COVID impacted verticals that are coming back online. I guess as we head into the next fiscal year, Are there on the other side, are there any revenue contributions that will taper as the COVID crisis ends? Are there any is there any sort of lumpy work that might taper off as you head into the next fiscal year amidst all of the other momentum that's happening in the business. I mean, there's nothing material. I mean, think about the public sector, for example. We did a lot of COVID surge work, but now you've got the fiscal stimulus that's around the world and you see the digitization The public sector, like we gave the example of concept in Italy. So there's nothing material that we think will be difficult to manage Because you're seeing really when you see that in the results kind of across industries, there's this Need to digitize. So nothing material that we think to mention. Thank you. Thank you. Our next question comes from the line of Bryan Bergin with Cowen. Please go ahead. Good morning. Thank you. I'm curious over the last 2 to 3 quarters, have you seen a notable change in clients' appetite for pricing increases as broader transformation demand has ramped up? Yes. So let me talk to you a little bit about what we're seeing in terms of pricing overall. So just Importantly, as a reminder, we talk about pricing. We define it as the contract profitability or margins on the work that we sell, Brian. And as always, the environment remains competitive. And in many areas of our business, we did see pricing was lower. That's really based on a combination of the fact that the market is competitive and disciplined investments that we're making. And so all of that is baked into our operating margin guidance for the year. Okay. And then one on Accenture operations. I'm curious if you're seeing any change in the size And scope of engagements that clients are outsourcing to, can you just comment on some of the strength or the drivers of the continued strength that you've shown in that business? Yes, it's a great question. It's not so much about the size, it's really about the intent. I mean, what you're seeing is Clients really saying in a world where I've got to digitize the entire enterprise, right, what can where do I want to focus My own resources and leadership and where can I leverage Accenture and their investments? And this is where we really got ahead of the market, right, where we developed Synapse. And what we're providing them is both cost efficiencies, but really outcomes of Actual insights that come from being able to digitize. And then you add on top of that where we have more clients Thinking about having us take over, we have a strong pipeline and taking over more people because we are Such a great employee value proposition. And so they're starting when we think about the future of work, think about it, we're seeing more of our clients really see it as combination of their own employees, automation or bots and then partners like Accenture that really integrate With their own employees and we're just a leader here. And so it's more about the trends of the need to digitize That is what you're seeing reflected digitized at speed. Thank you. Thank you. Our next question comes from the line of Bryan Keane with Deutsche Bank. Please go ahead. Hi, guys. Congrats on the results. I wanted to ask about strategy consulting. It had been a laggard, but Saw that it moved positively into high single digit. Just a little bit on the outlook there, do you continue to see that maybe reach Some of the demand you're seeing in some of your other industry groups? Yes. Hey, Brian. Thanks for the question. You're right. We were very pleased with the acceleration high single digits in the quarter on strategy consulting, which is what we expected. In terms of how we look at just consulting overall type of work Go forward, we see it being strong double digit for the Q4 and the second half of the year. That would mean we round up really kind of in a strong double digit growth perspective. And Brian, as a reminder, because I remind you all, every single quarter, right, clients aren't focused on is it strategy and consulting Our marketing transformation bring together our services and with more confidence and certainty. And that's really how we think about it. Got it. And then just as a follow-up, the increase in M and A, just curious On how you guys are thinking about capital allocation, in particular, the dividends and the share repurchase, Does that change at all with a little more M and A? Obviously, we'll give you I'll give you specifics in September, Brian, for next But overall, our capital allocation framework really remains intact. I mean, you should all just think about this as we're going to deliver on our commitments And we are investing to drive the next waves of growth and we are taking advantage of our ability to do so in this market. Great. Thanks so much. Last question. Operator, we have time for one more question and then Julie will wrap up the call. Thank you. And that question will come from Tien Tsin Huang with JPMorgan. Please go ahead. Hey, thanks so much. Amazing results. Sorry, this was already asked, I got to jump off earlier. Just on The record number of deals over $100,000,000 I'm just curious how the pipeline is for such deals going forward. Is there an opportunity to replenish? Just what is the What do you see out there in terms of large deal potential from here? Yes. Hi, Tien Tsin, We still have a strong pipeline overall and that includes in the large scale category. Okay, good. And then just on the 4 Point inorganic contribution, I heard that for next Sure. How about on the margin impact there? I think, Casey, you mentioned that there'll be a little bit impact on margin. You'll still be able to expand. Just wanted to make sure I heard that correctly. Thanks. Yes. So yes, we wanted so what I did say is that we do expect inorganic contribution next year about 4% and we Our line of sight now is about $4,000,000,000 of capital spend next year, 2022, but we expect modest margin expansion To continue in 2022. Okay. Very good. Appreciate that guys. Well done. Great. Thank you. Great, Tianjin. Okay. In closing, we really appreciate everyone joining us today. We believe that we are unique because of both what we do and how we do it. And we're a company That as I've shared before, creates value and leads with values. I want to thank all of our people and our leaders for what you're doing every day. And finally, I want to thank all of our shareholders for your continued trust and support. We'll make sure to earn it every day. Be well. September 23. You may access the AT and T replay system at any time by dialing 1-eight 66 207-1041, ending access code 1334,620. International participants may dial 4029700847. Those numbers again are 1-eight sixty six-two zero seven-ten forty one and four zero two 9,700,847 with access code 13,340,620. That does conclude our conference for today. We thank you for your participation and for using AT and T conferencing service. You may now disconnect.