Accenture plc
For the period ended May 31, 2024. Filed Jun 20, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
May 31, 2024 · Filed Jun 20, 2024
ACN$260.50-1.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-02-29; filed 2024-03-21.
0001467373-24-000108
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-05-31; filed 2024-06-20.
0001467373-24-000196
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 142 previous paragraphs and 142 current paragraphs.
86 unchanged; 47 reworded; 9 added; 9 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 25 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
•New bookings of $21.1 billion, an increase of 22% in U.S. dollars and 26% in local currency;
Current report
•Diluted earnings per share of $3.04, a 3% decrease from $3.15 in the third quarter of fiscal 2023; adjusted earnings per share decreased 2% to $3.13 compared to $3.19 in the third quarter of fiscal 2023; and
Current report
•Three Months. Revenues increased 1% in local currency, led by growth in Public Service, partially offset by a decline in Banking & Capital Markets. Revenue growth was driven by the United States.
Current report
•Nine Months. Operating income increased primarilydue to lower business optimization costs and lower labor costs, partially offset by a decline in consulting contract profitability and higher acquisition-related costs.
Current report
•Three Months. Operating income increased primarily due to lower business optimization costs and lower labor costs, partially offset by declines in consulting contract profitability and consulting revenues in local currency.
Current report
The effective tax rates for the third quarter of fiscal 2024 and 2023 were 25.4% and 22.2%, respectively. The higher effective tax rate for the third quarter of fiscal 2024 was primarily due to the tax impact in the prior year from an investment gain and higher expense from adjustments to prior year tax liabilities. The effective tax rates for the nine months ended May 31, 2024 and 2023 were 22.6% and 22.1%, respectively. The higher effective tax rate for the nine months ended May 31, 2024 was primarily due to the tax impact in the prior year from an investment gain.
Current report
Excluding the business optimization costs of $332 million and related reduction in tax expense of $86 million, our adjusted effective tax rate was 22.8% for thenine months ended May 31, 2024. Excluding the business optimization costs of $591 million and related reduction in tax expense of $132 million, and the investment gain of$253 million and related tax expense of$9 million, our adjusted effective tax rate was 22.7% for thenine months ended May 31, 2023.
Current report
The business optimization costs of $54 million, net of related taxes, decreased diluted earnings per share by $0.08 for the third quarter of fiscal 2024. Adjusted diluted earnings per share were $3.13 for the third quarter of fiscal 2024. The business optimization costs of $267 million, net of related taxes, decreased diluted earnings per share by $0.42 and the investment gain of$244 million, net of related taxes, increased diluted earnings per share by $0.38 for the third quarter of fiscal 2023. Adjusted diluted earnings per share were$3.19 for thethird quarter of fiscal 2023.
Current report
For information about borrowing facilities, see Note 9 (Borrowings and Indebtedness) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Removed paragraphs (9)
Previous report
•Revenues of $15.8 billion, flat with the second quarter of fiscal 2023 in both U.S. dollars and local currency;
Previous report
•Diluted earnings per share of $2.63, a 10% increase over $2.39 in the second quarter of fiscal 2023; adjusted earnings per share increased 3% to $2.77 compared to $2.69 in the second quarter of fiscal 2023; and
Previous report
•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.
Previous report
•Six Months. Operating income increased primarily due to lower business optimization costs and lower labor costs, partially offset by a decline in consulting contract profitability.
Previous report
•Three Months. Operating income decreased primarily due to higher business optimization costs as well as a decline in consulting revenues and consulting contract profitability.
Previous report
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.
Previous report
As of February 29, 2024, we had the following borrowing facilities:
Previous report
(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%.
Previous report
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.
Reworded paragraphs (47)
Previous wording
Accenture is a leading global professional services company, providing a broad range of services and solutions across Strategy & Consulting, Technology, Operations, Industry X and Song. We serve clients in three geographic markets: North America, EMEA (Europe, Middle East and Africa) and Growth Markets (Asia Pacific and Latin America). We combine our strength in technology and leadership in cloud, data and AI with unmatched industry experience, functional expertise and global delivery capability to help the world’s leading businesses, governments and other organizations build their digital core, optimize their operations, accelerate revenue growth and enhance citizen services—creating tangible value at speed and scale.
Current wording
Accenture is a leading global professional services company, providing a broad range of services and solutions across Strategy & Consulting, Technology, Operations, Industry X and Song. We serve clients in three geographic markets: North America, EMEA (Europe, Middle East and Africa) and Growth Markets (Asia Pacific and Latin America). We combine our strength in technology and leadership in cloud, data and AI with unmatched industry experience, functional expertise and global delivery capability to help the world’s leading businesses, governments and other organizations build their digital core, optimize their operations, accelerate revenue growth and enhance citizen services—creating tangible value at speed and scale. As announced on June 11, 2024, effective September 1, 2024, our Latin America market unit will move from Growth Markets to North America. With this change, North America will become The Americas market and Growth Markets will become the Asia Pacific market.
Previous wording
Our results of operations are affected by economic conditions, including macroeconomic conditions, the overall inflationary environment and levels of business confidence. There continues to be significant economic and geopolitical uncertainty in many markets around the world, which has impacted and may continue to impact our business. These conditions have slowed the pace and level of client spending, particularly for smaller contracts with a shorter duration and for our consulting services.
Current wording
Our results of operations are affected by economic conditions, including macroeconomic conditions, the overall inflationary environment and levels of business confidence. There continues to be significant economic and geopolitical uncertainty in many markets around the world, which has impacted and may continue to impact our business. These conditions have slowed the pace and level of client spending, particularly for smaller contracts with a shorter duration and for our consulting services. Clients continue to prioritize large-scale transformations, which convert to revenue over a longer period.
Previous wording
Key metrics for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 are included below. We have presented operating income, operating margin, effective tax rate and diluted earnings per share on a non-GAAP or “adjusted” basis to exclude the impact of $115 million and $244 million, respectively, in business optimization costs as discussed further in our Results of Operations. For additional information, see Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Current wording
Key metrics for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 are included below. We have presented operating income, operating margin, effective tax rate and diluted earnings per share on a non-GAAP or “adjusted” basis to exclude the impact of $77 million and $347 million, respectively, in business optimization costs recorded during the third quarter of fiscal 2024 and 2023 and, with respect to effective tax rate and diluted earnings per share, the impact of a$253 million investment gain related to our investment in Duck Creek Technologies recorded during the third quarter of fiscal 2023 as discussed further in our Results of Operations. For additional information regarding business optimization costs, see Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Previous wording
•New bookings of $21.6 billion, a decrease of 2% in both U.S. dollars and local currency;
Current wording
•Revenues of $16.5 billion, a decrease of 1% in U.S. dollars and an increase of 1% in local currency;
Previous wording
•Operating margin of 13.0%, compared to 12.3% in the second quarter of fiscal 2023; adjusted operating margin was 13.7% compared to 13.8% in the second quarter of fiscal 2023;
Current wording
•Operating margin of 16.0%, compared to 14.2% in the third quarter of fiscal 2023; adjusted operating margin was 16.4% compared to 16.3% in the third quarter of fiscal 2023;
Previous wording
•Cash returned to shareholders of $2.1 billion, including share purchases of $1.3 billion and dividends of $813 million.
Current wording
•Cash returned to shareholders of $2.2 billion, including share purchases of $1.4 billion and dividends of $811 million.
Previous wording
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.
Current wording
Revenues for the third quarter of fiscal 2024 decreased 1% in U.S. dollars and increased 1% in local currency compared to the third quarter of fiscal 2023. During the third quarter of fiscal 2024, revenue growth in local currency was very strong in Growth Markets and slight in North America, partially offset by a modest decline in EMEA. We experienced local currency revenue growth that was very strong in Health & Public Service and modest in Resources and Products, partially offset by a decline in Financial Services and a slight decline in Communications, Media & Technology. Revenue growth in local currency was solid in managed services, partially offset by a slight decline in consulting. The business environment is competitive, and we continue to experience lower pricing across the business. We define pricing as contract profitability or margin on the work that we sell.
Previous wording
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.
Current wording
In our consulting business, revenues for the third quarter of fiscal 2024 decreased 3% in U.S. dollars and 1% in local currency compared to the third quarter of fiscal 2023. The decline in consulting revenue in local currency for the third quarter of fiscal 2024 was driven by a decline in EMEA, partially offset by solid growth in Growth Markets and modest growth in North America. Our consulting revenue continues to be driven by helping our clients accelerate their digital transformation, including moving to the cloud, embedding security across the enterprise and adopting new technologies. In addition, clients continue to be focused on initiatives designed to deliver cost savings and operational efficiency, as well as projects to accelerate growth and improve customer experiences. While we continue to experience demand for these services, we are seeing a slower pace and level of client spending, especially for smaller contracts with a shorter duration.
Previous wording
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.
Current wording
In our managed services business, revenues for the third quarter of fiscal 2024 increased 2% in U.S. dollars and 4% in local currency compared to the third quarter of fiscal 2023. Managed services revenue growth in local currency for the third quarter of fiscal 2024 was driven by very strong growth in Growth Markets, modest growth in EMEA and slight growth in North America. We continue to experience growing demand to assist clients with application modernization and maintenance, cloud enablement and cybersecurity-as-a-service. In addition, clients continue to be focused on transforming their operations through technology, data and AI, and leveraging our digital platforms and talent to drive productivity and operational cost savings.
Previous wording
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.
Current wording
As we are a global company, our revenues are denominated in multiple currencies and may be significantly affected by currency exchange rate fluctuations. While a significant portion of our revenues are in U.S. dollars, the majority of our revenues are denominated in other currencies, including the Euro, Japanese yen and U.K. pound. There continues to be volatility in foreign currency exchange rates. Unfavorable fluctuations in foreign currency exchange rates have had and could in the future have a material effect on our financial results. If the U.S. dollar weakens against other currencies, resulting in favorable currency translation, our revenues, revenue growth and results of operations in U.S. dollars may be higher. If the U.S. dollar strengthens against other currencies, resulting in unfavorable currency translation, our revenues, revenue growth and results of operations in U.S. dollars may be lower. The U.S. dollar strengthened against various currencies during the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023, resulting in unfavorable currency translation and U.S. dollar revenue growth that was approximately 2% lower than our revenue growth in local currency. There was minimal currency translation impact for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. Assuming that exchange rates stay within recent ranges for the remainder of fiscal 2024, we estimate that our full fiscal 2024 revenue growth in U.S. dollars will be approximately 0.7% lower than our revenue growth in local currency.
Previous wording
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.
Current wording
Utilization for the third quarter of fiscal 2024 was 92%, compared to 91% in the third quarter of fiscal 2023. We hire to meet current and projected future demand. We proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services and solutions, given that compensation costs are the most significant portion of our operating expenses. Our workforce, the majority of which serves our clients, increased to approximately 750,000 as of May 31, 2024, compared to approximately 732,000 as of May 31, 2023. The year-over-year increase in our workforce reflects people added in connection with acquisitions and hiring for specific skills.
Previous wording
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.
Current wording
For the third quarter of fiscal 2024, annualized attrition, excluding involuntary terminations, was 14%, up from 13% in the third quarter of fiscal 2023. We evaluate voluntary attrition, adjust levels of new hiring and use involuntary terminations as a means to keep our supply of skills and resources in balance with changes in client demand.
Previous wording
Results of Operations for the Three and Six Months Ended February 29, 2024 Compared to the Three and Six Months Ended February 28, 2023
Current wording
Results of Operations for the Three and Nine Months Ended May 31, 2024 Compared to the Three and Nine Months Ended May 31, 2023
Previous wording
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:
Current wording
The following revenues commentary discusses the primary drivers of local currency revenue changes by geographic market for the three and nine months ended May 31, 2024 compared to the three and nine months ended May 31, 2023:
Previous wording
•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.
Current wording
•Nine Months. Revenues were flat in local currency, as growth in Public Service was offset by declines in Banking & Capital Markets, Software & Platforms, and Communications & Media.
Previous wording
•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.
Current wording
•Three Months. Revenues decreased 2% in local currency, due to declines in Banking & Capital Markets and Communications & Media, partially offset by growth in Public Service. The decline in revenues was driven by France, partially offset by revenue growth in Italy.
Previous wording
•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.
Current wording
•Nine Months. Revenues decreased 1% in local currency, due to declines in Communications & Media and Banking & Capital Markets, partially offset by growth in Public Service. The decline in revenues was driven by the United Kingdom and France, partially offset by revenue growth in Italy.
Previous wording
•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.
Current wording
•Three Months. Revenues increased 8% in local currency, led by growth in Banking & Capital Markets and Industrial. Revenue growth was driven by Argentina and Japan, partially offset by a decline in Australia. Argentina revenues grew in local currency primarily due to hyperinflation.
Previous wording
•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.
Current wording
•Nine Months. Revenues increased 6% in local currency, led by growth in Banking & Capital Markets, Chemicals & Natural Resources and Industrial. Revenue growth was driven by Japan and Argentina, partially offset by declines in Australia and Brazil. Argentina revenues grew in local currency due to hyperinflation, but declined slightly in U.S. dollars.
Previous wording
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.
Current wording
Operating expenses for the third quarter of fiscal 2024 decreased $369 million, or 3%, compared to the third quarter of fiscal 2023, and decreased as a percentage of revenues to 84.0% from 85.8% during this period. Operating expenses for the nine months ended May 31, 2024 increased $19 million compared to the nine months ended May 31, 2023, and decreased as a percentage of revenues to 85.1% from 85.7% during this period.
Previous wording
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.
Current wording
Cost of services for the third quarter of fiscal 2024 decreased $67 million, or 1%, from the third quarter of fiscal 2023, and remained flat as a percentage of revenues at 66.6% during this period. Gross margin for the third quarter of fiscal 2024 remained flat as a percentage of revenues at 33.4% compared to the third quarter of fiscal 2023 as lower labor costs were offset by higher non-payroll costs, primarily for travel.
Previous wording
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.
Current wording
Cost of services for the nine months ended May 31, 2024 increased $89 million over the nine months ended May 31, 2023, and decreased as a percentage of revenues to 67.4% from 67.7% during this period. Gross margin for the nine months ended May 31, 2024 increased to 32.6% compared to 32.3% during the nine months ended May 31, 2023. The increase in gross margin was primarily due to lower labor costs, partially offset by higher non-payroll costs, primarily for travel compared to the same period in fiscal 2023.
Previous wording
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.
Current wording
Sales and marketing expense for the third quarter of fiscal 2024 increased $12 million, or 1%, over the third quarter of fiscal 2023, and increased as a percentage of revenues to 10.6% compared to 10.5% during this period. Sales and marketing expense for the nine months ended May 31, 2024 increased $239 million, or 5%, over the nine months ended May 31, 2023, and increased as a percentage of revenues to 10.5% compared to 10.1% during this period. The increase as a percentage of revenues for the nine months ended May 31, 2024 was due to higher selling and other business development costs compared to the same period in fiscal 2023.
Previous wording
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.
Current wording
General and administrative costs for the third quarter of fiscal 2024 decreased $44 million, or 4%, from the third quarter of fiscal 2023, and decreased as a percentage of revenues to 6.3% from 6.5% during this period. General and administrative costs for the nine months ended May 31, 2024 decreased $51 million, or 2%, from the nine months ended May 31, 2023, and decreased as a percentage of revenues to 6.5% from 6.7% during this period.
Previous wording
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.”
Current wording
During the third quarter of fiscal 2024 and 2023, we recorded business optimization costs of $77 million and $347 million, respectively, primarily for employee severance. During the nine months ended May 31, 2024 and 2023, we recorded business optimization costs of $332 million and $591 million, respectively, primarily for employee severance. For additional information, see Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Previous wording
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.
Current wording
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, and, with respect to effective tax rate and diluted earnings per share, the impact of an investment gain recorded in fiscal 2023, as we believe doing so facilitates understanding as to the impact of these items and our performance in comparison to the prior periods. While we believe that this non-GAAP financial information is useful in evaluating our operations, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.
Previous wording
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.
Current wording
Operating income for the third quarter of fiscal 2024 increased $272 million, or 12%, compared with the third quarter of fiscal 2023. Operating margin for the third quarter of fiscal 2024 was 16.0%, compared with 14.2% for the third quarter of fiscal 2023. Operating income for the nine months ended May 31, 2024 increased $345 million, or 5%, compared with the nine months ended May 31, 2023. Operating margin for the nine months ended May 31, 2024 was 14.9%, compared with 14.3% for the nine months ended May 31, 2023.
Previous wording
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:
Current wording
We estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during the three and nine months ended May 31, 2024 was similar to that disclosed for revenue for each geographic market. The commentary below provides insight into other factors affecting geographic market performance and operating income, including the impact of foreign currency exchange rates where significant, for the three and nine months ended May 31, 2024 compared with the three and nine months ended May 31, 2023:
Previous wording
•Three Months. Operating income increased primarily due to lower business optimization costs and lower labor costs, partially offset by a decline in consulting contract profitability.
Current wording
•Three Months. Operating income increased primarilydue to lower business optimization costs and lower labor costs, partially offset by a decline in consulting contract profitability and higher acquisition-related costs.
Previous wording
•Six Months. Operating income increased primarily due to the positive impact of foreign currency exchange rates which resulted in an increase in U.S. dollar revenues, partially offset by higher business optimization costs.
Current wording
•Nine Months. Operating income increased primarily due to the positive impact of foreign currency exchange rates which resulted in an increase in U.S. dollar revenues, and lower labor costs, partially offset by declines in consulting revenues in local currency and consulting contract profitability.
Previous wording
•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.
Current wording
•Three Months. Opera ting income increased primarily due to lower business optimization costs and revenue growth in local currency, partially offset by the negative impact of foreign currency exchange rates which resulted in a decline in U.S. dollar revenues.
Previous wording
•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.
Current wording
•Nine Months. Operating income decreased as revenue growth in local currency and lower business optimization costs were more than offset by lower contract profitability and the negative impact of foreign currency exchange rates which resulted in a decline in U.S. dollar revenues.
Previous wording
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 operating margin for the six months ended February 29, 2024 remained flat at 15.2% compared with the six months ended February 28, 2023.
Current wording
The business optimization costs reduced operating margin for the third quarter of fiscal 2024 and 2023 by 40 and 210 basis points, respectively. Adjusted operating margin for the third quarter of fiscal 2024 increased 10 basis points to 16.4% compared with the third quarter of fiscal 2023. The business optimization costs reduced operating margin for the nine months ended May 31, 2024 and 2023 by 70 and 130 basis points, respectively. Adjusted operating margin for the nine months ended May 31, 2024 remained flat at 15.6% compared with the nine months ended May 31, 2023.
Previous wording
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.
Current wording
Interest income for the third quarter of fiscal 2024 was $54 million, a decrease of $28 million from the third quarter of fiscal 2023. Interest income for the nine months ended May 31, 2024 was $221 million, an increase of $44 million over the nine months ended May 31, 2023. The decrease for the third quarter of fiscal 2024 was primarily due to lower cash balances compared to the third quarter of fiscal 2023. The increase for the nine months ended May 31, 2024 was primarily due to higher interest rates compared to the nine months ended May 31, 2023.
Previous wording
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."
Current wording
Other income (expense), net primarily consists of foreign currency gains and losses, non-operating components of pension expense, as well as gains and losses associated with our investments. During the three and nine months ended May 31, 2024, Other income (expense), net decreased $221 million and $197 million from the three and nine months ended May 31, 2023, respectively, primarily due to lower gains on investments.
Previous wording
Income Tax Expense Excluding Business Optimization Costs (Non-GAAP)
Current wording
Income Tax Expense Excluding Business Optimization Costs and Investment Gain (Non-GAAP)
Previous wording
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.
Current wording
Excluding the business optimization costs of $77 million and related reduction in tax expense of $24 million, our adjusted effective tax rate was 25.5% for the third quarter of fiscal 2024. Excluding the business optimization costs of $347 million and related reduction in tax expense of $80 million, and the investment gain of$253 million and related tax expense of$9 million, our adjusted effective tax rate was 24.0% for thethird quarter of fiscal 2023.
Previous wording
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.”
Current wording
Diluted earnings per share were $3.04 for the third quarter of fiscal 2024, compared with $3.15 for the third quarter of fiscal 2023. Diluted earnings per share were $8.77 for the nine months ended May 31, 2024, compared with $8.62 for the nine months ended May 31, 2023. For information regarding our earnings per share calculations, see Note 3 (Earnings Per Share) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Previous wording
Earnings Per Share Excluding Business Optimization Costs (Non-GAAP)
Current wording
Earnings Per Share Excluding Business Optimization Costs and Investment Gain (Non-GAAP)
Previous wording
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.
Current wording
The business optimization costs of $247 million, net of related taxes, decreased diluted earnings per share by$0.39 for the nine months ended May 31, 2024. Adjusted diluted earnings per share were $9.16 for the nine months ended May 31, 2024. The business optimization costs of$459 million, net of related taxes, decreased diluted earnings per share by$0.72 and the investment gain of $244 million, net of related taxes, increased diluted earnings per share by $0.38 for the nine months ended May 31, 2023. Adjusted diluted earnings per share were$8.96 for thenine months ended May 31, 2023.
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