Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
Revenues for the second quarter of fiscal 2024 were flat in both U.S. dollars and local currency compared to the second quarter of fiscal 2023. During the second quarter of fiscal 2024, revenue growth in local currency was strong in Growth Markets, while North America was flat and EMEA had a modest decline. We experienced local currency revenue growth that was very strong in Health & Public Service, solid in Resources and flat in Products, offset by declines in Communications, Media & Technology and Financial Services. Revenue growth in local currency was modest in managed services, offset by a modest decline in consulting. The business environment is competitive, and we have been experiencing 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 second quarter of fiscal 2024 decreased 3% in both U.S. dollars and local currency compared to the second quarter of fiscal 2023. The decline in consulting revenue in local currency for the second quarter of fiscal 2024 was driven by a decline in EMEA and a modest decline in North America, partially offset by modest growth in Growth Markets. 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 second quarter of fiscal 2024 increased 3% in both U.S. dollars and local currency compared to the second quarter of fiscal 2023. Managed services revenue growth in local currency for the second quarter of fiscal 2024 was driven by very strong growth in Growth Markets, solid 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 second quarter of fiscal 2024 compared to the second quarter of fiscal 2023, resulting in unfavorable currency translation and U.S. dollar revenue growth that was approximately 0.5% lower than our revenue growth in local currency. The U.S. dollar weakened against various currencies during the six months ended February 29, 2024 compared to the six months ended February 28, 2023, resulting in favorable currency translation and U.S. dollar revenue growth that was approximately 0.5% higher than our revenue growth in local currency. 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 equal to our revenue growth in local currency.
People Metrics
Utilization
Workforce
Annualized Voluntary Attrition
92%
742,000+
13%
compared to 91% in the second quarter of fiscal 2023
compared to approximately 738,000 as of February 28, 2023
compared to 12% in the second quarter of fiscal 2023
Utilization for the second quarter of fiscal 2024 was 92%, compared to 91% in the second 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 742,000 as of February 29, 2024, compared to approximately 738,000 as of February 28, 2023. The year-over-year increase in our workforce reflects people added in connection with acquisitions and hiring for specific skills.
For the second quarter of fiscal 2024, annualized attrition, excluding involuntary terminations, was 13%, up from 12% in the second 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.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
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 Six Months Ended Percent
Increase
(Decrease)
U.S.
Dollars Percent
Increase
(Decrease)
Local
Currency
(in billions of U.S. dollars) February 29, 2024 February 28, 2023 February 29, 2024 February 28, 2023
Consulting $ 10.5 $ 10.7 (1) % (1) % $ 19.1 $ 18.8 2 % 1 %
Managed Services 11.1 11.4 (3) (3) 20.9 19.5 7 6
Total New Bookings $ 21.6 $ 22.1 (2) % (2) % $ 40.0 $ 38.3 4 % 4 %
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.
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Results of Operations for the Three and Six Months Ended February 29, 2024 Compared to the Three and Six Months Ended February 28, 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 Six Months Ended Percent
Increase
(Decrease)
U.S.
Dollars Percent
Increase
(Decrease)
Local
Currency
(in millions of U.S. dollars) February 29, 2024 February 28, 2023 February 29, 2024 February 28, 2023
Geographic Markets (1)
North America $ 7,377 $ 7,398 — % — % $ 14,940 $ 15,021 (1) % (1) %
EMEA 5,599 5,555 1 (2) 11,402 10,868 5 —
Growth Markets 2,824 2,862 (1) 6 5,682 5,674 — 5
Total $ 15,800 $ 15,814 — % — % $ 32,024 $ 31,562 1 % 1 %
Industry Groups
Communications, Media & Technology $ 2,654 $ 2,885 (8) % (7) % $ 5,324 $ 5,865 (9) % (9) %
Financial Services 2,809 3,003 (6) (6) 5,843 5,966 (2) (3)
Health & Public Service 3,334 3,024 10 10 6,712 6,024 11 11
Products 4,762 4,719 1 — 9,622 9,384 3 1
Resources 2,241 2,184 3 4 4,524 4,323 5 5
Total $ 15,800 $ 15,814 — % — % $ 32,024 $ 31,562 1 % 1 %
Type of Work
Consulting $ 8,021 $ 8,279 (3) % (3) % $ 16,478 $ 16,723 (1) % (2) %
Managed Services 7,778 7,535 3 3 15,546 14,839 5 4
Total $ 15,800 $ 15,814 — % — % $ 32,024 $ 31,562 1 % 1 %
Amounts in table may not total due to rounding.
(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.
Geographic Markets
The following revenues commentary discusses local currency revenue changes by geographic market for the three and six months ended February 29, 2024 compared to the three and six months ended February 28, 2023:
North America
• Three 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.
• Six Months. Revenues decreased 1% in local currency, due to declines in Software & Platforms, Banking & Capital Markets and Communications & Media. These decreases were partially offset by growth in Public Service. The decline in revenues was driven by the United States.
EMEA
• Three Months. Revenues decreased 2% in local currency, due to declines in Communications & Media and Banking & Capital Markets. These decreases were partially offset by growth in Public Service. The decline in revenues was driven by the United Kingdom, France and Ireland, partially offset by revenue growth in Italy.
• Six Months. Revenues were flat in local currency, as growth in Public Service was offset by declines in Communications & Media and Consumer Goods, Retail & Travel Services. Revenues were driven by increases in Italy and Austria, offset by declines in the United Kingdom and Ireland.
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Growth Markets
• Three Months. Revenues increased 6% in local currency, led by growth in Banking & Capital Markets, Industrial, Public Service and Chemicals & Natural Resources. 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.
• Six Months. Revenues increased 5% in local currency, led by growth in Chemicals & Natural Resources, Banking & Capital Markets, Public Service and Industrial. Revenue growth was driven by Japan and Argentina, partially offset by declines in Brazil and Australia. Argentina revenues grew in local currency due to hyperinflation, but declined slightly in U.S. dollars.
Operating Expenses
Operating expenses for the second quarter of fiscal 2024 decreased $116 million, or 1%, compared to the second quarter of fiscal 2023, and decreased as a percentage of revenues to 87.0% from 87.7% during this period. Operating expenses for the six months ended February 29, 2024 increased $388 million, or 1%, compared to the six months ended February 28, 2023, and remained flat as a percentage of revenues at 85.6% 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 Six Months Ended
(in millions of U.S. dollars) February 29, 2024 February 28, 2023 Increase
(Decrease) February 29, 2024 February 28, 2023 Increase
(Decrease)
Operating Expenses $ 13,753 87.0 % $ 13,870 87.7 % $ (116) $ 27,413 85.6 % $ 27,024 85.6 % $ 388
Cost of services 10,921 69.1 10,979 69.4 (58) 21,697 67.8 21,541 68.3 156
Sales and marketing 1,631 10.3 1,564 9.9 68 3,341 10.4 3,114 9.9 227
General and administrative costs 1,085 6.9 1,082 6.8 3 2,119 6.6 2,125 6.7 (6)
Business optimization costs 115 0.7 244 1.5 (129) 255 0.8 244 0.8 11
Amounts in table may not total due to rounding.
Cost of Services
Cost of services for the second quarter of fiscal 2024 decreased $58 million, or 1%, from the second quarter of fiscal 2023, and decreased as a percentage of revenues to 69.1% from 69.4% during this period. Gross margin for the second quarter of fiscal 2024 increased as a percentage of revenues to 30.9% compared to 30.6% during the second quarter of fiscal 2023. The increase in gross margin was primarily due to lower labor costs compared to the same period in fiscal 2023.
Cost of services for the six months ended February 29, 2024 increased $156 million, or 1%, over the six months ended February 28, 2023, and decreased as a percentage of revenues to 67.8% from 68.3% during this period. Gross margin for the six months ended February 29, 2024 increased to 32.2% compared to 31.7% during the six months ended February 28, 2023. The increase in gross margin was primarily due to lower labor costs, including lower subcontractor costs compared to the same period in fiscal 2023.
Sales and Marketing
Sales and marketing expense for the second quarter of fiscal 2024 increased $68 million, or 4%, over the second quarter of fiscal 2023, and increased as a percentage of revenues to 10.3% compared to 9.9% during this period. Sales and marketing expense for the six months ended February 29, 2024 increased $227 million, or 7%, over the six months ended February 28, 2023, and increased as a percentage of revenues to 10.4% compared to 9.9% during this period. The increase as a percentage of revenues for the three and six months ended February 29, 2024 was due to higher selling and other business development costs as a percentage of revenues compared to the same period in fiscal 2023.
General and Administrative Costs
General and administrative costs for the second quarter of fiscal 2024 increased $3 million over the second quarter of fiscal 2023, and increased as a percentage of revenues to 6.9% compared to 6.8% during this period. General and administrative costs for the six months ended February 29, 2024 decreased $6 million from the six months ended February 28, 2023, and decreased as a percentage of revenues to 6.6% from 6.7% during this period.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28
Business Optimization Costs
During the second quarter of fiscal 2024 and 2023, we recorded business optimization costs of $115 million and $244 million, respectively, primarily for employee severance. During the six months ended February 29, 2024, and February 28, 2023, we recorded business optimization costs of $255 million and $244 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.”
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 exclu ding the business optimization costs recorded in fiscal 2024 and 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 Six Months Ended
February 29, 2024 February 28, 2023 February 29, 2024 February 28, 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 $ 1,060 14 % $ 824 11 % $ 237 $ 2,317 16 % $ 2,134 14 % $ 183
EMEA (1) 529 9 615 11 (86) 1,353 12 1,342 12 10
Growth Markets (1) 457 16 505 18 (48) 942 17 1,062 19 (120)
Total $ 2,046 13.0 % $ 1,945 12.3 % $ 102 $ 4,611 14.4 % $ 4,538 14.4 % $ 74
Amounts in table may not total due to rounding.
(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.
Operating income for the second quarter of fiscal 2024 increased $102 million, or 5%, compared with the second quarter of fiscal 2023. Operating margin for the second quarter of fiscal 2024 was 13.0%, compared with 12.3% for the second quarter of fiscal 2023. Operating income for the six months ended February 29, 2024 increased $74 million, or 2%, compared with the six months ended February 28, 2023. Operating margin for the six months ended February 29, 2024 was 14.4%, flat with the six months ended February 28, 2023.
Geographic Markets
We estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during the three and six months ended February 29, 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 six months ended February 29, 2024 compared with the three and six months ended February 28, 2023:
North America
• Three Months. Operatin g income increased primarily due to lower business optimization costs and lower labor costs, partially offset by a decline in consulting contract profitability.
• Six Months. Operating i ncome increased primarily due to lower business optimization costs and lower labor costs, partially offset by a decline in consulting contract profitability.
EMEA
• Three Months. Operatin g income decreased primarily due to higher business optimization costs as well as a decline in consulting revenues and consulting contract profitability.
• Six Months. Operating incom e increased primarily due to the positive impact of foreign currency exchange rates which resulted in an increase in U.S. dollar revenues, partially offset by higher business optimization costs.
Growth Markets
• Three Months. Opera ting income decreased as revenue growth in local currency was 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.
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• Six Months. Oper ating income decreased as revenue growth in local currency was more than offset by lower contract profitability, higher business optimization costs and the negative impact of foreign currency exchange rates which resulted in a decline in U.S. dollar revenues.
Operating Income and Operating Margin Excluding Business Optimization Costs (Non-GAAP)
The business optimization costs reduced operating margin for the second quarter of fiscal 2024 and 2023 by 70 and 150 basis points, respectively . Adjusted operating margin for the second quarter of fiscal 2024 decreased 10 basis points to 13.7% compared with the second quarter of fiscal 2023. The business optimization costs reduced operating margin for both the six months ended February 29, 2024 and February 28, 2023 by 80 basis points. Adjusted op erating margin for the six months ended February 29, 2024 remained flat at 15.2% compared with the six months ended February 28, 2023.
Three Months Ended
February 29, 2024 February 28, 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 $ 1,060 $ 5 $ 1,065 14 % $ 824 $ 177 $ 1,001 14 % $ 64
EMEA (2) 529 86 615 11 615 41 656 12 (42)
Growth Markets (2) 457 25 482 17 505 26 532 19 (50)
Total $ 2,046 $ 115 $ 2,162 13.7 % $ 1,945 $ 244 $ 2,189 13.8 % $ (27)
Six Months Ended
February 29, 2024 February 28, 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 $ 2,317 $ 51 $ 2,368 16 % $ 2,134 $ 177 $ 2,311 15 % $ 57
EMEA (2) 1,353 156 1,509 13 1,342 41 1,383 13 126
Growth Markets (2) 942 48 990 17 1,062 26 1,088 19 (98)
Total $ 4,611 $ 255 $ 4,866 15.2 % $ 4,538 $ 244 $ 4,782 15.2 % $ 84
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 second quarter of fiscal 2024 was $65 million, an increase of $15 million over the second quarter of fiscal 2023. Interest income for the six months ended February 29, 2024 was $167 million, an increase of $72 million over the six months ended February 28, 2023. The increase for the three and six months ended February 29, 2024 was primarily due to higher interest rates compared to the three and six months ended February 28, 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 six months ended February 29, 2024, Other income (expense), net decreased $31 million and $24 million from the three and six months ended February 28, 2023, respectively, primarily due to higher gains on investments, partially offset by higher foreign currency exchange losses. For additional information, see Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements."
Income Tax Expense
The effective tax rates for the second quarter of fiscal 2024 and 2023 were 18.4% and 20.4%, respectively. The lower effective tax rate for the second quarter of fiscal 2024 was primarily due to higher tax benefits from share-based payments. The effective tax rates for the six months ended February 29, 2024 and February 28, 2023 were 21.1% and 22.0%, respectively.
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Income Tax Expense Excluding Business Optimization Costs (Non-GAAP)
Excluding the business optimization costs of $115 million and $244 million, and related reduction in tax expense of $28 million and $52 million, our adjusted effective tax rates were 18.8% and 20.4% for the second quarter of fiscal 2024 and 2023, respectively. Excluding the business optimization costs of $255 million and $244 million, and related reduction in tax expense of $62 million and $52 million, our adjusted effective tax rates were 21.2% and 22.0% for the six months ended February 29, 2024 and February 28, 2023, respectively.
Earnings Per Share
Diluted earnings per share were $2.63 for the second quarter of fiscal 2024, compared with $2.39 for the second quarter of fiscal 2023. Diluted earnings per share were $5.73 for the six months ended February 29, 2024, compared with $5.47 for the six months ended February 28, 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 (Non-GAAP)
The business optimization costs of $87 million and $193 million, net of related taxes, decreased diluted earnings per share by $0.14 and $0.30 for the second quarter of fiscal 2024 and 2023, respectively. Adjusted diluted earnings per share were $2.77 and $2.69 for the second quarter of fiscal 2024 and 2023, respectively. The business optimization costs of $193 million, net of related taxes, decreased diluted earnings per share by $0.30 for both the six months ended February 29, 2024 and February 28, 2023. Adjusted diluted earnings per share were $6.04 and $5.77 for the six months ended February 29, 2024 and February 28, 2023, respectively.
Three Months Ended Six Months Ended
February 29, 2024 As Reported $ 2.63 $ 5.73
Business optimization costs 0.18 0.40
Tax effect of business optimization costs (1) (0.04) (0.10)
February 29, 2024 As Adjusted $ 2.77 $ 6.04
February 28, 2023 As Reported $ 2.39 $ 5.47
Business optimization costs 0.38 0.38
Tax effect of business optimization costs (1) (0.08) (0.08)
February 28, 2023 As Adjusted $ 2.69 $ 5.77
Amounts in table may not total due to rounding.
(1) The income tax effect of business optimization costs includes both the current and deferred income tax impact and was calculated by using the relevant tax rate of the country where the costs were recorded.
Changes in adjusted diluted earnings per share were due to the following factors:
Three Months Ended Six Months Ended
February 28, 2023 As Adjusted $ 2.69 $ 5.77
Non-operating income 0.06 0.11
Effective tax rate 0.06 0.06
Lower share count — 0.01
Net income attributable to noncontrolling interests (0.01) (0.01)
Operating results (0.03) 0.10
February 29, 2024 As Adjusted $ 2.77 $ 6.04
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Liquidity and Capital Resources
As of February 29, 2024, Cash and cash equivalents was $5.1 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:
Six Months Ended
(in millions of U.S. dollars) February 29, 2024 February 28, 2023 Change
Net cash provided by (used in):
Operating activities $ 2,600 $ 2,826 $ (226)
Investing activities (3,064) (1,260) (1,803)
Financing activities (3,418) (3,192) (225)
Effect of exchange rate changes on cash and cash equivalents (42) (24) (18)
Net increase (decrease) in cash and cash equivalents $ (3,924) $ (1,651) $ (2,273)
Amounts in table may not total due to rounding.
Operating activities: The $226 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 $1,803 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 $225 million increase in cash used was primarily due to an increase in 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
As of February 29, 2024, we had the following borrowing facilities:
(in millions of U.S. dollars) Credit Facilities
Syndicated loan facility (1) $ 3,000
Separate, uncommitted, unsecured multicurrency revolving credit facilities 1,900
Local guaranteed and non-guaranteed lines of credit 243
Total $ 5,144
Amounts in table may not total due to rounding.
(1) This facility, which matures on April 24, 2026, provides unsecured, revolving borrowing capacity for general corporate capital purposes, including the issuance of letters of credit and short-term commercial paper. Borrowings under this facility will accrue interest at the applicable risk-free rate plus a spread. We continue to be in compliance with relevant covenant terms. The facility is subject to annual commitment fees. As of February 29, 2024, we had $100 million of commercial paper outstanding and backed by this facility, with a weighted-average effective interest rate of 5.4%.
Under the borrowing facilities described above, we had an aggregate of $1,037 million of letters of credit outstanding as of February 29, 2024. We also had $100 million of commercial paper outstanding as of February 29, 2024. The amount of commercial paper and letters of credit outstanding reduces the available borrowing capacity under these facilities.
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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 six months ended February 29, 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) 5,659,433 $ 1,863 — $ —
Other share purchase programs — — 18,684 6
Other purchases (2) 1,892,301 644 — —
Total 7,551,734 $ 2,507 18,684 $ 6
(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 six months ended February 29, 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.
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 10 (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 33