Accenture plc - Class A (ACN) — Q1 2022 Earnings Call Transcript

Thank you, operator, and thanks, everyone, for joining us today on our first quarter fiscal 2022 earnings announcement. As the operator just mentioned, I am Angie Park, Managing Director and 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 the first quarter. Julie will then provide a brief update on our market positioning, before KC provides our business outlook for the second 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 will 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 metrics, 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. As always, Accenture assumes no obligation to update the information presented on this conference call. Now, let me turn the call over to Julie.

Thank you, Angie, and thank you everyone for joining us. I would like to start by thanking our 674,000 people around the world for your extraordinary work and commitment to our clients. Our results again this quarter reflect how you are living our purpose every day to deliver on the promise of technology and human ingenuity. As more and more companies embrace compressed transformation, our clients are turning to us as their trusted partner, as reflected in our outstanding growth of 27% this quarter. We added 15 new diamond clients bringing the total to 244. Diamond clients are our largest relationships. And to give some context, we added 13 diamonds in all of FY '21. We also had record bookings of $16.8 billion, a 30% growth year-over-year with 20 clients with bookings over $100 million. And we expanded operating margin by 20 basis points in Q1 with adjusted EPS growth of 28%. While we continue to invest in our business and people, including $1.7 billion in acquisitions, and in just the first quarter, we invested $250 million in learning for our people, with 8.6 million training hours for approximately 14 hours per person. The extraordinary demand we see in the market reflects the imperative of digital transformation. Companies are making critical decisions about who will be their strategic partners. And they are selecting us because of our talented people, our deep industry and technology capabilities, and our commitment to both create value and lead with value. We predicted back in 2013 that every business would be a digital business. And we have executed a clear strategy to rotate our business to anticipate and be ready to serve our clients. And when the pandemic hit, we were ready with capabilities that scaled, reflected in 70% of our revenue at that time being from digital, cloud and security, with strong relationships with the world's leading technology companies. This in some cases goes back decades, with a focus on growing our people through learning, allowing us to rapidly re-skill, with an unwavering commitment to inclusion and diversity and equality and caring for our people professionally and personally, making us a talent magnet in a tight labor market, adding 50,000 talented individuals in Q1. And it is our breadth of capabilities across strategy and consulting, interactive technology and operations, which is unique in our industry that allows us to work side by side with our clients to deliver results. And we believe our goal to create 360-degree value for our clients, people, shareholders, partners and communities is an essential part of our success. Certainly our commitment to creating vibrant career paths for our people is an important part of this value and we just completed our annual promotion process. I want to congratulate our 1,030 new promotions to Managing Director, 143 new appointments to Senior Managing Directors and the more than 90,000 people we promoted around the world in Q1 overall. Today we launched our 360 value reporting experience, a new way to show our progress and the value we create in all directions for all of our stakeholders. More on that later. KC, over to you.

Thank you, Julie. Happy Holidays to all of you, and thanks for taking the time to join us on today's call. We were very pleased with our overall results in the first quarter, which exceeded our expectations, setting new bookings records at $16.8 billion, with consulting bookings exceeding the previous record by more than $1 billion. Our results reflected strong double-digit revenue growth across all dimensions of our business, all markets, services and industry groups. And we saw improved pricing in many parts of our business. Based on the strength of our first quarter results and the demand we see in the market, we are significantly increasing our full year revenue and EPS outlook. Now let me summarize a few of the highlights of the quarter. Revenues grew 27% in local currency, increasing more than $3.2 billion over Q1 last year, and more than $600 million above our guided range, with broad-based over delivery across all markets, services and industries with all 13 industry groups growing double digits. We continue to extend our leadership position with growth we estimate to be more than 5x the market which refers to our basket of publicly traded companies. Operating margin of 16.3% for the quarter, an increase with an increase of 20 basis points. We continue to drive margin expansion while making significant investments in our people, in our business, including acquisitions. We delivered very strong EPS of $2.78, up 28% over adjusted fiscal '21 results. Finally, we delivered free cash flow of $349 million and return $1.5 billion to shareholders through repurchases and dividends. We also invested approximately $1.7 billion in acquisitions, and we continue to expect to invest approximately $4 billion in acquisitions this fiscal year. With those high-level comments, let me turn to some of the details, starting with new bookings. New bookings were record at $16.8 billion for the quarter, representing 30% growth in U.S dollars, and were $800 million higher than our previous record. With an overall book-to-bill of 1.1. Consulting bookings were record at $9.4 billion with a book-to-bill of 1.1. Outsourcing bookings were $7.4 billion with a book-to-bill of 1.1. We were very pleased with our bookings this quarter, which reflected 20 clients with bookings over $100 million. All of our service dimensions, strategy consulting, technology services and operations, as well as our geographic markets delivered strong double-digit bookings growth in U.S dollars. Turning now to revenues. Revenues for the quarter were $15 billion, a 27% increase in U.S dollars and in local currency. Consulting revenues for the quarter were $8.4 billion, up 33% in U.S dollars and 32% in local currency. Outsourcing revenues were $6.6 billion, up 21% U.S dollars and in local currency. Taking a closer look at our service dimension, strategy and consulting, technology services and operations all grew very strong double digits. Turning to our geographic markets. In North America, revenue growth was 26% 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 28% local currency, led by double-digit growth in consumer goods, retail and travel services, industrial and banking and capital markets. Looking closer to countries, Europe was driven by double-digit growth in Germany, U.K., France and Italy. In growth markets, we delivered 30% revenue growth in local currency, driven 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 Australia. Moving down the income statement. Gross margin for the quarter was 32.9%, compared with 33.1% for the same period last year. Sales and marketing expense for the quarter was 9.7% compared with 10.4% for the first quarter last year. General and administrative expenses were 6.9% compared to 6.6% for the same quarter last year. Operating income was $2.4 billion in the first quarter, reflecting a 16.3% operating margin, up 20 basis points compared with Q1 last year. Before I continue, as a reminder, we recognized an investment gain in Q1 last year, which impacted our tax rates and increased EPS by $0.15. The following comparisons exclude these impacts and reflect adjusted results. Our effective tax rate for the quarter was 24.4% compared with an adjusted effective tax rate of 23.7% for the first quarter last year. Diluted earnings per share were $2.78 compared with adjusted diluted EPS of $2.17 in the first quarter last year. Days service outstanding were 42 days, compared to 38 days last quarter and 38 days in the first quarter of last year. Free cash flow for the quarter was $349 million, resulting from cash generated by operating activities of $531 million, net of property and equipment additions of $182 million. Our cash balance at November 30 was $5.6 billion compared with $8.2 billion at August 31. With regards to our ongoing objective to return cash to shareholders, in the first quarter, we repurchased or redeemed 2.4 million shares for $845 million at an average price of $346.19 per share. At November 30, we had approximately $5.6 billion of share repurchase authority remaining. Also in November, we paid a quarterly cash dividend of $0.97 per share for a total of $613 million. This represents a 10% increase over last year. And our Board of Directors declared a quarterly cash dividend of $0.97 per share to be paid on February 15, a 10% increase over last year. So in summary, we are very pleased with our Q1 results and we are off to a very strong start in FY '22. Now, let me turn it back to Julie.

Thank you, KC. Starting with the demand environment, as we expected across industries and the globe, technology continues to be the single biggest driver of change, accelerating, disrupting and creating new opportunities. More companies are embracing compressed transformation underpinned by cloud and digital and are moving to build their digital core and use technology to transform how they operate and to find new ways to compete and grow as you would expect for 27% revenue growth. We are seeing broad-based demand across all markets, services and industries with double-digit growth across all our strategic growth priorities, including Applied Intelligence, Cloud, Industry X, Interactive, Intelligent Operations, Intelligent Platform Services, Security and Transformational Change Management. Let me bring this demand to life. First, compressed transformation is occurring across the globe and the key enabler is the cloud across the continuum from public to hybrid to increasingly the edge, and the move to leading SaaS platforms along with the convergence of cloud and data. For example, we are working with a leading global supplier of tires and mobility solutions to migrate to the cloud, modernize its IT platforms, use data to accelerate growth and value and shift to a digital supply chain. We created a state-of-the-art system to track inventory, sales, warranty information and returns, all in the cloud, all in real time and have already helped to increase customer satisfaction by 35% with improved cost optimization and increased revenue up next. We're also helping Mount Sinai Health System, New York City's largest academic medical system transform, modernize and increase its resilience by migrating its clinical systems, non-clinical systems and clinical data to a stable, secure cloud-based infrastructure to proactively detect and prevent threats, adapt to business and regulatory changes, together with a potential to save millions over the next 5 years, savings that can be reinvested to fund strategic innovative programs and help rescale teams. Our deep industry expertise is helping companies find new solutions and paths to growth and helping their customers. For example, we are collaborating with Opay, a leading Finnish Financial Group to use automation, advanced analytics and other emerging technologies to increase business agility, reduce cost, and deliver enhanced customer and employee experiences. Opay will adopt the Intelligent Automation Platform, Accenture myWizard to enable the company to extract greater value from its technology investments. We are working with TUGA, a leading utilities provider in Germany to create and operate a game-changing meter-to-cash IT platform in the cloud. It will help reduce operating costs by up to 40%, accelerate time to market and free up resources for energy transition and innovations like smart metering, helping customers make environmentally conscious decisions and energy providers stay responsive and reliable. And as we talked about last quarter, our Sustainability Services are focused on helping our clients across industries move from commitment to action at scale. We see these services as critical to our clients' agendas. I'm pleased to announce that we have signed an agreement to acquire Zestgroup, a Dutch sustainability services company with 140 employees that specializes in energy transition services and sourcing renewables and other clean energy sources. We look forward to welcoming them and working together to help clients move at speed to achieve net-zero carbon. We continue to help our clients to enter the next digital frontier of Industry X. We're excited to have completed the acquisition of umlaut and are seeing the power of our combination already. Together we're working with a global technology leader to transform from a traditional engineering platform to a more agile model-based engineering platform that uses simulation and analysis from design and development all the way through the product lifecycle. We were also working with an American wireless operator to help improve daily operations and transform their network security by combining our deep security risk assessment and communications industry skills. Of course, growth is at the heart of every client's agenda and Interactive is helping our clients capture new growth with their customers with our unique combination of creativity, technology, data, AI and industry expertise. For example, we are applying our digital global capabilities to help Capri Holdings Limited, a global fashion luxury group consisting of the iconic brands Versace, Jimmy Choo and Michael Kors, translate its rich in-store luxury shopping experience to a digital experience that aligns with shifting customer behaviors and accelerates sustainable growth. As a strategic partner with Volkswagen Group, a German motor vehicle manufacturer, we're helping Audi and VW to pave the way for sustainable growth through precise continuous commerce and rich experiences along the entire car buying journey. We are combining the power of AI and predictive analytics to deliver the right experiences at the right time to accelerate revenue growth through an expanded digital commerce ecosystem. We're also working with VLI, a Brazilian logistics solutions company and Trato to provide a digital one-stop shop for self-employed truckers to enhance their growth, improve logistics by offering options for more profitable freight products as well as provide them access to critical services such as insurance, loans and health care, all by combining data analytics and AI. We see an increasing demand to create the platforms that power the digital products and experiences our clients seek for their customers. We're helping CLO, a leader in electronic payments in Latin America become more competitive by migrating to the cloud, which will accelerate new product development and enable cutting-edge technologies. This will make it easier to launch innovative products, reduce time to market by two-thirds and lower costs, all while enhancing their customer experience. And of course, security is critical to all our clients. We were proud to be selected by the Department of Homeland Security's Cybersecurity and Infrastructure Security Agency in the U.S., America's risk advisor defending against today's threats, with advanced cyber services to help the Department of Homeland Security protect federal, civilian and executive branch systems against cyber attacks like ransomware, botnets and malware campaigns. Even as companies undergo compressed transformation, exponential technology changes continue. We are investing to anticipate the future and we are working with our clients to innovate and take advantage of emerging technologies to compete and win. Our R&D is powered by Accenture Labs and Ventures and extends across every part of our business so that we can quickly translate research into real results for our clients. For example, we are working with ESPN to explore how emerging technologies can enable new ways for fans to experience sports at the ESPN Edge Innovation Center, leveraging the years of early investments we've made in extended reality. We've been a key participant in shaping the innovation in enterprise, blockchain technologies across the globe, with applications in financial markets, supply chain and digital identity, which now are creating value for our clients. From partnering with the Digital Dollar Foundation to explore a U.S. central bank digital currency to working with Hong Kong Exchanges and Clearing Limited to build a new integrated settlement platform using digital asset modeling language, Smart Contract. And while the metaverse has recently burst into the public eye, we've been an early innovator in applying the technology. In fact, we often innovate on cutting-edge technologies by deploying them at Accenture first. We are proud to have the largest enterprise metaverse to what we call the Nth Floor and are deploying over 60,000 virtual reality headsets and have created one Accenture Park, a virtual campus for onboarding and immersive learning, including meeting rooms and collaborative experiences. Our VR environments provide our people with a human connection and learning experiences in an immersive digital world. We are also working with clients to help explore and shape their early forays into the metaverse through new digital experiences enabled by virtual reality and responding to their interests in new products enabled by NFTs or non-fungible tokens, new ways to conduct commerce as the metaverse takes shape. Many of these client examples reflect our goal to create 360-degree value. This goal reflects our growth strategy, our purpose, our core values, and our culture of shared success. It is also how we operate Accenture and we measure our success by how well we are achieving this goal for all our stakeholders. And today, we are proud to present our new 360-degree value reporting experience, a new way to share our progress, which is available on our website. With this comprehensive digital tool, you'll find all our reporting and data in one place, measuring how we're doing. We've expanded our ESG reporting with three additional ESG frameworks, the Sustainability Accounting Standards Board, SASB, the Task Force on Climate-related Financial Disclosures, TCFD and the World Economic Forum International Business Council WEF, IBC metrics, while continuing to report against the Global Reporting Initiative GRI standards, the UNGC 10 principles and the Carbon Disclosure Project, CDP because we believe that transparency builds trust and helps us all make more progress. Back to you, KC.

Thanks, Julie. Now, let me turn to our business outlook. For the second quarter fiscal '22, we expect revenues to be in the range of $14.3 billion to $14.75 billion. This assumes the impact of FX will be about negative 4% compared to the second quarter of fiscal '21 and reflects an estimated 22% to 26% growth in local currency. For the full fiscal year '22, based on how the rates have been trending over the last few weeks, we now expect the impact of FX on a result in U.S. dollars will be approximately negative 3% compared to fiscal '21. For the full fiscal '22, we now expect our revenue to be in the range of 19% to 22% growth in local currency over fiscal '21, which continued to assume an inorganic contribution of 5%. For operating margin, we continue to expect fiscal year '22 to be 15.2% to 15.4%, a 10 to 30 basis point expansion over fiscal '21 results. We continue to expect our annual effective tax rate to be in the range of 23% to 25%. This compares to an adjusted effective tax rate of 23.1% in fiscal '21. For earnings per share, we now expect our full-year diluted EPS for fiscal '22 to be in the range of $10.32 to $10.60 or 17% to 20% growth over adjusted fiscal '21 results. For the full fiscal '22, we now expect operating cash flow to be in the range of $8.4 billion to $8.9 billion, property and equipment additions to be approximately $700 million and free cash flow to be in the range of $7.7 billion to $8.2 billion. Our free cash flow guidance continues to reflect a very strong free cash flow to net income ratio of 1.1 to 1.2. Finally, we continue to expect to return at least $6.3 billion through dividends and share repurchases as we remain committed to returning a substantial portion of cash to our shareholders. With that, let's open it up, so we can take your questions. Angie?

Thanks, KC. I would ask that you each keep to one question and a follow-up to allow as many participants as possible to ask the question. Operator, would you provide instructions for those on the call?

Thank you very much. Yes, there has been truly remarkable growth here. I think this is the largest growth we have seen. I have to ask what surprised you regarding the compressed transformation and more on …

Hi, I think we were having a little trouble hearing you, but I think I got it. You want to know what drove our over delivery of $600 million?

Good morning. I want to start by saying that our revenue performance this quarter improved across the board. We experienced strong growth in all markets, industries, and services. This positive trend begins with our bookings, which also saw broad-based over delivery. Notably, we had 20 clients with bookings exceeding $100 million, reflecting growth from larger deals to midsized and smaller transactions. This growth greatly contributed to our revenue increase. Furthermore, we were able to fulfill this heightened demand thanks to our capable team prepared to handle the additional workload stemming from our bookings. Overall, we are very pleased with the strong performance in the first quarter, which positions us well for the second quarter and significantly contributes to our anticipated full-year revenue growth.

Got it. Thanks, I hope you can hear me okay. My follow-up is for Julie. I've been hearing a lot about the 360 degrees. Does that become a bigger factor in pushing this 360-degree approach?

Yes, that's a great question, Tien-tsin. There are a few things happening here. First, we definitely notice a growing interest from our clients in understanding our stance on sustainability, especially in their requests for proposals. This trend has been evident for at least the past year and is becoming increasingly significant in our RFPs. Additionally, our discussions with clients reveal that they are very focused on sustainability, making it an important topic for them. When we initiated our strategy around 360-degree value over a year ago, it was prompted by our clients' demands. They expressed the need to make substantial progress on these issues. A key challenge is transitioning from commitment to action, and clients prefer to collaborate with companies that share their commitment to sustainability. For instance, they value the fact that 50% of our centers worldwide utilize renewable energy. They also appreciate our efforts in developing green IT software, which will lead to more sustainable software practices in the future. This focus on sustainability is clear both formally and informally, which underscores the relevance of our sustainability services, as we discussed today.

That's excellent. Thank you, guys.

Thanks.

Thanks.

Hi, good morning. Thank you. So you often talk about the market share gains. I'm curious if you've seen an inflection in win rates over the last few quarters, or has there been a significant uptick in overall demand in the market with consistent win rates that are driving this level of growth?

Good morning, Bryan. It's the latter. I want to start by saying that we have observed a very consistent win rate. To revisit what we discussed in the fourth quarter, we felt optimistic about our pipeline as we entered the year. Even during a typically slower quarter, we saw strong bookings for the first quarter, which you noticed reflected in our results. Our bookings this quarter reached record levels, and despite that, we remain confident in our pipeline across all markets and services.

Okay. And then my follow-up, so when we think about headcount progression, it would seem you're on a path to hit a million people here over the next 3 years or so. So as you've gotten larger, can you talk about what you've had to do differently to enable the strong execution across so many global resources? And just how are you thinking about what you were going to need to do more of as you get even larger?

That’s a great question, Bryan. Let me address it. There are three key areas to consider. First, it's about how we manage the business. If we go back to March 1, 2020, when we introduced our next-generation growth model, one of the main reasons for our reorganization was to focus on different geographies to help us scale. This restructuring has been beneficial since we operate fundamentally as a people-focused business. While we have many assets, being close to our clients and workforce is essential. This change has enabled our current growth and improved our agility. For instance, we set this in motion and launched Accenture Cloud just four months later, which has proven very successful. Simplifying our structure has contributed to this agility as well. The second aspect to highlight is our emphasis on employee experience. One of our core leadership principles is to genuinely care for our people both personally and professionally. This focus is crucial for our scaling efforts and cultural development. Our attrition rates reflect this, especially at lower levels in India, while our attrition at the executive level is significantly lower, which we believe is a direct result of prioritizing our people. Finally, there's our culture. We've mentioned the metaverse and our recent launches, which are part of how we foster our culture. We're always innovating. In an environment where people have many physical interactions, we've created immersive experiences that connect individuals and build relationships. Thus, being strategic about managing our workforce while maintaining close connections with our clients and focusing on leadership development, alongside continuous innovation to enhance connectivity and culture, is critical for us as we scale.

Thank you.

Okay.

Hi, good morning. Thank you for taking my question. I have a couple of macro questions. Can you explain how inflation is impacting your business? Specifically, is it benefiting your revenues because you can pass on labor cost inflation to your clients? If so, are there any other factors related to inflation that you want to mention? Thank you.

I'll start by discussing inflation, particularly from the perspective of wage increases. Wage inflation is a significant concern for everyone right now, impacting various industries worldwide, with our clients facing a tight labor market. This means we anticipate ongoing wage increases for specific skills, though this will differ by geography. To address this, we're focusing on pricing strategies to manage our higher labor costs. Additionally, we are pleased with the improved pricing we achieved this quarter, contributing to our record bookings, but we recognize that we have more work ahead. It's important to note that it will take time for these price improvements to reflect in our profit and loss statements, which may lead to some contraction in operating margins in the second quarter. Despite that, we expect to expand margins by 10 to 30 basis points for the entire year. This gives you some insight into how we're navigating these challenges, and now I'll turn it over to Julie to share her insights and discuss what she's hearing from our clients.

Yes, great. We're all managing different aspects, including wage inflation and product inflation, which vary by industry in terms of their impact. Our clients are being extremely focused on cost efficiencies and growth due to the uncertainty surrounding inflation in 2022. Many industries cannot easily pass on higher prices, and it takes time for improvements to materialize. This focus on efficiency is also driving demand for growth.

Terrific. Thank you. And then just for my follow-up, maybe a follow-up on Tien-tsin's question. So clearly, the level of demand you're seeing is sort of surprising even you guys have a very good handle on it all the time. So if you can just give some color around what your senses about what's happening, like what's happening out in the marketplace. You said it's very broad based across industries across geographies. And so maybe just sort of from a narrative perspective, what's your sense of what's happening differently or differently than you expected even 3 months ago in terms of that's driving dramatic increase in demand? Thank you.

Sure. A significant aspect is the need for speed. We're seeing more companies pursue compressed transformations, eager to tackle more tasks simultaneously and to do so more rapidly. Recently, I had conversations with clients we've been collaborating with on their cloud journeys. One client called me up and said they needed to accelerate their next phase because the pace was tougher than anticipated. As companies engage, they recognize the desire to move even quicker, influenced by the successes of others. I spoke with the CEO of a company where we're implementing a major cloud and data platform, and he acknowledged the limits of speed while expressing a desire for us to expedite the process, realizing the potential benefits of replatforming. This push for change and speed indeed appears to drive demand. We anticipated that this trend of compressed transformation, which has only begun to gain traction in about a third of industries, would continue to grow. Importantly, the initial phase of compressed transformation is merely the beginning. As clients witness the advantages of transitioning to the cloud, they start to recognize additional opportunities. I believe this underscores the acknowledgment of replatforming's value and the competitive need for speed.

Terrific. Thank you and happy holidays.

Happy holidays.

Thanks, guys. Congrats on these numbers. Happy holidays. Maybe a little bit more to follow-up on some of these top line questions. You mentioned the pipeline still remains robust after the very strong Q1 bookings. So how should we be thinking about second quarter bookings growth in both consulting and outsourcing relative to the Q1 levels?

Thanks, Jason, and happy holidays to you too. We are optimistic about our pipeline for the second quarter and the rest of the year. However, bookings can be unpredictable. So, I can't make any firm projections compared to Q1, Jason. Nevertheless, we feel confident about both outsourcing and consulting across all our markets and services.

Okay. Okay, got it. Got it. So we will have to account for some of that lumpiness. And I'm wondering also, if there's been any noticeable change in average project sizes or conversion cycles of backlog into revenue. And then just anything you may want to comment on regarding updated assumptions for consulting and outsourcing revenue growth in full year fiscal '22? Thanks, again.

Sure. So there's really no change, Jason, to anything that we're seeing in duration or in conversion. I mean, it all depends on the mix of the work that we're selling. But every individual type of service, there's no change within those durations or mixes. And then just in terms of what we're seeing for the full year, I'll just comment on the type of work we see. Consulting, strong double digits, even probably stronger than what we saw, obviously, at the beginning of the year. And outsourcing now, a double-digit growth. Yes, it's important to note that our expectations were surpassed across all sizes. Additionally, small deals are also contributing positively to quarter revenue, making it a broad-based performance.

Okay, appreciate all that. Thanks, again, guys.

Sure.

Congratulations on the results and the insights you've shared. I have one question. Could you provide some details on your newer offerings? I'm curious to know which of them are experiencing the most growth right now. Could you also elaborate on the contributions from offerings like Industry X, Cloud, and Automation? Is there a particular new offering that stands out, or can you provide more specific information beyond just saying everything is doing well? Thank you.

Sure. Thanks, Rod. I'll give you a little bit more color, maybe on some of the numbers and hand it over to Julie to add anything she'd like to. But what you'll see is on Cloud, Industry X, Interactive Security, I mean they're all at scale, they're all strong or very strong double-digit growth. And so, there's really not what I would call out individually. Julie also mentioned another other list of our strategic priorities within her commentary at the beginning of the call. So I won't be redundant and go through this again. But Julie is there anything you want to add in terms of additional color?

Well, sure. I mean, so first of all, you just have to remember scale, right. So Accenture Cloud First was a $12 billion business. Our cloud business overall is down $80 billion business, right. So that's what we announced last quarter. And so when cloud is very strong, double-digit growth is obviously adding big dollars, but across each of the strategic priorities. So obviously, it would be a different scale. But, look, you have to look at the cloud, right? Because the cloud is the enabler. Think about it this way, cloud is the enabler, data is the driver and then AI will be the differentiator for our clients. And so you saw many, many of the examples, really bringing these things together, right, so that you've got to get to the cloud, you got to get a handle on your data, right, and then be able to use AI. And we saw that in many of the examples that I gave in the script today. And so the first big step is, of course, replatforming in the cloud, both through migration and SaaS products. So just if you kind of have that mental model, I think it's helpful and then that goes across the organization.

Well explained. Thanks.

Next question.

Good morning, and congrats on these superior results. I'd like to ask about the sustainability of the compressed digital transformation. Can you give us some proof points that you're still in the early innings of this transformation, especially in some of your largest practices like Cloud First and Interactive?

Sure. There are a few key points to consider. We mentioned last quarter that building your digital core is essential. For instance, platforms like Oracle and SAP are currently moving to the cloud, but less than 50% of their installed base has made that transition. The proportion of workloads shifted to the cloud is still around 30% or slightly higher. Technically speaking, there's a lot happening. Our own research indicates that about 10% of companies are considered leaders and are performing significantly better than the bottom 25%. However, this constitutes only a portion of their organizations. They are still engaged in extensive transformation processes. We estimate that around a third of organizations are making significant advancements through compressed transformations, which involve multiple phases. Once a company transitions to the cloud, managing data effectively becomes crucial. We view this as a multi-year journey. Many may suggest that the pandemic has sped up years of transformation into mere months, but that perspective is somewhat misleading. Re-platforming is quite challenging, and gaining control over data is a complex task. Once completed, it can lead to numerous opportunities, but our clients face considerable work ahead, and we are honored to support them through this process.

Thanks for that. Just as a quick follow-up, could you comment on where you are with Industry X in terms of the innings of the growth of this business? I mean, clearly, we've got huge supply chain problems currently. I mean, how long do you think the supply chain problems will last as you look around the globe?

We frequently discuss this with our clients because there are immediate supply chain problems, but also long-term issues such as ports not functioning well in many global markets. There are fundamental changes happening regarding how to build resilience, which has shifted focus from just minimizing costs. Addressing supply chain issues is a multi-year effort. It’s important to remember where we stand; new technologies have really only emerged recently, especially platforms like Blue Yonder Luminate and SAP. These tools are just beginning to gain traction and be implemented. Therefore, the work on digital supply chains is still in its early stages, as is manufacturing. This is why we refer to it as the next frontier. It's a major area of focus, and according to a Gartner survey, a significant majority of directors view it as the largest transformation opportunity. However, we are still in the very early stages of this journey.

Thank you. Happy holidays.

Happy holidays.

Hi. Good morning. Great job here. It's a solid way to wrap up the year. I was just wondering if anyone has asked about travel yet, and if so, I apologize for missing it. But KC, what are your plans regarding travel for fiscal '22 at this point?

Jamie, on travel, it's no change to the assumptions that we had at the beginning of the year. So two components to travel, revenue from reimbursable travel, we don't have that in our guidance at the beginning of the year and there's no travel revenue assumed. And if it changes, we'll let you know. And then in terms of travel, outside of contract travel to clients, we continue to have an uptick in our expenses forecasted for the back half of the year, which again continues to be difficult to accurately estimate.

Thanks for that. Julie or KC, do you have any early insights on the 2022 IT budgets for your clients? Are they increasing and to what degree? Is the pace different compared to last year?

I mean, I would just say that this is kind of when the budgets are getting finalized. So we'll have much more insight next quarter because they get finalized into January. But what we're seeing is, which is reflected in our guidance is continued strong demand.

Right. Operator, we have time for one more question. And then Julie will wrap up the call.

Hi, guys. Happy holidays. The first question I want to ask was, the surprise jump in diamond client adds? I think it was 15 in the quarter, and you did 13 all of last fiscal year. So just trying to get a sense is that something Accenture is specifically doing with the sales force to grab those larger clients? Or is that just a function of the demand environment that people are knocking down your door, even these larger clients that you would think you would already be working with you're not, and they're just continue to add to the number of diamond clients for you guys?

Yes, it's really a function of what we've been talking about, it's compressed transformation, right? It's a function of more clients taking on more change, right, because that's what builds this level of bookings. And we've been talking about that trend, really from the first 6 months after the pandemic, where we had more clients do over $100 million bookings in the first 6 months of that fiscal year. And we continue to see that building as clients recognize how much change they need to do, and that they have to go faster. So that's really what we see is the function.

Got it. Got it. And then KC, when just looking at the numbers on for the revenue growth, obviously a 27% constant currency number for the quarter. And then the guide, I think, for 2Q was above street expectations 22% to 26%. I guess, what does that imply for the back half of the year? Obviously, it would be a much different growth rate in the back half. Is that some conservatism versus just tougher comps? Can you talk about the back half for '22?

What that means for the second half of the year is that it remains very strong, with double-digit growth at both the low and high ends of our guidance range. This indicates strong organic growth in the latter half of the year, along with continued expansion of our business as we transition from the first half of the year.

But nothing specific to call out in terms of any weakness you see in the back half, but it's just a function of how the demand lays out?

Correct.

Got it. Thanks so much, and Happy Holidays again.

Same to you.

Thanks, Bryan. Okay. I think that was our last question. So thank you for joining us on today's call. And thank you again to our really incredible people across the globe. And thanks to all of our shareholders for your continued trust. We work to earn it every day and we really appreciate it. So best wishes to all for a safe, healthy and joyful holiday season.