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 February 28, 2022

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 March 7, 2022 was: 2,668,157,000.

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 February 28, 2022 and May 31, 2021	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended February 28, 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended February 28, 2022 and 2021	5
	Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the Three and Nine Months Ended February 28, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 28, 2022 and 2021	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
PART II.	OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 5.	Other Information	46
Item 6.	Exhibits	47
	Signatures	48

Cautionary Note on Forward-Looking Statements

For purposes of this Quarterly Report, the terms “Oracle,” “we,” “us” and “our” refer to Oracle Corporation and its consolidated subsidiaries. This Quarterly Report on Form 10-Q 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 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These include, among other things, statements regarding:

• the possible impact of the Russia-Ukraine situation on our business, including our belief that our profitability and the generation of positive cash flow from our operations will not be jeopardized by the current situation;

• our expectations regarding the impacts on our business as a result of the global COVID-19 pandemic;

• our expectation that we may acquire companies, products, services and technologies to further our corporate strategy as compelling opportunities become available;

• our expectations regarding the proposed acquisition of Cerner Corporation;

• 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 our license support offerings, and continued demand for our cloud license and on-premise license offerings;

• our expectation that substantially all of our customers will renew their license support contracts annually;

• 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, and our belief that research and development efforts are essential to maintaining our competitive position;

• our expectation that our international operations will continue to provide a significant portion of our total revenues and expenses;

• our expectation that variable expenditures that were curtailed primarily in response to COVID-19 may normalize in future periods provided global economic and health conditions improve;

• our expectation that the proportion of our cloud services and license support revenues relative to our cloud license and on-premise license revenues, hardware revenues and services 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 U.S. generally accepted accounting principles for outcomes related to our tax audits and that the final outcome of our tax-related examinations, agreements or judicial proceedings will not have a material effect on our results of operations, our belief that our net deferred tax assets will likely be realized in the foreseeable future, and our expectations regarding the “Build Back Better Act” budget reconciliation bill;

• 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;

• our expectation that certain litigation related charges will not recur;

• 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;

1

• the timing and amount of expenses we expect to incur;

• the cost savings we expect to realize pursuant to our Fiscal 2022 Oracle Restructuring Plan;

• 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 expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements;

• our expectation that, to the extent customers renew support contracts or cloud SaaS and IaaS contracts from companies that we have acquired prior to fiscal 2022, we will recognize revenues for the full contracts’ values over the respective renewal periods;

• 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 “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “strives,” “endeavors,” “estimates,” “will,” “should,” “is designed to” and similar expressions. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 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 (the SEC), including our Annual Report on Form 10-K for our fiscal year ended May 31, 2021 and our other Quarterly Reports on Form 10-Q filed by us in our fiscal 2022, which runs from June 1, 2021 to May 31, 2022.

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 February 28, 2022 and May 31, 2021

(Unaudited)

(in millions, except per share data)	February 28, 2022			May 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	22,682		$	30,098
Marketable securities		707			16,456
Trade receivables, net of allowances for doubtful accounts of $367 and $373 as of February 28, 2022 and May 31, 2021, respectively		4,588			5,409
Prepaid expenses and other current assets		3,698			3,604
Total current assets		31,675			55,567
Non-current assets:
Property, plant and equipment, net		8,609			7,049
Intangible assets, net		1,688			2,430
Goodwill, net		43,833			43,935
Deferred tax assets		13,109			13,636
Other non-current assets		9,730			8,490
Total non-current assets		76,969			75,540
Total assets	$	108,644		$	131,107
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Notes payable, current	$	6,248		$	8,250
Accounts payable		1,124			745
Accrued compensation and related benefits		1,626			2,017
Deferred revenues		7,871			8,775
Other current liabilities		3,964			4,377
Total current liabilities		20,833			24,164
Non-current liabilities:
Notes payable and other borrowings, non-current		72,165			75,995
Income taxes payable		12,168			12,345
Deferred tax liabilities		6,462			7,864
Other non-current liabilities		5,227			4,787
Total non-current liabilities		96,022			100,991
Commitments and contingencies
Oracle Corporation stockholders’ (deficit) 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: 2,668 shares and 2,814 shares as of February 28, 2022 and May 31, 2021, respectively		26,129			26,533
Accumulated deficit		(33,147	)		(20,120	)
Accumulated other comprehensive loss		(1,678	)		(1,175	)
Total Oracle Corporation stockholders’ (deficit) equity		(8,696	)		5,238
Noncontrolling interests		485			714
Total stockholders’ (deficit) equity		(8,211	)		5,952
Total liabilities and stockholders’ (deficit) equity	$	108,644		$	131,107

See notes to condensed consolidated financial statements.

3

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended February 28, 2022 and 2021

(Unaudited)

	Three Months Ended February 28,						Nine Months Ended February 28,
(in millions, except per share data)	2022			2021			2022			2021
Revenues:
Cloud services and license support	$	7,637		$	7,252		$	22,562		$	21,311
Cloud license and on-premise license		1,289			1,276			3,339			3,254
Hardware		798			820			2,328			2,478
Services		789			737			2,371			2,209
Total revenues		10,513			10,085			30,600			29,252
Operating expenses:
Cloud services and license support(1)		1,305			1,064			3,778			3,139
Hardware(1)		244			230			718			719
Services		669			621			1,984			1,875
Sales and marketing(1)		2,004			1,915			5,811			5,605
Research and development		1,816			1,621			5,254			4,812
General and administrative		335			330			953			949
Amortization of intangible assets		279			347			882			1,037
Acquisition related and other		20			13			4,707			107
Restructuring		19			66			89			337
Total operating expenses		6,691			6,207			24,176			18,580
Operating income		3,822			3,878			6,424			10,672
Interest expense		(667	)		(585	)		(2,051	)		(1,799	)
Non-operating expenses, net		(315	)		(17	)		(348	)		(30	)
Income before income taxes		2,840			3,276			4,025			8,843
(Provision for) benefit from income taxes		(521	)		1,745			(497	)		871
Net income	$	2,319		$	5,021		$	3,528		$	9,714
Earnings per share:
Basic	$	0.87		$	1.72		$	1.30		$	3.26
Diluted	$	0.84		$	1.68		$	1.26		$	3.19
Weighted average common shares outstanding:
Basic		2,670			2,913			2,711			2,977
Diluted		2,754			2,994			2,800			3,049

⁽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 and Nine Months Ended February 28, 2022 and 2021

(Unaudited)

	Three Months Ended February 28,						Nine Months Ended February 28,
(in millions)	2022			2021			2022			2021
Net income	$	2,319		$	5,021		$	3,528		$	9,714
Other comprehensive (loss) income, net of tax:
Net foreign currency translation (losses) gains		(63	)		132			(508	)		504
Net unrealized gains on defined benefit plans		1			10			5			66
Net unrealized losses on marketable securities		—			(4	)		—			(1	)
Net unrealized losses on cash flow hedges		—			(7	)		—			(8	)
Total other comprehensive (loss) income, net		(62	)		131			(503	)		561
Comprehensive income	$	2,257		$	5,152		$	3,025		$	10,275

See notes to condensed consolidated financial statements.

5

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

For the Three and Nine Months Ended February 28, 2022 and 2021

(Unaudited)

	Three Months Ended February 28,						Nine Months Ended February 28,
(in millions, except per share data)	2022			2021			2022			2021
Common stock and additional paid in capital
Balance, beginning of period	$	25,591		$	26,298		$	26,533		$	26,486
Common stock issued		52			143			357			915
Stock-based compensation		674			479			1,900			1,395
Repurchases of common stock		(65	)		(567	)		(1,648	)		(1,922	)
Other, net		(123	)		(92	)		(1,013	)		(613	)
Balance, end of period	$	26,129		$	26,261		$	26,129		$	26,261
Accumulated deficit
Balance, beginning of period	$	(34,076	)	$	(17,095	)	$	(20,120	)	$	(12,696	)
Repurchases of common stock		(535	)		(3,433	)		(13,952	)		(11,078	)
Cash dividends declared		(855	)		(699	)		(2,603	)		(2,146	)
Net income		2,319			5,021			3,528			9,714
Balance, end of period	$	(33,147	)	$	(16,206	)	$	(33,147	)	$	(16,206	)
Other stockholders’ (deficit) equity, net
Balance, beginning of period	$	(1,173	)	$	(587	)	$	(461	)	$	(1,073	)
Other comprehensive (loss) income, net		(62	)		131			(503	)		561
Other, net		42			38			(229	)		94
Balance, end of period	$	(1,193	)	$	(418	)	$	(1,193	)	$	(418	)
Total stockholders’ (deficit) equity	$	(8,211	)	$	9,637		$	(8,211	)	$	9,637
Cash dividends declared per common share	$	0.32		$	0.24		$	0.96		$	0.72

See notes to condensed consolidated financial statements.

6

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended February 28, 2022 and 2021

(Unaudited)

	Nine Months Ended February 28,
(in millions)	2022			2021
Cash flows from operating activities:
Net income	$	3,528		$	9,714
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,409			1,127
Amortization of intangible assets		882			1,037
Deferred income taxes		(983	)		(2,475	)
Stock-based compensation		1,900			1,395
Other, net		82			227
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net		652			1,089
Decrease in prepaid expenses and other assets		71			609
Decrease in accounts payable and other liabilities		(683	)		(247	)
Decrease in income taxes payable		(661	)		(1,181	)
Decrease in deferred revenues		(643	)		(250	)
Net cash provided by operating activities		5,554			11,045
Cash flows from investing activities:
Purchases of marketable securities and other investments		(10,134	)		(26,775	)
Proceeds from sales and maturities of marketable securities and other investments		25,735			19,035
Acquisitions, net of cash acquired		(132	)		(29	)
Capital expenditures		(3,088	)		(1,418	)
Net cash provided by (used for) investing activities		12,381			(9,187	)
Cash flows from financing activities:
Payments for repurchases of common stock		(15,654	)		(12,958	)
Proceeds from issuances of common stock		357			915
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards		(1,011	)		(597	)
Payments of dividends to stockholders		(2,603	)		(2,146	)
Repayments of borrowings		(5,750	)		(2,631	)
Other, net		(439	)		241
Net cash used for financing activities		(25,100	)		(17,176	)
Effect of exchange rate changes on cash and cash equivalents		(251	)		400
Net decrease in cash and cash equivalents		(7,416	)		(14,918	)
Cash and cash equivalents at beginning of period		30,098			37,239
Cash and cash equivalents at end of period	$	22,682		$	22,321
Non-cash financing activities:
Change in unsettled repurchases of common stock	$	(54	)	$	42

See notes to condensed consolidated financial statements.

7

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(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 U.S. Securities and Exchange Commission (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, 2021.

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 our fiscal year ending May 31, 2022.

The comparability of our condensed consolidated financial statements as of and for the nine months ended February 28, 2022 was impacted by $4.7 billion of certain litigation related charges that are more fully described in Note 11 below. The comparability of our condensed consolidated financial statements for the three and nine months ended February 28, 2021 was impacted by a $2.3 billion net income tax benefit related to the partial realignment of our legal entity structure that resulted in the intra-group transfer of certain intellectual property rights (refer to Notes 1 and 14 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended May 31, 2021 for additional information).

During the first nine months of fiscal 2022, we adopted Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes; and ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, neither of which had a material impact to our condensed consolidated financial statements as of and for the nine months ended February 28, 2022. 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, 2021 that had a significant impact on our condensed consolidated financial statements or notes thereto as of and for the nine months ended February 28, 2022.

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 February 28, 2022 and May 31, 2021 and our condensed consolidated statements of cash flows for the nine months ended February 28, 2022 and 2021 was nominal.

Remaining Performance Obligations from Contracts with Customers

Trade receivables, net of allowance for doubtful accounts, and deferred revenues are reported net of related uncollected deferred revenues in our condensed consolidated balance sheets as of February 28, 2022 and May 31, 2021. The revenues recognized during the nine months ended February 28, 2022 and 2021, respectively, that were included in the opening deferred revenues balances as of May 31, 2021 and 2020, respectively, were approximately $8.1 billion and $7.4 billion, respectively. Revenues recognized from performance obligations satisfied in prior periods and impairment losses recognized on our receivables were immaterial in each of the three and nine months ended February 28, 2022 and 2021, respectively.

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, 2021, were $38.5 billion as of February 28,

8

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 28, 2022

(Unaudited)

2022, approximately 59% of which we expect to recognize as revenues over the next twelve months, 30% over the subsequent month 13 to month 36, 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 $352 million and $1.4 billion for the three and nine months ended February 28, 2022, respectively, and $338 million and $1.3 billion for the three and nine months ended February 28, 2021, respectively.

Non-Marketable Investments

Our non-marketable debt investments and equity securities and related instruments totaled $1.3 billion and $971 million as of February 28, 2022 and May 31, 2021, respectively, and are included either in other current assets or in other non-current assets in the accompanying consolidated balance sheets and are subject to periodic impairment reviews. Certain of these instruments are adjusted for observable price changes from orderly transactions. The substantial majority of the non-marketable debt investments and equity securities and related instruments held as of these dates were with a related party entity for which we follow the equity method of accounting. We are also a counterparty to certain