Item 1. Financial Statements (Unaudited)

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Item 1. Financial Statements (Unaudited)

ORACLE CORPORATION

CONDENSED CONSOLIDA****TED BALANCE SHEETS

As of November 30, 2023 and May 31, 2023

(Unaudited)

(in millions, except per share data)November 30, 2023May 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$8,244$9,765
Marketable securities446422
Trade receivables, net of allowances for credit losses of $470 and $428 as of November 30, 2023 and May 31, 2023, respectively6,8046,915
Prepaid expenses and other current assets3,7953,902
Total current assets19,28921,004
Non-current assets:
Property, plant and equipment, net18,00917,069
Intangible assets, net8,3789,837
Goodwill, net62,23162,261
Deferred tax assets12,75812,226
Other non-current assets13,65911,987
Total non-current assets115,035113,380
Total assets$134,324$134,384
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and other borrowings, current$6,321$4,061
Accounts payable1,1071,204
Accrued compensation and related benefits1,7062,053
Deferred revenues8,8788,970
Other current liabilities6,3956,802
Total current liabilities24,40723,090
Non-current liabilities:
Notes payable and other borrowings, non-current82,46886,420
Income taxes payable10,04611,077
Deferred tax liabilities5,2445,772
Other non-current liabilities7,7816,469
Total non-current liabilities105,539109,738
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: 2,748 shares and 2,713 shares as of November 30, 2023 and May 31, 2023, respectively30,72430,215
Accumulated deficit(25,431)(27,620)
Accumulated other comprehensive loss(1,427)(1,522)
Total Oracle Corporation stockholders’ equity3,8661,073
Noncontrolling interests512483
Total stockholders’ equity4,3781,556
Total liabilities and stockholders’ equity$134,324$134,384

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED S****TATEMENTS OF OPERATIONS

For the Three and Six Months Ended November 30, 2023 and 2022

(Unaudited)

Three Months Ended November 30,Six Months Ended November 30,
(in millions, except per share data)2023202220232022
Revenues:
Cloud services and license support$9,639$8,598$19,186$17,015
Cloud license and on-premise license1,1781,4351,9872,339
Hardware7568501,4701,613
Services1,3681,3922,7512,753
Total revenues12,94112,27525,39423,720
Operating expenses:
Cloud services and license support(1)2,2741,8914,4523,626
Hardware(1)213286432536
Services(1)1,2531,1812,4652,233
Sales and marketing(1)2,0932,2164,1184,393
Research and development2,2262,1584,4424,251
General and administrative375366769777
Amortization of intangible assets7559071,5181,826
Acquisition related and other476258103
Restructuring83137222281
Total operating expenses9,3199,20418,47618,026
Operating income3,6223,0716,9185,694
Interest expense(888)(856)(1,760)(1,643)
Non-operating expenses, net(14)(71)(63)(251)
Income before income taxes2,7202,1445,0953,800
Provision for income taxes217403172511
Net income$2,503$1,741$4,923$3,289
Earnings per share:
Basic$0.91$0.65$1.80$1.22
Diluted$0.89$0.63$1.75$1.20
Weighted average common shares outstanding:
Basic2,7462,6952,7372,690
Diluted2,8172,7462,8202,747

(1)

Exclusive of amortization of intangible assets, which is shown separately.

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEM****ENTS OF COMPREHENSIVE INCOME

For the Three and Six Months Ended November 30, 2023 and 2022

(Unaudited)

Three Months Ended November 30,Six Months Ended November 30,
(in millions)2023202220232022
Net income$2,503$1,741$4,923$3,289
Other comprehensive income (loss), net of tax:
Net foreign currency translation gains (losses)869542(194)
Net unrealized (losses) gains on cash flow hedges(17)9355110
Other, net1—(2)(1)
Total other comprehensive income (loss), net7018895(85)
Comprehensive income$2,573$1,929$5,018$3,204

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMEN****TS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the Three and Six Months Ended November 30, 2023 and 2022

(Unaudited)

Three Months Ended November 30,Six Months Ended November 30,
(in millions, except per share data)2023202220232022
Common stock and additional paid in capital
Balance, beginning of period$30,295$27,224$30,215$26,808
Common stock issued118146426661
Stock-based compensation1,0299091,8781,659
Repurchases of common stock(43)(61)(56)(134)
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards(673)(66)(1,733)(895)
Other, net(2)(4)(6)49
Balance, end of period$30,724$28,148$30,724$28,148
Accumulated deficit
Balance, beginning of period$(26,428)$(31,134)$(27,620)$(31,336)
Repurchases of common stock(407)(361)(544)(847)
Cash dividends declared(1,099)(863)(2,190)(1,723)
Net income2,5031,7414,9233,289
Balance, end of period$(25,431)$(30,617)$(25,431)$(30,617)
Other stockholders’ equity (deficit), net
Balance, beginning of period$(1,026)$(1,539)$(1,039)$(1,240)
Other comprehensive income (loss), net7018895(85)
Other, net41442918
Balance, end of period$(915)$(1,307)$(915)$(1,307)
Total stockholders’ equity (deficit)$4,378$(3,776)$4,378$(3,776)
Cash dividends declared per common share$0.40$0.32$0.80$0.64

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED S****TATEMENTS OF CASH FLOWS

For the Six Months Ended November 30, 2023 and 2022

(Unaudited)

Six Months Ended November 30,
(in millions)20232022
Cash flows from operating activities:
Net income$4,923$3,289
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation1,5101,138
Amortization of intangible assets1,5181,826
Deferred income taxes(1,049)(852)
Stock-based compensation1,8781,659
Other, net331289
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net145516
Decrease in prepaid expenses and other assets301121
Decrease in accounts payable and other liabilities(1,048)(785)
Decrease in income taxes payable(1,541)(327)
Increase in deferred revenues149369
Net cash provided by operating activities7,1177,243
Cash flows from investing activities:
Purchases of marketable securities and other investments(515)(603)
Proceeds from sales and maturities of marketable securities and other investments157462
Acquisitions, net of cash acquired(59)(27,799)
Capital expenditures(2,394)(4,154)
Net cash used for investing activities(2,811)(32,094)
Cash flows from financing activities:
Payments for repurchases of common stock(600)(1,000)
Proceeds from issuances of common stock426661
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards(1,733)(895)
Payments of dividends to stockholders(2,190)(1,723)
Proceeds from issuances of commercial paper, net of repayments1,7491,880
Proceeds from issuances of senior notes and other borrowings, net of issuance costs—28,280
Repayments of senior notes and other borrowings(3,500)(16,692)
Other, net31(56)
Net cash (used for) provided by financing activities(5,817)10,455
Effect of exchange rate changes on cash and cash equivalents(10)(174)
Net decrease in cash and cash equivalents(1,521)(14,570)
Cash and cash equivalents at beginning of period9,76521,383
Cash and cash equivalents at end of period$8,244$6,813
Non-cash financing activities:
Fair values of stock awards assumed in connection with acquisitions$—$55

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLID****ATED FINANCIAL STATEMENTS

November 30, 2023

(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. 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, 2023.

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, 2024.

During the first quarter of fiscal 2024, we finalized our adoption of Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and subsequent amendments to the initial guidance (collectively, Topic 848), which had no material impact to our current or historical condensed consolidated financial statements. 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, 2023 that had a significant impact on our condensed consolidated financial statements or notes thereto as of and for the six months ended November 30, 2023.

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 November 30, 2023 and May 31, 2023 and our condensed consolidated statements of cash flows for the six months ended November 30, 2023 and 2022 was immaterial.

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 November 30, 2023 and May 31, 2023. The revenues recognized during the six months ended November 30, 2023 and 2022, respectively, that were included in the opening deferred revenues balances as of May 31, 2023 and 2022, respectively, were approximately $6.8 billion and $6.2 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 six months ended November 30, 2023 and 2022, 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, 2023, were $65.5 billion as of November 30, 2023, approximately 48% of which we expect to recognize as revenues over the next twelve months, 35% 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

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

because we are considered to have surrendered control of these financing receivables. Financing receivables sold to financial institutions were $255 million and $816 million for the three and six months ended November 30, 2023, respectively, and $265 million and $1.2 billion for the three and six months ended November 30, 2022, respectively.

Non-Marketable Investments

Our non-marketable debt investments and equity securities and related instruments totaled $1.8 billion and $1.6 billion as of November 30, 2023 and May 31, 2023, respectively, and are included in other non-current assets in the accompanying condensed consolidated balance sheets and are subject to periodic 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 a related party entity for which we follow the equity method of accounting. We are also a counterparty to certain options to acquire additional equity interests in that entity at various times through June 2025 and we could obtain control of that entity should such options be exercised.

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 November 30,Six Months Ended November 30,
(in millions)2023202220232022
Transitional and other employee related costs$6$21$12$38
Business combination adjustments, net123138
Other, net29383357
Total acquisition related and other expenses$47$62$58$103

Non-Operating Expenses, net

Non-operating 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 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 November 30,Six Months Ended November 30,
(in millions)2023202220232022
Interest income$133$52$269$90
Foreign currency losses, net(32)(55)(113)(125)
Noncontrolling interests in income(41)(41)(78)(79)
Losses from equity investments, net(79)(40)(197)(126)
Other income (expenses), net51356(11)
Total non-operating expenses, net$(14)$(71)$(63)$(251)

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

Recent Accounting Pronouncements

Segment Reporting**:** In November 2023, the Financial Accounting Standards Board (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.

2.

ACQUISITIONS

Fiscal 2023 Acquisition of Cerner Corporation

On June 8, 2022, we completed our acquisition of Cerner Corporation (Cerner), a provider of digital information systems used within hospitals and health systems that are designed to enable medical professionals to deliver better healthcare to individual patients and communities.

The total purchase price for Cerner was $28.2 billion, which consisted of $28.2 billion in cash and $55 million for the fair values of restricted stock-based awards and stock options assumed. In allocating the purchase price based on estimated fair values, we recorded approximately $18.6 billion of goodwill, $12.0 billion of identifiable intangible assets and $2.4 billion of net tangible liabilities. See Note 2 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023 for additional information regarding our acquisition of Cerner.

Other Fiscal 2024 and 2023 Acquisitions

During the first half of fiscal 2024 and full year fiscal 2023, we acquired certain other companies and purchased certain technology and development assets primarily to expand our products and services offerings. These acquisitions were not significant individually or in the aggregate to our condensed consolidated financial statements.

3.

FAIR VALUE MEASUREMENTS

We perform fair value measurements in accordance with FASB Accounting Standards Codification (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.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

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):

November 30, 2023May 31, 2023
Fair Value Measurements Using Input TypesFair Value Measurements Using Input Types
(in millions)Level 1Level 2TotalLevel 1Level 2Total
Assets:
Money market funds$1,568$—$1,568$1,694$—$1,694
Time deposits and other151384535180288468
Derivative financial instruments—158158—102102
Total assets$1,719$542$2,261$1,874$390$2,264
Liabilities:
Derivative financial instruments$—$94$94$—$126$126

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 November 30, 2023 and May 31, 2023, 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 $86.5 billion and $89.9 billion of senior notes and other long-term borrowings and the related fair value hedges that we had outstanding as of November 30, 2023 and May 31, 2023, 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 November 30, 2023 and May 31, 2023 were $76.9 billion and $79.9 billion, respectively.

4.

INTANGIBLE ASSETS AND GOODWILL

The changes in intangible assets for fiscal 2024 and the net book value of intangible assets as of November 30, 2023 and May 31, 2023 were as follows:

Intangible Assets, GrossAccumulated AmortizationIntangible Assets, NetWeighted Average
(Dollars in millions)May 31, 2023AdditionsNovember 30, 2023May 31, 2023ExpenseNovember 30, 2023May 31, 2023November 30, 2023Useful Life**(1)**
Developed technology$4,300$59$4,359$(2,407)$(337)$(2,744)$1,893$1,6153
Cloud services and license support agreements and related relationships9,456—9,456(5,579)(528)(6,107)3,8773,349N.A.
Cloud license and on-premise license agreements and related relationships2,688—2,688(697)(233)(930)1,9911,758N.A.
Other3,582—3,582(1,506)(420)(1,926)2,0761,656N.A.
Total intangible assets, net$20,026$59$20,085$(10,189)$(1,518)$(11,707)$9,837$8,378

(1)

Represents weighted-average useful lives (in years) of intangible assets acquired during fiscal 2024.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

As of November 30, 2023, estimated future amortization expenses related to intangible assets were as follows (in millions):

Remainder of fiscal 2024$1,488
Fiscal 20252,303
Fiscal 20261,639
Fiscal 2027672
Fiscal 2028635
Fiscal 2029561
Thereafter1,080
Total intangible assets, net$8,378

The changes in the carrying amounts of goodwill, net, which is generally not deductible for tax purposes, for our operating segments for the six months ended November 30, 2023 were as follows:

(in millions)Cloud and LicenseHardwareServicesTotal Goodwill, net
Balances as of May 31, 2023$57,060$2,732$2,469$62,261
Goodwill adjustments, net(1)12—(42)(30)
Balances as of November 30, 2023$57,072$2,732$2,427$62,231

(1)

Amounts include any changes in goodwill balances for the period presented that resulted from foreign currency translations and certain other adjustments.

5.

RESTRUCTURING ACTIVITIES

Fiscal 2024 Oracle Restructuring Plan

During the first half of 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 $609 million and will be recorded to the restructuring expense line item within our condensed consolidated statements of operations as they are incurred. We recorded $243 million of restructuring expenses in connection with the 2024 Restructuring Plan in the first half of fiscal 2024 and we expect to incur the majority of the estimated remaining $366 million through the end of fiscal 2025. Any changes to the estimates of executing the 2024 Restructuring Plan will be reflected in our future results of operations.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

Summary of All Plans

AccruedSix Months Ended November 30, 2023AccruedTotal CostsTotal Expected
(in millions)May 31, 2023**(2)**Initial Costs**(3)**Adj. to Cost**(4)**Cash PaymentsOthers**(5)**November 30, 2023**(2)**Accrued to DateProgram Costs
2024 Restructuring Plan(1)
Cloud and license$—$119$(1)$(47)$1$72$118$184
Hardware—5—(2)—3515
Services—32—(17)—1532177
Other—89(1)(56)—3288233
Total 2024 Restructuring Plan$—$245$(2)$(122)$1$122$243$609
Total other restructuring plans(6)$199$—$(21)$(64)$2$116
Total restructuring plans$199$245$(23)$(186)$3$238

(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.

(2)

As of November 30, 2023 and May 31, 2023, 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.

6.

DEFERRED REVENUES

Deferred revenues consisted of the following:

(in millions)November 30, 2023May 31, 2023
Cloud services and license support$8,004$7,983
Hardware512535
Services306400
Cloud license and on-premise license5652
Deferred revenues, current8,8788,970
Deferred revenues, non-current (in other non-current liabilities)1,251968
Total deferred revenues$10,129$9,938

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.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

7.

STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock Repurchases

Our Board of Directors has approved a program for us to repurchase shares of our common stock. As of November 30, 2023, approximately $7.6 billion remained available for stock repurchases pursuant to our stock repurchase program. We repurchased 5.3 million shares for $600 million during the six months ended November 30, 2023 and 13.6 million shares for $981 million during the six months ended November 30, 2022 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.

Dividends on Common Stock

In December 2023, our Board of Directors declared a quarterly cash dividend of $0.40 per share of our outstanding common stock. The dividend is payable on January 25, 2024 to stockholders of record as of the close of business on January 11, 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 2024 Stock‑Based Awards Activity and Compensation Expense

During the first half of fiscal 2024, we issued 44 million stock-based awards, substantially all of which were restricted stock-based units (RSUs) issued as a part of our annual stock-based award process, which are subject to service-based vesting restrictions. These fiscal 2024 stock-based award issuances were partially offset by stock-based award forfeitures and cancellations of 4 million shares during the first half of fiscal 2024.

The RSUs that were granted during the six months ended November 30, 2023 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, 2023.

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

Three Months Ended November 30,Six Months Ended November 30,
(in millions)2023202220232022
Cloud services and license support$137$113$248$204
Hardware65119
Services45357860
Sales and marketing174151309275
Research and development5735101,057932
General and administrative9495175179
Total stock-based compensation$1,029$909$1,878$1,659

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

8.

INCOME TAXES

Our effective tax rates for each of the periods presented are the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. Our provision for 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 rates were 8.0% and 3.4% for the three and six months ended November 30, 2023, respectively, and 18.8% and 13.4% for the three and six months ended November 30, 2022, respectively.

Our net deferred tax assets were $7.5 billion and $6.5 billion as of November 30, 2023 and May 31, 2023, 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 2021. 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 2023. 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, Mexico, 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.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

9.

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.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

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

Three Months Ended November 30,Six Months Ended November 30,
(in millions)2023202220232022
Cloud and license:
Revenues$10,817$10,033$21,173$19,354
Cloud services and license support expenses2,1051,7474,1453,367
Sales and marketing expenses1,7971,9343,5823,864
Margin(1)$6,915$6,352$13,446$12,123
Hardware:
Revenues$756$850$1,470$1,613
Hardware products and support expenses204279415522
Sales and marketing expenses7883148162
Margin(1)$474$488$907$929
Services:
Revenues$1,368$1,392$2,751$2,753
Services expenses1,1661,1112,3112,118
Margin(1)$202$281$440$635
Totals:
Revenues$12,941$12,275$25,394$23,720
Expenses5,3505,15410,60110,033
Margin(1)$7,591$7,121$14,793$13,687

(1)

The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of research and development, general and administrative and certain other allocable expenses, net. Additionally, the margins reported above do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other non-operating expenses, net. Refer to the table below for a reconciliation of our total margin for operating segments to our income before income taxes as reported per our condensed consolidated statements of operations.

The following table reconciles total operating segment margin to income before income taxes:

Three Months Ended November 30,Six Months Ended November 30,
(in millions)2023202220232022
Total margin for operating segments$7,591$7,121$14,793$13,687
Research and development(2,226)(2,158)(4,442)(4,251)
General and administrative(375)(366)(769)(777)
Amortization of intangible assets(755)(907)(1,518)(1,826)
Acquisition related and other(47)(62)(58)(103)
Restructuring(83)(137)(222)(281)
Stock-based compensation for operating segments(362)(304)(646)(548)
Expense allocations and other, net(121)(116)(220)(207)
Interest expense(888)(856)(1,760)(1,643)
Non-operating expenses, net(14)(71)(63)(251)
Income before income taxes$2,720$2,144$5,095$3,800

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

Disaggregation of Revenues

We have considered information that is regularly reviewed by our CODMs in evaluating financial performance and disclosures presented outside of our financial statements in our earnings releases and used in investor presentations to disaggregate revenues to depict how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. The principal category we use to disaggregate revenues is the nature of our products and services as presented in our condensed consolidated statements of operations.

The following table is a summary of our total revenues by geographic region:

Three Months Ended November 30,Six Months Ended November 30,
(in millions)2023202220232022
Americas$8,067$7,786$15,907$14,978
EMEA(1)3,1702,8956,1755,586
Asia Pacific1,7041,5943,3123,156
Total revenues$12,941$12,275$25,394$23,720

(1)

Comprised of Europe, the Middle East and Africa

The following table presents our cloud services and license support revenues by offerings:

Three Months Ended November 30,Six Months Ended November 30,
(in millions)2023202220232022
Cloud services$4,775$3,813$9,410$7,392
License support4,8644,7859,7769,623
Total cloud services and license support revenues$9,639$8,598$19,186$17,015

The following table presents our cloud services and license support revenues by applications and infrastructure ecosystems:

Three Months Ended November 30,Six Months Ended November 30,
(in millions)2023202220232022
Applications cloud services and license support$4,474$4,080$8,945$8,096
Infrastructure cloud services and license support5,1654,51810,2418,919
Total cloud services and license support revenues$9,639$8,598$19,186$17,015

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

10.

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income for the period by the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding restricted stock-based awards, stock options and shares issuable under the employee stock purchase plan as applicable pursuant to the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended November 30,Six Months Ended November 30,
(in millions, except per share data)2023202220232022
Net income$2,503$1,741$4,923$3,289
Weighted-average common shares outstanding2,7462,6952,7372,690
Dilutive effect of employee stock plans71518357
Dilutive weighted-average common shares outstanding2,8172,7462,8202,747
Basic earnings per share$0.91$0.65$1.80$1.22
Diluted earnings per share$0.89$0.63$1.75$1.20
Shares subject to anti-dilutive restricted stock-based awards and stock options excluded from calculation(1)27642768

(1)

These weighted shares relate to anti-dilutive restricted service based stock-based awards as calculated using the treasury stock method and contingently issuable shares pursuant to performance stock option arrangements. Such shares could be dilutive in the future.

11.

LEGAL PROCEEDINGS

Derivative Litigation Concerning Oracle’s NetSuite Acquisition

On May 3 and July 18, 2017, two alleged stockholders filed separate derivative lawsuits in the Court of Chancery of the State of Delaware, purportedly on Oracle’s behalf. Thereafter, the court consolidated the two derivative cases and designated the July 18, 2017 complaint as the operative complaint. The consolidated lawsuit was brought against all the then-current members and one former member of our Board of Directors, and Oracle as a nominal defendant. Plaintiff alleged that the defendants breached their fiduciary duties by causing Oracle to agree to purchase NetSuite Inc. at an excessive price. The complaint sought (and the operative complaint continues to seek) declaratory relief, unspecified monetary damages (including interest) and attorneys’ fees and costs. The defendants filed a motion to dismiss, which the court denied on March 19, 2018.

On May 4, 2018, our Board of Directors established a Special Litigation Committee (SLC) to investigate the allegations in this derivative action. Three non-employee directors served on the SLC. On August 15, 2019, the SLC filed a letter with the court, stating that the SLC believed that plaintiff should be allowed to proceed with the derivative litigation on behalf of Oracle. After the SLC advised the Board that it had fulfilled its duties and obligations, the Board withdrew the SLC’s authority, except that the SLC maintained certain authority to respond to discovery requests in the litigation.

After plaintiff filed the July 18, 2017 complaint, an additional plaintiff joined the case. Plaintiffs filed several amended complaints, and filed their most recent amended complaint on December 11, 2020. The operative complaint asserts claims for breach of fiduciary duty against our Chief Executive Officer, our Chief Technology Officer, the estate of Mark Hurd (our former Chief Executive Officer who passed away on October 18, 2019) and two other members of our Board of Directors. Oracle is named as a nominal defendant. On December 11, 2020, the estate of Mark Hurd and the two other members of our Board of Directors moved to dismiss this complaint. On June 21, 2021, the court granted this motion as to the estate of Mark Hurd and one Board member and denied the motion as to the other

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

November 30, 2023

(Unaudited)

Board member, who filed an answer to the complaint on August 9, 2021. On December 28, 2020, our Chief Executive Officer, our Chief Technology Officer and Oracle as a nominal defendant filed answers to the operative complaint.

Trial commenced on July 18, 2022, and has concluded. On November 18, 2022, the court held a final hearing on the parties’ post-trial briefing. On December 27, 2022, the court “so ordered” a stipulation, dismissing the Board member from this action. On May 12, 2023, the court issued its trial ruling, finding for defendants and rejecting plaintiffs’ claims. On May 22, 2023, plaintiffs filed a motion for attorneys’ fees, claiming that this lawsuit had conferred a benefit on Oracle. By letter dated May 23, 2023, the court informed the parties that a final order and judgment would be entered after the court resolved plaintiffs’ motion for attorneys’ fees. On July 28, 2023, nominal defendant Oracle filed an opposition to plaintiffs’ fee application; plaintiffs filed a reply on October 11, 2023; a hearing on this motion was held on November 17, 2023. The court has not yet ruled on this motion. Because the court has not yet ruled on plaintiffs’ motion, no judgment has been entered, and plaintiffs’ time to file a notice of appeal has not yet begun to run. On May 31, 2023, defendants filed a bill of costs, as the prevailing party. This motion is fully briefed, and the court has not yet ruled on this motion.

While Oracle continues to evaluate these claims, we do not believe this litigation will have a material impact on our financial position or results of operations.

Derivative Litigation Concerning Oracle’s Cloud Business

On February 12 and May 6, 2019, two stockholder derivative lawsuits were filed in the United States District Court for the Northern District of California. The cases were consolidated, and on July 8, 2019, a single plaintiff filed a consolidated complaint. The consolidated complaint brought various claims relating to a Rule 10b-5 class action that was filed in the same court on August 10, 2018, and which was settled for a payment by Oracle of $17,500,000. That matter is now concluded. In the Rule 10b-5 class action, plaintiff alleged Oracle and certain Oracle officers made or were responsible for false and misleading statements regarding Oracle’s cloud business.

Plaintiff in the derivative action filed an amended complaint on June 4, 2021. The derivative suit is brought by an alleged stockholder of Oracle, purportedly on Oracle’s behalf, against our Chief Technology Officer, our Chief Executive Officer and the estate of Mark Hurd. Plaintiff claims that the alleged actions described in the 10b-5 class action caused harm to Oracle, including harming Oracle because Oracle allegedly repurchased its own stock at an inflated price. Plaintiff also claims that defendants violated their fiduciary duties of candor, good faith, loyalty, and due care by failing to prevent this alleged harm. Plaintiff also brings derivative claims for violations of federal securities laws. Plaintiff seeks a ruling that this case may proceed as a derivative action, a finding that defendants are liable for breaching their fiduciary duties, an award of damages to Oracle, an order directing defendants to enact corporate reforms, attorneys’ fees and costs, and unspecified relief. On June 14, 2021, the court “so ordered” a stipulation from the parties, staying this case pending resolution of the 10b-5 action, and the court “so ordered” two additional stipulations, staying the case until January 31, 2023. While Defendants had been scheduled to file their motion to dismiss by June 29, 2023, the parties agreed to two stays of this case, which the court “so ordered” on June 23, 2023, and on September 1, 2023. On October 17, 2023, the parties informed the court that they had reached an agreement in principle to resolve this matter, subject to negotiation and documentation of a final agreement.

While Oracle continues to evaluate these claims, we do not believe these matters will have a material impact on our financial position or results of operations.

Other Litigation

We are party to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including proceedings and claims that relate to acquisitions we have completed or to companies we have acquired or are attempting to acquire. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized, if any.

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