ITEM 1. FINANCIAL STATEMENTS
ACCENTURE PLC
CONSOLIDATED BALANCE SHEETS
May 31, 2020 and August 31, 2019
(In thousands of U.S. dollars, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31,
2020
|
|
August 31,
2019
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents
|
$
|
6,442,261
|
|
|
$
|
6,126,853
|
|
|
Short-term investments
|
3,676
|
|
|
3,313
|
|
|
Receivables and contract assets
|
8,345,601
|
|
|
8,095,071
|
|
|
Other current assets
|
1,354,698
|
|
|
1,225,364
|
|
|
Total current assets
|
16,146,236
|
|
|
15,450,601
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
Contract assets
|
52,701
|
|
|
71,002
|
|
|
Investments
|
270,984
|
|
|
240,313
|
|
|
Property and equipment, net
|
1,445,183
|
|
|
1,391,166
|
|
|
Lease assets
|
3,222,787
|
|
|
—
|
|
|
Goodwill
|
7,334,594
|
|
|
6,205,550
|
|
|
Deferred contract costs
|
704,282
|
|
|
681,492
|
|
|
Deferred tax assets
|
4,242,528
|
|
|
4,349,464
|
|
|
Other non-current assets
|
1,638,024
|
|
|
1,400,292
|
|
|
Total non-current assets
|
18,911,083
|
|
|
14,339,279
|
|
|
TOTAL ASSETS
|
$
|
35,057,319
|
|
|
$
|
29,789,880
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Current portion of long-term debt and bank borrowings
|
$
|
8,697
|
|
|
$
|
6,411
|
|
|
Accounts payable
|
1,405,977
|
|
|
1,646,641
|
|
|
Deferred revenues
|
3,536,521
|
|
|
3,188,835
|
|
|
Accrued payroll and related benefits
|
4,426,829
|
|
|
4,890,542
|
|
|
Income taxes payable
|
443,881
|
|
|
378,017
|
|
|
Lease liabilities
|
738,642
|
|
|
—
|
|
|
Accrued consumption taxes
|
663,697
|
|
|
446,699
|
|
|
Other accrued liabilities
|
604,037
|
|
|
504,751
|
|
|
Total current liabilities
|
11,828,281
|
|
|
11,061,896
|
|
|
NON-CURRENT LIABILITIES:
|
|
|
|
|
Long-term debt
|
60,342
|
|
|
16,247
|
|
|
Deferred revenues
|
638,821
|
|
|
565,224
|
|
|
Retirement obligation
|
1,820,410
|
|
|
1,765,914
|
|
|
Deferred tax liabilities
|
208,146
|
|
|
133,232
|
|
|
Income taxes payable
|
907,590
|
|
|
892,688
|
|
|
Lease liabilities
|
2,704,540
|
|
|
—
|
|
|
Other non-current liabilities
|
405,544
|
|
|
526,988
|
|
|
Total non-current liabilities
|
6,745,393
|
|
|
3,900,293
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
Ordinary shares, par value 1.00 euros per share, 40,000 shares authorized and issued as of May 31, 2020 and August 31, 2019
|
57
|
|
|
57
|
|
|
Class A ordinary shares, par value $0.0000225 per share, 20,000,000,000 shares authorized, 663,533,025 and 654,739,267 shares issued as of May 31, 2020 and August 31, 2019, respectively
|
15
|
|
|
15
|
|
|
Class X ordinary shares, par value $0.0000225 per share, 1,000,000,000 shares authorized, 585,059 and 609,404 shares issued and outstanding as of May 31, 2020 and August 31, 2019, respectively
|
—
|
|
|
—
|
|
|
Restricted share units
|
1,337,761
|
|
|
1,411,903
|
|
|
Additional paid-in capital
|
7,190,179
|
|
|
5,804,448
|
|
|
Treasury shares, at cost: Ordinary, 40,000 shares as of May 31, 2020 and August 31, 2019; Class A ordinary, 27,565,988 and 18,964,863 shares as of May 31, 2020 and August 31, 2019, respectively
|
(3,085,444
|
)
|
|
(1,388,376
|
)
|
|
Retained earnings
|
12,565,857
|
|
|
10,421,538
|
|
|
Accumulated other comprehensive loss
|
(1,993,819
|
)
|
|
(1,840,577
|
)
|
|
Total Accenture plc shareholders’ equity
|
16,014,606
|
|
|
14,409,008
|
|
|
Noncontrolling interests
|
469,039
|
|
|
418,683
|
|
|
Total shareholders’ equity
|
16,483,645
|
|
|
14,827,691
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
35,057,319
|
|
|
$
|
29,789,880
|
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ACCENTURE PLC
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended May 31, 2020 and 2019
(In thousands of U.S. dollars, except share and per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
May 31, 2020
|
|
May 31, 2019
|
|
May 31, 2020
|
|
May 31, 2019
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
10,991,305
|
|
|
$
|
11,099,688
|
|
|
$
|
33,491,768
|
|
|
$
|
32,159,363
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Cost of services
|
7,462,617
|
|
|
7,571,390
|
|
|
22,956,150
|
|
|
22,279,291
|
|
|
Sales and marketing
|
1,118,204
|
|
|
1,184,164
|
|
|
3,471,980
|
|
|
3,274,216
|
|
|
General and administrative costs
|
697,751
|
|
|
626,191
|
|
|
2,094,697
|
|
|
1,872,275
|
|
|
Total operating expenses
|
9,278,572
|
|
|
9,381,745
|
|
|
28,522,827
|
|
|
27,425,782
|
|
|
OPERATING INCOME
|
1,712,733
|
|
|
1,717,943
|
|
|
4,968,941
|
|
|
4,733,581
|
|
|
Interest income
|
12,671
|
|
|
21,402
|
|
|
61,476
|
|
|
60,114
|
|
|
Interest expense
|
(4,961
|
)
|
|
(5,348
|
)
|
|
(19,002
|
)
|
|
(15,472
|
)
|
|
Other income (expense), net
|
(39,670
|
)
|
|
(29,690
|
)
|
|
(20,439
|
)
|
|
(87,178
|
)
|
|
INCOME BEFORE INCOME TAXES
|
1,680,773
|
|
|
1,704,307
|
|
|
4,990,976
|
|
|
4,691,045
|
|
|
Income tax expense
|
428,134
|
|
|
435,658
|
|
|
1,111,087
|
|
|
990,352
|
|
|
NET INCOME
|
1,252,639
|
|
|
1,268,649
|
|
|
3,879,889
|
|
|
3,700,693
|
|
|
Net income attributable to noncontrolling interest in Accenture Canada Holdings Inc.
|
(1,518
|
)
|
|
(1,676
|
)
|
|
(4,791
|
)
|
|
(5,213
|
)
|
|
Net income attributable to noncontrolling interests – other
|
(22,919
|
)
|
|
(17,457
|
)
|
|
(55,188
|
)
|
|
(46,795
|
)
|
|
NET INCOME ATTRIBUTABLE TO ACCENTURE PLC
|
$
|
1,228,202
|
|
|
$
|
1,249,516
|
|
|
$
|
3,819,910
|
|
|
$
|
3,648,685
|
|
|
Weighted average Class A ordinary shares:
|
|
|
|
|
|
|
|
|
Basic
|
636,146,240
|
|
|
637,831,341
|
|
|
636,445,172
|
|
|
638,439,707
|
|
|
Diluted
|
645,607,914
|
|
|
649,297,717
|
|
|
648,025,669
|
|
|
650,144,931
|
|
|
Earnings per Class A ordinary share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.93
|
|
|
$
|
1.96
|
|
|
$
|
6.00
|
|
|
$
|
5.72
|
|
|
Diluted
|
$
|
1.90
|
|
|
$
|
1.93
|
|
|
$
|
5.90
|
|
|
$
|
5.62
|
|
|
Cash dividends per share
|
$
|
0.80
|
|
|
$
|
1.46
|
|
|
$
|
2.40
|
|
|
$
|
2.92
|
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ACCENTURE PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended May 31, 2020 and 2019
(In thousands of U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
May 31, 2020
|
|
May 31, 2019
|
|
May 31, 2020
|
|
May 31, 2019
|
|
NET INCOME
|
$
|
1,252,639
|
|
|
$
|
1,268,649
|
|
|
$
|
3,879,889
|
|
|
$
|
3,700,693
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
(100,750
|
)
|
|
(102,620
|
)
|
|
(110,468
|
)
|
|
(69,592
|
)
|
|
Defined benefit plans
|
10,704
|
|
|
5,890
|
|
|
29,261
|
|
|
32,881
|
|
|
Cash flow hedges
|
(101,516
|
)
|
|
96,382
|
|
|
(72,035
|
)
|
|
148,036
|
|
|
Investments
|
—
|
|
|
(1,148
|
)
|
|
—
|
|
|
(1,663
|
)
|
|
OTHER COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ACCENTURE PLC
|
(191,562
|
)
|
|
(1,496
|
)
|
|
(153,242
|
)
|
|
109,662
|
|
|
Other comprehensive income (loss) attributable to noncontrolling interests
|
(2,285
|
)
|
|
(4,188
|
)
|
|
(2,262
|
)
|
|
(4,859
|
)
|
|
COMPREHENSIVE INCOME
|
$
|
1,058,792
|
|
|
$
|
1,262,965
|
|
|
$
|
3,724,385
|
|
|
$
|
3,805,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO ACCENTURE PLC
|
$
|
1,036,640
|
|
|
$
|
1,248,020
|
|
|
$
|
3,666,668
|
|
|
$
|
3,758,347
|
|
|
Comprehensive income attributable to noncontrolling interests
|
22,152
|
|
|
14,945
|
|
|
57,717
|
|
|
47,149
|
|
|
COMPREHENSIVE INCOME
|
$
|
1,058,792
|
|
|
$
|
1,262,965
|
|
|
$
|
3,724,385
|
|
|
$
|
3,805,496
|
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ACCENTURE PLC
CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT
For the Three Months Ended May 31, 2020
(In thousands of U.S. dollars and share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
Shares
|
|
Class A
Ordinary
Shares
|
|
Class X
Ordinary
Shares
|
|
Restricted
Share
Units
|
|
Additional
Paid-in
Capital
|
|
Treasury Shares
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Accenture plc
Shareholders’
Equity
|
|
Noncontrolling
Interests
|
|
Total
Shareholders’
Equity
|
|
|
$
|
|
No.
Shares
|
|
$
|
|
No.
Shares
|
|
$
|
|
No.
Shares
|
|
|
|
$
|
|
No.
Shares
|
|
|
|
|
|
|
Balance as of February 29, 2020
|
$
|
57
|
|
|
40
|
|
|
$
|
15
|
|
|
661,742
|
|
|
$
|
—
|
|
|
588
|
|
|
$
|
1,095,560
|
|
|
$
|
6,884,963
|
|
|
$
|
(2,571,256
|
)
|
|
(24,551
|
)
|
|
$
|
11,867,507
|
|
|
$
|
(1,802,257
|
)
|
|
$
|
15,474,589
|
|
|
$
|
446,217
|
|
|
$
|
15,920,806
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,228,202
|
|
|
|
|
1,228,202
|
|
|
24,437
|
|
|
1,252,639
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(191,562
|
)
|
|
(191,562
|
)
|
|
(2,285
|
)
|
|
(193,847
|
)
|
|
Purchases of Class A shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
661
|
|
|
(626,116
|
)
|
|
(3,672
|
)
|
|
|
|
|
|
(625,455
|
)
|
|
(661
|
)
|
|
(626,116
|
)
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
248,055
|
|
|
42,811
|
|
|
|
|
|
|
|
|
|
|
290,866
|
|
|
|
|
290,866
|
|
|
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
(572
|
)
|
|
|
|
|
|
|
|
|
|
(572
|
)
|
|
|
|
(572
|
)
|
|
Issuances of Class A shares for employee share programs
|
|
|
|
|
|
|
1,791
|
|
|
|
|
|
|
(24,614
|
)
|
|
264,298
|
|
|
111,928
|
|
|
617
|
|
|
(2,809
|
)
|
|
|
|
348,803
|
|
|
362
|
|
|
349,165
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
18,760
|
|
|
|
|
|
|
|
|
(527,043
|
)
|
|
|
|
(508,283
|
)
|
|
(630
|
)
|
|
(508,913
|
)
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,982
|
)
|
|
|
|
|
|
|
|
|
|
(1,982
|
)
|
|
1,599
|
|
|
(383
|
)
|
|
Balance as of May 31, 2020
|
$
|
57
|
|
|
40
|
|
|
$
|
15
|
|
|
663,533
|
|
|
$
|
—
|
|
|
585
|
|
|
$
|
1,337,761
|
|
|
$
|
7,190,179
|
|
|
$
|
(3,085,444
|
)
|
|
(27,606
|
)
|
|
$
|
12,565,857
|
|
|
$
|
(1,993,819
|
)
|
|
$
|
16,014,606
|
|
|
$
|
469,039
|
|
|
$
|
16,483,645
|
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ACCENTURE PLC
CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT
For the Three Months Ended May 31, 2019
(In thousands of U.S. dollars and share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
Shares
|
|
Class A
Ordinary
Shares
|
|
Class X
Ordinary
Shares
|
|
Restricted
Share
Units
|
|
Additional
Paid-in
Capital
|
|
Treasury Shares
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Accenture plc
Shareholders’
Equity
|
|
Noncontrolling
Interests
|
|
Total
Shareholders’
Equity
|
|
|
$
|
|
No.
Shares
|
|
$
|
|
No.
Shares
|
|
$
|
|
No.
Shares
|
|
|
|
$
|
|
No.
Shares
|
|
|
|
|
|
|
Balance as of February 28, 2019
|
$
|
57
|
|
|
40
|
|
|
$
|
15
|
|
|
670,313
|
|
|
$
|
—
|
|
|
651
|
|
|
$
|
954,613
|
|
|
$
|
5,783,062
|
|
|
$
|
(3,357,665
|
)
|
|
(32,439
|
)
|
|
$
|
11,421,964
|
|
|
$
|
(1,465,013
|
)
|
|
$
|
13,337,033
|
|
|
$
|
391,512
|
|
|
$
|
13,728,545
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,249,516
|
|
|
|
|
1,249,516
|
|
|
19,133
|
|
|
1,268,649
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,496
|
)
|
|
(1,496
|
)
|
|
(4,188
|
)
|
|
(5,684
|
)
|
|
Purchases of Class A shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
568
|
|
|
(485,625
|
)
|
|
(2,792
|
)
|
|
|
|
|
|
(485,057
|
)
|
|
(568
|
)
|
|
(485,625
|
)
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
226,158
|
|
|
37,516
|
|
|
|
|
|
|
|
|
|
|
263,674
|
|
|
|
|
263,674
|
|
|
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
(2,829
|
)
|
|
|
|
|
|
|
|
|
|
(2,829
|
)
|
|
|
|
|
(2,829
|
)
|
|
Issuances of Class A shares for employee share programs
|
|
|
|
|
|
|
1,523
|
|
|
|
|
|
|
(16,437
|
)
|
|
242,228
|
|
|
82,280
|
|
|
551
|
|
|
(249
|
)
|
|
|
|
307,822
|
|
|
355
|
|
|
308,177
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
31,649
|
|
|
|
|
|
|
|
|
|
(961,914
|
)
|
|
|
|
(930,265
|
)
|
|
(1,250
|
)
|
|
(931,515
|
)
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,074
|
)
|
|
|
|
|
|
|
|
|
|
(1,074
|
)
|
|
640
|
|
|
(434
|
)
|
|
Balance as of May 31, 2019
|
$
|
57
|
|
|
40
|
|
|
$
|
15
|
|
|
671,836
|
|
|
$
|
—
|
|
|
637
|
|
|
$
|
1,195,983
|
|
|
$
|
6,059,471
|
|
|
$
|
(3,761,010
|
)
|
|
(34,680
|
)
|
|
$
|
11,709,317
|
|
|
$
|
(1,466,509
|
)
|
|
$
|
13,737,324
|
|
|
$
|
405,634
|
|
|
$
|
14,142,958
|
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ACCENTURE PLC
CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT
For the Nine Months Ended May 31, 2020
(In thousands of U.S. dollars and share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
Shares
|
|
Class A
Ordinary
Shares
|
|
Class X
Ordinary
Shares
|
|
Restricted
Share
Units
|
|
Additional
Paid-in
Capital
|
|
Treasury Shares
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Accenture plc
Shareholders’
Equity
|
|
Noncontrolling
Interests
|
|
Total
Shareholders’
Equity
|
|
|
$
|
|
No.
Shares
|
|
$
|
|
No.
Shares
|
|
$
|
|
No.
Shares
|
|
|
|
$
|
|
No.
Shares
|
|
|
|
|
|
|
Balance as of August 31, 2019
|
$
|
57
|
|
|
40
|
|
|
$
|
15
|
|
|
654,739
|
|
|
$
|
—
|
|
|
609
|
|
|
$
|
1,411,903
|
|
|
$
|
5,804,448
|
|
|
$
|
(1,388,376
|
)
|
|
(19,005
|
)
|
|
$
|
10,421,538
|
|
|
$
|
(1,840,577
|
)
|
|
$
|
14,409,008
|
|
|
$
|
418,683
|
|
|
$
|
14,827,691
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,819,910
|
|
|
|
|
3,819,910
|
|
|
59,979
|
|
|
3,879,889
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(153,242
|
)
|
|
(153,242
|
)
|
|
(2,262
|
)
|
|
(155,504
|
)
|
|
Purchases of Class A shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,527
|
|
|
(2,318,768
|
)
|
|
(12,176
|
)
|
|
|
|
|
|
(2,316,241
|
)
|
|
(2,527
|
)
|
|
(2,318,768
|
)
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
858,578
|
|
|
79,522
|
|
|
|
|
|
|
|
|
|
|
938,100
|
|
|
|
|
938,100
|
|
|
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
(7,187
|
)
|
|
|
|
|
|
|
|
|
|
(7,187
|
)
|
|
|
|
(7,187
|
)
|
|
Issuances of Class A shares for employee share programs
|
|
|
|
|
|
|
8,794
|
|
|
|
|
|
|
(989,782
|
)
|
|
1,308,659
|
|
|
621,700
|
|
|
3,575
|
|
|
(91,917
|
)
|
|
|
|
848,660
|
|
|
905
|
|
|
849,565
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
57,062
|
|
|
|
|
|
|
|
|
(1,583,674
|
)
|
|
|
|
(1,526,612
|
)
|
|
(1,920
|
)
|
|
(1,528,532
|
)
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,210
|
|
|
|
|
|
|
|
|
|
|
|
2,210
|
|
|
(3,819
|
)
|
|
(1,609
|
)
|
|
Balance as of May 31, 2020
|
$
|
57
|
|
|
40
|
|
|
$
|
15
|
|
|
663,533
|
|
|
$
|
—
|
|
|
585
|
|
|
$
|
1,337,761
|
|
|
$
|
7,190,179
|
|
|
$
|
(3,085,444
|
)
|
|
(27,606
|
)
|
|
$
|
12,565,857
|
|
|
$
|
(1,993,819
|
)
|
|
$
|
16,014,606
|
|
|
$
|
469,039
|
|
|
$
|
16,483,645
|
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ACCENTURE PLC
CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT
For the Nine Months Ended May 31, 2019
(In thousands of U.S. dollars and share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
Shares
|
|
Class A
Ordinary
Shares
|
|
Class X
Ordinary
Shares
|
|
Restricted
Share
Units
|
|
Additional
Paid-in
Capital
|
|
Treasury Shares
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Accenture plc
Shareholders’
Equity
|
|
Noncontrolling
Interests
|
|
Total
Shareholders’
Equity
|
|
|
$
|
|
No.
Shares
|
|
$
|
|
No.
Shares
|
|
$
|
|
No.
Shares
|
|
|
|
$
|
|
No.
Shares
|
|
|
|
|
|
|
Balance as of August 31, 2018
|
$
|
57
|
|
|
40
|
|
|
$
|
15
|
|
|
663,328
|
|
|
$
|
—
|
|
|
656
|
|
|
$
|
1,234,623
|
|
|
$
|
4,870,764
|
|
|
$
|
(2,116,948
|
)
|
|
(24,333
|
)
|
|
$
|
7,952,413
|
|
|
$
|
(1,576,171
|
)
|
|
$
|
10,364,753
|
|
|
$
|
359,835
|
|
|
$
|
10,724,588
|
|
|
Cumulative effect adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,134,818
|
|
|
|
|
2,134,818
|
|
|
3,158
|
|
|
2,137,976
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,648,685
|
|
|
|
|
3,648,685
|
|
|
52,008
|
|
|
3,700,693
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,662
|
|
|
109,662
|
|
|
(4,859
|
)
|
|
104,803
|
|
|
Purchases of Class A shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,841
|
|
|
(2,268,189
|
)
|
|
(14,316
|
)
|
|
|
|
|
|
(2,265,348
|
)
|
|
(2,841
|
)
|
|
(2,268,189
|
)
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
787,633
|
|
|
69,319
|
|
|
|
|
|
|
|
|
|
|
856,952
|
|
|
|
|
856,952
|
|
|
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
(16,399
|
)
|
|
|
|
|
|
|
|
|
|
(16,399
|
)
|
|
|
|
(16,399
|
)
|
|
Issuances of Class A shares for employee share programs
|
|
|
|
|
|
|
8,508
|
|
|
|
|
|
|
(884,308
|
)
|
|
1,134,959
|
|
|
624,127
|
|
|
3,969
|
|
|
(121,250
|
)
|
|
|
|
753,528
|
|
|
926
|
|
|
754,454
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
58,035
|
|
|
|
|
|
|
|
|
(1,919,760
|
)
|
|
|
|
(1,861,725
|
)
|
|
(2,628
|
)
|
|
(1,864,353
|
)
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,013
|
)
|
|
|
|
|
|
14,411
|
|
|
|
|
12,398
|
|
|
35
|
|
|
12,433
|
|
|
Balance as of May 31, 2019
|
$
|
57
|
|
|
40
|
|
|
$
|
15
|
|
|
671,836
|
|
|
$
|
—
|
|
|
637
|
|
|
$
|
1,195,983
|
|
|
$
|
6,059,471
|
|
|
$
|
(3,761,010
|
)
|
|
(34,680
|
)
|
|
$
|
11,709,317
|
|
|
$
|
(1,466,509
|
)
|
|
$
|
13,737,324
|
|
|
$
|
405,634
|
|
|
$
|
14,142,958
|
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ACCENTURE PLC
CONSOLIDATED CASH FLOWS STATEMENTS
For the Nine Months Ended May 31, 2020 and 2019
(In thousands of U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2020
|
|
May 31, 2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net income
|
$
|
3,879,889
|
|
|
$
|
3,700,693
|
|
|
Adjustments to reconcile Net income to Net cash provided by (used in) operating activities —
|
|
|
|
|
Depreciation, amortization and other
|
1,286,234
|
|
|
652,592
|
|
|
Share-based compensation expense
|
938,100
|
|
|
856,952
|
|
|
Deferred tax expense (benefit)
|
128,245
|
|
|
(47,130
|
)
|
|
Other, net
|
(142,943
|
)
|
|
(85,725
|
)
|
|
Change in assets and liabilities, net of acquisitions —
|
|
|
|
|
Receivables and contract assets, current and non-current
|
(96,365
|
)
|
|
(493,733
|
)
|
|
Other current and non-current assets
|
(483,825
|
)
|
|
(373,142
|
)
|
|
Accounts payable
|
(245,718
|
)
|
|
94,144
|
|
|
Deferred revenues, current and non-current
|
263,274
|
|
|
342,633
|
|
|
Accrued payroll and related benefits
|
(475,183
|
)
|
|
(67,970
|
)
|
|
Income taxes payable, current and non-current
|
74,338
|
|
|
(52,518
|
)
|
|
Other current and non-current liabilities
|
(67,028
|
)
|
|
(16,096
|
)
|
|
Net cash provided by (used in) operating activities
|
5,059,018
|
|
|
4,510,700
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Purchases of property and equipment
|
(410,414
|
)
|
|
(357,749
|
)
|
|
Purchases of businesses and investments, net of cash acquired
|
(1,326,366
|
)
|
|
(1,055,915
|
)
|
|
Proceeds from sales of businesses and investments
|
84,886
|
|
|
27,915
|
|
|
Other investing, net
|
3,717
|
|
|
6,041
|
|
|
Net cash provided by (used in) investing activities
|
(1,648,177
|
)
|
|
(1,379,708
|
)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Proceeds from issuance of shares
|
849,565
|
|
|
754,453
|
|
|
Purchases of shares
|
(2,325,955
|
)
|
|
(2,284,587
|
)
|
|
Proceeds from (repayments of) long-term debt, net
|
(207
|
)
|
|
(983
|
)
|
|
Cash dividends paid
|
(1,528,532
|
)
|
|
(1,864,353
|
)
|
|
Other, net
|
(30,421
|
)
|
|
(20,683
|
)
|
|
Net cash provided by (used in) financing activities
|
(3,035,550
|
)
|
|
(3,416,153
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(59,883
|
)
|
|
(7,041
|
)
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
315,408
|
|
|
(292,202
|
)
|
|
CASH AND CASH EQUIVALENTS, beginning of period
|
6,126,853
|
|
|
5,061,360
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
$
|
6,442,261
|
|
|
$
|
4,769,158
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
Income taxes paid, net
|
$
|
993,848
|
|
|
$
|
1,052,517
|
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited interim Consolidated Financial Statements of Accenture plc and its controlled subsidiary companies have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. We use the terms “Accenture,” “we” and “our” in the Notes to Consolidated Financial Statements to refer to Accenture plc and its subsidiaries. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended August 31, 2019 included in our Annual Report on Form 10-K filed with the SEC on October 29, 2019.
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that we may undertake in the future, actual results may differ from those estimates. The Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The results of operations for the three and nine months ended May 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2020.
Effective March 1, 2020, we began managing our business under a new growth model through our three geographic markets, North America, Europe and Growth Markets, which became our reportable segments in the third quarter of fiscal 2020. Prior to this change, our reportable segments were our five operating groups, Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources. See Note 6 (Goodwill and Intangible Assets) and Note 12 (Segment Reporting) to these Consolidated Financial Statements for further details regarding the change in our reportable segments.
Allowance for Client Receivables
As of May 31, 2020 and August 31, 2019, total allowance recorded for client receivables was $37,468 and $45,538, respectively.
Depreciation and Amortization
Depreciation expense was $119,148 and $338,830 for the three and nine months ended May 31, 2020, respectively, and $109,398 and $322,746 for the three and nine months ended May 31, 2019, respectively. As of May 31, 2020 and August 31, 2019, total accumulated depreciation was $2,238,805 and $1,956,029, respectively. Deferred transition amortization expense was $71,278 and $217,946 for the three and nine months ended May 31, 2020, respectively, and $67,225 and $204,313 for the three and nine months ended May 31, 2019, respectively. See Note 6 (Goodwill and Intangible Assets) to these Consolidated Financial Statements for intangible asset amortization balances.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
Recently Adopted Accounting Pronouncements
Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-02 and related updates (“Topic 842”)
On September 1, 2019, we adopted FASB ASU No. 2016-02, Leases, and related updates (“Topic 842”) using the effective date method. Prior period amounts were not adjusted. The primary impact of adoption is the requirement for lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by both operating and finance leases. Enhanced quantitative and qualitative disclosures about leasing arrangements are also required. We elected the package of practical expedients which does not require reassessment of prior conclusions related to identifying leases, lease classification or initial direct costs. We also elected the practical expedient to combine lease and nonlease components, accounting for the combined components as a single lease component, for our office real estate and automobile leases. The standard did not have a material impact on our Consolidated Income Statement.
The impact of adopting Topic 842 on our Consolidated Balance Sheets was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
Balance as of August 31, 2019
|
|
Adjustments due to ASU 2016-02 (Topic 842)
|
|
Balance as of September 1, 2019
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
Other current assets
|
$
|
1,225,364
|
|
|
$
|
(38,666
|
)
|
|
$
|
1,186,698
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
Lease assets
|
—
|
|
|
3,169,608
|
|
|
3,169,608
|
|
|
Other non-current assets
|
1,400,292
|
|
|
(10,333
|
)
|
|
1,389,959
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
Lease liabilities
|
—
|
|
|
699,399
|
|
|
699,399
|
|
|
Other accrued liabilities
|
951,450
|
|
|
(703
|
)
|
|
950,747
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
Lease liabilities
|
—
|
|
|
2,666,344
|
|
|
2,666,344
|
|
|
Other non-current liabilities
|
526,988
|
|
|
(244,431
|
)
|
|
282,557
|
|
See Note 7 (Leases) to these Consolidated Financial Statements for further details.
FASB ASU No. 2018-15 (“Subtopic 350-40”)
On September 1, 2019, we prospectively adopted FASB ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 clarifies and aligns the accounting and capitalization of implementation costs in cloud computing arrangements that are service arrangements with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC No. 350-40. Implementation costs that are currently capitalized in software licensing arrangements (e.g. costs to configure the software) will be capitalized in cloud computing arrangements, and costs expensed in software license arrangements (e.g. data conversion, training, and business process re-engineering) will be expensed in cloud computing arrangements. The adoption did not have a material impact on our Consolidated Financial Statements.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
2. REVENUES
Disaggregation of Revenue
See Note 12 (Segment Reporting) to these Consolidated Financial Statements for our disaggregated revenues.
Remaining Performance Obligations
We had remaining performance obligations of approximately $19 billion and $20 billion as of May 31, 2020 and August 31, 2019, respectively. Our remaining performance obligations represent the amount of transaction price for which work has not been performed and revenue has not been recognized. The majority of our contracts are terminable by the client on short notice with little or no termination penalties, and some without notice. Under Topic 606, only the non-cancelable portion of these contracts is included in our performance obligations. Additionally, our performance obligations only include variable consideration if we assess it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is resolved. Based on the terms of our contracts, a significant portion of what we consider contract bookings is not included in our remaining performance obligations. We expect to recognize approximately 36% of our remaining performance obligations as of May 31, 2020 as revenue in fiscal 2020, an additional 36% in fiscal 2021, and the balance thereafter.
Contract Estimates
Adjustments in contract estimates related to performance obligations satisfied or partially satisfied in prior periods were immaterial for the three and nine months ended May 31, 2020 and May 31, 2019, respectively.
Contract Balances
Deferred transition revenues were $638,821 and $563,245 as of May 31, 2020 and August 31, 2019, respectively, and are included in Non-current deferred revenues. Costs related to these activities are also deferred and are expensed as the services are provided. Generally, deferred amounts are protected in the event of early termination of the contract and are monitored regularly for impairment. Impairment losses are recorded when projected remaining undiscounted operating cash flows of the related contract are not sufficient to recover the carrying amount of contract assets. Deferred transition costs were $704,282 and $681,492 as of May 31, 2020 and August 31, 2019, respectively, and are included in Deferred contract costs.
The following table provides information about the balances of our Receivables, Contract assets and Contract liabilities (Deferred revenues):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of May 31, 2020
|
|
As of August 31, 2019
|
|
Receivables, net of allowance
|
$
|
7,677,366
|
|
|
$
|
7,467,338
|
|
|
Contract assets (current)
|
668,235
|
|
|
627,733
|
|
|
Receivables and contract assets (current)
|
8,345,601
|
|
|
8,095,071
|
|
|
Contract assets (non-current)
|
52,701
|
|
|
71,002
|
|
|
Deferred revenues (current)
|
3,536,521
|
|
|
3,188,835
|
|
|
Deferred revenues (non-current)
|
638,821
|
|
|
565,224
|
|
Changes in the contract asset and liability balances during the nine months ended May 31, 2020, were a result of normal business activity and not materially impacted by any other factors.
Revenues recognized during the three and nine months ended May 31, 2020 that were included in Deferred revenues as of February 29, 2020 and August 31, 2019 were $1.9 billion and $2.6 billion, respectively. Revenues recognized during the three and nine months ended May 31, 2019 that were included in Deferred revenues as of February 28, 2019 and September 1, 2018 were $1.7 billion and $2.7 billion, respectively.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
3. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
May 31, 2020
|
|
May 31, 2019
|
|
May 31, 2020
|
|
May 31, 2019
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
Net income attributable to Accenture plc
|
$
|
1,228,202
|
|
|
$
|
1,249,516
|
|
|
$
|
3,819,910
|
|
|
$
|
3,648,685
|
|
|
Basic weighted average Class A ordinary shares
|
636,146,240
|
|
|
637,831,341
|
|
|
636,445,172
|
|
|
638,439,707
|
|
|
Basic earnings per share
|
$
|
1.93
|
|
|
$
|
1.96
|
|
|
$
|
6.00
|
|
|
$
|
5.72
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
Net income attributable to Accenture plc
|
$
|
1,228,202
|
|
|
$
|
1,249,516
|
|
|
$
|
3,819,910
|
|
|
$
|
3,648,685
|
|
|
Net income attributable to noncontrolling interest in Accenture Canada Holdings Inc. (1)
|
1,518
|
|
|
1,676
|
|
|
4,791
|
|
|
5,213
|
|
|
Net income for diluted earnings per share calculation
|
$
|
1,229,720
|
|
|
$
|
1,251,192
|
|
|
$
|
3,824,701
|
|
|
$
|
3,653,898
|
|
|
Basic weighted average Class A ordinary shares
|
636,146,240
|
|
|
637,831,341
|
|
|
636,445,172
|
|
|
638,439,707
|
|
|
Class A ordinary shares issuable upon redemption/exchange of noncontrolling interest (1)
|
785,993
|
|
|
855,508
|
|
|
797,551
|
|
|
912,175
|
|
|
Diluted effect of employee compensation related to Class A ordinary shares
|
8,651,386
|
|
|
10,531,355
|
|
|
10,647,446
|
|
|
10,680,792
|
|
|
Diluted effect of share purchase plans related to Class A ordinary shares
|
24,295
|
|
|
79,513
|
|
|
135,500
|
|
|
112,257
|
|
|
Diluted weighted average Class A ordinary shares
|
645,607,914
|
|
|
649,297,717
|
|
|
648,025,669
|
|
|
650,144,931
|
|
|
Diluted earnings per share
|
$
|
1.90
|
|
|
$
|
1.93
|
|
|
$
|
5.90
|
|
|
$
|
5.62
|
|
_______________
|
|
|
|
(1)
|
Diluted earnings per share assumes the exchange of all Accenture Canada Holdings Inc. exchangeable shares for Accenture plc Class A ordinary shares on a one-for-one basis. The income effect does not take into account “Net income attributable to noncontrolling interests - other,” since those shares are not redeemable or exchangeable for Accenture plc Class A ordinary shares.
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
4. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss attributable to Accenture plc:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
May 31, 2020
|
|
May 31, 2019
|
|
May 31, 2020
|
|
May 31, 2019
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
(1,217,693
|
)
|
|
$
|
(1,042,240
|
)
|
|
$
|
(1,207,975
|
)
|
|
$
|
(1,075,268
|
)
|
|
Foreign currency translation
|
(106,621
|
)
|
|
(108,056
|
)
|
|
(115,154
|
)
|
|
(74,444
|
)
|
|
Income tax benefit (expense)
|
3,698
|
|
|
1,115
|
|
|
2,477
|
|
|
(246
|
)
|
|
Portion attributable to noncontrolling interests
|
2,173
|
|
|
4,321
|
|
|
2,209
|
|
|
5,098
|
|
|
Foreign currency translation, net of tax
|
(100,750
|
)
|
|
(102,620
|
)
|
|
(110,468
|
)
|
|
(69,592
|
)
|
|
Ending balance
|
(1,318,443
|
)
|
|
(1,144,860
|
)
|
|
(1,318,443
|
)
|
|
(1,144,860
|
)
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plans
|
|
|
|
|
|
|
|
|
Beginning balance
|
(653,766
|
)
|
|
(392,293
|
)
|
|
(672,323
|
)
|
|
(419,284
|
)
|
|
Reclassifications into net periodic pension and
post-retirement expense (1)
|
13,718
|
|
|
8,389
|
|
|
40,330
|
|
|
39,718
|
|
|
Income tax benefit (expense)
|
(3,001
|
)
|
|
(2,492
|
)
|
|
(11,033
|
)
|
|
(6,793
|
)
|
|
Portion attributable to noncontrolling interests
|
(13
|
)
|
|
(7
|
)
|
|
(36
|
)
|
|
(44
|
)
|
|
Defined benefit plans, net of tax
|
10,704
|
|
|
5,890
|
|
|
29,261
|
|
|
32,881
|
|
|
Ending balance
|
(643,062
|
)
|
|
(386,403
|
)
|
|
(643,062
|
)
|
|
(386,403
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
Beginning balance
|
68,474
|
|
|
(32,356
|
)
|
|
38,993
|
|
|
(84,010
|
)
|
|
Unrealized gain (loss)
|
(109,481
|
)
|
|
142,416
|
|
|
(32,918
|
)
|
|
219,441
|
|
|
Reclassification adjustments into Cost of services
|
(4,547
|
)
|
|
(19,512
|
)
|
|
(43,362
|
)
|
|
(25,772
|
)
|
|
Income tax benefit (expense)
|
12,387
|
|
|
(26,395
|
)
|
|
4,156
|
|
|
(45,436
|
)
|
|
Portion attributable to noncontrolling interests
|
125
|
|
|
(127
|
)
|
|
89
|
|
|
(197
|
)
|
|
Cash flow hedges, net of tax
|
(101,516
|
)
|
|
96,382
|
|
|
(72,035
|
)
|
|
148,036
|
|
|
Ending balance (2)
|
(33,042
|
)
|
|
64,026
|
|
|
(33,042
|
)
|
|
64,026
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
|
Beginning balance
|
728
|
|
|
1,876
|
|
|
728
|
|
|
2,391
|
|
|
Unrealized gain (loss)
|
—
|
|
|
(1,454
|
)
|
|
—
|
|
|
(1,970
|
)
|
|
Income tax benefit (expense)
|
—
|
|
|
305
|
|
|
—
|
|
|
305
|
|
|
Portion attributable to noncontrolling interests
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
Investments, net of tax
|
—
|
|
|
(1,148
|
)
|
|
—
|
|
|
(1,663
|
)
|
|
Ending balance
|
728
|
|
|
728
|
|
|
728
|
|
|
728
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
$
|
(1,993,819
|
)
|
|
$
|
(1,466,509
|
)
|
|
$
|
(1,993,819
|
)
|
|
$
|
(1,466,509
|
)
|
_______________
|
|
|
|
(1)
|
Reclassifications into net periodic pension and post-retirement expense are recognized in Cost of services, Sales and marketing, General and administrative costs and non-operating expenses.
|
|
|
|
|
(2)
|
As of May 31, 2020, $4,372 of net unrealized gains related to derivatives designated as cash flow hedges is expected to be reclassified into Cost of services in the next twelve months.
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
5. BUSINESS COMBINATIONS
During the nine months ended May 31, 2020, we completed individually immaterial acquisitions for total consideration of $1,303,380, net of cash acquired. The pro forma effects of these acquisitions on our operations were not material.
6. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill by reportable operating segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
2019
|
|
Additions/
Adjustments
|
|
Foreign
Currency
Translation
|
|
May 31,
2020
|
|
GEOGRAPHIC MARKETS (1)
|
|
|
|
|
|
|
|
|
North America
|
3,973,356
|
|
|
529,405
|
|
|
(1,492
|
)
|
|
4,501,269
|
|
|
Europe
|
1,569,223
|
|
|
371,680
|
|
|
2,720
|
|
|
1,943,623
|
|
|
Growth Markets
|
662,971
|
|
|
250,801
|
|
|
(24,070
|
)
|
|
889,702
|
|
|
Total
|
$
|
6,205,550
|
|
|
$
|
1,151,886
|
|
|
$
|
(22,842
|
)
|
|
$
|
7,334,594
|
|
_______________
|
|
|
|
(1)
|
Effective March 1, 2020, we began managing our business under a new growth model through our three geographic markets, which became our reportable segments in the third quarter of fiscal 2020.
|
Goodwill includes immaterial adjustments related to prior period acquisitions.
Intangible Assets
Our definite-lived intangible assets by major asset class were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31, 2019
|
|
May 31, 2020
|
|
Intangible Asset Class
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Customer-related
|
|
$
|
1,013,976
|
|
|
$
|
(358,130
|
)
|
|
$
|
655,846
|
|
|
$
|
1,268,841
|
|
|
$
|
(444,315
|
)
|
|
$
|
824,526
|
|
|
Technology
|
|
119,686
|
|
|
(45,851
|
)
|
|
73,835
|
|
|
146,815
|
|
|
(50,697
|
)
|
|
96,118
|
|
|
Patents
|
|
127,796
|
|
|
(66,167
|
)
|
|
61,629
|
|
|
128,070
|
|
|
(66,048
|
)
|
|
62,022
|
|
|
Other
|
|
78,344
|
|
|
(28,875
|
)
|
|
49,469
|
|
|
82,736
|
|
|
(33,396
|
)
|
|
49,340
|
|
|
Total
|
|
$
|
1,339,802
|
|
|
$
|
(499,023
|
)
|
|
$
|
840,779
|
|
|
$
|
1,626,462
|
|
|
$
|
(594,456
|
)
|
|
$
|
1,032,006
|
|
Total amortization related to our intangible assets was $62,883 and $172,054 for the three and nine months ended May 31, 2020, respectively. Total amortization related to our intangible assets was $44,686 and $125,533 for the three and nine months ended May 31, 2019, respectively. Estimated future amortization related to intangible assets held as of May 31, 2020 is as follows:
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Estimated Amortization
|
|
Remainder of 2020
|
|
$
|
62,762
|
|
|
2021
|
|
220,067
|
|
|
2022
|
|
177,937
|
|
|
2023
|
|
159,124
|
|
|
2024
|
|
132,463
|
|
|
Thereafter
|
|
279,653
|
|
|
Total
|
|
$
|
1,032,006
|
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
7. LEASES
We account for leases in accordance with Topic 842. See Note 1 (Basis of Presentation) to these Consolidated Financial Statements for further information on our adoption.
As a lessee, substantially all of our lease obligation is for office real estate. Our significant judgments used in determining our lease obligation include whether a contract is or contains a lease and the determination of the discount rate used to calculate the lease liability.
Our leases may include the option to extend or terminate before the end of the contractual term and are often non-cancelable or cancelable only by the payment of penalties. Our lease assets and liabilities include these options in the lease term when it is reasonably certain that they will be exercised. In certain cases, we sublease excess office real estate to third-party tenants.
Lease assets and liabilities recognized at the lease commencement date are determined predominantly as the present value of the payments due over the lease term. Since we cannot determine the implicit rate in our leases, we use our incremental borrowing rate on that date to calculate the present value. Our incremental borrowing rate approximates the rate at which we could borrow, on a secured basis for a similar term, an amount equal to our lease payments in a similar economic environment.
Effective September 1, 2019, when we are the lessee, all leases are recognized as lease liabilities and associated lease assets on the Consolidated Balance Sheet. Lease liabilities represent our obligation to make payments arising from the lease. Lease assets represent our right to use an underlying asset for the lease term and may also include advance payments, initial direct costs or lease incentives. Fixed and variable payments that depend upon an index or rate, such as the Consumer Price Index (CPI), are included in the recognition of lease assets and liabilities at the commencement-date rate. Other variable payments, such as common area maintenance, property and other taxes, utilities and insurance that are based on the lessor’s cost, are recognized in the Consolidated Income Statement in the period incurred.
As of May 31, 2020, we had no material finance leases. Operating lease expense is recorded on a straight-line basis over the lease term. Lease costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended May 31, 2020
|
|
Nine Months Ended May 31, 2020
|
|
Operating lease cost
|
$
|
191,351
|
|
|
$
|
557,404
|
|
|
Variable lease cost
|
42,537
|
|
|
137,940
|
|
|
Sublease income
|
(6,831
|
)
|
|
(19,391
|
)
|
|
|
$
|
227,057
|
|
|
$
|
675,953
|
|
Supplemental information related to operating lease transactions was as follows:
|
|
|
|
|
|
|
|
|
Nine Months Ended May 31, 2020
|
|
Lease liability payments
|
$
|
535,549
|
|
|
Lease assets obtained in exchange for liabilities
|
$
|
486,739
|
|
As of May 31, 2020, our operating leases had a weighted average remaining lease term of 7.5 years and a weighted average discount rate of 4.3%.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
The following maturity analysis presents future undiscounted cash outflows for operating leases as of May 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Payments
|
|
Sublease Receipts
|
|
2020 (Remainder)
|
$
|
179,590
|
|
|
$
|
(5,479
|
)
|
|
2021
|
744,328
|
|
|
(16,026
|
)
|
|
2022
|
626,354
|
|
|
(8,061
|
)
|
|
2023
|
523,343
|
|
|
(7,618
|
)
|
|
2024
|
439,048
|
|
|
(7,181
|
)
|
|
Thereafter
|
1,474,890
|
|
|
(31,050
|
)
|
|
Total lease payments (receipts)
|
3,987,553
|
|
|
$
|
(75,415
|
)
|
|
Less interest
|
(544,371
|
)
|
|
|
|
Total lease liabilities
|
$
|
3,443,182
|
|
|
|
As of May 31, 2020, we have entered into leases that have not yet commenced with future lease payments of $474 million that are not reflected in the table above. These leases are primarily related to office real estate and will commence in or before fiscal year 2022 with lease terms of up to 16 years.
Future minimum rental commitments under non-cancelable operating leases as of August 31, 2019, which were accounted for in accordance with Topic 840, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Payments
|
|
Sublease Receipts
|
|
2020
|
$
|
688,020
|
|
|
$
|
(24,884
|
)
|
|
2021
|
597,307
|
|
|
(17,908
|
)
|
|
2022
|
516,544
|
|
|
(8,535
|
)
|
|
2023
|
428,481
|
|
|
(7,541
|
)
|
|
2024
|
363,107
|
|
|
(7,184
|
)
|
|
Thereafter
|
1,246,097
|
|
|
(30,708
|
)
|
|
|
$
|
3,839,556
|
|
|
$
|
(96,760
|
)
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
8. MATERIAL TRANSACTIONS AFFECTING SHAREHOLDERS’ EQUITY
Dividends
Our dividend activity during the nine months ended May 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend Per
Share
|
|
Accenture plc Class A
Ordinary Shares
|
|
Accenture Canada Holdings
Inc. Exchangeable Shares
|
|
Total Cash
Outlay
|
|
Dividend Payment Date
|
|
|
Record Date
|
|
Cash Outlay
|
|
Record Date
|
|
Cash Outlay
|
|
|
November 15, 2019
|
|
$
|
0.80
|
|
|
October 17, 2019
|
|
$
|
507,725
|
|
|
October 15, 2019
|
|
$
|
656
|
|
|
$
|
508,381
|
|
|
February 14, 2020
|
|
$
|
0.80
|
|
|
January 16, 2020
|
|
$
|
510,604
|
|
|
January 14, 2020
|
|
$
|
634
|
|
|
$
|
511,238
|
|
|
May 15, 2020
|
|
$
|
0.80
|
|
|
April 16, 2020
|
|
$
|
508,283
|
|
|
April 14, 2020
|
|
$
|
630
|
|
|
$
|
508,913
|
|
|
Total Dividends
|
|
|
|
|
|
$
|
1,526,612
|
|
|
|
|
$
|
1,920
|
|
|
$
|
1,528,532
|
|
The payment of the cash dividends also resulted in the issuance of an immaterial number of additional restricted share units to holders of restricted share units.
Subsequent Event
On June 24, 2020, the Board of Directors of Accenture plc declared a quarterly cash dividend of $0.80 per share on its Class A ordinary shares for shareholders of record at the close of business on July 16, 2020 payable on August 14, 2020. The payment of the cash dividend will result in the issuance of an immaterial number of additional restricted share units to holders of restricted share units.
9. FINANCIAL INSTRUMENTS
Derivatives
In the normal course of business, we use derivative financial instruments to manage foreign currency exchange rate risk. Our derivative financial instruments consist of deliverable and non-deliverable foreign currency forward contracts.
Cash Flow Hedges
For a cash flow hedge, the effective portion of the change in estimated fair value of a hedging instrument is recorded in Accumulated other comprehensive loss as a separate component of Shareholders’ Equity and is reclassified into Cost of services in the Consolidated Income Statements during the period in which the hedged transaction is recognized. For information related to derivatives designated as cash flow hedges that were reclassified into Cost of services during the three and nine months ended May 31, 2020 and May 31, 2019, as well as those expected to be reclassified into Cost of services in the next 12 months, see Note 4 (Accumulated Other Comprehensive Loss) to these Consolidated Financial Statements.
Other Derivatives
Realized gains or losses and changes in the estimated fair value of foreign currency forward contracts that have not been designated as hedges were net gains of $17,132 and net losses of $38,026 for the three and nine months ended May 31, 2020, respectively, and net losses of $10,319 and $88,247 for the three and nine months ended May 31, 2019, respectively. Gains and losses on these contracts are recorded in Other income (expense), net in the Consolidated Income Statements and are offset by gains and losses on the related hedged items.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
Fair Value of Derivative Instruments
The notional and fair values of all derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31,
2020
|
|
August 31,
2019
|
|
Assets
|
|
|
|
|
Cash Flow Hedges
|
|
|
|
|
Other current assets
|
$
|
42,750
|
|
|
$
|
53,033
|
|
|
Other non-current assets
|
26,010
|
|
|
49,525
|
|
|
Other Derivatives
|
|
|
|
|
Other current assets
|
26,750
|
|
|
8,059
|
|
|
Total assets
|
$
|
95,510
|
|
|
$
|
110,617
|
|
|
Liabilities
|
|
|
|
|
Cash Flow Hedges
|
|
|
|
|
Other accrued liabilities
|
$
|
38,378
|
|
|
$
|
18,826
|
|
|
Other non-current liabilities
|
30,568
|
|
|
8,770
|
|
|
Other Derivatives
|
|
|
|
|
Other accrued liabilities
|
9,093
|
|
|
32,195
|
|
|
Total liabilities
|
$
|
78,039
|
|
|
$
|
59,791
|
|
|
Total fair value
|
$
|
17,471
|
|
|
$
|
50,826
|
|
|
Total notional value
|
$
|
8,766,370
|
|
|
$
|
8,709,917
|
|
We utilize standard counterparty master agreements containing provisions for the netting of certain foreign currency transaction obligations and for the set-off of certain obligations in the event of an insolvency of one of the parties to the transaction. In the Consolidated Balance Sheets, we record derivative assets and liabilities at gross fair value. The potential effect of netting derivative assets against liabilities under the counterparty master agreements was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31,
2020
|
|
August 31,
2019
|
|
Net derivative assets
|
$
|
59,781
|
|
|
$
|
88,811
|
|
|
Net derivative liabilities
|
42,310
|
|
|
37,985
|
|
|
Total fair value
|
$
|
17,471
|
|
|
$
|
50,826
|
|
Equity Securities Without Readily Determinable Fair Values
We hold investments in equity securities that do not have readily determinable fair values. We record these investments at cost and remeasure them to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was $133,222 and $131,675 as of May 31, 2020 and August 31, 2019, respectively.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
10. INCOME TAXES
We apply an estimated annual effective tax rate to our year-to-date operating results to determine the interim provision for income tax expense. In addition, we recognize taxes related to unusual or infrequent items or resulting from a change in judgment regarding a position taken in a prior year as discrete items in the interim period in which the event occurs.
Our effective tax rates for the three months ended May 31, 2020 and 2019 were 25.5% and 25.6%, respectively. The slightly lower effective tax rate for the three months ended May 31, 2020 included benefits from tax law changes offset by the phased-in effects of U.S. tax reform. Our effective tax rates for the nine months ended May 31, 2020 and 2019 were 22.3% and 21.1%, respectively. The effective tax rate for the nine months ended May 31, 2020 was higher primarily due to lower benefits from final determinations of prior year taxes and the phased-in effects of U.S. tax reform, partially offset by higher tax benefits from share-based payments.
11. COMMITMENTS AND CONTINGENCIES
Indemnifications and Guarantees
In the normal course of business and in conjunction with certain client engagements, we have entered into contractual arrangements through which we may be obligated to indemnify clients with respect to certain matters.
As of May 31, 2020 and August 31, 2019, our aggregate potential liability to our clients for expressly limited guarantees involving the performance of third parties was approximately $737,000 and $794,000, respectively, of which all but approximately $98,000 and $128,000, respectively, may be recovered from the other third parties if we are obligated to make payments to the indemnified parties as a consequence of a performance default by the other third parties. For arrangements with unspecified limitations, we cannot reasonably estimate the aggregate maximum potential liability, as it is inherently difficult to predict the maximum potential amount of such payments, due to the conditional nature and unique facts of each particular arrangement.
To date, we have not been required to make any significant payment under any of the arrangements described above. We have assessed the current status of performance/payment risk related to arrangements with limited guarantees, warranty obligations, unspecified limitations and/or indemnification provisions and believe that any potential payments would be immaterial to the Consolidated Financial Statements, as a whole.
Legal Contingencies
As of May 31, 2020, we or our present personnel had been named as a defendant in various litigation matters. We and/or our personnel also from time to time are involved in investigations by various regulatory or legal authorities concerning matters arising in the course of our business around the world. Based on the present status of these matters, including the putative class action lawsuit discussed below, management believes the range of reasonably possible losses in addition to amounts accrued, net of insurance recoveries, will not have a material effect on our results of operations or financial condition.
On July 24, 2019, Accenture was named in a putative class action lawsuit filed by consumers of Marriott International, Inc. (“Marriott”) in the U.S. District Court for the District of Maryland. The complaint alleges negligence by us, and seeks monetary damages, costs and attorneys’ fees and other related relief, relating to a data security incident involving unauthorized access to the reservations database of Starwood Worldwide Resorts, Inc. (“Starwood”), which was acquired by Marriott on September 23, 2016. Since 2009, we have provided certain IT infrastructure outsourcing services to Starwood. We believe the lawsuit is without merit and we will vigorously defend it. We cannot reasonably estimate a range of loss, if any, at this time.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
12. SEGMENT REPORTING
Operating segments are components of an enterprise where separate financial information is available and is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.
Our chief operating decision makers are our Chief Executive Officer and Chief Financial Officer. Our operating segments are managed separately because each operating segment represents a strategic business unit providing consulting and outsourcing services to clients across different industries.
Effective March 1, 2020, we began managing our business under a new growth model through our three geographic markets, North America, Europe and Growth Markets, which became our reportable segments in the third quarter of fiscal 2020. The change is designed to help us better serve our clients and continue to scale our business. Prior to this change, our reportable segments were our five operating groups, Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources, which we now refer to as our industry groups.
Amounts are attributed to geographic markets based on where clients are located. Information regarding our geographic markets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended May 31, 2020
|
North America
|
|
Europe
|
|
Growth Markets
|
|
Total
|
|
Revenues
|
$
|
5,239,275
|
|
|
$
|
3,574,995
|
|
|
$
|
2,177,035
|
|
|
$
|
10,991,305
|
|
|
Depreciation and amortization (2)
|
91,066
|
|
|
87,895
|
|
|
74,347
|
|
|
253,308
|
|
|
Operating income
|
720,997
|
|
|
535,463
|
|
|
456,273
|
|
|
1,712,733
|
|
|
Net assets as of May 31 (3)
|
3,141,914
|
|
|
1,236,004
|
|
|
549,324
|
|
|
4,927,242
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended May 31, 2019
|
North America
|
|
Europe
|
|
Growth Markets
|
|
Total
|
|
Revenues (1)
|
$
|
5,147,948
|
|
|
$
|
3,773,835
|
|
|
$
|
2,177,905
|
|
|
$
|
11,099,688
|
|
|
Depreciation and amortization (2)
|
74,759
|
|
|
73,994
|
|
|
72,556
|
|
|
221,309
|
|
|
Operating income
|
881,557
|
|
|
551,665
|
|
|
284,721
|
|
|
1,717,943
|
|
|
Net assets as of May 31 (3)
|
2,907,951
|
|
|
1,332,909
|
|
|
771,078
|
|
|
5,011,938
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended May 31, 2020
|
North America
|
|
Europe
|
|
Growth Markets
|
|
Total
|
|
Revenues
|
$
|
15,784,518
|
|
|
$
|
10,993,277
|
|
|
$
|
6,713,973
|
|
|
$
|
33,491,768
|
|
|
Depreciation and amortization (2)
|
253,018
|
|
|
248,448
|
|
|
227,364
|
|
|
728,830
|
|
|
Operating income
|
2,281,648
|
|
|
1,477,338
|
|
|
1,209,955
|
|
|
4,968,941
|
|
|
Net assets as of May 31 (3)
|
3,141,914
|
|
|
1,236,004
|
|
|
549,324
|
|
|
4,927,242
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended May 31, 2019
|
North America
|
|
Europe
|
|
Growth Markets
|
|
Total
|
|
Revenues (1)
|
$
|
14,758,046
|
|
|
$
|
11,125,999
|
|
|
$
|
6,275,318
|
|
|
$
|
32,159,363
|
|
|
Depreciation and amortization (2)
|
221,896
|
|
|
213,789
|
|
|
216,907
|
|
|
652,592
|
|
|
Operating income
|
2,266,963
|
|
|
1,596,776
|
|
|
869,842
|
|
|
4,733,581
|
|
|
Net assets as of May 31 (3)
|
2,907,951
|
|
|
1,332,909
|
|
|
771,078
|
|
|
5,011,938
|
|
_______________
|
|
|
|
(1)
|
Effective September 1, 2019 we revised the reporting of our geographic markets for the movement of one country from Growth Markets to Europe. Prior period amounts have been reclassified to conform with the current period presentation.
|
|
|
|
|
(2)
|
Amounts include depreciation on property and equipment and amortization of intangible assets controlled by each reportable segment, as well as an allocation for amounts they do not directly control.
|
|
|
|
|
(3)
|
We do not allocate total assets by reportable segment. Reportable segment assets directly attributable to a reportable segment and provided to the chief operating decision makers include receivables and current and non-current contract assets, deferred contract costs and current and non-current deferred revenues.
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)
Revenues by industry group and type of work is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
May 31, 2020
|
|
May 31, 2019
|
|
May 31, 2020
|
|
May 31, 2019
|
|
INDUSTRY GROUPS
|
|
|
|
|
|
|
|
|
Communications, Media & Technology
|
$
|
2,197,152
|
|
|
$
|
2,253,136
|
|
|
$
|
6,681,968
|
|
|
$
|
6,533,319
|
|
|
Financial Services
|
2,137,850
|
|
|
2,196,595
|
|
|
6,414,211
|
|
|
6,369,477
|
|
|
Health & Public Service
|
2,015,874
|
|
|
1,819,775
|
|
|
5,932,693
|
|
|
5,283,364
|
|
|
Products
|
2,998,903
|
|
|
3,077,227
|
|
|
9,376,984
|
|
|
8,912,588
|
|
|
Resources
|
1,636,606
|
|
|
1,747,977
|
|
|
5,071,450
|
|
|
5,040,143
|
|
|
Other
|
4,920
|
|
|
4,978
|
|
|
14,462
|
|
|
20,472
|
|
|
Total
|
$
|
10,991,305
|
|
|
$
|
11,099,688
|
|
|
$
|
33,491,768
|
|
|
$
|
32,159,363
|
|
|
TYPE OF WORK
|
|
|
|
|
|
|
|
|
Consulting
|
$
|
5,997,894
|
|
|
$
|
6,236,630
|
|
|
$
|
18,546,448
|
|
|
$
|
17,990,967
|
|
|
Outsourcing
|
4,993,411
|
|
|
4,863,058
|
|
|
14,945,320
|
|
|
14,168,396
|
|
|
Total
|
$
|
10,991,305
|
|
|
$
|
11,099,688
|
|
|
$
|
33,491,768
|
|
|
$
|
32,159,363
|
|
13. SUBSEQUENT EVENT
On June 17, 2020, we entered into a $1 billion 364-day syndicated loan facility, which expires in June 2021. This facility is in addition to our existing $1 billion syndicated loan facility, which expires in December 2024. No balances were outstanding under either credit facility at any time during fiscal 2020. In the event of a loan drawn against the new facility, the lenders have the option to require us to repay the loan by issuing public debt within 45 days of their request.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended August 31, 2019, and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended August 31, 2019.
We use the terms “Accenture,” “we,” “our” and “us” in this report to refer to Accenture plc and its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal year, which ends on August 31. For example, a reference to “fiscal 2020” means the 12-month period that will end on August 31, 2020. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.
We use the term “in local currency” so that certain financial results may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of business performance. Financial results “in local currency” are calculated by restating current period activity into U.S. dollars using the comparable prior year period’s foreign currency exchange rates. This approach is used for all results where the functional currency is not the U.S. dollar.
Disclosure Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our operations, results of operations and other matters that are based on our current expectations, estimates, assumptions and projections. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “positioned,” “outlook” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. Risks, uncertainties and other factors that might cause such differences, some of which could be material, include but are not limited to those identified below. For a discussion of risks and actions taken in response to the coronavirus (COVID-19) pandemic, see the “Overview” below and “Our results of operations have been significantly adversely affected and could in the future be materially adversely impacted by the COVID-19 pandemic.” under Item 1A, “Risk Factors.” Many of the following risks, uncertainties and other factors identified below are, and will be, amplified by the COVID-19 pandemic.
|
|
|
|
•
|
Our results of operations have been significantly adversely affected and could in the future be materially adversely impacted by the COVID-19 pandemic.
|
|
|
|
|
•
|
Our results of operations could be adversely affected by volatile, negative or uncertain economic and political conditions and the effects of these conditions on our clients’ businesses and levels of business activity.
|
|
|
|
|
•
|
Our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, including through the adaptation and expansion of our services and solutions in response to ongoing changes in technology and offerings, and a significant reduction in such demand or an inability to respond to the evolving technological environment could materially affect our results of operations.
|
|
|
|
|
•
|
If we are unable to keep our supply of skills and resources in balance with client demand around the world and attract and retain professionals with strong leadership skills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected.
|
|
|
|
|
•
|
We could face legal, reputational and financial risks if we fail to protect client and/or Accenture data from security breaches or cyberattacks.
|
|
|
|
|
•
|
The markets in which we operate are highly competitive, and we might not be able to compete effectively.
|
|
|
|
|
•
|
Changes in our level of taxes, as well as audits, investigations and tax proceedings, or changes in tax laws or in their interpretation or enforcement, could have a material adverse effect on our effective tax rate, results of operations, cash flows and financial condition.
|
|
|
|
|
•
|
Our profitability could materially suffer if we are unable to obtain favorable pricing for our services and solutions, if we are unable to remain competitive, if our cost-management strategies are unsuccessful or if we experience delivery inefficiencies.
|
|
|
|
|
•
|
Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.
|
|
|
|
|
•
|
As a result of our geographically diverse operations and our growth strategy to continue to expand in our key markets around the world, we are more susceptible to certain risks.
|
|
|
|
|
•
|
Our business could be materially adversely affected if we incur legal liability.
|
|
|
|
|
•
|
Our work with government clients exposes us to additional risks inherent in the government contracting environment.
|
|
|
|
|
•
|
If we are unable to manage the organizational challenges associated with our size, we might be unable to achieve our business objectives.
|
|
|
|
|
•
|
Our ability to attract and retain business and employees may depend on our reputation in the marketplace.
|
|
|
|
|
•
|
If we do not successfully manage and develop our relationships with key alliance partners or if we fail to anticipate and establish new alliances in new technologies, our results of operations could be adversely affected.
|
|
|
|
|
•
|
We might not be successful at acquiring, investing in or integrating businesses, entering into joint ventures or divesting businesses.
|
|
|
|
|
•
|
If we are unable to protect or enforce our intellectual property rights, or if our services or solutions infringe upon the intellectual property rights of others or we lose our ability to utilize the intellectual property of others, our business could be adversely affected.
|
|
|
|
|
•
|
Our results of operations and share price could be adversely affected if we are unable to maintain effective internal controls.
|
|
|
|
|
•
|
Changes to accounting standards or in the estimates and assumptions we make in connection with the preparation of our consolidated financial statements could adversely affect our financial results.
|
|
|
|
|
•
|
Many of our contracts include fees subject to the attainment of targets or specific service levels. This could increase the variability of our revenues and impact our margins.
|
|
|
|
|
•
|
We might be unable to access additional capital on favorable terms or at all. If we raise equity capital, it may dilute our shareholders’ ownership interest in us.
|
|
|
|
|
•
|
We are incorporated in Ireland and a significant portion of our assets is located outside the United States. As a result, it might not be possible for shareholders to enforce civil liability provisions of the federal or state securities laws of the United States. We may also be subject to criticism and negative publicity related to our incorporation in Ireland.
|
|
|
|
|
•
|
Irish law differs from the laws in effect in the United States and might afford less protection to shareholders.
|
For a more detailed discussion of these factors, see the information under Item 1A, “Risk Factors” in this report and under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2019. Our forward-looking statements speak only as of the date of this report or as of the date they are made, and we undertake no obligation to update any forward-looking statements.
Change in Reportable Segments
Effective March 1, 2020, we began managing our business under a new growth model through our three geographic markets, North America, Europe and Growth Markets, which became our reportable segments in the third quarter of fiscal 2020. Prior to this change, our reportable segments were our five operating groups, Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources. For additional information, see our Form 8-K filed on January 13, 2020.
Overview
The COVID-19 pandemic has caused a significant loss of life, disrupted businesses and restricted travel worldwide, causing significant economic disruption and uncertainty. This disruption and uncertainty has had and continues to have a significant adverse impact on our business, operations and financial results. For our third quarter ended May 31, 2020, our revenues declined 1% in U.S. dollars and grew 1% in local currency, a significant decrease when compared to the revenue growth experienced in the first half of this fiscal year. The pandemic impacted almost all aspects of our business and forced us to quickly adapt the way we operate. As described below, we took actions to shift the majority of our workforce to a remote working environment, to ensure the continuity of our business, including the sales and delivery of services to our clients, and to respond to a rapidly changing demand environment from our clients.
During the third quarter, we enabled our global workforce to work from home and suspended substantially all business travel. During the quarter, approximately 95% of our people were enabled to work remotely, while a small number of our people providing essential services continued to work from our and our clients’ offices. As governments ease their restrictions, we continue to develop and implement our comprehensive plan to return to our offices. As of June 22, 2020, approximately 35% of our offices were partially open with our people’s safety and the needs of our clients guiding how we manage our phased transition.
We experienced reduced demand for our services during the quarter as some clients reprioritized and delayed certain work as a result of the pandemic, particularly in the Travel, Retail, Energy, High Tech and Industrial industries and primarily for our consulting services. We also experienced increased demand in the Public Service, Software & Platforms and Life Sciences industries and from clients across all of our industry groups in connection with their digital transformations, the adoption of cloud technologies and security-related services. In this current market, the level of revenues we achieve is based on our ability to deliver market-leading services while deploying skilled teams of professionals effectively on a remote basis.
For further information on the impact to our results for the third quarter of fiscal 2020, please see “Summary of Results” below. For a discussion of risks related to the COVID-19 pandemic, see “Our results of operations have been significantly adversely affected and could in the future be materially adversely impacted by the COVID-19 pandemic.” under Item 1A, “Risk Factors”.
Summary of Results
Revenues for the third quarter of fiscal 2020 decreased 1% in U.S. dollars and increased 1% in local currency compared to the third quarter of fiscal 2019. This included the impact of a decline in reimbursable travel costs, which reduced revenues approximately 2%. Revenues for the nine months ended May 31, 2020 increased 4% in U.S. dollars and 6% in local currency compared to the nine months ended May 31, 2019. During the third quarter of fiscal 2020, revenue growth in local currency was solid in Growth Markets and modest in North America, partially offset by a slight decline in Europe. We experienced local currency revenue growth that was very strong in Health & Public Service and flat in Financial Services and Communications, Media & Technology, partially offset by a modest decline in Resources and slight decline in Products. Revenue growth in local currency was solid in outsourcing, partially offset by a slight decline in consulting during the third quarter of fiscal 2020. The business environment remained competitive and, in some areas, we experienced pricing pressures. We use the term “pricing” to mean the contract profitability or margin on the work that we sell.
In our consulting business, revenues for the third quarter of fiscal 2020 decreased 4% in U.S. dollars and 2% in local currency compared to the third quarter of fiscal 2019. This included the impact of a decline in reimbursable travel costs, which reduced consulting revenues approximately 3%. Consulting revenues for the nine months ended May 31, 2020 increased 3% in U.S. dollars and 5% in local currency compared to the nine months ended May 31, 2019. The contraction in our consulting revenue in the third quarter of fiscal 2020 was led by a decline in Europe and a slight decline in North America, partially offset by strong growth in Growth Markets. Our consulting revenue continues to be driven by digital-, cloud- and security-related services and assisting clients with the adoption of new technologies. In addition, clients continue to be focused on initiatives designed to deliver cost savings and operational efficiency, as well as projects to integrate their global operations and grow and transform their businesses.
In our outsourcing business, revenues for the third quarter of fiscal 2020 increased 3% in U.S. dollars and 5% in local currency compared to the third quarter of fiscal 2019. Outsourcing revenues for the nine months ended May 31, 2020 increased 5% in U.S. dollars and 7% in local currency compared to the nine months ended May 31, 2019. Outsourcing revenue growth in local currency in the third quarter of fiscal 2020 was led by strong growth in North America, solid growth in Europe and modest growth in Growth Markets. We continue to experience growing demand to assist clients with the operation and maintenance of digital-related services and cloud enablement. In addition, clients continue to be focused on transforming their operations to improve effectiveness and cost efficiency.
As we are a global company, our revenues are denominated in multiple currencies and may be significantly affected by currency exchange rate fluctuations. The majority of our revenues are denominated in currencies other than the U.S. dollar, 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 have in the future 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 three and nine months ended May 31, 2020 compared to the three and nine months ended May 31, 2019, resulting in unfavorable currency translation and U.S. dollar revenue growth that was approximately 2% lower than our revenue growth in local currency. Assuming that exchange rates stay within recent ranges for the remainder of fiscal 2020, we estimate that our full fiscal 2020 revenue growth in U.S. dollars will be approximately 1.5% lower in U.S. dollars than our revenue growth in local currency.
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 client-service personnel, which consists mainly of compensation, subcontractor and other personnel costs, and non-payroll costs on outsourcing contracts. 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 non-client-facing personnel, information systems, office space and certain acquisition-related costs.
Utilization for the third quarter of fiscal 2020 was 88%, down from 91% in the third quarter of fiscal 2019. 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 headcount, the majority of which serve our clients, increased to approximately 513,000 as of May 31, 2020, compared to approximately 482,000 as of May 31, 2019. The year-over-year increase in our headcount reflects an overall increase in demand for our services and solutions, as well as headcount added in connection with acquisitions. Attrition, excluding involuntary terminations, for the third quarter of fiscal 2020 was 11%, down from 18% in the third quarter of fiscal 2019. We evaluate voluntary attrition, adjust levels of new hiring and use involuntary terminations as means to keep our supply of skills and resources in balance with changes in client demand. In addition, we adjust compensation in certain skill sets and geographies in order to attract and retain appropriate numbers of qualified employees. For the majority of our personnel, compensation increases become effective December 1st of each fiscal year. We strive to adjust pricing and/or the mix of resources to reduce the impact of compensation increases on our margin. Our ability to grow our revenues and maintain or increase our margin could be adversely affected if we are unable to: keep our supply of skills and resources in balance with changes in the types or amounts of services and solutions clients are demanding; recover increases in compensation; deploy our employees globally on a timely basis; manage attrition; and/or effectively assimilate and utilize new employees.
Gross margin (Revenues less Cost of services as a percentage of Revenues) for the third quarter of fiscal 2020 was 32.1%, compared with 31.8% for the third quarter of fiscal 2019. Gross margin for the nine months ended May 31, 2020 was 31.5%, compared with 30.7% for the nine months ended May 31, 2019. The increase in gross margin for the third quarter and nine months ended May 31, 2020 was due to lower non-payroll costs, primarily for travel, partially offset by an increase in labor costs as a percentage of revenues compared to the same periods in fiscal 2019.
Sales and marketing and General and administrative costs as a percentage of revenues were 16.5% for the third quarter of fiscal 2020 and 16.6% for the nine months ended May 31, 2020, compared with 16.3% for the third quarter of fiscal 2019 and 16.0% for the nine months ended May 31, 2019. For the third quarter, compared to the same period in fiscal 2019, Sales and marketing costs as a percentage of revenues decreased 50 basis points, due to lower selling and other business development costs, primarily for travel. For the nine months ended May 31, 2020 compared to the same period in fiscal 2019, Sales and marketing costs as a percentage of revenues increased 20 basis points. For the third quarter and nine months ended May 31, 2020, compared to the same periods in fiscal 2019, General and administrative costs as a percentage of revenues increased 70 and 50 basis points, respectively, primarily due to higher technology and facilities costs.
Operating margin (Operating income as a percentage of revenues) for the third quarter of fiscal 2020 was 15.6%, compared with 15.5% for the third quarter of fiscal 2019. Operating margin for the nine months ended May 31, 2020 was 14.8%, compared with 14.7% for the nine months ended May 31, 2019.
New Bookings
New bookings for the third quarter of fiscal 2020 were $11.0 billion, with consulting bookings of $6.2 billion and outsourcing bookings of $4.8 billion. New bookings for the nine months ended May 31, 2020 were $35.6 billion, with consulting bookings of $19.4 billion and outsourcing bookings of $16.2 billion.
Results of Operations for the Three Months Ended May 31, 2020 Compared to the Three Months Ended May 31, 2019
Effective March 1, 2020, we began managing our business under a new growth model through our three geographic markets, North America, Europe and Growth Markets, which became our reportable segments in the third quarter of fiscal 2020. Prior to this change, our reportable segments were our five operating groups, Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources, which we now refer to as our industry groups.
Revenues by geographic market, industry group and type of work were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Percent
Increase
(Decrease)
U.S.
Dollars
|
|
Percent
Increase
(Decrease)
Local
Currency
|
|
Percent of Revenues
for the Three Months Ended
|
|
|
May 31, 2020
|
|
May 31,
2019 (1)
|
|
|
|
May 31,
2020
|
|
May 31,
2019
|
|
|
(in millions of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
GEOGRAPHIC MARKETS
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
$
|
5,239
|
|
|
$
|
5,148
|
|
|
2
|
%
|
|
2
|
%
|
|
48
|
%
|
|
46
|
%
|
|
Europe
|
3,575
|
|
|
3,774
|
|
|
(5
|
)
|
|
(2
|
)
|
|
32
|
|
|
34
|
|
|
Growth Markets
|
2,177
|
|
|
2,178
|
|
|
—
|
|
|
5
|
|
|
20
|
|
|
20
|
|
|
TOTAL REVENUES
|
10,991
|
|
|
11,100
|
|
|
(1
|
)%
|
|
1
|
%
|
|
100
|
%
|
|
100
|
%
|
|
INDUSTRY GROUPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications, Media & Technology
|
$
|
2,197
|
|
|
$
|
2,253
|
|
|
(2
|
)%
|
|
—
|
|
|
20
|
%
|
|
20
|
%
|
|
Financial Services
|
2,138
|
|
|
2,197
|
|
|
(3
|
)
|
|
—
|
|
|
20
|
|
|
20
|
|
|
Health & Public Service
|
2,016
|
|
|
1,820
|
|
|
11
|
|
|
12
|
%
|
|
18
|
|
|
16
|
|
|
Products
|
2,999
|
|
|
3,077
|
|
|
(3
|
)
|
|
(1
|
)
|
|
27
|
|
|
28
|
|
|
Resources
|
1,637
|
|
|
1,748
|
|
|
(6
|
)
|
|
(3
|
)
|
|
15
|
|
|
16
|
|
|
Other
|
5
|
|
|
5
|
|
|
n/m
|
|
|
n/m
|
|
|
—
|
|
|
—
|
|
|
TOTAL REVENUES
|
$
|
10,991
|
|
|
$
|
11,100
|
|
|
(1
|
)%
|
|
1
|
%
|
|
100
|
%
|
|
100
|
%
|
|
TYPE OF WORK
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
$
|
5,998
|
|
|
$
|
6,237
|
|
|
(4
|
)%
|
|
(2
|
)%
|
|
55
|
%
|
|
56
|
%
|
|
Outsourcing
|
4,993
|
|
|
4,863
|
|
|
3
|
|
|
5
|
|
|
45
|
|
|
44
|
|
|
TOTAL REVENUES
|
$
|
10,991
|
|
|
$
|
11,100
|
|
|
(1
|
)%
|
|
1
|
%
|
|
100
|
%
|
|
100
|
%
|
_______________
n/m = not meaningful
Amounts in table may not total due to rounding.
|
|
|
|
(1)
|
Effective September 1, 2019 we revised the reporting of our geographic markets for the movement of one country from Growth Markets to Europe. Prior period amounts have been reclassified to conform with the current period presentation.
|
Revenues
Revenues were impacted by a decline in reimbursable travel costs across all markets, which reduced revenues by approximately 2%. The following commentary discusses local currency revenue changes for the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019:
Geographic Markets
|
|
|
|
•
|
North America revenues increased 2% in local currency, led by growth in Public Service, Life Sciences and Software & Platforms. These increases were partially offset by declines in Chemicals & Natural Resources and High Tech. Revenue growth was driven by the United States.
|
|
|
|
|
•
|
Europe revenues decreased 2% in local currency, led by declines in Consumer Goods, Retail & Travel Services and Banking & Capital Markets. These decreases were partially offset by growth in Life Sciences, Chemicals & Natural Resources and Software & Platforms. Revenue decline was led by the United Kingdom, Spain and France, partially offset by growth in Italy and Germany.
|
|
|
|
|
•
|
Growth Markets revenues increased 5% in local currency, led by growth in Public Service, Software & Platforms and Chemicals & Natural Resources. These increases were partially offset by a decline in Consumer Goods, Retail & Travel Services. Revenue growth was driven by Japan.
|
Operating Expenses
Operating expenses for the third quarter of fiscal 2020 decreased $103 million, or 1%, over the third quarter of fiscal 2019, and decreased as a percentage of revenues to 84.4% from 84.5% during this period.
Cost of Services
Cost of services for the third quarter of fiscal 2020 decreased $109 million, or 1%, over the third quarter of fiscal 2019, and decreased as a percentage of revenues to 67.9% from 68.2% during this period. Gross margin for the third quarter of fiscal 2020 increased to 32.1% from 31.8% during the third quarter of fiscal 2019. The increase in gross margin was due to lower non-payroll costs, primarily for travel, partially offset by an increase in labor costs as a percentage of revenues compared to the same period in fiscal 2019.
Sales and Marketing
Sales and marketing expense for the third quarter of fiscal 2020 decreased $66 million, or 6%, over the third quarter of fiscal 2019, and decreased as a percentage of revenues to 10.2% from 10.7% during this period. The decrease as a percentage of revenues was primarily due to lower selling and other business development costs, primarily for travel, compared to the same period in fiscal 2019.
General and Administrative Costs
General and administrative costs for the third quarter of fiscal 2020 increased $72 million, or 11%, over the third quarter of fiscal 2019, and increased as a percentage of revenues to 6.3% from 5.6% during this period. The increase as a percentage of revenues was primarily due to higher technology and facilities costs compared to the same period in fiscal 2019.
Operating Income and Operating Margin
Operating income for the third quarter of fiscal 2020 decreased $5 million over the third quarter of fiscal 2019. Effective March 1, 2020, we began managing our business under a new growth model through our three geographic markets, North America, Europe and Growth Markets, which became our reportable segments in the third quarter of fiscal 2020. Prior to this change, our reportable segments were our five operating groups, Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources.
Operating income and operating margin for each of the geographic markets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
May 31, 2020
|
|
May 31, 2019
|
|
|
|
|
Operating
Income
|
|
Operating
Margin
|
|
Operating
Income
|
|
Operating
Margin
|
|
Increase
(Decrease)
|
|
|
(in millions of U.S. dollars)
|
|
|
|
North America
|
$
|
721
|
|
|
14
|
%
|
|
$
|
882
|
|
|
17
|
%
|
|
$
|
(161
|
)
|
|
Europe
|
535
|
|
|
15
|
|
|
552
|
|
|
15
|
|
|
(16
|
)
|
|
Growth Markets
|
456
|
|
|
21
|
|
|
285
|
|
|
13
|
|
|
172
|
|
|
TOTAL
|
$
|
1,713
|
|
|
15.6
|
%
|
|
$
|
1,718
|
|
|
15.5
|
%
|
|
$
|
(5
|
)
|
_______________
Amounts in table may not total due to rounding.
We estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during the third quarter of fiscal 2020 was similar to that disclosed for revenue for each geographic market. The reduction in travel costs during the third quarter of fiscal 2020 had a favorable impact on operating income. The commentary below provides insight into other factors affecting geographic market performance and operating income for the third quarter of fiscal 2020 compared with the third quarter of fiscal 2019:
|
|
|
|
•
|
North America operating income decreased as revenue growth was more than offset by higher labor costs as a percentage of revenues.
|
|
|
|
|
•
|
Europe operating income decreased primarily due to a decline in revenue.
|
|
|
|
|
•
|
Growth Markets operating income increased primarily due to revenue growth and higher contract profitability.
|
Income Tax Expense
The effective tax rate for the third quarter of fiscal 2020 was 25.5%, compared with 25.6% for the third quarter of fiscal 2019. The slightly lower effective tax rate for the three months ended May 31, 2020 included benefits from tax law changes offset by the phased-in effects of U.S. tax reform.
Earnings Per Share
Diluted earnings per share were $1.90 for the third quarter of fiscal 2020, compared with $1.93 for the third quarter of fiscal 2019. The $0.03 decrease in our diluted earnings per share was due to a decrease of $0.02 from higher non-operating expense, $0.01 from higher net income attributable to non-controlling interests - other and $0.01 from lower revenues and operating results. These decreases were partially offset by an increase of $0.01 from lower weighted average shares outstanding. For information regarding our earnings per share calculations, see Note 3 (Earnings Per Share) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Results of Operations for the Nine Months Ended May 31, 2020 Compared to the Nine Months Ended May 31, 2019
Effective March 1, 2020, we began managing our business under a new growth model through our three geographic markets, North America, Europe and Growth Markets, which became our reportable segments in the third quarter of fiscal 2020. Prior to this change, our reportable segments were our five operating groups, Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources, which we now refer to as our industry groups.
Revenues by geographic market, industry group and type of work were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
Percent
Increase
(Decrease)
U.S.
Dollars
|
|
Percent
Increase Local
Currency
|
|
Percent of Revenues
for the Nine Months Ended
|
|
|
May 31, 2020
|
|
May 31,
2019 (1)
|
|
|
|
May 31,
2020
|
|
May 31,
2019
|
|
|
(in millions of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
GEOGRAPHIC MARKETS
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
$
|
15,785
|
|
|
$
|
14,758
|
|
|
7
|
%
|
|
7
|
%
|
|
47
|
%
|
|
46
|
%
|
|
Europe
|
10,993
|
|
|
11,126
|
|
|
(1
|
)
|
|
2
|
|
|
33
|
|
|
34
|
|
|
Growth Markets
|
6,714
|
|
|
6,275
|
|
|
7
|
|
|
10
|
|
|
20
|
|
|
20
|
|
|
TOTAL REVENUES
|
$
|
33,492
|
|
|
$
|
32,159
|
|
|
4
|
%
|
|
6
|
%
|
|
100
|
%
|
|
100
|
%
|
|
INDUSTRY GROUPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications, Media & Technology
|
$
|
6,682
|
|
|
$
|
6,533
|
|
|
2
|
%
|
|
4
|
%
|
|
20
|
%
|
|
20
|
%
|
|
Financial Services
|
6,414
|
|
|
6,369
|
|
|
1
|
|
|
3
|
|
|
19
|
|
|
20
|
|
|
Health & Public Service
|
5,933
|
|
|
5,283
|
|
|
12
|
|
|
13
|
|
|
18
|
|
|
16
|
|
|
Products
|
9,377
|
|
|
8,913
|
|
|
5
|
|
|
7
|
|
|
28
|
|
|
28
|
|
|
Resources
|
5,071
|
|
|
5,040
|
|
|
1
|
|
|
3
|
|
|
15
|
|
|
16
|
|
|
Other
|
14
|
|
|
20
|
|
|
n/m
|
|
|
n/m
|
|
|
—
|
|
|
—
|
|
|
TOTAL REVENUES
|
$
|
33,492
|
|
|
$
|
32,159
|
|
|
4
|
%
|
|
6
|
%
|
|
100
|
%
|
|
100
|
%
|
|
TYPE OF WORK
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
$
|
18,546
|
|
|
$
|
17,991
|
|
|
3
|
%
|
|
5
|
%
|
|
55
|
%
|
|
56
|
%
|
|
Outsourcing
|
14,945
|
|
|
14,168
|
|
|
5
|
|
|
7
|
|
|
45
|
|
|
44
|
|
|
TOTAL REVENUES
|
$
|
33,492
|
|
|
$
|
32,159
|
|
|
4
|
%
|
|
6
|
%
|
|
100
|
%
|
|
100
|
%
|
_______________
n/m = not meaningful
Amounts in table may not total due to rounding.
|
|
|
|
(1)
|
Effective September 1, 2019 we revised the reporting of our geographic markets for the movement of one country from Growth Markets to Europe. Prior period amounts have been reclassified to conform with the current period presentation.
|
Revenues
Revenues were impacted by a decline during the third quarter in reimbursable travel costs across all markets. The following commentary discusses local currency revenue changes for the nine months ended May 31, 2020 compared to the nine months ended May 31, 2019:
Geographic Markets
|
|
|
|
•
|
North America revenues increased 7% in local currency, led by growth in Public Service, Life Sciences, Consumer Goods, Retail & Travel Services, Health and Software & Platforms. These increases were partially offset by a decline in Chemicals & Natural Resources. Revenue growth was driven by the United States.
|
|
|
|
|
•
|
Europe revenues increased 2% in local currency, led by growth in Chemicals & Natural Resources, Life Sciences, Software & Platforms, Energy, Utilities and Health. These increases were partially offset by a decline in Banking & Capital Markets. Revenue growth was led by Italy and Germany, partially offset by a decline in the United Kingdom.
|
|
|
|
|
•
|
Growth Markets revenues increased 10% in local currency, led by growth in Software & Platforms, Banking & Capital Markets, Public Service, Chemicals & Natural Resources, Industrial, Consumer Goods, Retail & Travel Services and Life Sciences. Revenue growth was driven by Japan, as well as Brazil.
|
Operating Expenses
Operating expenses for the nine months ended May 31, 2020 increased $1,097 million, or 4%, over the nine months ended May 31, 2019, and decreased as a percentage of revenues to 85.2% from 85.3% during this period.
Cost of Services
Cost of services for the nine months ended May 31, 2020 increased $677 million, or 3%, over the nine months ended May 31, 2019, and decreased as a percentage of revenues to 68.5% from 69.3% during this period. Gross margin for the nine months ended May 31, 2020 increased to 31.5% from 30.7% during the nine months ended May 31, 2019. The increase in gross margin was due to lower non-payroll costs, primarily for travel, partially offset by an increase in labor costs as a percentage of revenues compared to the same period in fiscal 2019.
Sales and Marketing
Sales and marketing expense for the nine months ended May 31, 2020 increased $198 million, or 6%, over the nine months ended May 31, 2019, and increased as a percentage of revenues to 10.4% from 10.2% during this period.
General and Administrative Costs
General and administrative costs for the nine months ended May 31, 2020 increased $222 million, or 12%, over the nine months ended May 31, 2019, and increased as a percentage of revenues to 6.3% from 5.8% during this period. The increase as a percentage of revenues was primarily due to higher technology and facilities costs compared to the same period in fiscal 2019.
Operating Income and Operating Margin
Operating income for the nine months ended May 31, 2020 increased $235 million, or 5%, over the nine months ended May 31, 2019. Effective March 1, 2020, we began managing our business under a new growth model through our three geographic markets, North America, Europe and Growth Markets, which became our reportable segments in the third quarter of fiscal 2020. Prior to this change, our reportable segments were our five operating groups, Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources.
Operating income and operating margin for each of the geographic markets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
May 31, 2020
|
|
May 31, 2019
|
|
|
|
|
Operating
Income
|
|
Operating
Margin
|
|
Operating
Income
|
|
Operating
Margin
|
|
Increase
(Decrease)
|
|
|
(in millions of U.S. dollars)
|
|
|
|
North America
|
$
|
2,282
|
|
|
14
|
%
|
|
$
|
2,267
|
|
|
15
|
%
|
|
$
|
15
|
|
|
Europe
|
1,477
|
|
|
13
|
|
|
1,597
|
|
|
14
|
|
|
(119
|
)
|
|
Growth Markets
|
1,210
|
|
|
18
|
|
|
870
|
|
|
14
|
|
|
340
|
|
|
TOTAL
|
$
|
4,969
|
|
|
14.8
|
%
|
|
$
|
4,734
|
|
|
14.7
|
%
|
|
$
|
235
|
|
_______________
Amounts in table may not total due to rounding.
We estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during the nine months ended May 31, 2020 was similar to that disclosed for revenue for each geographic market. The reduction in travel costs during the third quarter of fiscal 2020 had a favorable impact on operating income. The commentary below provides insight into other factors affecting geographic market performance and operating income for the nine months ended May 31, 2020 compared with the nine months ended May 31, 2019:
|
|
|
|
•
|
North America operating income increased primarily due to revenue growth, partially offset by lower outsourcing contract profitability and higher sales and marketing costs as a percentage of revenues.
|
|
|
|
|
•
|
Europe operating income decreased as revenue growth was offset by lower consulting contract profitability and higher sales and marketing costs as a percentage of revenues.
|
|
|
|
|
•
|
Growth Markets operating income increased primarily due to revenue growth and higher contract profitability.
|
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. For the nine months ended May 31, 2020, other income (expense) increased $67 million over the nine months ended May 31, 2019, primarily due to gains on investments, partially offset by foreign exchange losses.
Income Tax Expense
The effective tax rate for the nine months ended May 31, 2020 was 22.3%, compared with 21.1% for the nine months ended May 31, 2019. The higher effective tax rate for the nine months ended May 31, 2020 was primarily due to lower benefits from final determinations of prior year taxes and the phased-in effects of U.S. tax reform, partially offset by higher tax benefits from share-based payments.
Our provision for income taxes is based on many factors and subject to volatility year to year. We expect the fiscal 2020 annual effective tax rate to be in the range of 23.5% to 24.5%. The effective tax rate for interim periods can vary because of the timing of when certain events occur during the year.
Earnings Per Share
Diluted earnings per share were $5.90 for the nine months ended May 31, 2020, compared with $5.62 for the nine months ended May 31, 2019. The $0.28 increase in our diluted earnings per share was due to an increase of $0.28 from higher revenues and operating results, $0.08 from higher non-operating income and $0.02 from lower weighted average shares outstanding. These increases were partially offset by a decrease of $0.09 from a higher effective tax rate and $0.01 from higher net income attributable to non-controlling interests - other. For information regarding our earnings per share calculations, see Note 3 (Earnings Per Share) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Liquidity and Capital Resources
As of May 31, 2020, Cash and cash equivalents was $6.4 billion, compared with $6.1 billion as of August 31, 2019.
Cash flows from operating, investing and financing activities, as reflected in our Consolidated Cash Flows Statements, are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
May 31, 2020
|
|
May 31, 2019
|
|
Change
|
|
|
(in millions of U.S. dollars)
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
Operating activities
|
$
|
5,059
|
|
|
$
|
4,511
|
|
|
$
|
548
|
|
|
Investing activities
|
(1,648
|
)
|
|
(1,380
|
)
|
|
(268
|
)
|
|
Financing activities
|
(3,036
|
)
|
|
(3,416
|
)
|
|
381
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(60
|
)
|
|
(7
|
)
|
|
(53
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
$
|
315
|
|
|
$
|
(292
|
)
|
|
$
|
608
|
|
_______________
Amounts in table may not total due to rounding.
Operating activities: The $548 million year-over-year increase in operating cash flow was due to higher net income and the deferral of payments for consumption and payroll taxes in several jurisdictions that adopted COVID-19 related deferral provisions.
Investing activities: The $268 million increase in cash used was primarily due to higher spending on business acquisitions and property and equipment, partially offset by increased proceeds from investments. For additional information, see Note 5 (Business Combinations) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Financing activities: The $381 million decrease in cash used was primarily due to a decrease in cash dividends paid due to a change in the frequency of payments from semi-annually to quarterly and an increase in net proceeds from share issuances, partially offset by an increase in net purchase of shares. For additional information, see Note 8 (Material Transactions Affecting 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 May 31, 2020, we had the following borrowing facilities, including the issuance of letters of credit, to support general working capital purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility
Amount
|
|
Borrowings
Under
Facilities
|
|
|
(in millions of U.S. dollars)
|
|
Syndicated loan facility
|
$
|
1,000
|
|
|
$
|
—
|
|
|
Separate, uncommitted, unsecured multicurrency revolving credit facilities
|
875
|
|
|
—
|
|
|
Local guaranteed and non-guaranteed lines of credit
|
229
|
|
|
—
|
|
|
Total
|
$
|
2,104
|
|
|
$
|
—
|
|
Under the borrowing facilities described above, we had an aggregate of $442 million of letters of credit outstanding as of May 31, 2020.
We ended the quarter with a cash balance of $6.4 billion and our cash flows remain very strong. Given the significant economic uncertainty, we supplemented our total available liquidity in June 2020 by adding a $1 billion 364-day syndicated loan facility, which expires in June 2021. This facility is in addition to our existing $1 billion syndicated loan facility, which expires in December 2024. No balances were outstanding under either credit facility at any time during fiscal 2020. In the event of a loan drawn against the new facility, the lenders have the option to require us to repay the loan by issuing public debt within 45 days of their request.
Share Purchases and Redemptions
The Board of Directors of Accenture plc has authorized funding for our publicly announced open-market share purchase program for acquiring Accenture plc Class A ordinary shares and for purchases and redemptions of Accenture plc Class A ordinary shares and Accenture Canada Holdings Inc. exchangeable shares held by current and former members of Accenture Leadership and their permitted transferees.
Our share purchase activity during the nine months ended May 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accenture plc Class A
Ordinary Shares
|
|
Accenture Canada
Holdings Inc. Exchangeable Shares
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
(in millions of U.S. dollars, except share amounts)
|
|
Open-market share purchases (1)
|
9,522,567
|
|
|
$
|
1,782
|
|
|
—
|
|
|
$
|
—
|
|
|
Other share purchase programs
|
—
|
|
|
—
|
|
|
36,345
|
|
|
7
|
|
|
Other purchases (2)
|
2,653,127
|
|
|
537
|
|
|
—
|
|
|
—
|
|
|
Total
|
12,175,694
|
|
|
$
|
2,319
|
|
|
36,345
|
|
|
$
|
7
|
|
_______________
|
|
|
|
(1)
|
We conduct a publicly announced open-market share purchase program for Accenture plc Class A ordinary shares. These shares are held as treasury shares by Accenture plc and may be utilized to provide for select employee benefits, such as equity awards to our employees.
|
|
|
|
|
(2)
|
During the nine months ended May 31, 2020, 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 2020. The number of shares ultimately repurchased under our open-market share purchase program may vary depending on numerous factors, including, without limitation, share price and other market conditions, our ongoing capital allocation planning, the levels of cash and debt balances, other demands for cash, such as acquisition activity, general economic and/or business conditions, and board and management discretion. Additionally, as these factors may change over the course of the year, the amount of share repurchase activity during any particular period cannot be predicted and may fluctuate from time to time. Share repurchases may be made from time to time through open-market purchases, in respect of purchases and redemptions of Accenture Canada Holdings Inc. exchangeable shares, through the use of Rule 10b5-1 plans and/or by other means. The repurchase program may be accelerated, suspended, delayed or discontinued at any time, without notice.
Off-Balance Sheet Arrangements
In the normal course of business and in conjunction with some client engagements, we have entered into contractual arrangements through which we may be obligated to indemnify clients with respect to certain matters.
To date, we have not been required to make any significant payment under any of the arrangements described above. For further discussion of these transactions, see Note 11 (Commitments and Contingencies) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Significant Accounting Policies
See Note 1 (Basis of Presentation) and Note 7 (Leases) to our Consolidated Financial Statements under Item 1, “Financial Statements.” Note 7 includes updates to our leases policy as a result of the implementation of FASB ASU No. 2016-02.