0000950170-24-104905.txt : 20240910 0000950170-24-104905.hdr.sgml : 20240910 20240910060511 ACCESSION NUMBER: 0000950170-24-104905 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 53 CONFORMED PERIOD OF REPORT: 20240831 FILED AS OF DATE: 20240910 DATE AS OF CHANGE: 20240910 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORACLE CORP CENTRAL INDEX KEY: 0001341439 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] ORGANIZATION NAME: 06 Technology IRS NUMBER: 542185193 FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35992 FILM NUMBER: 241288682 BUSINESS ADDRESS: STREET 1: 2300 ORACLE WAY CITY: AUSTIN STATE: TX ZIP: 78741 BUSINESS PHONE: (737) 867-1000 MAIL ADDRESS: STREET 1: 2300 ORACLE WAY CITY: AUSTIN STATE: TX ZIP: 78741 FORMER COMPANY: FORMER CONFORMED NAME: Ozark Holding Inc. DATE OF NAME CHANGE: 20051013 10-Q 1 orcl-20240831.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-35992

 

Oracle Corporation

(Exact name of registrant as specified in its charter)

 

Delaware

 

54-2185193

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

2300 Oracle Way
Austin, Texas

 

78741

(Address of principal executive offices)

 

(Zip Code)

 

(737) 867-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

3.125% senior notes due July 2025

ORCL

New York Stock Exchange

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The number of shares of registrant’s common stock outstanding as of September 6, 2024 was: 2,770,968,000.

 


ORACLE CORPORATION

FORM 10-Q QUARTERLY REPORT

 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

PART I.

 

FINANCIAL INFORMATION

 

3

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

3

 

 

 

 

Condensed Consolidated Balance Sheets as of August 31, 2024 and May 31, 2024

 

3

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended August 31, 2024 and 2023

 

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended August 31, 2024 and 2023

 

5

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended August 31, 2024 and 2023

 

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended August 31, 2024 and 2023

 

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

37

 

 

 

Item 4.

 

Controls and Procedures

 

37

 

 

 

PART II.

 

OTHER INFORMATION

 

38

 

 

 

Item 1.

 

Legal Proceedings

 

38

 

 

 

Item 1A.

 

Risk Factors

 

38

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

38

 

 

 

Item 6.

 

Exhibits

 

39

 

 

 

 

Signatures

 

40

 

 


Cautionary Note on Forward-Looking Statements

For purposes of this Quarterly Report on Form 10-Q (this Quarterly Report), the terms “Oracle,” “we,” “us” and “our” refer to Oracle Corporation and its consolidated subsidiaries. This Quarterly Report contains statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the Securities Act of 1933, as amended (the Securities Act). These include, among other things, statements regarding:

our expectation that we may acquire, and realize the anticipated benefits of acquiring, companies, products, services and technologies to further our corporate strategy as compelling opportunities become available;
our expectation that, on a constant currency basis, our total cloud and license revenues generally will continue to increase due to expected growth in our cloud services and continued demand for our cloud license and on-premise license and license support offerings;
our expectation that substantially all of our customers will renew their license support contracts upon expiration;
our expectation that current and expected customer demand will require continued growth in our cloud services and license support expenses in order to increase our existing data center capacity and establish additional data centers in new geographic locations;
our expectation that our hardware business will have lower operating margins as a percentage of revenues than our cloud and license business;
our expectation that we will continue to make significant investments in research and development to maintain and improve our current products and service offerings, and our belief that research and development efforts are essential to maintaining our competitive position;
our expectations regarding the financial performance and long-term potential of one of our investment companies;
our expectation that our international operations will continue to provide a significant portion of our total revenues and expenses;
our expectation that the proportion of our cloud services revenues relative to our total revenues will continue to increase;
the sufficiency of our sources of funding for working capital, capital expenditures, contractual obligations, acquisitions, dividends, stock repurchases, debt repayments and other matters;
our belief that we have adequately provided under United States (U.S.) generally accepted accounting principles for outcomes related to our tax audits, that the final outcome of our tax-related examinations, agreements or judicial proceedings will not have a material effect on our results of operations, and that our net deferred tax assets will likely be realized in the foreseeable future;
our belief that the outcome of certain legal proceedings and claims to which we are a party will not, individually or in the aggregate, result in losses that are materially in excess of amounts already recognized, if any;
the possibility that certain legal proceedings to which we are a party could have a material impact on our financial position or results of operations;
the timing and amount of expenses we expect to incur;
the cost savings we expect to realize pursuant to the Fiscal 2024 Oracle Restructuring Plan;

1


declarations of future cash dividend payments and the timing and amount of future stock repurchases, including our expectation that the levels of our future stock repurchase activity may be modified in comparison to past periods in order to use available cash for other purposes;
our ability to predict revenues, particularly certain cloud license and on-premise license revenues and hardware revenues;
the percentages of remaining performance obligations that we expect to recognize as revenues over respective future periods;

as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may be preceded by, followed by or include the words “anticipates,” “believes,” “commits,” “continues,” “could,” “endeavors,” “estimates,” “expects,” “goal,” “intends,” “is designed to,” “likely,” “maintains,” “may,” “plans,” “potential,” “seeks,” “shall,” “should,” “strives,” “will” and similar expressions. We claim the protection of the safe harbor for forward-looking statements contained in the Exchange Act and the Securities Act for all forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about our business that could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” included in documents we file from time to time with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 and our other Quarterly Reports on Form 10-Q to be filed by us in our fiscal year 2025, which runs from June 1, 2024 to May 31, 2025.

We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. New information, future events or risks could cause the forward-looking events we discuss in this Quarterly Report not to occur. You should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this Quarterly Report.

2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ORACLE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

As of August 31, 2024 and May 31, 2024

(Unaudited)

 

(in millions, except per share data)

 

August 31,
 2024

 

 

May 31,
 2024

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,616

 

 

$

10,454

 

Marketable securities

 

 

295

 

 

 

207

 

Trade receivables, net of allowances for credit losses of $574 and $485 as of August 31, 2024 and May 31, 2024, respectively

 

 

8,021

 

 

 

7,874

 

Prepaid expenses and other current assets

 

 

4,140

 

 

 

4,019

 

Total current assets

 

 

23,072

 

 

 

22,554

 

Non-current assets:

 

 

 

 

 

 

Property, plant and equipment, net

 

 

23,094

 

 

 

21,536

 

Intangible assets, net

 

 

6,270

 

 

 

6,890

 

Goodwill, net

 

 

62,249

 

 

 

62,230

 

Deferred tax assets

 

 

12,219

 

 

 

12,273

 

Other non-current assets

 

 

17,310

 

 

 

15,493

 

Total non-current assets

 

 

121,142

 

 

 

118,422

 

Total assets

 

$

144,214

 

 

$

140,976

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Notes payable and other borrowings, current

 

$

9,201

 

 

$

10,605

 

Accounts payable

 

 

2,207

 

 

 

2,357

 

Accrued compensation and related benefits

 

 

1,772

 

 

 

1,916

 

Deferred revenues

 

 

11,455

 

 

 

9,313

 

Other current liabilities

 

 

7,410

 

 

 

7,353

 

Total current liabilities

 

 

32,045

 

 

 

31,544

 

Non-current liabilities:

 

 

 

 

 

 

Notes payable and other borrowings, non-current

 

 

75,314

 

 

 

76,264

 

Income taxes payable

 

 

11,038

 

 

 

10,817

 

Deferred tax liabilities

 

 

3,442

 

 

 

3,692

 

Other non-current liabilities

 

 

11,106

 

 

 

9,420

 

Total non-current liabilities

 

 

100,900

 

 

 

100,193

 

Commitments and contingencies

 

 

 

 

 

 

Oracle Corporation stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value—authorized: 1.0 shares; outstanding: none

 

 

 

 

 

 

Common stock, $0.01 par value and additional paid in capital—authorized: 11,000 shares; outstanding: 2,771 shares and 2,755 shares as of August 31, 2024 and May 31, 2024, respectively

 

 

33,083

 

 

 

32,764

 

Accumulated deficit

 

 

(20,939

)

 

 

(22,628

)

Accumulated other comprehensive loss

 

 

(1,328

)

 

 

(1,432

)

Total Oracle Corporation stockholders’ equity

 

 

10,816

 

 

 

8,704

 

Noncontrolling interests

 

 

453

 

 

 

535

 

Total stockholders’ equity

 

 

11,269

 

 

 

9,239

 

Total liabilities and stockholders’ equity

 

$

144,214

 

 

$

140,976

 

 

 

See notes to condensed consolidated financial statements.

3


ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

 

 

 

Three Months Ended
August 31,

 

(in millions, except per share data)

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

Cloud services and license support

 

$

10,519

 

 

$

9,547

 

Cloud license and on-premise license

 

 

870

 

 

 

809

 

Hardware

 

 

655

 

 

 

714

 

Services

 

 

1,263

 

 

 

1,383

 

Total revenues

 

 

13,307

 

 

 

12,453

 

Operating expenses:

 

 

 

 

 

 

Cloud services and license support(1)

 

 

2,597

 

 

 

2,179

 

Hardware(1)

 

 

162

 

 

 

219

 

Services(1)

 

 

1,147

 

 

 

1,212

 

Sales and marketing(1)

 

 

2,036

 

 

 

2,026

 

Research and development

 

 

2,306

 

 

 

2,216

 

General and administrative

 

 

358

 

 

 

393

 

Amortization of intangible assets

 

 

624

 

 

 

763

 

Acquisition related and other

 

 

13

 

 

 

11

 

Restructuring

 

 

73

 

 

 

138

 

Total operating expenses

 

 

9,316

 

 

 

9,157

 

Operating income

 

 

3,991

 

 

 

3,296

 

Interest expense

 

 

(842

)

 

 

(872

)

Non-operating income (expenses), net

 

 

20

 

 

 

(49

)

Income before income taxes

 

 

3,169

 

 

 

2,375

 

(Provision for) benefit from income taxes

 

 

(240

)

 

 

45

 

Net income

 

$

2,929

 

 

$

2,420

 

Earnings per share:

 

 

 

 

 

 

Basic

 

$

1.06

 

 

$

0.89

 

Diluted

 

$

1.03

 

 

$

0.86

 

Weighted average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

2,761

 

 

 

2,728

 

Diluted

 

 

2,851

 

 

 

2,823

 

(1)
Exclusive of amortization of intangible assets, which is shown separately.

 

 

See notes to condensed consolidated financial statements.

4


ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

 

 

 

Three Months Ended
August 31,

 

(in millions)

 

2024

 

 

2023

 

Net income

 

$

2,929

 

 

$

2,420

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

Net foreign currency translation gains (losses)

 

 

220

 

 

 

(44

)

Net unrealized (losses) gains on cash flow hedges

 

 

(116

)

 

 

72

 

Other, net

 

 

 

 

 

(3

)

Total other comprehensive income, net

 

 

104

 

 

 

25

 

Comprehensive income

 

$

3,033

 

 

$

2,445

 

 

 

 

See notes to condensed consolidated financial statements.

 

5


ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

 

 

 

Three Months Ended
August 31,

 

(in millions, except per share data)

 

2024

 

 

2023

 

Common stock and additional paid in capital

 

 

 

 

 

 

Balance, beginning of period

 

$

32,764

 

 

$

30,215

 

Common stock issued

 

 

179

 

 

 

308

 

Stock-based compensation

 

 

1,007

 

 

 

849

 

Repurchases of common stock

 

 

(13

)

 

 

(13

)

Shares repurchased for tax withholdings upon vesting of restricted stock-based awards

 

 

(851

)

 

 

(1,060

)

Other, net

 

 

(3

)

 

 

(4

)

Balance, end of period

 

$

33,083

 

 

$

30,295

 

Accumulated deficit

 

 

 

 

 

 

Balance, beginning of period

 

$

(22,628

)

 

$

(27,620

)

Repurchases of common stock

 

 

(137

)

 

 

(137

)

Cash dividends declared

 

 

(1,103

)

 

 

(1,091

)

Net income

 

 

2,929

 

 

 

2,420

 

Balance, end of period

 

$

(20,939

)

 

$

(26,428

)

Other stockholders’ equity, net

 

 

 

 

 

 

Balance, beginning of period

 

$

(897

)

 

$

(1,039

)

Other comprehensive income, net

 

 

104

 

 

 

25

 

Other, net

 

 

(82

)

 

 

(12

)

Balance, end of period

 

$

(875

)

 

$

(1,026

)

Total stockholders’ equity

 

$

11,269

 

 

$

2,841

 

Cash dividends declared per common share

 

$

0.40

 

 

$

0.40

 

 

 

 

See notes to condensed consolidated financial statements.

6


ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

 

 

 

Three Months Ended
August 31,

 

(in millions)

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

2,929

 

 

$

2,420

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

804

 

 

 

712

 

Amortization of intangible assets

 

 

624

 

 

 

763

 

Deferred income taxes

 

 

(151

)

 

 

(517

)

Stock-based compensation

 

 

1,007

 

 

 

849

 

Other, net

 

 

130

 

 

 

169

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

(Increase) decrease in trade receivables, net

 

 

(81

)

 

 

380

 

Decrease in prepaid expenses and other assets

 

 

367

 

 

 

269

 

Decrease in accounts payable and other liabilities

 

 

(531

)

 

 

(457

)

Increase in income taxes payable

 

 

24

 

 

 

69

 

Increase in deferred revenues

 

 

2,305

 

 

 

2,317

 

Net cash provided by operating activities

 

 

7,427

 

 

 

6,974

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities and other investments

 

 

(477

)

 

 

(333

)

Proceeds from sales and maturities of marketable securities and other investments

 

 

15

 

 

 

85

 

Capital expenditures

 

 

(2,303

)

 

 

(1,314

)

Net cash used for investing activities

 

 

(2,765

)

 

 

(1,562

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments for repurchases of common stock

 

 

(150

)

 

 

(150

)

Proceeds from issuances of common stock

 

 

179

 

 

 

308

 

Shares repurchased for tax withholdings upon vesting of restricted stock-based awards

 

 

(851

)

 

 

(1,060

)

Payments of dividends to stockholders

 

 

(1,103

)

 

 

(1,091

)

Repayments of commercial paper, net

 

 

(396

)

 

 

(562

)

Proceeds from issuances of term loan credit agreements

 

 

5,627

 

 

 

 

Repayments of senior notes and term loan credit agreements

 

 

(7,630

)

 

 

(1,000

)

Other, net

 

 

(261

)

 

 

27

 

Net cash used for financing activities

 

 

(4,585

)

 

 

(3,528

)

Effect of exchange rate changes on cash and cash equivalents

 

 

85

 

 

 

(36

)

Net increase in cash and cash equivalents

 

 

162

 

 

 

1,848

 

Cash and cash equivalents at beginning of period

 

 

10,454

 

 

 

9,765

 

Cash and cash equivalents at end of period

 

$

10,616

 

 

$

11,613

 

Non-cash investing activities:

 

 

 

 

 

 

Unpaid capital expenditures

 

$

1,582

 

 

$

507

 

 

 

 

See notes to condensed consolidated financial statements.

7


ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2024

(Unaudited)

 

1.
BASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER

Basis of Presentation

We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the United States (U.S.) Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures herein are adequate to ensure the information presented is not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

We believe that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year ending May 31, 2025.

There have been no changes to our significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 that had a significant impact on our condensed consolidated financial statements or notes thereto as of and for the three months ended August 31, 2024.

Use of Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC), and we consider various staff accounting bulletins and other applicable guidance issued by the SEC. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent that there are differences between these estimates, judgments or assumptions and actual results, our consolidated financial statements will be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result.

During the first quarter of fiscal 2025, we completed an assessment of the useful lives of our servers and networking equipment and increased the estimate of the useful lives from five years to six years, effective at the beginning of fiscal 2025. Based on the carrying value of our servers and networking equipment as of May 31, 2024, this change in accounting estimate decreased our total operating expenses by $197 million and increased our net income by $157 million, or $0.06 per both basic and diluted share, for the first quarter of fiscal 2025.

Cash, Cash Equivalents and Restricted Cash

Restricted cash that was included within cash and cash equivalents as presented within our condensed consolidated balance sheets as of August 31, 2024 and May 31, 2024 and our condensed consolidated statements of cash flows for the three months ended August 31, 2024 and 2023 was immaterial.

8


Table of Contents

 

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

 

Remaining Performance Obligations from Contracts with Customers

Trade receivables, net of allowance for credit losses, and deferred revenues are reported net of related uncollected deferred revenues in our condensed consolidated balance sheets as of August 31, 2024 and May 31, 2024. The revenues recognized during the three months ended August 31, 2024 and 2023 that were included in the opening deferred revenues balances as of May 31, 2024 and 2023 were approximately $3.9 billion during each period. Revenues recognized from performance obligations satisfied in prior periods and impairment losses recognized on our receivables were immaterial in each of the three months ended August 31, 2024 and 2023.

Remaining performance obligations, as defined in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024, were $99.1 billion as of August 31, 2024, of which we expect to recognize approximately 38% as revenues over the next twelve months, 38% over the subsequent month 13 to month 36, 19% over the subsequent month 37 to month 60 and the remainder thereafter.

Sales of Financing Receivables

We offer certain of our customers the option to acquire certain of our cloud and license, hardware and services offerings through separate long-term payment contracts. We generally sell these contracts that we have financed for our customers on a non-recourse basis to financial institutions within 90 days of the contracts’ dates of execution. We record the transfers of amounts due from customers to financial institutions as sales of financing receivables because we are considered to have surrendered control of these financing receivables. Financing receivables sold to financial institutions were $595 million and $561 million for the three months ended August 31, 2024 and 2023, respectively.

Non-Marketable Investments

Our non-marketable debt investments and equity securities and related instruments totaled $2.3 billion and $2.0 billion as of August 31, 2024 and May 31, 2024, respectively, and are included in other non-current assets in the accompanying condensed consolidated balance sheets and are subject to periodic credit losses and impairment reviews. Certain of these non-marketable equity securities and related instruments are adjusted for observable price changes from orderly transactions. The majority of the non-marketable investments held as of these dates were with Ampere Computing Holdings LLC (Ampere), a related party entity in which we have an ownership interest of approximately 29% as of August 31, 2024. We follow the equity method of accounting for our investment in Ampere and our share of loss under the equity method of accounting is recorded in the non-operating income (expenses), net line item in our condensed consolidated statements of operations. We also have convertible debt investments in Ampere which, under the terms of an agreement with Ampere and other co-investors, will mature in June 2026 and are convertible into equity securities at the holder’s option under certain circumstances. During the three months ended August 31, 2024, we invested $75 million in convertible debt instruments issued by Ampere. The total carrying value of our investments in Ampere after accounting for losses under the equity method of accounting was $1.5 billion as of August 31, 2024. In accordance with the terms of an agreement with other co-investors, we are also a counterparty to certain put (exercisable by a co-investor) and call (exercisable by Oracle) options at prices of approximately $450 million to $1.5 billion, respectively, to acquire additional equity interests in Ampere from our co-investors through January 2027. If either of such options is exercised by us or our co-investors, we would obtain control of Ampere and consolidate its results with our results of operations. Ampere has historically generated net losses.

9


Table of Contents

 

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

 

Acquisition Related and Other Expenses

Acquisition related and other expenses primarily consist of personnel related costs for transitional and certain other employees, certain business combination adjustments, including adjustments after the measurement period has ended, and certain other operating items, net.

 

 

 

Three Months Ended
August 31,

 

(in millions)

 

2024

 

 

2023

 

Transitional and other employee related costs

 

$

2

 

 

$

6

 

Business combination adjustments, net

 

 

(5

)

 

 

1

 

Other, net

 

 

16

 

 

 

4

 

Total acquisition related and other expenses

 

$

13

 

 

$

11

 

Non-Operating Income (Expenses), net

Non-operating income (expenses), net consists primarily of interest income, net foreign currency exchange losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Corporation Japan), net losses related to equity investments, including losses attributable to equity method investments (primarily Ampere) and net other income and expenses, including net unrealized gains and losses from our investment portfolio related to our deferred compensation plan and non-service net periodic pension income and losses.

 

 

 

Three Months Ended
August 31,

 

(in millions)

 

2024

 

 

2023

 

Interest income

 

$

133

 

 

$

136

 

Foreign currency losses, net

 

 

(50

)

 

 

(82

)

Noncontrolling interests in income

 

 

(43

)

 

 

(37

)

Losses from equity investments, net

 

 

(69

)

 

 

(118

)

Other income, net

 

 

49

 

 

 

52

 

Total non-operating income (expenses), net

 

$

20

 

 

$

(49

)

 

Recent Accounting Pronouncements

Segment Reporting: In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which enhances the disclosures required for operating segments in our annual and interim consolidated financial statements. ASU 2023-07 is effective for us for our annual reporting for fiscal 2025 and for interim period reporting beginning in fiscal 2026 on a retrospective basis. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2023-07 on our consolidated financial statements.

Income Taxes: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which enhances the disclosures required for income taxes in our annual consolidated financial statements. ASU 2023-09 is effective for us for our annual reporting for fiscal 2026 on a prospective basis. Both early adoption and retrospective application are permitted. We are currently evaluating the impact of our pending adoption of ASU 2023-09 on our consolidated financial statements.

10


Table of Contents

 

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

 

2.
FAIR VALUE MEASUREMENTS

We perform fair value measurements in accordance with FASB ASC 820, Fair Value Measurement. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance.

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:

Level 1: quoted prices in active markets for identical assets or liabilities;
Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or
Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our assets and liabilities measured at fair value on a recurring basis consisted of the following (Level 1 and Level 2 inputs are defined above):

 

 

 

August 31, 2024

 

 

May 31, 2024

 

 

 

Fair Value Measurements
Using Input Types

 

 

 

 

 

Fair Value Measurements
Using Input Types

 

 

 

 

(in millions)

 

Level 1

 

 

Level 2

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

3,961

 

 

$

 

 

$

3,961

 

 

$

2,620

 

 

$

 

 

$

2,620

 

Time deposits and other

 

 

55

 

 

 

347

 

 

 

402

 

 

 

48

 

 

 

262

 

 

 

310

 

Derivative financial instruments

 

 

 

 

 

63

 

 

 

63

 

 

 

 

 

 

179

 

 

 

179

 

Total assets

 

$

4,016

 

 

$

410

 

 

$

4,426

 

 

$

2,668

 

 

$

441

 

 

$

3,109

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

 

$

62

 

 

$

62

 

 

$

 

 

$

96

 

 

$

96

 

 

11


Table of Contents

 

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

 

Our cash equivalents and marketable securities investments consist of money market funds, time deposits, marketable equity securities and certain other securities. Marketable securities as presented per our condensed consolidated balance sheets included debt securities with original maturities at the time of purchase greater than three months and the remainder of the debt securities were included in cash and cash equivalents. We classify our marketable debt securities as available-for-sale debt securities at the time of purchase and reevaluate such classification as of each balance sheet date. As of August 31, 2024 and May 31, 2024, all of our marketable debt securities investments mature within one year. Our valuation techniques used to measure the fair values of our instruments that were classified as Level 1 in the table above were derived from quoted market prices and active markets for these instruments that exist. Our valuation techniques used to measure the fair values of Level 2 instruments listed in the table above were derived from the following: non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data including reference rate yield curves, among others.

Based on the trading prices of the $84.5 billion and $86.5 billion of senior notes and other long-term borrowings and the related fair value hedges that we had outstanding as of August 31, 2024 and May 31, 2024, respectively, the estimated fair values of the senior notes and other long-term borrowings and the related fair value hedges using Level 2 inputs at August 31, 2024 and May 31, 2024 were $77.7 billion and $77.2 billion, respectively.

3.
RESTRUCTURING ACTIVITIES

Fiscal 2024 Oracle Restructuring Plan

During fiscal 2024, our management approved, committed to and initiated plans to restructure and further improve efficiencies in our operations due to our acquisitions and certain other operational activities (2024 Restructuring Plan). The total estimated restructuring costs associated with the 2024 Restructuring Plan are up to $635 million and will be recorded to the restructuring expense line item within our condensed consolidated statements of operations as they are incurred through the end of the plan. We recorded $76 million and $153 million of restructuring expenses in connection with the 2024 Restructuring Plan during the three months ended August 31, 2024 and 2023, respectively. Any changes to the estimates of executing the 2024 Restructuring Plan will be reflected in our future results of operations.

Summary of All Plans

 

 

 

Accrued

 

 

Three Months Ended August 31, 2024

 

 

Accrued

 

 

Total
Costs

 

 

Total
Expected

 

(in millions)

 

May 31,
2024
(2)

 

 

Initial
Costs
(3)

 

 

Adj. to
Cost
(4)

 

 

Cash
Payments

 

 

Others(5)

 

 

August 31,
2024
(2)

 

 

Accrued
to Date

 

 

Program
Costs

 

2024 Restructuring Plan(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud and license

 

$

87

 

 

$

40

 

 

$

(2

)

 

$

(33

)

 

$

1

 

 

$

93

 

 

$

233

 

 

$

255

 

Hardware

 

 

4

 

 

 

2

 

 

 

 

 

 

(2

)

 

 

 

 

 

4

 

 

 

11

 

 

 

17

 

Services

 

 

12

 

 

 

5

 

 

 

 

 

 

(6

)

 

 

 

 

 

11

 

 

 

50

 

 

 

106

 

Other

 

 

49

 

 

 

34

 

 

 

(3

)

 

 

(33

)

 

 

 

 

 

47

 

 

 

214

 

 

 

257

 

Total 2024 Restructuring Plan

 

$

152

 

 

$

81

 

 

$

(5

)

 

$

(74

)

 

$

1

 

 

$

155

 

 

$

508

 

 

$

635

 

Total other restructuring plans(6)

 

$

84

 

 

$

 

 

$

(3

)

 

$

(11

)

 

$

2

 

 

$

72

 

 

 

 

 

 

 

Total restructuring plans

 

$

236

 

 

$

81

 

 

$

(8

)

 

$

(85

)

 

$

3

 

 

$

227

 

 

 

 

 

 

 

 

(1)
Restructuring costs recorded to each of the operating segments presented primarily related to employee severance costs. Other restructuring costs represented employee severance costs not related to our operating segments and certain other restructuring plan costs.

12


Table of Contents

 

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

 

(2)
As of August 31, 2024 and May 31, 2024, substantially all restructuring liabilities have been recorded in other current liabilities within our condensed consolidated balance sheets.
(3)
Costs recorded for the respective restructuring plans during the period presented.
(4)
All plan adjustments were changes in estimates whereby increases and decreases in costs were generally recorded to operating expenses in the period of adjustments.
(5)
Represents foreign currency translation and certain other non-cash adjustments.
(6)
Other restructuring plans presented in the tables above included condensed information for other Oracle based plans and other plans associated with certain of our acquisitions whereby we continued to make cash outlays to settle obligations under these plans during the periods presented but for which the periodic impact to our condensed consolidated statements of operations was not significant.
4.
DEFERRED REVENUES

Deferred revenues consisted of the following:

 

(in millions)

 

August 31,
 2024

 

 

May 31,
 2024

 

Cloud services and license support

 

$

10,257

 

 

$

8,203

 

Hardware

 

 

660

 

 

 

546

 

Services

 

 

487

 

 

 

512

 

Cloud license and on-premise license

 

 

51

 

 

 

52

 

Deferred revenues, current

 

 

11,455

 

 

 

9,313

 

Deferred revenues, non-current (in other non-current liabilities)

 

 

1,429

 

 

 

1,233

 

Total deferred revenues

 

$

12,884

 

 

$

10,546

 

 

Deferred cloud services and license support revenues and deferred hardware revenues substantially represent customer payments made in advance for cloud or support contracts that are typically billed in advance with corresponding revenues generally being recognized ratably or based upon customer usage over the respective contractual periods. Deferred services revenues include prepayments for our services business and revenues for these services are generally recognized as the services are performed. Deferred cloud license and on-premise license revenues typically resulted from customer payments that related to undelivered products and services or specified enhancements.

 

5.
STOCKHOLDERS’ EQUITY

Common Stock Repurchases

Our Board of Directors has approved a program for us to repurchase shares of our common stock. As of August 31, 2024, approximately $6.8 billion remained available for stock repurchases pursuant to our stock repurchase program. We repurchased 1.1 million shares for $150 million during the three months ended August 31, 2024 and 1.3 million shares for $150 million during the three months ended August 31, 2023 under the stock repurchase program.

Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchases of our debt, our stock price and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule 10b5-1 trading plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

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ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

 

Dividends on Common Stock

In September 2024, our Board of Directors declared a quarterly cash dividend of $0.40 per share of our outstanding common stock. The dividend is payable on October 24, 2024 to stockholders of record as of the close of business on October 10, 2024. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.

Fiscal 2025 Stock‑Based Awards Activity and Compensation Expense

During the first quarter of fiscal 2025, we issued 3 million restricted stock-based units (RSUs), all of which are subject to service-based vesting restrictions. These fiscal 2025 stock-based award issuances were partially offset by stock-based award forfeitures and cancellations of 1 million shares during the first quarter of fiscal 2025.

The RSUs that were granted during the three months ended August 31, 2024 have similar vesting restrictions and contractual lives and were valued using methodologies of a similar nature as those described in Note 12 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

Stock-based compensation expense is included in the following operating expense line items in our condensed consolidated statements of operations:

 

 

Three Months Ended
August 31,

 

(in millions)

 

2024

 

 

2023

 

Cloud services and license support

 

$

141

 

 

$

111

 

Hardware

 

 

6

 

 

 

5

 

Services

 

 

43

 

 

 

34

 

Sales and marketing

 

 

162

 

 

 

135

 

Research and development

 

 

569

 

 

 

484

 

General and administrative

 

 

86

 

 

 

80

 

Total stock-based compensation

 

$

1,007

 

 

$

849

 

 

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ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

 

6.
INCOME TAXES

Our effective tax rates for each of the periods presented are the result of the mix of income and losses earned in various tax jurisdictions that apply a broad range of income tax rates. Our (provision for) benefit from income taxes varied from the tax computed at the U.S. federal statutory income tax rate for the periods presented primarily due to earnings in foreign operations, state taxes, the U.S. research and development tax credit, settlements with tax authorities, the tax effects of stock-based compensation, the Foreign Derived Intangible Income deduction and the tax effect of Global Intangible Low-Taxed Income. Our effective tax rate was 7.6% for the three months ended August 31, 2024, and our effective tax benefit rate was (1.9%) for the three months ended August 31, 2023.

Our net deferred tax assets were $8.8 billion and $8.6 billion as of August 31, 2024 and May 31, 2024, respectively. We believe that it is more likely than not that the net deferred tax assets will be realized in the foreseeable future. Realization of our net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credit carryforwards. The amount of net deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal 2022. Our U.S. federal income tax returns have been examined for all years prior to fiscal 2013 and, with some exceptions, we are no longer subject to audit for those periods. Our U.S. state income tax returns, with some exceptions, have been examined for all years prior to fiscal 2010, and we are no longer subject to audit for those periods.

Internationally, tax authorities for numerous non-U.S. jurisdictions are also examining or have examined returns of Oracle and various acquired entities for years through fiscal 2024. Many of the relevant tax years are at an advanced stage in examination or subsequent controversy resolution processes. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal 2001.

We are under audit by the IRS and various other domestic and foreign tax authorities with regards to income tax and indirect tax matters and are involved in various challenges and litigation in a number of countries, including, in particular, Australia, Brazil, Canada, Egypt, Germany, India, Indonesia, Israel, Italy, Pakistan, Saudi Arabia, South Korea and Spain, where the amounts under controversy are significant. In some, although not all, cases, we have reserved for potential adjustments to our provision for income taxes and accrual of indirect taxes that may result from examinations by, or any negotiated agreements with, these tax authorities or final outcomes in judicial proceedings and we believe that the final outcome of these examinations, agreements or judicial proceedings will not have a material effect on our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period we determine the liabilities are no longer necessary. If our estimates of the federal, state and foreign income tax liabilities and indirect tax liabilities are less than the ultimate assessment, it could result in a further charge to expense.

We believe that we have adequately provided under GAAP for outcomes related to our tax audits. However, there can be no assurances as to the possible outcomes or any related financial statement effect thereof.

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ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

 

7.
SEGMENT INFORMATION

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that 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 (CODMs) are our Chief Executive Officer and Chief Technology Officer. We are organized by line of business and geographically. While our CODMs evaluate results in a number of different ways, the line of business management structure is the primary basis for which the allocation of resources and financial results are assessed. The tabular information below presents financial information that is provided to our CODMs for their review and assists our CODMs with evaluating the company’s performance and allocating company resources.

We have three businesses—cloud and license, hardware and services—each of which is comprised of a single operating segment. All three of our businesses market and sell our offerings globally to businesses of many sizes, government agencies, educational institutions and resellers with a worldwide sales force positioned to offer the combinations that best meet customer needs.

Our cloud and license business engages in the sale, marketing and delivery of our enterprise applications and infrastructure technologies through cloud and on-premise deployment models including our cloud services and license support offerings; and our cloud license and on-premise license offerings. Cloud services and license support revenues are generated from offerings that are typically contracted with customers directly, billed to customers in advance, delivered to customers over time with our revenue recognition occurring over the contractual terms and renewed by customers upon completion of the contractual terms. Cloud services and license support contracts provide customers with access to the latest updates to the applications and infrastructure technologies as they become available and for which the customer contracted and also include related technical support services over the contractual term. Cloud license and on-premise license revenues represent fees earned from granting customers licenses, generally on a perpetual basis, to use our database and middleware and our applications software products within cloud and on-premise IT environments. We generally recognize revenues at the point in time the software is made available to the customer to download and use, which typically is immediate upon signature of the license contract. In each fiscal year, our cloud and license business’ contractual activities are typically highest in our fourth fiscal quarter and the related cash flows are typically highest in the following quarter (i.e., in the first fiscal quarter of the next fiscal year) as we receive payments from these contracts.

Our hardware business provides infrastructure technologies including Oracle Engineered Systems, servers, storage, industry-specific hardware, operating systems, virtualization, management and other hardware-related software to support diverse IT environments. Our hardware business also offers hardware support, which provides customers with software updates for the software components that are essential to the functionality of their hardware products and can also include product repairs, maintenance services and technical support services that are typically delivered and recognized ratably over the contractual term.

Our services business provides services to customers and partners to help maximize the performance of their investments in Oracle applications and infrastructure technologies.

We do not track our assets for each business. Consequently, it is not practical to show assets by operating segment.

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ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

 

The following table presents summary results for each of our three businesses:

 

 

 

Three Months Ended
August 31,

 

(in millions)

 

2024

 

 

2023

 

Cloud and license:

 

 

 

 

 

 

Revenues

 

$

11,389

 

 

$

10,356

 

Cloud services and license support expenses

 

 

2,422

 

 

 

2,040

 

Sales and marketing expenses

 

 

1,771

 

 

 

1,784

 

Margin(1)

 

$

7,196

 

 

$

6,532

 

Hardware:

 

 

 

 

 

 

Revenues

 

$

655

 

 

$

714

 

Hardware products and support expenses

 

 

152

 

 

 

211

 

Sales and marketing expenses

 

 

65

 

 

 

70

 

Margin(1)

 

$

438

 

 

$

433

 

Services: