What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2024-10-10 compared with 2023-10-12 · 43 added, 82 removed, 123 unchanged (50% of the section changed)

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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 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.

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 organizations build their digital core, optimize their operations, accelerate revenue growth and enhance services—creating tangible value at speed and scale.

In the first quarter of fiscal 2025, 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 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.

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 for fiscal 2024 compared to fiscal 2023 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 $1,063 million in business optimization costs and, with respect to diluted earnings per share, the impact of a $253 million investment gain recorded during fiscal 2023.

For additional information, see Note 1 (Summary of Significant Accounting Policies) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

• Revenues of $64.1 billion, representing 4% growth in U.S.

dollars and 8% growth in local currency;

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 $438 million and $1,063 million, respectively, in business optimization costs recorded during 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 fiscal 2023 as discussed further in our Results of Operations.

For additional information regarding business optimization costs, see Note 1 (Summary of Significant Accounting Policies) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

• Revenues of $64.9 billion, an increase of 1% in U.S.

dollars and 2% in local currency;

• New bookings of $81.2 billion, an increase of 13% in U.S.

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• Operating margin of 14.8%, compared to 13.7% in fiscal 2023;

adjusted operating margin expanded 20 basis points to 15.4%;

• Diluted earnings per share of $10.77, compared to $10.71 for fiscal 2022;

adjusted earnings per share increased 9% to $11.67;

adjusted operating margin was 15.5% compared to 15.4% in fiscal 2023;

• Diluted earnings per share of $11.44, a 6% increase over $10.77 for fiscal 2023;

adjusted earnings per share increased 2% to $11.95 compared to $11.67 for fiscal 2023;

• Cash returned to shareholders of $7.8 billion, including share purchases of $4.5 billion and dividends of $3.2 billion.

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Increase (Decrease)

Currency Percent of Total

(in billions of U.S.

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Geographic Markets North America (1) $ 30.7 $ 30.3 1 % 2 % 47 % 47 %

Europe 21.3 20.3 5 11

EMEA (2) 22.8 22.3 2 — 35 35

Growth Markets (1) (2) 11.3 11.5 (2) 7 17 18

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Amounts in table may not total due to rounding.

(1) In the first quarter of fiscal 2024, our Middle East and Africa market units will move from Growth Markets to Europe, and the Europe market will be referred to as our Europe, Middle East and Africa (EMEA) geographic market.

(2) Previously referred to as our outsourcing business.

(1) In the first quarter of fiscal 2025, 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.

(2) During the first quarter of fiscal 2024, 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 became our EMEA (Europe, Middle East and Africa) geographic market.

Prior period amounts have been reclassified to conform with the current period presentation.

Revenues for fiscal 2024 increased 1% in U.S.

dollars and 2% in local currency compared to fiscal 2023.

During fiscal 2023, revenue growth in local currency was very strong in Growth Markets and Europe and solid in North America.

We experienced local currency revenue growth that was very strong in Resources and Health & Public Service, strong in Products and Financial Services, partially offset by a modest decline in Communications, Media & Technology.

Revenue growth in local currency was very strong in managed services and modest in consulting during fiscal 2023.

The business environment is competitive, and we are experiencing lower pricing across the business.

During fiscal 2024, revenue growth in local currency was strong in Growth Markets and modest in North America, while EMEA was flat.

We experienced local currency revenue growth that was very strong in Health & Public Service, solid in Resources and modest in Products, partially offset by a decline in Communications, Media & Technology and a modest decline in Financial Services.

Revenue growth in local currency was solid in managed services, partially offset by a slight decline in consulting during fiscal 2024.

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 fiscal 2023 decreased 1% in U.S.

dollars and increased 3% in local currency compared to fiscal 2022.

Consulting revenue growth in local currency in fiscal 2023 was driven by strong growth in Growth Markets and solid growth in Europe, while North America was flat.

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.

In our consulting business, revenues for fiscal 2024 decreased 1% in both U.S.

dollars and local currency compared to fiscal 2023.

The decline in consulting revenue in local currency in fiscal 2024 was driven by a decline in EMEA, partially offset by modest growth in Growth Markets and slight growth in North America.

Our consulting revenue continues to be driven by helping our clients accelerate their reinvention, in particular technology, data, and AI led digital transformations.

This includes moving to the cloud, embedding security and responsible AI across the enterprise and leveraging our change capabilities to help our clients build new skills and drive the successful adoption of new processes and technologies.

In addition, clients continue to be focused on initiatives designed to deliver cost savings and supply chain and operational resilience, 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.

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dollars and 5% in local currency compared to fiscal 2023.

Managed services revenue growth in local currency in fiscal 2023 was driven by very strong growth in Growth Markets and Europe and strong 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 (formerly managed security services).

In addition, clients continue to be focused on transforming their operations through data and analytics, automation and artificial intelligence to drive productivity and operational cost savings.

Managed services revenue growth in local currency in fiscal 2024 was driven by very strong growth in Growth Markets, solid growth in EMEA and modest 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.

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dollar strengthened against various currencies during fiscal 2024, resulting in unfavorable currency translation and U.S.

dollar revenue growth that was approximately 4% lower than our revenue growth in local currency for the year.

Assuming that exchange rates stay within recent ranges, we estimate that our fiscal 2024 revenue growth in U.S.

dollars will be approximately equal to our revenue growth in local currency.

dollar revenue growth that was approximately 1% lower than our

ACCENTURE 2024 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 39

revenue growth in local currency for the year.

Assuming that exchange rates stay within recent ranges, we estimate that our fiscal 2025 revenue growth in U.S.

dollars will be approximately 1.5% higher than our revenue growth in local currency.

People Metrics

Annualized Voluntary Attrition

consistent with fiscal 2022

up from 91% in fiscal 2023

compared to approximately 733,000 as of August 31, 2023

compared to 19% in fiscal 2022

Utilization for fiscal 2023 was 91%, consistent with fiscal 2022.

consistent with fiscal 2023

Utilization for fiscal 2024 was 92%, up from 91% in fiscal 2023.

We hire to meet current and projected future demand.

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The year-over-year increase in our workforce reflects people added in connection with acquisitions and hiring for specific skills.

For fiscal 2023, attrition, excluding involuntary terminations, was 13%, down from 19% in fiscal 2022.

For the fourth quarter of fiscal 2023, annualized attrition, excluding involuntary terminations, was 14%, up from 13% in the third quarter of fiscal 2023.

For fiscal 2024, attrition, excluding involuntary terminations, was 13%, consistent with fiscal 2023.

For the fourth quarter of fiscal 2024, annualized attrition, excluding involuntary terminations, was 14%, consistent with the third quarter of fiscal 2024.

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.

During the second quarter of fiscal 2023, we initiated actions to streamline operations and transform our nonbillable corporate functions to reduce costs.

In addition, we adjust compensation in order to attract and retain appropriate numbers of qualified employees.

For the majority of our people, compensation increases became effective December 1st of fiscal 2023.

Given the overall inflationary environment, compensation has increased faster than in prior years, but is moderating.

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.

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and/or effectively assimilate new employees.

Operating Expenses

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.

Gross margin (Revenues less Cost of services as a percentage of Revenues) for fiscal 2023 was 32.3%, compared with 32.0% for fiscal 2022.

The increase in gross margin for fiscal 2023 was primarily due to lower labor costs, including lower subcontractor costs, partially offset by higher non-payroll costs, primarily for travel.

Sales and marketing and General and administrative costs as a percentage of revenues were 16.9% for fiscal 2023, compared with 16.8% for fiscal 2022.

For fiscal 2023 compared to fiscal 2022, Sales and marketing costs increased 40 basis points due to higher selling and other business development costs as a percentage of revenues.

General and administrative costs decreased 20 basis points as a percentage of revenues.

During fiscal 2023, we recorded $1,063 million in business optimization costs primarily for employee severance.

For additional information, see Note 1 (Summary of Significant Accounting Policies) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

Operating margin (Operating income as a percentage of Revenues) for fiscal 2023 was 13.7%, compared with 15.2% for fiscal 2022.The business optimization costs recorded during fiscal 2023 reduced operating margin by 170 basis points.

Excluding these costs, operating margin for fiscal 2023 increased 20 basis points to 15.4%.

ACCENTURE 2023 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 36

Other Income (Expense), net

During fiscal 2023, we recorded a gain of $253 million related to our investment in Duck Creek Technologies.

For additional information, see Note 1 (Summary of Significant Accounting Policies) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

Effective Tax Rate

The effective tax rates for fiscal 2023 and 2022 were 23.4% and 24.0%, respectively.

Absent the business optimization costs of $1,063 million and related reduction in tax expense of $247 million, as well as an investment gain of $253 million and related tax expense of $9 million, our effective tax rate for fiscal 2023 was 23.9%.

Earnings Per Share

Diluted earnings per share were $10.77 for fiscal 2023, compared with $10.71 for fiscal 2022.

The $816 million of business optimization costs, net of related taxes, decreased diluted earnings per share by $1.28 and the $244 million investment gain, net of related taxes, increased diluted earnings per share by $0.38 for fiscal 2023.

Excluding these impacts, diluted earnings per share were $11.67 for fiscal 2023.

Our operating income and diluted earnings per share are affected by currency exchange rate fluctuations on revenues and costs.

Most of our costs are incurred in the same currency as the related revenues.

Where practical, we seek to manage foreign currency exposure for costs not incurred in the same currency as the related revenues, such as the costs associated with our global delivery model, by using currency protection provisions in our customer contracts and through our hedging programs.

We seek to manage our costs, taking into consideration the residual positive and negative effects of changes in foreign exchange rates on those costs.

For more information on our hedging programs, see Foreign Currency Risk under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” and Note 9 (Financial Instruments) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

Non-GAAP Financial Measures

For fiscal 2023, we have presented effective tax rates and diluted earnings per share excluding the business optimization costs and investment gain, as well as operating income and operating margin excluding the business optimization costs, 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.

Fiscal Percent

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Total New Bookings $ 81.2 $ 72.2 13 % 14 %

Amounts in table may not total due to rounding.

(1) Previously referred to as our outsourcing business.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity