Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

67K characters. Original on sec.gov · Markdown

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended August 31, 2023, and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended August 31, 2023.

We use the terms “Accenture,” “we,” “our” and “us” in this report to refer to Accenture plc and its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal year, which ends on August 31. For example, a reference to “fiscal 2024” means the 12-month period that will end on August 31, 2024. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.

We use the term “in local currency” so that certain financial results may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of business performance. Financial results “in local currency” are calculated by restating current period activity into U.S. dollars using the comparable prior year period’s foreign currency exchange rates. This approach is used for all results where the functional currency is not the U.S. dollar.

Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our operations, results of operations and other matters that are based on our current expectations, estimates, assumptions and projections. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “aspires,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “positioned,” “outlook,” “goal,” “target,” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. Risks, uncertainties and other factors that might cause such differences, some of which could be material, include but are not limited to those identified below.

Business Risks

Our results of operations have been, and may in the future be, adversely affected by volatile, negative or uncertain economic and political conditions and the effects of these conditions on our clients’ businesses and levels of business activity.
Our business depends on generating and maintaining client demand for our services and solutions, including through the adaptation and expansion of our services and solutions in response to ongoing changes in technology and offerings, and a significant reduction in such demand or an inability to respond to the evolving technological environment could materially affect our results of operations.
If we are unable to match people and their skills with client demand around the world and attract and retain professionals with strong leadership skills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected.
We face legal, reputational and financial risks from any failure to protect client and/or Accenture data from security incidents or cyberattacks.
The markets in which we operate are highly competitive, and we might not be able to compete effectively.
Our ability to attract and retain business and employees may depend on our reputation in the marketplace.
If we do not successfully manage and develop our relationships with key ecosystem partners or if we fail to anticipate and establish new alliances in new technologies, our results of operations could be adversely affected.


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23

Financial Risks

Our profitability could materially suffer if we are unable to obtain favorable pricing for our services and solutions, if we are unable to remain competitive, if our cost-management strategies are unsuccessful or if we experience delivery inefficiencies or fail to satisfy certain agreed-upon targets or specific service levels.
Changes in our level of taxes, as well as audits, investigations and tax proceedings, or changes in tax laws or in their interpretation or enforcement, could have a material adverse effect on our effective tax rate, results of operations, cash flows and financial condition.
Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.
Changes to accounting standards or in the estimates and assumptions we make in connection with the preparation of our consolidated financial statements could adversely affect our financial results.

Operational Risks

As a result of our geographically diverse operations and strategy to continue to grow in key markets around the world, we are more susceptible to certain risks.
If we are unable to manage the organizational challenges associated with our size, we might be unable to achieve our business objectives.
We might not be successful at acquiring, investing in or integrating businesses, entering into joint ventures or divesting businesses.

Legal and Regulatory Risks

Our business could be materially adversely affected if we incur legal liability.
Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, and violation of these regulations could harm our business.
Our work with government clients exposes us to additional risks inherent in the government contracting environment.
If we are unable to protect or enforce our intellectual property rights, or if our services or solutions infringe upon the intellectual property rights of others or we lose our ability to utilize the intellectual property of others, our business could be adversely affected.
We are incorporated in Ireland and Irish law differs from the laws in effect in the United States and might afford less protection to our shareholders. We may also be subject to criticism and negative publicity related to our incorporation in Ireland.

For a more detailed discussion of these factors, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2023. Our forward-looking statements speak only as of the date of this report or as of the date they are made, and we undertake no obligation to update any forward-looking statements.


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24

Overview

Accenture is a leading global professional services company, providing a broad range of services and solutions across Strategy & Consulting, Technology, Operations, Industry X and Song. We serve clients in three geographic markets: North America, EMEA (Europe, Middle East and Africa) and Growth Markets (Asia Pacific and Latin America). We combine our strength in technology and leadership in cloud, data and AI with unmatched industry experience, functional expertise and global delivery capability to help the world’s leading businesses, governments and other organizations build their digital core, optimize their operations, accelerate revenue growth and enhance citizen services—creating tangible value at speed and scale. As announced on June 11, 2024, effective September 1, 2024, our Latin America market unit will move from Growth Markets to North America. With this change, North America will become The Americas market and Growth Markets will become the Asia Pacific market.

Our results of operations are affected by economic conditions, including macroeconomic conditions, the overall inflationary environment and levels of business confidence. There continues to be significant economic and geopolitical uncertainty in many markets around the world, which has impacted and may continue to impact our business. These conditions have slowed the pace and level of client spending, particularly for smaller contracts with a shorter duration and for our consulting services. Clients continue to prioritize large-scale transformations, which convert to revenue over a longer period.

Key Metrics

Key metrics for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 are included below. We have presented operating income, operating margin, effective tax rate and diluted earnings per share on a non-GAAP or “adjusted” basis to exclude the impact of $77 million and $347 million, respectively, in business optimization costs recorded during the third quarter of fiscal 2024 and 2023 and, with respect to effective tax rate and diluted earnings per share, the impact of a $253 million investment gain related to our investment in Duck Creek Technologies recorded during the third quarter of fiscal 2023 as discussed further in our Results of Operations. For additional information regarding business optimization costs, see Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements.”

Revenues of $16.5 billion, a decrease of 1% in U.S. dollars and an increase of 1% in local currency;
New bookings of $21.1 billion, an increase of 22% in U.S. dollars and 26% in local currency;
Operating margin of 16.0%, compared to 14.2% in the third quarter of fiscal 2023; adjusted operating margin was 16.4% compared to 16.3% in the third quarter of fiscal 2023;
Diluted earnings per share of $3.04, a 3% decrease from $3.15 in the third quarter of fiscal 2023; adjusted earnings per share decreased 2% to $3.13 compared to $3.19 in the third quarter of fiscal 2023; and
Cash returned to shareholders of $2.2 billion, including share purchases of $1.4 billion and dividends of $811 million.

Revenues


			Three Months Ended						Percent Increase (Decrease) U.S. Dollars				Percent Increase (Decrease) Local Currency				Percent of Revenues for the Three Months Ended
(in billions of U.S. dollars)			May 31, 2024		May 31, 2023								May 31, 2024		May 31, 2023

Geographic Markets	North America		$	7.8	$	7.7			1	%			1	%			48	%			47	%
EMEA (1)	5.8		5.9				(2)				(2)				35				35
Growth Markets (1)	2.9		3.0				(4)				8				17				18
Total Revenues	$	16.5	$	16.6			(1)	%			1	%			100	%			100	%


Industry Groups	Communications, Media & Technology		$	2.8	$	2.9			(4)	%			(1)	%			17	%			17	%
Financial Services	2.9		3.1				(8)				(5)				18				19
Health & Public Service	3.5		3.3				8				9				21				20
Products	5.0		5.0				—				2				30				30
Resources	2.3		2.3				—				3				14				14
Total Revenues	$	16.5	$	16.6			(1)	%			1	%			100	%			100	%


Type of Work	Consulting		$	8.5	$	8.7			(3)	%			(1)	%			51	%			52	%
Managed Services	8.0		7.9				2				4				49				48
Total Revenues	$	16.5	$	16.6			(1)	%			1	%			100	%			100	%

(1)Effective September 1, 2023, we revised the reporting of our geographic markets for the movement of our Middle East and Africa market units from Growth Markets to Europe, and the Europe market is now referred to as our EMEA (Europe, Middle East and Africa) geographic market. Prior period amounts have been reclassified to conform with the current period presentation.


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25

Revenues for the third quarter of fiscal 2024 decreased 1% in U.S. dollars and increased 1% in local currency compared to the third quarter of fiscal 2023. During the third quarter of fiscal 2024, revenue growth in local currency was very strong in Growth Markets and slight in North America, partially offset by a modest decline in EMEA. We experienced local currency revenue growth that was very strong in Health & Public Service and modest in Resources and Products, partially offset by a decline in Financial Services and a slight decline in Communications, Media & Technology. Revenue growth in local currency was solid in managed services, partially offset by a slight decline in consulting. The business environment is competitive, and we continue to experience lower pricing across the business. We define pricing as contract profitability or margin on the work that we sell.

In our consulting business, revenues for the third quarter of fiscal 2024 decreased 3% in U.S. dollars and 1% in local currency compared to the third quarter of fiscal 2023. The decline in consulting revenue in local currency for the third quarter of fiscal 2024 was driven by a decline in EMEA, partially offset by solid growth in Growth Markets and modest growth in North America. Our consulting revenue continues to be driven by helping our clients accelerate their digital transformation, including moving to the cloud, embedding security across the enterprise and adopting new technologies. In addition, clients continue to be focused on initiatives designed to deliver cost savings and operational efficiency, as well as projects to accelerate growth and improve customer experiences. While we continue to experience demand for these services, we are seeing a slower pace and level of client spending, especially for smaller contracts with a shorter duration.

In our managed services business, revenues for the third quarter of fiscal 2024 increased 2% in U.S. dollars and 4% in local currency compared to the third quarter of fiscal 2023. Managed services revenue growth in local currency for the third quarter of fiscal 2024 was driven by very strong growth in Growth Markets, modest growth in EMEA and slight growth in North America. We continue to experience growing demand to assist clients with application modernization and maintenance, cloud enablement and cybersecurity-as-a-service. In addition, clients continue to be focused on transforming their operations through technology, data and AI, and leveraging our digital platforms and talent to drive productivity and operational cost savings.

As we are a global company, our revenues are denominated in multiple currencies and may be significantly affected by currency exchange rate fluctuations. While a significant portion of our revenues are in U.S. dollars, the majority of our revenues are denominated in other currencies, including the Euro, Japanese yen and U.K. pound. There continues to be volatility in foreign currency exchange rates. Unfavorable fluctuations in foreign currency exchange rates have had and could in the future have a material effect on our financial results. If the U.S. dollar weakens against other currencies, resulting in favorable currency translation, our revenues, revenue growth and results of operations in U.S. dollars may be higher. If the U.S. dollar strengthens against other currencies, resulting in unfavorable currency translation, our revenues, revenue growth and results of operations in U.S. dollars may be lower. The U.S. dollar strengthened against various currencies during the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023, resulting in unfavorable currency translation and U.S. dollar revenue growth that was approximately 2% lower than our revenue growth in local currency. There was minimal currency translation impact for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. Assuming that exchange rates stay within recent ranges for the remainder of fiscal 2024, we estimate that our full fiscal 2024 revenue growth in U.S. dollars will be approximately 0.7% lower than our revenue growth in local currency.

People Metrics



Utilization	Workforce	Annualized Voluntary Attrition
92%	750,000+	14%
compared to 91% in the third quarter of fiscal 2023	compared to approximately 732,000 as of May 31, 2023	compared to 13% in the third quarter of fiscal 2023

Utilization for the third quarter of fiscal 2024 was 92%, compared to 91% in the third quarter of fiscal 2023. We hire to meet current and projected future demand. We proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services and solutions, given that compensation costs are the most significant portion of our operating expenses. Our workforce, the majority of which serves our clients, increased to approximately 750,000 as of May 31, 2024, compared to approximately 732,000 as of May 31, 2023. The year-over-year increase in our workforce reflects people added in connection with acquisitions and hiring for specific skills.

For the third quarter of fiscal 2024, annualized attrition, excluding involuntary terminations, was 14%, up from 13% in the third quarter of fiscal 2023. We evaluate voluntary attrition, adjust levels of new hiring and use involuntary terminations as a means to keep our supply of skills and resources in balance with changes in client demand.


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26

In addition, we adjust compensation to provide market relevant pay based on the skills of our people and locations where we operate. We also consider a variety of factors, including the macroeconomic environment, in making our decisions around pay and benefits. We strive to adjust pricing as well as drive cost and delivery efficiencies, such as changing the mix of people and utilizing technology, to reduce the impact of compensation increases on our margin and contract profitability.

Our ability to grow our revenues and maintain or increase our margin could be adversely affected if we are unable to: match people and skills with the types or amounts of services and solutions clients are demanding; recover or offset increases in compensation; deploy our employees globally on a timely basis; manage attrition; and/or effectively assimilate new employees.

New Bookings


	Three Months Ended				Percent Increase (Decrease) U.S. Dollars		Percent Increase (Decrease) Local Currency			Nine Months Ended				Percent Increase (Decrease) U.S. Dollars		Percent Increase (Decrease) Local Currency
(in billions of U.S. dollars)	May 31, 2024		May 31, 2023				May 31, 2024		May 31, 2023
Consulting	$	9.3	$	8.9	4	%	8	%		$	28.4	$	27.7	3	%	4	%
Managed Services	11.8		8.3		42		46			32.7		27.9		17		18
Total New Bookings	$	21.1	$	17.2	22	%	26	%		$	61.1	$	55.6	10	%	11	%

We provide information regarding our new bookings, which include new contracts, including those acquired through acquisitions, as well as renewals, extensions and changes to existing contracts, because we believe doing so provides useful trend information regarding changes in the volume of our new business over time. New bookings can vary significantly quarter to quarter depending in part on the timing of the signing of a small number of large managed services contracts. The types of services and solutions clients are demanding and the pace and level of their spending may impact the conversion of new bookings to revenues. For example, managed services bookings, which are typically for multi-year contracts, generally convert to revenue over a longer period of time compared to consulting bookings.

Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. New bookings involve estimates and judgments. There are no third-party standards or requirements governing the calculation of bookings. We do not update our new bookings for material subsequent terminations or reductions related to bookings originally recorded in prior fiscal years. New bookings are recorded using then-existing foreign currency exchange rates and are not subsequently adjusted for foreign currency exchange rate fluctuations.

The majority of our contracts are terminable by the client on short notice with little or no termination penalties, and some without notice. Only the non-cancelable portion of these contracts is included in our remaining performance obligations disclosed in Note 2 (Revenues) to our Consolidated Financial Statements under Item 1, “Financial Statements.” Accordingly, a significant portion of what we consider contract bookings is not included in our remaining performance obligations.


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27

Results of Operations for the Three and Nine Months Ended May 31, 2024 Compared to the Three and Nine Months Ended May 31, 2023

Revenues

Revenues by geographic market, industry group and type of work are as follows:


	Three Months Ended				Percent Increase (Decrease) U.S. Dollars		Percent Increase (Decrease) Local Currency			Nine Months Ended				Percent Increase (Decrease) U.S. Dollars		Percent Increase (Decrease) Local Currency
(in millions of U.S. dollars)	May 31, 2024		May 31, 2023				May 31, 2024		May 31, 2023
Geographic Markets
North America	$	7,834	$	7,721	1	%	1	%		$	22,774	$	22,742	—	%	—	%
EMEA (1)	5,777		5,872		(2)		(2)			17,179		16,740		3		(1)
Growth Markets (1)	2,856		2,972		(4)		8			8,538		8,645		(1)		6
Total	$	16,467	$	16,565	(1)	%	1	%		$	48,491	$	48,127	1	%	1	%
Industry Groups
Communications, Media & Technology	$	2,763	$	2,880	(4)	%	(1)	%		$	8,087	$	8,745	(8)	%	(6)	%
Financial Services	2,895		3,138		(8)		(5)			8,737		9,104		(4)		(4)
Health & Public Service	3,515		3,266		8		9			10,227		9,290		10		10
Products	4,983		4,968		—		2			14,605		14,353		2		1
Resources	2,310		2,311		—		3			6,835		6,634		3		4
Total	$	16,467	$	16,565	(1)	%	1	%		$	48,491	$	48,127	1	%	1	%
Type of Work
Consulting	$	8,457	$	8,693	(3)	%	(1)	%		$	24,935	$	25,416	(2)	%	(2)	%
Managed Services	8,010		7,872		2		4			23,556		22,710		4		4
Total	$	16,467	$	16,565	(1)	%	1	%		$	48,491	$	48,127	1	%	1	%

Amounts in table may not total due to rounding.

Geographic Markets

The following revenues commentary discusses the primary drivers of local currency revenue changes by geographic market for the three and nine months ended May 31, 2024 compared to the three and nine months ended May 31, 2023:

North America

Three Months.** Revenues increased 1% in local currency, led by growth in Public Service, partially offset by a decline in Banking & Capital Markets. Revenue growth was driven by the United States.
Nine Months.** Revenues were flat in local currency, as growth in Public Service was offset by declines in Banking & Capital Markets, Software & Platforms, and Communications & Media.

EMEA

Three Months.** Revenues decreased 2% in local currency, due to declines in Banking & Capital Markets and Communications & Media, partially offset by growth in Public Service. The decline in revenues was driven by France, partially offset by revenue growth in Italy.
Nine Months.** Revenues decreased 1% in local currency, due to declines in Communications & Media and Banking & Capital Markets, partially offset by growth in Public Service. The decline in revenues was driven by the United Kingdom and France, partially offset by revenue growth in Italy.

Growth Markets

Three Months.** Revenues increased 8% in local currency, led by growth in Banking & Capital Markets and Industrial. Revenue growth was driven by Argentina and Japan, partially offset by a decline in Australia. Argentina revenues grew in local currency primarily due to hyperinflation.


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28

Nine Months.** Revenues increased 6% in local currency, led by growth in Banking & Capital Markets, Chemicals & Natural Resources and Industrial. Revenue growth was driven by Japan and Argentina, partially offset by declines in Australia and Brazil. Argentina revenues grew in local currency due to hyperinflation, but declined slightly in U.S. dollars.

Operating Expenses

Operating expenses for the third quarter of fiscal 2024 decreased $369 million, or 3%, compared to the third quarter of fiscal 2023, and decreased as a percentage of revenues to 84.0% from 85.8% during this period. Operating expenses for the nine months ended May 31, 2024 increased $19 million compared to the nine months ended May 31, 2023, and decreased as a percentage of revenues to 85.1% from 85.7% during this period.

The primary categories of operating expenses include Cost of services, Sales and marketing and General and administrative costs. Cost of services is primarily driven by the cost of people serving our clients, which consists mainly of compensation, subcontractor and other payroll costs, and non-payroll costs such as facilities, technology and travel. Cost of services includes a variety of activities such as: contract delivery; recruiting and training; software development; and integration of acquisitions. Sales and marketing costs are driven primarily by compensation costs for business development activities; marketing- and advertising-related activities; and certain acquisition-related costs. General and administrative costs primarily include costs for people that are non-client-facing, information systems, office space and certain acquisition-related costs.

Operating expenses by category are as follows:


	Three Months Ended										Nine Months Ended
(in millions of U.S. dollars)	May 31, 2024				May 31, 2023				Increase (Decrease)		May 31, 2024				May 31, 2023				Increase (Decrease)
Operating Expenses	$	13,836	84.0	%	$	14,205	85.8	%	$	(369)	$	41,248	85.1	%	$	41,230	85.7	%	$	19
Cost of services	10,968		66.6		11,036		66.6		(67)		32,666		67.4		32,577		67.7		89
Sales and marketing	1,750		10.6		1,739		10.5		12		5,091		10.5		4,852		10.1		239
General and administrative costs	1,040		6.3		1,084		6.5		(44)		3,159		6.5		3,210		6.7		(51)
Business optimization costs	77		0.5		347		2.1		(269)		332		0.7		591		1.2		(259)

Amounts in table may not total due to rounding.

Cost of Services

Cost of services for the third quarter of fiscal 2024 decreased $67 million, or 1%, from the third quarter of fiscal 2023, and remained flat as a percentage of revenues at 66.6% during this period. Gross margin for the third quarter of fiscal 2024 remained flat as a percentage of revenues at 33.4% compared to the third quarter of fiscal 2023 as lower labor costs were offset by higher non-payroll costs, primarily for travel.

Cost of services for the nine months ended May 31, 2024 increased $89 million over the nine months ended May 31, 2023, and decreased as a percentage of revenues to 67.4% from 67.7% during this period. Gross margin for the nine months ended May 31, 2024 increased to 32.6% compared to 32.3% during the nine months ended May 31, 2023. The increase in gross margin was primarily due to lower labor costs, partially offset by higher non-payroll costs, primarily for travel compared to the same period in fiscal 2023.

Sales and Marketing

Sales and marketing expense for the third quarter of fiscal 2024 increased $12 million, or 1%, over the third quarter of fiscal 2023, and increased as a percentage of revenues to 10.6% compared to 10.5% during this period. Sales and marketing expense for the nine months ended May 31, 2024 increased $239 million, or 5%, over the nine months ended May 31, 2023, and increased as a percentage of revenues to 10.5% compared to 10.1% during this period. The increase as a percentage of revenues for the nine months ended May 31, 2024 was due to higher selling and other business development costs compared to the same period in fiscal 2023.

General and Administrative Costs

General and administrative costs for the third quarter of fiscal 2024 decreased $44 million, or 4%, from the third quarter of fiscal 2023, and decreased as a percentage of revenues to 6.3% from 6.5% during this period. General and administrative costs for the nine months ended May 31, 2024 decreased $51 million, or 2%, from the nine months ended May 31, 2023, and decreased as a percentage of revenues to 6.5% from 6.7% during this period.

Business Optimization Costs

During the third quarter of fiscal 2024 and 2023, we recorded business optimization costs of $77 million and $347 million, respectively, primarily for employee severance. During the nine months ended May 31, 2024 and 2023, we recorded business optimization costs of $332 million and $591 million, respectively, primarily for employee severance. For additional information, see Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements.”


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			29

Non-GAAP Financial Measures

We have presented operating income, operating margin, effective tax rate and diluted earnings per share on a non-GAAP or "adjusted" basis excluding the business optimization costs recorded in fiscal 2024 and fiscal 2023, and, with respect to effective tax rate and diluted earnings per share, the impact of an investment gain recorded in fiscal 2023, as we believe doing so facilitates understanding as to the impact of these items and our performance in comparison to the prior periods. While we believe that this non-GAAP financial information is useful in evaluating our operations, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.

Operating Income and Operating Margin

Operating income and operating margin for each of the geographic markets are as follows:


	Three Months Ended										Nine Months Ended
	May 31, 2024				May 31, 2023						May 31, 2024				May 31, 2023
(in millions of U.S. dollars)	Operating Income		Operating Margin		Operating Income		Operating Margin		Increase (Decrease)		Operating Income		Operating Margin		Operating Income		Operating Margin		Increase (Decrease)
North America	$	1,365	17	%	$	1,241	16	%	$	124	$	3,682	16	%	$	3,375	15	%	$	307
EMEA (1)	750		13		670		11		80		2,102		12		2,013		12		90
Growth Markets (1)	516		18		448		15		68		1,458		17		1,509		17		(52)
Total	$	2,631	16.0	%	$	2,359	14.2	%	$	272	$	7,242	14.9	%	$	6,897	14.3	%	$	345

Amounts in table may not total due to rounding.

Operating income for the third quarter of fiscal 2024 increased $272 million, or 12%, compared with the third quarter of fiscal 2023. Operating margin for the third quarter of fiscal 2024 was 16.0%, compared with 14.2% for the third quarter of fiscal 2023. Operating income for the nine months ended May 31, 2024 increased $345 million, or 5%, compared with the nine months ended May 31, 2023. Operating margin for the nine months ended May 31, 2024 was 14.9%, compared with 14.3% for the nine months ended May 31, 2023.

Geographic Markets

We estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during the three and nine months ended May 31, 2024 was similar to that disclosed for revenue for each geographic market. The commentary below provides insight into other factors affecting geographic market performance and operating income, including the impact of foreign currency exchange rates where significant, for the three and nine months ended May 31, 2024 compared with the three and nine months ended May 31, 2023:

North America

Three Months.** Operating income increased primarily due to lower business optimization costs and lower labor costs, partially offset by a decline in consulting contract profitability and higher acquisition-related costs.
Nine Months.** Operating income increased primarily due to lower business optimization costs and lower labor costs, partially offset by a decline in consulting contract profitability and higher acquisition-related costs.

EMEA

Three Months.** Operating income increased primarily due to lower business optimization costs and lower labor costs, partially offset by declines in consulting contract profitability and consulting revenues in local currency.
Nine Months.** Operating income increased primarily due to the positive impact of foreign currency exchange rates which resulted in an increase in U.S. dollar revenues, and lower labor costs, partially offset by declines in consulting revenues in local currency and consulting contract profitability.

Growth Markets

Three Months.** Operating income increased primarily due to lower business optimization costs and revenue growth in local currency, partially offset by the negative impact of foreign currency exchange rates which resulted in a decline in U.S. dollar revenues.
Nine Months.** Operating income decreased as revenue growth in local currency and lower business optimization costs were more than offset by lower contract profitability and the negative impact of foreign currency exchange rates which resulted in a decline in U.S. dollar revenues.


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30

Operating Income and Operating Margin Excluding Business Optimization Costs (Non-GAAP)

The business optimization costs reduced operating margin for the third quarter of fiscal 2024 and 2023 by 40 and 210 basis points, respectively. Adjusted operating margin for the third quarter of fiscal 2024 increased 10 basis points to 16.4% compared with the third quarter of fiscal 2023. The business optimization costs reduced operating margin for the nine months ended May 31, 2024 and 2023 by 70 and 130 basis points, respectively. Adjusted operating margin for the nine months ended May 31, 2024 remained flat at 15.6% compared with the nine months ended May 31, 2023.


	Three Months Ended
	May 31, 2024						May 31, 2023
(in millions of U.S. dollars)	Operating Income (GAAP)		Business Optimization (1)		Operating Income (Non-GAAP)			Operating Margin (Non-GAAP)		Operating Income (GAAP)		Business Optimization (1)		Operating Income (Non-GAAP)		Operating Margin (Non-GAAP)		Increase (Decrease)
North America	$	1,365	$	(4)	$	1,361		17	%	$	1,241	$	96	$	1,338	17	%	$	24
EMEA (2)	750		75		825			14		670		167		838		14		(13)
Growth Markets (2)	516		6		522			18		448		83		531		18		(9)
Total	$	2,631	$	77	$	2,708		16.4	%	$	2,359	$	347	$	2,706	16.3	%	$	2


	Nine Months Ended
	May 31, 2024						May 31, 2023
(in millions of U.S. dollars)	Operating Income (GAAP)		Business Optimization (1)		Operating Income (Non-GAAP)			Operating Margin (Non-GAAP)		Operating Income (GAAP)		Business Optimization (1)		Operating Income (Non-GAAP)		Operating Margin (Non-GAAP)		Increase (Decrease)
North America	$	3,682	$	47	$	3,729		16	%	$	3,375	$	273	$	3,648	16	%	$	81
EMEA (2)	2,102		231		2,334			14		2,013		208		2,221		13		113
Growth Markets (2)	1,458		54		1,512			18		1,509		110		1,619		19		(107)
Total	$	7,242	$	332	$	7,575		15.6	%	$	6,897	$	591	$	7,488	15.6	%	$	86

Amounts in tables may not total due to rounding.

(1)Costs recorded in connection with our business optimization initiatives, primarily for employee severance.

(2)Effective September 1, 2023, we revised the reporting of our geographic markets for the movement of our Middle East and Africa market units from Growth Markets to Europe, and the Europe market is now referred to as our EMEA (Europe, Middle East and Africa) geographic market. Prior period amounts have been reclassified to conform with the current period presentation.

Interest Income

Interest income for the third quarter of fiscal 2024 was $54 million, a decrease of $28 million from the third quarter of fiscal 2023. Interest income for the nine months ended May 31, 2024 was $221 million, an increase of $44 million over the nine months ended May 31, 2023. The decrease for the third quarter of fiscal 2024 was primarily due to lower cash balances compared to the third quarter of fiscal 2023. The increase for the nine months ended May 31, 2024 was primarily due to higher interest rates compared to the nine months ended May 31, 2023.

Other Income (Expense), net

Other income (expense), net primarily consists of foreign currency gains and losses, non-operating components of pension expense, as well as gains and losses associated with our investments. During the three and nine months ended May 31, 2024, Other income (expense), net decreased $221 million and $197 million from the three and nine months ended May 31, 2023, respectively, primarily due to lower gains on investments.

Income Tax Expense

The effective tax rates for the third quarter of fiscal 2024 and 2023 were 25.4% and 22.2%, respectively. The higher effective tax rate for the third quarter of fiscal 2024 was primarily due to the tax impact in the prior year from an investment gain and higher expense from adjustments to prior year tax liabilities. The effective tax rates for the nine months ended May 31, 2024 and 2023 were 22.6% and 22.1%, respectively. The higher effective tax rate for the nine months ended May 31, 2024 was primarily due to the tax impact in the prior year from an investment gain.

Income Tax Expense Excluding Business Optimization Costs and Investment Gain (Non-GAAP)

Excluding the business optimization costs of $77 million and related reduction in tax expense of $24 million, our adjusted effective tax rate was 25.5% for the third quarter of fiscal 2024. Excluding the business optimization costs of $347 million and related reduction in tax expense of $80 million, and the investment gain of $253 million and related tax expense of $9 million, our adjusted effective tax rate was 24.0% for the third quarter of fiscal 2023.


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			31

Excluding the business optimization costs of $332 million and related reduction in tax expense of $86 million, our adjusted effective tax rate was 22.8% for the nine months ended May 31, 2024. Excluding the business optimization costs of $591 million and related reduction in tax expense of $132 million, and the investment gain of $253 million and related tax expense of $9 million, our adjusted effective tax rate was 22.7% for the nine months ended May 31, 2023.

Earnings Per Share

Diluted earnings per share were $3.04 for the third quarter of fiscal 2024, compared with $3.15 for the third quarter of fiscal 2023. Diluted earnings per share were $8.77 for the nine months ended May 31, 2024, compared with $8.62 for the nine months ended May 31, 2023. For information regarding our earnings per share calculations, see Note 3 (Earnings Per Share) to our Consolidated Financial Statements under Item 1, “Financial Statements.”

Earnings Per Share Excluding Business Optimization Costs and Investment Gain (Non-GAAP)

The business optimization costs of $54 million, net of related taxes, decreased diluted earnings per share by $0.08 for the third quarter of fiscal 2024. Adjusted diluted earnings per share were $3.13 for the third quarter of fiscal 2024. The business optimization costs of $267 million, net of related taxes, decreased diluted earnings per share by $0.42 and the investment gain of $244 million, net of related taxes, increased diluted earnings per share by $0.38 for the third quarter of fiscal 2023. Adjusted diluted earnings per share were $3.19 for the third quarter of fiscal 2023.

The business optimization costs of $247 million, net of related taxes, decreased diluted earnings per share by $0.39 for the nine months ended May 31, 2024. Adjusted diluted earnings per share were $9.16 for the nine months ended May 31, 2024. The business optimization costs of $459 million, net of related taxes, decreased diluted earnings per share by $0.72 and the investment gain of $244 million, net of related taxes, increased diluted earnings per share by $0.38 for the nine months ended May 31, 2023. Adjusted diluted earnings per share were $8.96 for the nine months ended May 31, 2023.


	Three Months Ended		Nine Months Ended
May 31, 2024 As Reported	$	3.04	$	8.77
Business optimization costs	0.12		0.52
Tax effect of business optimization costs (1)	(0.04)		(0.13)
May 31, 2024 As Adjusted	$	3.13	$	9.16

May 31, 2023 As Reported	$	3.15	$	8.62
Business optimization costs	0.54		0.93
Gain on an investment	(0.40)		(0.40)
Tax effect of business optimization costs and gain on an investment (1)	(0.11)		(0.19)
May 31, 2023 As Adjusted	$	3.19	$	8.96

Amounts in table may not total due to rounding.

(1)The income tax effect of business optimization costs and gain on an investment include both the current and deferred income tax impact and was calculated by using the relevant tax rate of the country where the adjustments were recorded.

Changes in adjusted diluted earnings per share were due to the following factors:


	Three Months Ended		Nine Months Ended
May 31, 2023 As Adjusted	$	3.19	$	8.96
Non-operating income	—		0.11
Operating results	—		0.10
Lower share count	0.02		0.03
Effective tax rate	(0.07)		(0.01)
Net income attributable to noncontrolling interests	(0.01)		(0.03)
May 31, 2024 As Adjusted	$	3.13	$	9.16


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			32

Liquidity and Capital Resources

As of May 31, 2024, Cash and cash equivalents was $5.5 billion, compared with $9.0 billion as of August 31, 2023.

Cash flows from operating, investing and financing activities, as reflected in our Consolidated Cash Flows Statements, are summarized in the following table:


	Nine Months Ended
(in millions of U.S. dollars)	May 31, 2024		May 31, 2023		Change
Net cash provided by (used in):
Operating activities	$	5,742	$	6,115	$	(373)
Investing activities	(5,515)		(1,255)		(4,259)
Financing activities	(3,635)		(4,165)		530
Effect of exchange rate changes on cash and cash equivalents	(100)		(49)		(51)
Net increase (decrease) in cash and cash equivalents	$	(3,508)	$	646	$	(4,153)

Amounts in table may not total due to rounding.

Operating activities: The $373 million decrease in operating cash flows was primarily due to changes in operating assets and liabilities, partially offset by higher net income.

Investing activities: The $4,259 million increase in cash used was primarily due to higher spending on business acquisitions. For additional information, see Note 5 (Business Combinations) to our Consolidated Financial Statements under Item 1, “Financial Statements.”

Financing activities: The $530 million increase in financing cash flows was primarily due to net proceeds from borrowings, partially offset by increases in the net purchases of shares and cash dividends paid. For additional information, see Note 7 (Shareholders’ Equity) to our Consolidated Financial Statements under Item 1, “Financial Statements.”

We believe that our current and longer-term working capital, investments and other general corporate funding requirements will be satisfied for the next twelve months and thereafter through cash flows from operations and, to the extent necessary, from our borrowing facilities and future financial market activities.

Substantially all of our cash is held in jurisdictions where there are no regulatory restrictions or material tax effects on the free flow of funds. Domestic cash inflows for our Irish parent, principally dividend distributions from lower-tier subsidiaries, have been sufficient to meet our historic cash requirements, and we expect this to continue into the future.

Borrowing Facilities

For information about borrowing facilities, see Note 9 (Borrowings and Indebtedness) to our Consolidated Financial Statements under Item 1, “Financial Statements.”

Share Purchases and Redemptions

The Board of Directors of Accenture plc has authorized funding for our publicly announced open-market share purchase program for acquiring Accenture plc Class A ordinary shares and for purchases and redemptions of Accenture plc Class A ordinary shares and Accenture Canada Holdings Inc. exchangeable shares held by current and former members of Accenture Leadership and their permitted transferees.

Our share purchase activity during the nine months ended May 31, 2024 is as follows:


	Accenture plc Class A Ordinary Shares			Accenture Canada Holdings Inc. Exchangeable Shares
(in millions of U.S. dollars, except share amounts)	Shares	Amount		Shares	Amount
Open-market share purchases (1)	9,753,499	$	3,175	—	$	—
Other share purchase programs	—	—		46,752	15
Other purchases (2)	2,087,331	706		—	—
Total	11,840,830	$	3,881	46,752	$	15

(1)We conduct a publicly announced open-market share purchase program for Accenture plc Class A ordinary shares. These shares are held as treasury shares by Accenture plc and may be utilized to provide for select employee benefits, such as equity awards to our employees.

(2)During the nine months ended May 31, 2024, as authorized under our various employee equity share plans, we acquired Accenture plc Class A ordinary shares primarily via share withholding for payroll tax obligations due from employees and former employees in connection with the delivery of Accenture plc Class A ordinary shares under those plans. These purchases of shares in connection with employee share plans do not affect our aggregate available authorization for our publicly announced open-market share purchase and the other share purchase programs.


Table of Contents
ACCENTURE FORM 10-Q						Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			33

We intend to continue to use a significant portion of cash generated from operations for share repurchases during the remainder of fiscal 2024. The number of shares ultimately repurchased under our open-market share purchase program may vary depending on numerous factors, including, without limitation, share price and other market conditions, our ongoing capital allocation planning, the levels of cash and debt balances, other demands for cash, such as acquisition activity, general economic and/or business conditions, and board and management discretion. Additionally, as these factors may change over the course of the year, the amount of share repurchase activity during any particular period cannot be predicted and may fluctuate from time to time. Share repurchases may be made from time to time through open-market purchases, in respect of purchases and redemptions of Accenture Canada Holdings Inc. exchangeable shares, through the use of Rule 10b5-1 plans and/or by other means. The repurchase program may be accelerated, suspended, delayed or discontinued at any time, without notice.

Off-Balance Sheet Arrangements

In the normal course of business and in conjunction with some client engagements, we have entered into contractual arrangements through which we may be obligated to indemnify clients with respect to certain matters.

To date, we have not been required to make any significant payment under any of the arrangements described above. For further discussion of these transactions, see Note 11 (Commitments and Contingencies) to our Consolidated Financial Statements under Item 1, “Financial Statements.”

Significant Accounting Policies

See Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements.”


Table of Contents
ACCENTURE FORM 10-Q						Item 3. Quantitative and Qualitative Disclosures About Market Risk			34

Previous: Item 1. Financial Statements · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk