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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 February 29, 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 March 7, 2024 was: 2,748,514,000.

 


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 29, 2024 and May 31, 2023

 

3

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended February 29, 2024 and February 28, 2023

 

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended February 29, 2024 and February 28, 2023

 

5

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Nine Months Ended February 29, 2024 and February 28, 2023

 

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 29, 2024 and February 28, 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

 

38

 

 

 

Item 4.

 

Controls and Procedures

 

39

 

 

 

PART II.

 

OTHER INFORMATION

 

40

 

 

 

Item 1.

 

Legal Proceedings

 

40

 

 

 

Item 1A.

 

Risk Factors

 

40

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

40

 

 

 

Item 5.

 

Other Information

 

41

 

 

 

 

 

Item 6.

 

Exhibits

 

42

 

 

 

 

Signatures

 

43

 

 


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 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 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 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;
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;

1


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,” “continues,” “could,” “endeavors,” “estimates,” “expects,” “intends,” “is designed to,” “may,” “plans,” “potential,” “seeks,” “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, 2023 and our other Quarterly Reports on Form 10-Q filed by us in our fiscal year 2024, which runs from June 1, 2023 to May 31, 2024.

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 29, 2024 and May 31, 2023

(Unaudited)

 

(in millions, except per share data)

 

February 29,
 2024

 

 

May 31,
 2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,481

 

 

$

9,765

 

Marketable securities

 

 

423

 

 

 

422

 

Trade receivables, net of allowances for credit losses of $469 and $428 as of February 29, 2024 and May 31, 2023, respectively

 

 

7,297

 

 

 

6,915

 

Prepaid expenses and other current assets

 

 

3,862

 

 

 

3,902

 

Total current assets

 

 

21,063

 

 

 

21,004

 

Non-current assets:

 

 

 

 

 

 

Property, plant and equipment, net

 

 

19,117

 

 

 

17,069

 

Intangible assets, net

 

 

7,629

 

 

 

9,837

 

Goodwill, net

 

 

62,222

 

 

 

62,261

 

Deferred tax assets

 

 

12,688

 

 

 

12,226

 

Other non-current assets

 

 

14,363

 

 

 

11,987

 

Total non-current assets

 

 

116,019

 

 

 

113,380

 

Total assets

 

$

137,082

 

 

$

134,384

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Notes payable and other borrowings, current

 

$

5,510

 

 

$

4,061

 

Accounts payable

 

 

1,658

 

 

 

1,204

 

Accrued compensation and related benefits

 

 

1,796

 

 

 

2,053

 

Deferred revenues

 

 

8,931

 

 

 

8,970

 

Other current liabilities

 

 

6,990

 

 

 

6,802

 

Total current liabilities

 

 

24,885

 

 

 

23,090

 

Non-current liabilities:

 

 

 

 

 

 

Notes payable and other borrowings, non-current

 

 

82,470

 

 

 

86,420

 

Income taxes payable

 

 

10,451

 

 

 

11,077

 

Deferred tax liabilities

 

 

4,483

 

 

 

5,772

 

Other non-current liabilities

 

 

8,611

 

 

 

6,469

 

Total non-current liabilities

 

 

106,015

 

 

 

109,738

 

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: 2,747 shares and 2,713 shares as of February 29, 2024 and May 31, 2023, respectively

 

 

31,622

 

 

 

30,215

 

Accumulated deficit

 

 

(24,533

)

 

 

(27,620

)

Accumulated other comprehensive loss

 

 

(1,466

)

 

 

(1,522

)

Total Oracle Corporation stockholders’ equity

 

 

5,623

 

 

 

1,073

 

Noncontrolling interests

 

 

559

 

 

 

483

 

Total stockholders’ equity

 

 

6,182

 

 

 

1,556

 

Total liabilities and stockholders’ equity

 

$

137,082

 

 

$

134,384

 

 

 

See notes to condensed consolidated financial statements.

3


ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended February 29, 2024 and February 28, 2023

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in millions, except per share data)

 

February 29,
 2024

 

 

February 28,
 2023

 

 

February 29,
 2024

 

 

February 28,
 2023

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Cloud services and license support

 

$

9,963

 

 

$

8,923

 

 

$

29,149

 

 

$

25,938

 

Cloud license and on-premise license

 

 

1,256

 

 

 

1,288

 

 

 

3,243

 

 

 

3,627

 

Hardware

 

 

754

 

 

 

811

 

 

 

2,224

 

 

 

2,424

 

Services

 

 

1,307

 

 

 

1,376

 

 

 

4,058

 

 

 

4,129

 

Total revenues

 

 

13,280

 

 

 

12,398

 

 

 

38,674

 

 

 

36,118

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cloud services and license support(1)

 

 

2,452

 

 

 

1,980

 

 

 

6,905

 

 

 

5,606

 

Hardware(1)

 

 

217

 

 

 

244

 

 

 

649

 

 

 

780

 

Services(1)

 

 

1,200

 

 

 

1,215

 

 

 

3,665

 

 

 

3,448

 

Sales and marketing(1)

 

 

2,042

 

 

 

2,150

 

 

 

6,161

 

 

 

6,544

 

Research and development

 

 

2,248

 

 

 

2,146

 

 

 

6,689

 

 

 

6,397

 

General and administrative

 

 

377

 

 

 

402

 

 

 

1,146

 

 

 

1,179

 

Amortization of intangible assets

 

 

749

 

 

 

886

 

 

 

2,267

 

 

 

2,712

 

Acquisition related and other

 

 

155

 

 

 

37

 

 

 

214

 

 

 

140

 

Restructuring

 

 

90

 

 

 

78

 

 

 

311

 

 

 

359

 

Total operating expenses

 

 

9,530

 

 

 

9,138

 

 

 

28,007

 

 

 

27,165

 

Operating income

 

 

3,750

 

 

 

3,260

 

 

 

10,667

 

 

 

8,953

 

Interest expense

 

 

(876

)

 

 

(908

)

 

 

(2,636

)

 

 

(2,550

)

Non-operating expenses, net

 

 

(9

)

 

 

(134

)

 

 

(72

)

 

 

(386

)

Income before income taxes

 

 

2,865

 

 

 

2,218

 

 

 

7,959

 

 

 

6,017

 

Provision for income taxes

 

 

464

 

 

 

322

 

 

 

636

 

 

 

833

 

Net income

 

$

2,401

 

 

$

1,896

 

 

$

7,323

 

 

$

5,184

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.87

 

 

$

0.70

 

 

$

2.67

 

 

$

1.93

 

Diluted

 

$

0.85

 

 

$

0.68

 

 

$

2.60

 

 

$

1.88

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

2,748

 

 

 

2,698

 

 

 

2,741

 

 

 

2,692

 

Diluted

 

 

2,819

 

 

 

2,776

 

 

 

2,820

 

 

 

2,757

 

(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 29, 2024 and February 28, 2023

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in millions)

 

February 29,
 2024

 

 

February 28,
 2023

 

 

February 29,
 2024

 

 

February 28,
 2023

 

Net income

 

$

2,401

 

 

$

1,896

 

 

$

7,323

 

 

$

5,184

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Net foreign currency translation (losses) gains

 

 

(35

)

 

 

11

 

 

 

7

 

 

 

(183

)

Net unrealized (losses) gains on cash flow hedges

 

 

(3

)

 

 

71

 

 

 

52

 

 

 

181

 

Other, net

 

 

(1

)

 

 

1

 

 

 

(3

)

 

 

 

Total other comprehensive (loss) income, net

 

 

(39

)

 

 

83

 

 

 

56

 

 

 

(2

)

Comprehensive income

 

$

2,362

 

 

$

1,979

 

 

$

7,379

 

 

$

5,182

 

 

 

 

See notes to condensed consolidated financial statements.

 

5


ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the Three and Nine Months Ended February 29, 2024 and February 28, 2023

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in millions, except per share data)

 

February 29,
 2024

 

 

February 28,
 2023

 

 

February 29,
 2024

 

 

February 28,
 2023

 

Common stock and additional paid in capital

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

30,724

 

 

$

28,148

 

 

$

30,215

 

 

$

26,808

 

Common stock issued

 

 

28

 

 

 

98

 

 

 

454

 

 

 

759

 

Stock-based compensation

 

 

1,048

 

 

 

924

 

 

 

2,927

 

 

 

2,583

 

Repurchases of common stock

 

 

(46

)

 

 

(18

)

 

 

(103

)

 

 

(153

)

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

 

 

(132

)

 

 

(145

)

 

 

(1,865

)

 

 

(1,040

)

Other, net

 

 

 

 

 

(13

)

 

 

(6

)

 

 

37

 

Balance, end of period

 

$

31,622

 

 

$

28,994

 

 

$

31,622

 

 

$

28,994

 

Accumulated deficit

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(25,431

)

 

$

(30,617

)

 

$

(27,620

)

 

$

(31,336

)

Repurchases of common stock

 

 

(404

)

 

 

(137

)

 

 

(947

)

 

 

(983

)

Cash dividends declared

 

 

(1,099

)

 

 

(863

)

 

 

(3,289

)

 

 

(2,586

)

Net income

 

 

2,401

 

 

 

1,896

 

 

 

7,323

 

 

 

5,184

 

Balance, end of period

 

$

(24,533

)

 

$

(29,721

)

 

$

(24,533

)

 

$

(29,721

)

Other stockholders’ equity (deficit), net

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(915

)

 

$

(1,307

)

 

$

(1,039

)

 

$

(1,240

)

Other comprehensive (loss) income, net

 

 

(39

)

 

 

83

 

 

 

56

 

 

 

(2

)

Other, net

 

 

47

 

 

 

39

 

 

 

76

 

 

 

57

 

Balance, end of period

 

$

(907

)

 

$

(1,185

)

 

$

(907

)

 

$

(1,185

)

Total stockholders’ equity (deficit)

 

$

6,182

 

 

$

(1,912

)

 

$

6,182

 

 

$

(1,912

)

Cash dividends declared per common share

 

$

0.40

 

 

$

0.32

 

 

$

1.20

 

 

$

0.96

 

 

 

 

See notes to condensed consolidated financial statements.

6


ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended February 29, 2024 and February 28, 2023

(Unaudited)

 

 

 

Nine Months Ended

 

(in millions)

 

February 29,
 2024

 

 

February 28,
 2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

7,323

 

 

$

5,184

 

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

 

 

 

 

 

 

Depreciation

 

 

2,318

 

 

 

1,810

 

Amortization of intangible assets

 

 

2,267

 

 

 

2,712

 

Deferred income taxes

 

 

(1,755

)

 

 

(1,253

)

Stock-based compensation

 

 

2,927

 

 

 

2,583

 

Other, net

 

 

631

 

 

 

487

 

Changes in operating assets and liabilities, net of effects from acquisitions:

 

 

 

 

 

 

(Increase) decrease in trade receivables, net

 

 

(409

)

 

 

460

 

Decrease in prepaid expenses and other assets

 

 

457

 

 

 

515

 

Decrease in accounts payable and other liabilities

 

 

(682

)

 

 

(783

)

Decrease in income taxes payable

 

 

(788

)

 

 

(453

)

Increase in deferred revenues

 

 

303

 

 

 

256

 

Net cash provided by operating activities

 

 

12,592

 

 

 

11,518

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities and other investments

 

 

(674

)

 

 

(921

)

Proceeds from sales and maturities of marketable securities and other investments

 

 

207

 

 

 

552

 

Acquisitions, net of cash acquired

 

 

(59

)

 

 

(27,721

)

Capital expenditures

 

 

(4,068

)

 

 

(6,782

)

Net cash used for investing activities

 

 

(4,594

)

 

 

(34,872

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments for repurchases of common stock

 

 

(1,050

)

 

 

(1,150

)

Proceeds from issuances of common stock

 

 

454

 

 

 

759

 

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

 

 

(1,865

)

 

 

(1,040

)

Payments of dividends to stockholders

 

 

(3,289

)

 

 

(2,586

)

Proceeds from issuances of commercial paper, net of repayments

 

 

936

 

 

 

1,874

 

Proceeds from issuances of senior notes and other borrowings, net of issuance costs

 

 

 

 

 

33,494

 

Repayments of senior notes and other borrowings

 

 

(3,500

)

 

 

(21,050

)

Other, net

 

 

34

 

 

 

49

 

Net cash (used for) provided by financing activities

 

 

(8,280

)

 

 

10,350

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(2

)

 

 

(160

)

Net decrease in cash and cash equivalents

 

 

(284

)

 

 

(13,164

)

Cash and cash equivalents at beginning of period

 

 

9,765

 

 

 

21,383

 

Cash and cash equivalents at end of period

 

$

9,481

 

 

$

8,219

 

Non-cash financing activities:

 

 

 

 

 

 

Fair values of stock awards assumed in connection with acquisitions

 

$

 

 

$

55

 

 

 

 

See notes to condensed consolidated financial statements.

7


ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 29, 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 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 nine months ended February 29, 2024.

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 29, 2024 and May 31, 2023 and our condensed consolidated statements of cash flows for the nine months ended February 29, 2024 and February 28, 2023 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 February 29, 2024 and May 31, 2023. The revenues recognized during the nine months ended February 29, 2024 and February 28, 2023 that were included in the opening deferred revenues balances as of May 31, 2023 and 2022, respectively, were approximately $8.5 billion and $7.7 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 29, 2024 and February 28, 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, 2023, were $80.2 billion as of February 29, 2024, of which we expect to recognize approximately 43% 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

 


Table of Contents

 

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2024

(Unaudited)

 

because we are considered to have surrendered control of these financing receivables. Financing receivables sold to financial institutions were $269 million and $1.1 billion for the three and nine months ended February 29, 2024, respectively, and $344 million and $1.5 billion for the three and nine months ended February 28, 2023, respectively.

Non-Marketable Investments

Our non-marketable debt investments and equity securities and related instruments totaled $1.9 billion and $1.6 billion as of February 29, 2024 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 Ampere Computing Holdings LLC (Ampere), a related party entity in which we have an ownership interest of approximately 29% as of February 29, 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 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, as amended on March 5, 2024, will mature in June 2026 and are convertible into equity securities at the holder’s option under certain circumstances. During the three months ended February 29, 2024, we invested an additional $125 million in convertible debt instruments issued by Ampere. The total carrying value of our investments in Ampere as of February 29, 2024 after accounting for losses under the equity method of accounting was $1.4 billion. In accordance with the terms of an agreement with other co-investors, as amended on March 5, 2024, we are also a counterparty to certain put (exercisable by a co-investor) and call (exercisable by Oracle) options at prices of approximately $400 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.

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

 

 

Nine Months Ended

 

(in millions)

 

February 29,
 2024

 

 

February 28,
 2023

 

 

February 29,
 2024

 

 

February 28,
 2023

 

Transitional and other employee related costs

 

$

5

 

 

$

15

 

 

$

17

 

 

$

52

 

Business combination adjustments, net

 

 

4

 

 

 

2

 

 

 

17

 

 

 

10

 

Other, net

 

 

146

 

 

 

20

 

 

 

180

 

 

 

78

 

Total acquisition related and other expenses

 

$

155

 

 

$

37

 

 

$

214

 

 

$

140

 

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 (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.

 

9


Table of Contents

 

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2024

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in millions)

 

February 29,
 2024

 

 

February 28,
 2023

 

 

February 29,
 2024

 

 

February 28,
 2023

 

Interest income

 

$

111

 

 

$

90

 

 

$

380

 

 

$

180

 

Foreign currency losses, net

 

 

(59

)

 

 

(55

)

 

 

(172

)

 

 

(181

)

Noncontrolling interests in income

 

 

(51

)

 

 

(41

)

 

 

(130

)

 

 

(120

)

Losses from equity investments, net

 

 

(94

)

 

 

(122

)

 

 

(290

)

 

 

(249

)

Other income (expenses), net

 

 

84

 

 

 

(6

)

 

 

140

 

 

 

(16

)

Total non-operating expenses, net

 

$

(9

)

 

$

(134

)

 

$

(72

)

 

$

(386

)

 

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.

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.

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 nine months 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

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ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2024

(Unaudited)

 

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):

 

 

 

February 29, 2024

 

 

May 31, 2023

 

 

 

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

 

$

2,657

 

 

$

 

 

$

2,657

 

 

$

1,694

 

 

$

 

 

$

1,694

 

Time deposits and other

 

 

115

 

 

 

366

 

 

 

481

 

 

 

180

 

 

 

288

 

 

 

468

 

Derivative financial instruments

 

 

 

 

 

154

 

 

 

154

 

 

 

 

 

 

102

 

 

 

102

 

Total assets

 

$

2,772

 

 

$

520

 

 

$

3,292

 

 

$

1,874

 

 

$

390

 

 

$

2,264

 

Liabilities: