Accenture plc 10-Q

Item 1. Financial Statements Consolidated Balance Sheets May 31, 2023 and August 31, 2022 May 31, 2023 August 31, 2022 ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 8,535,446 $ 7,889,833 Short-term investments 4,482 3,973 Receivables and contract assets 12,582,660 11,776,775 Other current assets 2,257,485 1,940,290 Total current assets 23,380,073 21,610,871 NON-CURRENT ASSETS: Contract assets 66,432 46,844 Investments 176,259 317,972 Property and equipment, net 1,534,927 1,659,140 Lease assets 2,743,382 3,018,535 Goodwill 14,461,094 13,133,293 Deferred contract costs 852,188 807,940 Deferred tax assets 4,105,869 4,001,200 Other non-current assets 2,808,051 2,667,595 Total non-current assets 26,748,202 25,652,519 TOTAL ASSETS $ 50,128,275 $ 47,263,390 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Current portion of long-term debt and bank borrowings $ 10,389 $ 9,175 Accounts payable 2,388,474 2,559,485 Deferred revenues 5,101,692 4,478,048 Accrued payroll and related benefits 6,632,448 7,611,794 Income taxes payable 688,525 646,471 Lease liabilities 690,584 707,598 Other accrued liabilities 1,580,416 1,510,925 Total current liabilities 17,092,528 17,523,496 NON-CURRENT LIABILITIES: Long-term debt 43,865 45,893 Deferred revenues 687,098 712,715 Retirement obligation 1,678,405 1,692,152 Deferred tax liabilities 402,984 318,584 Income taxes payable 1,270,733 1,198,139 Lease liabilities 2,351,375 2,563,090 Other non-current liabilities 539,358 462,233 Total non-current liabilities 6,973,818 6,992,806 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Ordinary shares, par value 1.00 euros per share, 40,000 shares authorized and issued as of May 31, 2023 and August 31, 2022 57 57 Class A ordinary shares, par value $ 0.0000225 per share, 20,000,000,000 shares authorized, 664,125,473 and 664,561,282 shares issued as of May 31, 2023 and August 31, 2022, respectively 15 15 Class X ordinary shares, par value $ 0.0000225 per share, 1,000,000,000 shares authorized, 335,238 and 500,837 shares issued and outstanding as of May 31, 2023 and August 31, 2022, respectively — — Restricted share units 2,030,576 2,091,382 Additional paid-in capital 12,637,709 10,679,180 Treasury shares, at cost: Ordinary, 40,000 shares as of May 31, 2023 and August 31, 2022; Class A ordinary, 33,323,829 and 33,393,703 shares as of May 31, 2023 and August 31, 2022, respectively ( 6,127,121 ) ( 6,678,037 ) Retained earnings 18,692,118 18,203,842 Accumulated other comprehensive loss ( 1,900,923 ) ( 2,190,342 ) Total Accenture plc shareholders’ equity 25,332,431 22,106,097 Noncontrolling interests 729,498 640,991 Total shareholders’ equity 26,061,929 22,747,088 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 50,128,275 $ 47,263,390 The accompanying Notes are an integral part of these Consolidated Financial Statements. Table of Contents Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts) ACCENTURE FORM 10-Q 4 Consolidated Income Statements For the Three and Nine Months Ended May 31, 2023 and 2022 (Unaudited) Three Months Ended Nine Months Ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 REVENUES: Revenues $ 16,564,585 $ 16,158,803 $ 48,126,545 $ 46,170,649 OPERATING EXPENSES: Cost of services 11,035,515 10,844,069 32,576,567 31,415,167 Sales and marketing 1,738,621 1,660,919 4,852,207 4,530,158 General and administrative costs 1,084,288 1,050,697 3,209,539 3,126,332 Business optimization costs 346,873 — 591,263 — Total operating expenses 14,205,297 13,555,685 41,229,576 39,071,657 OPERATING INCOME 2,359,288 2,603,118 6,896,969 7,098,992 Interest income 81,818 8,727 176,782 22,046 Interest expense ( 11,208 ) ( 12,050 ) ( 30,122 ) ( 34,449 ) Other income (expense), net 201,783 ( 8,877 ) 136,576 ( 39,089 ) Loss on disposition of Russia business — ( 96,294 ) — ( 96,294 ) INCOME BEFORE INCOME TAXES 2,631,681 2,494,624 7,180,205 6,951,206 Income tax expense 583,346 675,308 1,584,887 1,654,631 NET INCOME 2,048,335 1,819,316 5,595,318 5,296,575 Net income attributable to noncontrolling interests in Accenture Canada Holdings Inc. ( 2,101 ) ( 1,902 ) ( 5,790 ) ( 5,578 ) Net income attributable to noncontrolling interests – other ( 36,238 ) ( 31,339 ) ( 90,934 ) ( 78,956 ) NET INCOME ATTRIBUTABLE TO ACCENTURE PLC $ 2,009,996 $ 1,786,075 $ 5,498,594 $ 5,212,041 Weighted average Class A ordinary shares: Basic 631,535,162 632,749,442 630,826,230 632,969,487 Diluted 638,743,434 641,004,741 638,404,751 643,692,440 Earnings per Class A ordinary share: Basic $ 3.18 $ 2.82 $ 8.72 $ 8.23 Diluted $ 3.15 $ 2.79 $ 8.62 $ 8.11 Cash dividends per share $ 1.12 $ 0.97 $ 3.36 $ 2.91 The accompanying Notes are an integral part of these Consolidated Financial Statements. Table of Contents Consolidated Financial Statements (In thousands of U.S. dollars) ACCENTURE FORM 10-Q 5 Consolidated Statements of Comprehensive Income For the Three and Nine Months Ended May 31, 2023 and 2022 (Unaudited) Three Months Ended Nine Months Ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 NET INCOME $ 2,048,335 $ 1,819,316 $ 5,595,318 $ 5,296,575 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: Foreign currency translation 13,252 ( 231,311 ) 210,045 ( 442,664 ) Defined benefit plans 6,722 10,292 104,941 6,865 Cash flow hedges 23,373 ( 57,642 ) ( 25,567 ) ( 98,850 ) OTHER COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ACCENTURE PLC 43,347 ( 278,661 ) 289,419 ( 534,649 ) Other comprehensive income (loss) attributable to noncontrolling interests 827 ( 4,456 ) 6,165 ( 10,032 ) COMPREHENSIVE INCOME $ 2,092,509 $ 1,536,199 $ 5,890,902 $ 4,751,894 COMPREHENSIVE INCOME ATTRIBUTABLE TO ACCENTURE PLC $ 2,053,343 $ 1,507,414 $ 5,788,013 $ 4,677,392 Comprehensive income attributable to noncontrolling interests 39,166 28,785 102,889 74,502 COMPREHENSIVE INCOME $ 2,092,509 $ 1,536,199 $ 5,890,902 $ 4,751,894 The accompanying Notes are an integral part of these Consolidated Financial Statements. Table of Contents Consolidated Financial Statements (In thousands of U.S. dollars and share amounts) ACCENTURE FORM 10-Q 6 Consolidated Shareholders’ Equity Statement For the Three Months Ended May 31, 2023 (Unaudited) Ordinary Shares Class A Ordinary Shares Class X Ordinary Shares Restricted Share Units Additional Paid-in Capital Treasury Shares Retained Earnings Accumulated Other Comprehensive Loss Total Accenture plc Shareholders’ Equity Noncontrolling Interests Total Shareholders’ Equity $ No. Shares $ No. Shares $ No. Shares $ No. Shares Balance as of February 28, 2023 $ 57 40 $ 15 662,406 $ — 339 $ 1,636,155 $ 12,163,671 $ ( 5,593,010 ) ( 31,181 ) $ 17,500,001 $ ( 1,944,270 ) $ 23,762,619 $ 694,659 $ 24,457,278 Net income 2,009,996 2,009,996 38,339 2,048,335 Other comprehensive income (loss) 43,347 43,347 827 44,174 Purchases of Class A shares 703 ( 787,299 ) ( 2,815 ) ( 786,596 ) ( 703 ) ( 787,299 ) Share-based compensation expense 406,504 66,191 472,695 472,695 Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares ( 4 ) ( 1,638 ) ( 1,638 ) ( 1,638 ) Issuances of Class A shares for employee share programs 1,719 ( 40,094 ) 406,315 253,188 632 ( 82,866 ) 536,543 473 537,016 Dividends 28,011 ( 735,013 ) ( 707,002 ) ( 740 ) ( 707,742 ) Other, net 2,467 2,467 ( 3,357 ) ( 890 ) Balance as of May 31, 2023 $ 57 40 $ 15 664,125 $ — 335 $ 2,030,576 $ 12,637,709 $ ( 6,127,121 ) ( 33,364 ) $ 18,692,118 $ ( 1,900,923 ) $ 25,332,431 $ 729,498 $ 26,061,929 The accompanying Notes are an integral part of these Consolidated Financial Statements. Table of Contents Consolidated Financial Statements (In thousands of U.S. dollars and share amounts) ACCENTURE FORM 10-Q 7 Consolidated Shareholders’ Equity Statement — (continued) For the Three Months Ended May 31, 2022 (Unaudited) Ordinary Shares Class A Ordinary Shares Class X Ordinary Shares Restricted Share Units Additional Paid-in Capital Treasury Shares Retained Earnings Accumulated Other Comprehensive Loss Total Accenture plc Shareholders’ Equity Noncontrolling Interests Total Shareholders’ Equity $ No. Shares $ No. Shares $ No. Shares $ No. Shares Balance as of February 28, 2022 $ 57 40 $ 15 662,417 $ — 504 $ 1,438,596 $ 10,065,790 $ ( 5,297,349 ) ( 29,035 ) $ 16,028,399 $ ( 1,675,485 ) $ 20,560,023 $ 596,956 $ 21,156,979 Net income 1,786,075 1,786,075 33,241 1,819,316 Other comprehensive income (loss) ( 278,661 ) ( 278,661 ) ( 4,456 ) ( 283,117 ) Purchases of Class A shares 925 ( 972,171 ) ( 3,102 ) ( 971,246 ) ( 925 ) ( 972,171 ) Share-based compensation expense 346,666 60,591 407,257 407,257 Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares — — Issuances of Class A shares for employee share programs 1,568 ( 55,313 ) 405,704 147,118 569 497,509 465 497,974 Dividends 23,981 ( 637,116 ) ( 613,135 ) ( 650 ) ( 613,785 ) Other, net 1,272 1,272 ( 2,002 ) ( 730 ) Balance as of May 31, 2022 $ 57 40 $ 15 663,985 $ — 504 $ 1,753,930 $ 10,534,282 $ ( 6,122,402 ) ( 31,568 ) $ 17,177,358 $ ( 1,954,146 ) $ 21,389,094 $ 622,629 $ 22,011,723 The accompanying Notes are an integral part of these Consolidated Financial Statements. Table of Contents Consolidated Financial Statements (In thousands of U.S. dollars and share amounts) ACCENTURE FORM 10-Q 8 Consolidated Shareholders’ Equity Statement — (continued) For the Nine Months Ended May 31, 2023 (Unaudited) Ordinary Shares Class A Ordinary Shares Class X Ordinary Shares Restricted Share Units Additional Paid-in Capital Treasury Shares Retained Earnings Accumulated Other Comprehensive Loss Total Accenture plc Shareholders’ Equity Noncontrolling Interests Total Shareholders’ Equity $ No. Shares $ No. Shares $ No. Shares $ No. Shares Balance as of August 31, 2022 $ 57 40 $ 15 664,561 $ — 501 $ 2,091,382 $ 10,679,180 $ ( 6,678,037 ) ( 33,434 ) $ 18,203,842 $ ( 2,190,342 ) $ 22,106,097 $ 640,991 $ 22,747,088 Net income 5,498,594 5,498,594 96,724 5,595,318 Other comprehensive income (loss) 289,419 289,419 6,165 295,584 Purchases of Class A shares 3,021 ( 3,321,982 ) ( 12,110 ) ( 3,318,961 ) ( 3,021 ) ( 3,321,982 ) Cancellation of treasury shares ( 8,828 ) ( 175,701 ) 2,595,281 8,828 ( 2,419,580 ) — — Share-based compensation expense 1,407,869 122,165 1,530,034 1,530,034 Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares ( 166 ) ( 3,868 ) ( 3,868 ) ( 3,868 ) Issuances of Class A shares for employee share programs 8,392 ( 1,553,088 ) 2,006,131 1,277,617 3,352 ( 387,229 ) 1,343,431 1,206 1,344,637 Dividends 84,413 ( 2,203,509 ) ( 2,119,096 ) ( 2,235 ) ( 2,121,331 ) Other, net 6,781 6,781 ( 10,332 ) ( 3,551 ) Balance as of May 31, 2023 $ 57 40 $ 15 664,125 $ — 335 $ 2,030,576 $ 12,637,709 $ ( 6,127,121 ) ( 33,364 ) $ 18,692,118 $ ( 1,900,923 ) $ 25,332,431 $ 729,498 $ 26,061,929 The accompanying Notes are an integral part of these Consolidated Financial Statements. Table of Contents Consolidated Financial Statements (In thousands of U.S. dollars and share amounts) ACCENTURE FORM 10-Q 9 Consolidated Shareholders’ Equity Statement — (continued) For the Nine Months Ended May 31, 2022 (Unaudited) Ordinary Shares Class A Ordinary Shares Class X Ordinary Shares Restricted Share Units Additional Paid-in Capital Treasury Shares Retained Earnings Accumulated Other Comprehensive Loss Total Accenture plc Shareholders’ Equity Noncontrolling Interests Total Shareholders’ Equity $ No. Shares $ No. Shares $ No. Shares $ No. Shares Balance as of August 31, 2021 $ 57 40 $ 15 656,591 $ — 513 $ 1,750,784 $ 8,617,838 $ ( 3,408,491 ) ( 24,545 ) $ 13,988,748 $ ( 1,419,497 ) $ 19,529,454 $ 567,660 $ 20,097,114 Net income 5,212,041 5,212,041 84,534 5,296,575 Other comprehensive income (loss) ( 534,649 ) ( 534,649 ) ( 10,032 ) ( 544,681 ) Purchases of Class A shares 3,388 ( 3,506,617 ) ( 10,119 ) ( 3,503,229 ) ( 3,388 ) ( 3,506,617 ) Share-based compensation expense 1,210,825 108,730 1,319,555 1,319,555 Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares ( 9 ) ( 4,274 ) ( 4,274 ) ( 4,274 ) Issuances of Class A shares for employee share programs 7,394 ( 1,285,617 ) 1,795,507 792,706 3,096 ( 103,889 ) 1,198,707 1,144 1,199,851 Dividends 77,938 ( 1,919,542 ) ( 1,841,604 ) ( 1,972 ) ( 1,843,576 ) Other, net 13,093 13,093 ( 15,317 ) ( 2,224 ) Balance as of May 31, 2022 $ 57 40 $ 15 663,985 $ — 504 $ 1,753,930 $ 10,534,282 $ ( 6,122,402 ) ( 31,568 ) $ 17,177,358 $ ( 1,954,146 ) $ 21,389,094 $ 622,629 $ 22,011,723 The accompanying Notes are an integral part of these Consolidated Financial Statements. Table of Contents Consolidated Financial Statements (In thousands of U.S. dollars) ACCENTURE FORM 10-Q 10 Consolidated Cash Flows Statements For the Nine Months Ended May 31, 2023 and 2022 (Unaudited) May 31, 2023 May 31, 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,595,318 $ 5,296,575 Adjustments to reconcile Net income to Net cash provided by (used in) operating activities — Depreciation, amortization and other 1,639,804 1,553,311 Share-based compensation expense 1,530,034 1,319,555 Deferred tax expense (benefit) ( 136,237 ) ( 27,784 ) Other, net ( 228,922 ) ( 99,979 ) Change in assets and liabilities, net of acquisitions — Receivables and contract assets, current and non-current ( 410,214 ) ( 2,594,564 ) Other current and non-current assets ( 588,958 ) ( 713,632 ) Accounts payable ( 242,633 ) 142,286 Deferred revenues, current and non-current 381,121 585,497 Accrued payroll and related benefits ( 1,064,577 ) 489,743 Income taxes payable, current and non-current 57,745 360,262 Other current and non-current liabilities ( 417,601 ) ( 560,251 ) Net cash provided by (used in) operating activities 6,114,880 5,751,019 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 347,878 ) ( 540,947 ) Purchases of businesses and investments, net of cash acquired ( 1,334,007 ) ( 2,212,388 ) Proceeds from the sale of businesses and investments, net of cash transferred 418,113 ( 108,099 ) Other investing, net 8,392 9,397 Net cash provided by (used in) investing activities ( 1,255,380 ) ( 2,852,037 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of shares 1,344,637 1,199,851 Purchases of shares ( 3,325,850 ) ( 3,510,891 ) Proceeds from (repayments of) long-term debt, net ( 364 ) ( 11,530 ) Cash dividends paid ( 2,121,331 ) ( 1,843,576 ) Other financing, net ( 62,117 ) ( 43,468 ) Net cash provided by (used in) financing activities ( 4,165,025 ) ( 4,209,614 ) Effect of exchange rate changes on cash and cash equivalents ( 48,862 ) ( 153,974 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 645,613 ( 1,464,606 ) CASH AND CASH EQUIVALENTS, beginning of period 7,889,833 8,168,174 CASH AND CASH EQUIVALENTS, end of period $ 8,535,446 $ 6,703,568 SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid, net $ 1,774,337 $ 1,264,631 The accompanying Notes are an integral part of these Consolidated Financial Statements. Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 11 1. Basis of Presentation The accompanying unaudited interim Consolidated Financial Statements of Accenture plc and its controlled subsidiary companies have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. We use the terms “Accenture,” “we” and “our” in the Notes to Consolidated Financial Statements to refer to Accenture plc and its subsidiaries. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended August 31, 2022 included in our Annual Report on Form 10-K filed with the SEC on October 12, 2022. The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that we may undertake in the future, actual results may differ from those estimates. The Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The results of operations for the three and nine months ended May 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2023. Allowance for Credit Losses—Client Receivables and Contract Assets As of May 31, 2023 and August 31, 2022, the total allowance for credit losses recorded for client receivables and contract assets was $ 26,770 and $ 25,786 , respectively. The change in the allowance is primarily due to immaterial write-offs and changes in gross client receivables and contract assets. Investments All available-for-sale securities and liquid investments with an original maturity greater than three months but less than one year are considered to be Short-term investments. Non-current investments consist of equity securities in publicly-traded and privately-held companies and are accounted for using either the equity or fair value measurement alternative method of accounting (for investments without readily determinable fair values). Our non-current investments are as follows: May 31, 2023 August 31, 2022 Equity method investments $ 22,816 $ 164,164 Investments without readily determinable fair values 153,443 153,808 Total non-current investments $ 176,259 $ 317,972 For investments in which we can exercise significant influence but do not control, we use the equity method of accounting. Equity method investments are initially recorded at cost and our proportionate share of gains and losses of the investee are included as a component of Other income (expense), net. As of August 31, 2022, our equity method investments consisted primarily of an investment in Duck Creek Technologies. On March 30, 2023, Duck Creek Technologies was acquired by Vista Equity Partners for $ 19.00 per share. As part of this transaction, we received proceeds of $ 400,355 and recorded a gain of $ 252,920 in Other income (expense), net during the third quarter of fiscal 2023. Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 12 Depreciation and Amortization As of May 31, 2023 and August 31, 2022, total accumulated depreciation was $ 2,766,344 and $ 2,490,187 , respectively. See table below for a summary of depreciation on fixed assets, deferred transition amortization, intangible assets amortization and operating lease cost for the three and nine months ended May 31, 2023 and 2022, respectively. Three Months Ended Nine Months Ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Depreciation $ 165,053 $ 150,272 $ 446,844 $ 438,937 Amortization - Deferred transition 91,480 68,420 247,080 203,957 Amortization - Intangible assets 101,814 109,855 331,095 328,228 Operating lease cost 240,601 193,209 605,329 576,320 Other 2,151 2,430 9,456 5,869 Total depreciation, amortization and other $ 601,099 $ 524,186 $ 1,639,804 $ 1,553,311 Business Optimization During the second quarter of fiscal 2023, we initiated actions to streamline our operations, transform our non-billable corporate functions and consolidate our office space to reduce costs. We recorded $ 346,873 and $ 591,263 of business optimization costs during the three and nine months ended May 31, 2023 , respectively, primarily for employee severance. Total b usiness optimization costs by reportable operating segment are as follows: Three Months Ended Nine Months Ended May 31, 2023 May 31, 2023 North America $ 96,349 $ 273,329 Europe 166,463 206,840 Growth Markets 84,061 111,094 Total business optimization costs $ 346,873 $ 591,263 We continue to expect to record total business optimization costs of approximately $ 1.5 billion related to these actions, with approximately $ 800 million in fiscal 2023 and $ 700 million in fiscal 2024. This consists of approximately $ 1.2 billion of employee severance and other personnel costs and $ 300 million of costs related to the consolidation of office space. The actual amount and timing of severance and other personnel costs are dependent in part upon local country consultation processes and regulations and may differ from our current expectations and estimates. Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 13 2. Revenues Disaggregation of Revenue See Note 11 (Segment Reporting) to these Consolidated Financial Statements for our disaggregated revenues. Remaining Performance Obligations We had remaining performance obligations of approximately $ 26 billion and $ 24 billion as of May 31, 2023 and August 31, 2022, respectively. Our remaining performance obligations represent the amount of transaction price for which work has not been performed and revenue has not been recognized. The majority of our contracts are terminable by the client on short notice with little or no termination penalties, and some without notice. Under Topic 606, only the non-cancelable portion of these contracts is included in our performance obligations. Additionally, our performance obligations only include variable consideration if we assess it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is resolved. Based on the terms of our contracts, a significant portion of what we consider contract bookings is not included in our remaining performance obligations. We expect to recognize approximately 37 % of our remaining performance obligations as of May 31, 2023 as revenue in fiscal 2023, an additional 35 % in fiscal 2024, and the balance thereafter. Contract Estimates Adjustments in contract estimates related to performance obligations satisfied or partially satisfied in prior periods were immaterial for the three and nine months ended May 31, 2023 and 2022. Contract Balances Deferred transition revenues were $ 687,098 and $ 712,715 as of May 31, 2023 and August 31, 2022, respectively, and are included in Non-current deferred revenues. Costs related to these activities are also deferred and are expensed as the services are provided. Deferred transition costs were $ 852,188 and $ 807,940 as of May 31, 2023 and August 31, 2022, respectively, and are included in Deferred contract costs. Generally, deferred amounts are protected in the event of early termination of the contract and are monitored regularly for impairment. Impairment losses are recorded when projected remaining undiscounted operating cash flows of the related contract are not sufficient to recover the carrying amount of contract assets. The following table provides information about the balances of our Receivables and Contract assets, net of allowance, and Contract liabilities (Deferred revenues): As of May 31, 2023 As of August 31, 2022 Receivables $ 11,005,863 $ 10,484,211 Contract assets (current) 1,576,797 1,292,564 Receivables and contract assets, net of allowance (current) 12,582,660 11,776,775 Contract assets (non-current) 66,432 46,844 Deferred revenues (current) 5,101,692 4,478,048 Deferred revenues (non-current) 687,098 712,715 Changes in the contract asset and liability balances during the nine months ended May 31, 2023 were a result of normal business activity and not materially impacted by any other factors. Revenues recognized during the three and nine months ended May 31, 2023 that were included in Deferred revenues as of February 28, 2023 and August 31, 2022 were $ 2.7 billion and $ 3.7 billion, respectively. Revenues recognized during the three and nine months ended May 31, 2022 that were included in Deferred revenues as of February 28, 2022 and August 31, 2021 were $ 2.5 billion and $ 3.5 billion, respectively. Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 14 3. Earnings Per Share Basic and diluted earnings per share are calculated as follows: Three Months Ended Nine Months Ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Basic earnings per share Net income attributable to Accenture plc $ 2,009,996 $ 1,786,075 $ 5,498,594 $ 5,212,041 Basic weighted average Class A ordinary shares 631,535,162 632,749,442 630,826,230 632,969,487 Basic earnings per share $ 3.18 $ 2.82 $ 8.72 $ 8.23 Diluted earnings per share Net income attributable to Accenture plc $ 2,009,996 $ 1,786,075 $ 5,498,594 $ 5,212,041 Net income attributable to noncontrolling interests in Accenture Canada Holdings Inc. (1) 2,101 1,902 5,790 5,578 Net income for diluted earnings per share calculation $ 2,012,097 $ 1,787,977 $ 5,504,384 $ 5,217,619 Basic weighted average Class A ordinary shares 631,535,162 632,749,442 630,826,230 632,969,487 Class A ordinary shares issuable upon redemption/exchange of noncontrolling interests (1) 660,083 673,775 664,324 677,363 Diluted effect of employee compensation related to Class A ordinary shares 6,505,805 7,513,927 6,830,076 9,834,622 Diluted effect of share purchase plans related to Class A ordinary shares 42,384 67,597 84,121 210,968 Diluted weighted average Class A ordinary shares 638,743,434 641,004,741 638,404,751 643,692,440 Diluted earnings per share $ 3.15 $ 2.79 $ 8.62 $ 8.11 (1) Diluted earnings per share assumes the exchange of all Accenture Canada Holdings Inc. exchangeable shares for Accenture plc Class A ordinary shares on a one-for-one basis. The income effect does not take into account “Net income attributable to noncontrolling interests - other,” since those shares are not redeemable or exchangeable for Accenture plc Class A ordinary shares. Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 15 4. Accumulated Other Comprehensive Loss The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss attributable to Accenture plc: Three Months Ended Nine Months Ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Foreign currency translation Beginning balance $ ( 1,655,527 ) $ ( 1,186,417 ) $ ( 1,852,320 ) $ ( 975,064 ) Foreign currency translation 12,897 ( 235,827 ) 217,607 ( 455,075 ) Income tax benefit (expense) 1,152 110 ( 1,479 ) 2,477 Portion attributable to noncontrolling interests ( 797 ) 4,406 ( 6,083 ) 9,934 Foreign currency translation, net of tax 13,252 ( 231,311 ) 210,045 ( 442,664 ) Ending balance ( 1,642,275 ) ( 1,417,728 ) ( 1,642,275 ) ( 1,417,728 ) Defined benefit plans Beginning balance ( 250,552 ) ( 563,385 ) ( 348,771 ) ( 559,958 ) Reclassifications into net periodic pension and post-retirement expense 8,712 12,579 143,602 7,881 Income tax benefit (expense) ( 1,984 ) ( 2,276 ) ( 38,552 ) ( 1,009 ) Portion attributable to noncontrolling interests ( 6 ) ( 11 ) ( 109 ) ( 7 ) Defined benefit plans, net of tax 6,722 10,292 104,941 6,865 Ending balance ( 243,830 ) ( 553,093 ) ( 243,830 ) ( 553,093 ) Cash flow hedges Beginning balance ( 38,191 ) 74,317 10,749 115,525 Unrealized gain (loss) 25,722 ( 37,978 ) ( 66,994 ) ( 31,924 ) Reclassification adjustments into Cost of services 4,115 ( 27,449 ) 24,721 ( 78,142 ) Income tax benefit (expense) ( 6,440 ) 7,724 16,679 11,111 Portion attributable to noncontrolling interests ( 24 ) 61 27 105 Cash flow hedges, net of tax 23,373 ( 57,642 ) ( 25,567 ) ( 98,850 ) Ending balance (1) ( 14,818 ) 16,675 ( 14,818 ) 16,675 Accumulated other comprehensive loss $ ( 1,900,923 ) $ ( 1,954,146 ) $ ( 1,900,923 ) $ ( 1,954,146 ) (1) As of May 31, 2023, $ 1,761 of net unrealized gains related to derivatives designated as cash flow hedges is expected to be reclassified into Cost of services in the next twelve months. Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 16 5. Business Combinations During the nine months ended May 31, 2023, we completed individually immaterial acquisitions for total consideration of $ 1,315,925 , net of cash acquired. The pro forma effects of these acquisitions on our operations were not material. 6. Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill by reportable operating segment are as follows: August 31, 2022 Additions/ Adjustments Foreign Currency Translation May 31, 2023 North America $ 7,744,582 $ 293,229 $ ( 16,741 ) $ 8,021,070 Europe 4,134,091 452,915 269,623 4,856,629 Growth Markets 1,254,620 366,380 ( 37,605 ) 1,583,395 Total $ 13,133,293 $ 1,112,524 $ 215,277 $ 14,461,094 Goodwill includes immaterial adjustments related to prior period acquisitions. Intangible Assets Our definite-lived intangible assets by major asset class are as follows: August 31, 2022 May 31, 2023 Intangible Asset Class Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer-related $ 2,498,001 $ ( 842,056 ) $ 1,655,945 $ 2,667,461 $ ( 969,779 ) $ 1,697,682 Technology 283,251 ( 96,782 ) 186,469 287,727 ( 127,137 ) 160,590 Patents 126,950 ( 70,745 ) 56,205 124,293 ( 69,930 ) 54,363 Other 62,875 ( 30,686 ) 32,189 66,919 ( 40,471 ) 26,448 Total $ 2,971,077 $ ( 1,040,269 ) $ 1,930,808 $ 3,146,400 $ ( 1,207,317 ) $ 1,939,083 Total amortization related to our intangible assets was $ 101,814 and $ 331,095 for the three and nine months ended May 31, 2023, respectively. Total amortization related to our intangible assets was $ 109,855 and $ 328,228 for the three and nine months ended May 31, 2022, respectively. Estimated future amortization related to intangible assets held as of May 31, 2023 is as follows: Fiscal Year Estimated Amortization Remainder of 2023 $ 107,772 2024 394,822 2025 361,876 2026 312,945 2027 250,085 Thereafter 511,583 Total $ 1,939,083 Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 17 7. Shareholders’ Equity Cancellation of Treasury Shares During the nine months ended May 31, 2023, we cancelled 8,828,496 Accenture plc Class A ordinary shares that were held as treasury shares and had an aggregate cost of $ 2,595,281 . The effect of the cancellation of these treasury shares was recognized in Class A ordinary shares and Additional paid-in capital with the residual recorded in Retained earnings. There was no effect on total shareholders’ equity as a result of this cancellation. Dividends Our dividend activity during the nine months ended May 31, 2023 is as follows: Dividend Per Share Accenture plc Class A Ordinary Shares Accenture Canada Holdings Inc. Exchangeable Shares Total Cash Outlay Dividend Payment Date Record Date Cash Outlay Record Date Cash Outlay November 15, 2022 $ 1.12 October 13, 2022 $ 704,938 October 11, 2022 $ 629 $ 705,567 February 15, 2023 1.12 January 12, 2023 707,156 January 10, 2023 866 708,022 May 15, 2023 1.12 April 13, 2023 707,002 April 11, 2023 740 707,742 Total Dividends $ 2,119,096 $ 2,235 $ 2,121,331 The payment of cash dividends includes the net effect of $ 84,413 of additional restricted stock units being issued as a part of our share plans, which resulted in 297,073 restricted share units being issued. Subsequent Event On June 21, 2023, the Board of Directors of Accenture plc declared a quarterly cash dividend of $ 1.12 per share on our Class A ordinary shares for shareholders of record at the close of business on July 13, 2023 payable on August 15, 2023. Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 18 8. Financial Instruments Derivatives In the normal course of business, we use derivative financial instruments to manage foreign currency exchange rate risk. Our derivative financial instruments consist of deliverable and non-deliverable foreign currency forward contracts. Cash Flow Hedges For a cash flow hedge, the effective portion of the change in estimated fair value of a hedging instrument is recorded in Accumulated other comprehensive loss as a separate component of Shareholders’ Equity and is reclassified into Cost of services in the Consolidated Income Statements during the period in which the hedged transaction is recognized. For information related to derivatives designated as cash flow hedges that were reclassified into Cost of services during the three and nine months ended May 31, 2023 and 2022, as well as those expected to be reclassified into Cost of services in the next 12 months, see Note 4 (Accumulated Other Comprehensive Loss) to these Consolidated Financial Statements. Other Derivatives Realized gains or losses and changes in the estimated fair value of foreign currency forward contracts that have not been designated as hedges were net losses of $ 72,091 and $ 94,351 for the three and nine months ended May 31, 2023, respectively, and net losses of $ 31,285 and $ 67,812 for the three and nine months ended May 31, 2022, respectively. Gains and losses on these contracts are recorded in Other income (expense), net in the Consolidated Income Statements and are offset by gains and losses on the related hedged items. Fair Value of Derivative Instruments The notional and fair values of all derivative instruments are as follows: May 31, 2023 August 31, 2022 Assets Cash Flow Hedges Other current assets $ 56,648 $ 89,867 Other non-current assets 39,624 69,209 Other Derivatives Other current assets 6,986 8,657 Total assets $ 103,258 $ 167,733 Liabilities Cash Flow Hedges Other accrued liabilities $ 54,887 $ 61,156 Other non-current liabilities 25,743 42,537 Other Derivatives Other accrued liabilities 90,903 83,792 Total liabilities $ 171,533 $ 187,485 Total fair value $ ( 68,275 ) $ ( 19,752 ) Total notional value $ 13,373,535 $ 11,095,604 We utilize standard counterparty master agreements containing provisions for the netting of certain foreign currency transaction obligations and for the set-off of certain obligations in the event of an insolvency of one of the parties to the transaction. In the Consolidated Balance Sheets, we record derivative assets and liabilities at gross fair value. The potential effect of netting derivative assets against liabilities under the counterparty master agreements is as follows: May 31, 2023 August 31, 2022 Net derivative assets $ 46,349 $ 140,073 Net derivative liabilities 114,624 159,825 Total fair value $ ( 68,275 ) $ ( 19,752 ) Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 19 9. Income Taxes We apply an estimated annual effective tax rate to our year-to-date operating results to determine the interim provision for income tax expense. In addition, we recognize taxes related to unusual or infrequent items or resulting from a change in judgment regarding a position taken in a prior year as discrete items in the interim period in which the event occurs. Our effective tax rates for the three months ended May 31, 2023 and 2022 were 22.2 % and 27.1 %, respectively. The lower effective tax rate for the three months ended May 31, 2023 was primarily due to lower tax expense from changes in the geographic distribution of earnings, the tax impact from an investment gain and higher benefits from adjustments to prior year tax liabilities. Our effective tax rates for the nine months ended May 31, 2023 and 2022 were 22.1 % and 23.8 %, respectively. The lower effective tax rate for the nine months ended May 31, 2023 was primarily due to lower tax expense from changes in the geographic distribution of earnings, higher benefits from adjustments to prior year tax liabilities and the tax impact from an investment gain, partially offset by lower tax benefits from share-based payments. 10. Commitments and Contingencies Indemnifications and Guarantees In the normal course of business and in conjunction with certain client engagements, we have entered into contractual arrangements through which we may be obligated to indemnify clients with respect to certain matters. As of May 31, 2023 and August 31, 2022, our aggregate potential liability to our clients for expressly limited guarantees involving the performance of third parties was approximately $ 1,750,000 and $ 1,349,000 , respectively, of which all but approximately $ 51,000 and $ 49,000 , respectively, may be recovered from the other third parties if we are obligated to make payments to the indemnified parties as a consequence of a performance default by the other third parties. For arrangements with unspecified limitations, we cannot reasonably estimate the aggregate maximum potential liability, as it is inherently difficult to predict the maximum potential amount of such payments, due to the conditional nature and unique facts of each particular arrangement. As of May 31, 2023 and August 31, 2022, we have issued or provided guarantees in the form of letters of credit and surety bonds of $ 1,239,648 and $ 1,116,298 , respectively, the majority of which support certain contracts that require us to provide them as a guarantee of our performance. These guarantees are typically renewed annually and remain in place until the contractual obligations are satisfied. In general, we would only be liable for these guarantees in the event we defaulted in performing our obligations under each contract, the probability of which we believe is remote. To date, we have not been required to make any significant payment under any of the arrangements described above. We have assessed the current status of performance/payment risk related to arrangements with limited guarantees, warranty obligations, unspecified limitations, indemnification provisions, letters of credit and surety bonds, and believe that any potential payments would be immaterial to the Consolidated Financial Statements, as a whole. Legal Contingencies As of May 31, 2023, we or our present personnel had been named as a defendant in various litigation matters. We and/or our personnel also from time to time are involved in investigations by various regulatory or legal authorities concerning matters arising in the course of our business around the world. Based on the present status of these matters, management believes the range of reasonably possible losses in addition to amounts accrued, net of insurance recoveries, will not have a material effect on our results of operations or financial condition. On July 24, 2019, Accenture was named in a putative class action lawsuit filed by consumers of Marriott International, Inc. (“Marriott”) in the U.S. District Court for the District of Maryland. The complaint alleges negligence by us, and seeks monetary damages, costs and attorneys’ fees and other related relief, relating to a data security incident involving unauthorized access to the reservations database of Starwood Worldwide Resorts, Inc. (“Starwood”), which was acquired by Marriott on September 23, 2016. Since 2009, we have provided certain IT infrastructure outsourcing services to Starwood. On October 27, 2020, the court issued an order largely denying Accenture’s motion to dismiss the claims against us. On May 3, 2022, the court issued an order granting in part the plaintiffs’ motion for class certification, which we are appealing. Oral argument on the appeal was held on May 3, 2023. We continue to believe the lawsuit is without merit and we will vigorously defend it. At present, we do not believe any losses from this matter will have a material effect on our results of operations or financial condition. Table of Contents Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) ACCENTURE FORM 10-Q 20 11. Segment Reporting Our reportable segments are our three geographic markets, which are North America, Europe and Growth Markets. Information regarding reportable segments, industry groups and type of work is as follows: Revenues Three Months Ended Nine Months Ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Geographic Markets North America $ 7,720,903 $ 7,613,629 $ 22,741,597 $ 21,597,880 Europe 5,615,466 5,350,360 15,987,685 15,460,313 Growth Markets 3,228,216 3,194,814 9,397,263 9,112,456 Total Revenues $ 16,564,585 $ 16,158,803 $ 48,126,545 $ 46,170,649 Industry Groups (1) Communications, Media & Technology $ 2,880,187 $ 3,222,525 $ 8,745,192 $ 9,118,790 Financial Services 3,138,181 3,079,418 9,104,444 8,869,296 Health & Public Service 3,266,347 2,917,028 9,289,961 8,333,915 Products 4,968,399 4,806,180 14,352,759 13,797,044 Resources 2,311,471 2,133,652 6,634,189 6,051,604 Total Revenues $ 16,564,585 $ 16,158,803 $ 48,126,545 $ 46,170,649 Type of Work Consulting $ 8,693,030 $ 9,032,484 $ 25,416,160 $ 25,747,095 Managed Services (2) 7,871,555 7,126,319 22,710,385 20,423,554 Total Revenues $ 16,564,585 $ 16,158,803 $ 48,126,545 $ 46,170,649 (1) Effective June 1, 2022, we revised the reporting of our industry groups for the movement of Aerospace & Defense from Communications, Media & Technology to Products. Prior period amounts have been reclassified to conform with the current period presentation. (2) Previously referred to as our outsourcing business. Operating Income Three Months Ended Nine Months Ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Geographic Markets North America $ 1,241,245 $ 1,379,828 $ 3,374,986 $ 3,715,155 Europe 631,547 693,512 1,895,180 1,969,997 Growth Markets 486,496 529,778 1,626,803 1,413,840 Total Operating Income $ 2,359,288 $ 2,603,118 $ 6,896,969 $ 7,098,992 Table of Contents ACCENTURE FORM 10-Q Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 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, 2022, 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, 2022. 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 2023” means the 12-month period that will end on August 31, 2023. 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 lim ited 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. • Our environmental, social and governance (ESG) commitments and disclosures may expose us to reputational risks and legal liability. • 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 22 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, 2022. In addition, the timing and amount of costs related to our business optimization actions and the nature and extent of benefits realized from such actions are subject to uncertainties and other factors, including local country consultation processes and regulations, and may differ from our current expectations and estimates. 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 23 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, Europe and Growth Markets (Asia Pacific, Latin America, Africa and the Middle East). We combine our strength in technology with 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. 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 for smaller contracts with a shorter duration, especially for our consulting services. From an industry perspective, we are also experiencing reduced demand particularly in our Communications, Media & Technology industry group. Key Metrics Key metrics for the third quarter of fiscal 2023 compared to the third quarter of fiscal 2022 are included below. We have presented operating margin and diluted earnings per share on a non-GAAP or “adjusted” basis to exclude the impact of $347 million in business optimization costs and, with respect to diluted earnings per share, the impact of a $253 million investment gain recorded during the third quarter of fiscal 2023. For additional information, see Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements.” • Revenues of $16.6 billion, representing 3% growth in U.S. dollars and 5% growth in local currency; • New bookings of $17.2 billion, an increase of 2% in U.S. dollars and 4% in local currency; • Operating margin of 14.2%, compared to 16.1% in the third quarter of fiscal 2022; adjusted operating margin expanded 20 basis points to 16.3%; • Diluted earnings per share of $3.15, compared to $2.79 in the third quarter of fiscal 2022; adjusted earnings per share increased 14% to $3.19; and • Cash returned to shareholders of $1.5 billion, including share purchases of $789 million and dividends of $708 million. Revenues Three Months Ended Percent Increase (Decrease) U.S. Dollars Percent Increase (Decrease) Local Currency (in billions of U.S. Dollars) May 31, 2023 May 31, 2022 Geographic Markets North America $ 7.7 $ 7.6 1 % 2 % Europe 5.6 5.4 5 7 Growth Markets 3.2 3.2 1 9 Total Revenues $ 16.6 $ 16.2 3 % 5 % Industry Groups (1) Communications, Media & Technology $ 2.9 $ 3.2 (11) % (8) % Financial Services 3.1 3.1 2 5 Health & Public Service 3.3 2.9 12 14 Products 5.0 4.8 3 6 Resources 2.3 2.1 8 12 Total Revenues $ 16.6 $ 16.2 3 % 5 % Type of Work Consulting $ 8.7 $ 9.0 (4) % (1) % Managed Services (2) 7.9 7.1 10 13 Total Revenues $ 16.6 $ 16.2 3 % 5 % Amounts in table may not total due to rounding. (1) Effective June 1, 2022, we revised the reporting of our industry groups for the movement of Aerospace & Defense from Communications, Media & Technology to Products. Prior period amounts have been reclassified to conform with the current period presentation. (2) Previously referred to as our outsourcing business. Table of Contents ACCENTURE FORM 10-Q