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Table of Contents

 

 

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 November 30, 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 December 7, 2022 was: 2,696,253,000.

 

 

 


Table of Contents

 

 

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 November 30, 2022 and May 31, 2022

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended November 30, 2022 and 2021

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended November 30, 2022 and 2021

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Six Months Ended November 30, 2022 and 2021

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended November 30, 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

 

27

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

45

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

45

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

47

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

47

 

 

 

 

 

Item 1A.

 

Risk Factors

 

47

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

47

 

 

 

 

 

Item 6.

 

Exhibits

 

48

 

 

 

 

 

 

 

Signatures

 

49

 

 

 

 


Table of Contents

 

 

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 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and Section 27A of the Securities Act of 1933, as amended (Securities Act). These include, among other things, statements regarding:

 

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

 

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 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 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 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, and our belief 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;

 

our expectation that certain litigation related charges and other expenses 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;

 

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;

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Table of Contents

 

 

 

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 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 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 our fiscal year ended May 31, 2022 and our other Quarterly Reports on Form 10-Q to be filed by us in our fiscal 2023, which runs from June 1, 2022 to May 31, 2023.

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.

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Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

ORACLE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

As of November 30, 2022 and May 31, 2022

(Unaudited)

 

(in millions, except per share data)

 

November 30,

2022

 

 

May 31,

2022

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,813

 

 

$

21,383

 

Marketable securities

 

 

537

 

 

 

519

 

Trade receivables, net of allowances for credit losses of $403 and $362 as of November 30, 2022 and May 31, 2022, respectively

 

 

6,197

 

 

 

5,953

 

Prepaid expenses and other current assets

 

 

4,014

 

 

 

3,778

 

Total current assets

 

 

17,561

 

 

 

31,633

 

Non-current assets:

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

14,351

 

 

 

9,716

 

Intangible assets, net

 

 

11,593

 

 

 

1,440

 

Goodwill, net

 

 

61,513

 

 

 

43,811

 

Deferred tax assets

 

 

12,091

 

 

 

12,782

 

Other non-current assets

 

 

11,360

 

 

 

9,915

 

Total non-current assets

 

 

110,908

 

 

 

77,664

 

Total assets

 

$

128,469

 

 

$

109,297

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Notes payable and other borrowings, current

 

$

9,746

 

 

$

3,749

 

Accounts payable

 

 

1,647

 

 

 

1,317

 

Accrued compensation and related benefits

 

 

1,780

 

 

 

1,944

 

Deferred revenues

 

 

8,705

 

 

 

8,357

 

Other current liabilities

 

 

5,228

 

 

 

4,144

 

Total current liabilities

 

 

27,106

 

 

 

19,511

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Notes payable and other borrowings, non-current

 

 

81,173

 

 

 

72,110

 

Income taxes payable

 

 

11,128

 

 

 

12,210

 

Deferred tax liabilities

 

 

7,165

 

 

 

6,031

 

Other non-current liabilities

 

 

5,673

 

 

 

5,203

 

Total non-current liabilities

 

 

105,139

 

 

 

95,554

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Oracle Corporation stockholders' deficit:

 

 

 

 

 

 

 

 

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: 2,695 shares and 2,665 shares as of November 30, 2022 and May 31, 2022, respectively

 

 

28,148

 

 

 

26,808

 

Accumulated deficit

 

 

(30,617

)

 

 

(31,336

)

Accumulated other comprehensive loss

 

 

(1,777

)

 

 

(1,692

)

Total Oracle Corporation stockholders' deficit

 

 

(4,246

)

 

 

(6,220

)

Noncontrolling interests

 

 

470

 

 

 

452

 

Total stockholders' deficit

 

 

(3,776

)

 

 

(5,768

)

Total liabilities and stockholders' deficit

 

$

128,469

 

 

$

109,297

 

 

 

See notes to condensed consolidated financial statements.

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ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended November 30, 2022 and 2021

(Unaudited)

 

 

 

Three Months Ended

November 30,

 

 

Six Months Ended

November 30,

 

(in millions, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud services and license support

 

$

8,598

 

 

$

7,554

 

 

$

17,015

 

 

$

14,925

 

Cloud license and on-premise license

 

 

1,435

 

 

 

1,237

 

 

 

2,339

 

 

 

2,049

 

Hardware

 

 

850

 

 

 

767

 

 

 

1,613

 

 

 

1,530

 

Services

 

 

1,392

 

 

 

802

 

 

 

2,753

 

 

 

1,583

 

Total revenues

 

 

12,275

 

 

 

10,360

 

 

 

23,720

 

 

 

20,087

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud services and license support(1)

 

 

1,891

 

 

 

1,259

 

 

 

3,626

 

 

 

2,472

 

Hardware(1)

 

 

286

 

 

 

229

 

 

 

536

 

 

 

474

 

Services(1)

 

 

1,181

 

 

 

671

 

 

 

2,233

 

 

 

1,315

 

Sales and marketing(1)

 

 

2,216

 

 

 

1,954

 

 

 

4,393

 

 

 

3,808

 

Research and development

 

 

2,158

 

 

 

1,754

 

 

 

4,251

 

 

 

3,438

 

General and administrative

 

 

366

 

 

 

319

 

 

 

777

 

 

 

618

 

Amortization of intangible assets

 

 

907

 

 

 

299

 

 

 

1,826

 

 

 

603

 

Acquisition related and other

 

 

62

 

 

 

4,667

 

 

 

103

 

 

 

4,687

 

Restructuring

 

 

137

 

 

 

32

 

 

 

281

 

 

 

70

 

Total operating expenses

 

 

9,204

 

 

 

11,184

 

 

 

18,026

 

 

 

17,485

 

Operating income (loss)

 

 

3,071

 

 

 

(824

)

 

 

5,694

 

 

 

2,602

 

Interest expense

 

 

(856

)

 

 

(679

)

 

 

(1,643

)

 

 

(1,384

)

Non-operating (expenses) income, net

 

 

(71

)

 

 

7

 

 

 

(251

)

 

 

(34

)

Income (loss) before income taxes

 

 

2,144

 

 

 

(1,496

)

 

 

3,800

 

 

 

1,184

 

(Provision for) benefit from income taxes

 

 

(403

)

 

 

249

 

 

 

(511

)

 

 

25

 

Net income (loss)

 

$

1,741

 

 

$

(1,247

)

 

$

3,289

 

 

$

1,209

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.65

 

 

$

(0.46

)

 

$

1.22

 

 

$

0.44

 

Diluted

 

$

0.63

 

 

$

(0.46

)

 

$

1.20

 

 

$

0.43

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

2,695

 

 

 

2,694

 

 

 

2,690

 

 

 

2,731

 

Diluted

 

 

2,746

 

 

 

2,694

 

 

 

2,747

 

 

 

2,823

 

 

(1)

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

 

 

 

See notes to condensed consolidated financial statements.

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ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Three and Six Months Ended November 30, 2022 and 2021

(Unaudited)

 

 

 

Three Months Ended

November 30,

 

 

Six Months Ended

November 30,

 

(in millions)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

1,741

 

 

$

(1,247

)

 

$

3,289

 

 

$

1,209

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net foreign currency translation gains (losses)

 

 

95

 

 

 

(222

)

 

 

(194

)

 

 

(445

)

Net unrealized gains (losses) on defined benefit plans

 

 

 

 

 

2

 

 

 

(1

)

 

 

4

 

Net unrealized gains on cash flow hedges

 

 

93

 

 

 

 

 

 

110

 

 

 

 

Total other comprehensive income (loss), net

 

 

188

 

 

 

(220

)

 

 

(85

)

 

 

(441

)

Comprehensive income (loss)

 

$

1,929

 

 

$

(1,467

)

 

$

3,204

 

 

$

768

 

 

 

 

See notes to condensed consolidated financial statements.

 

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ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

For the Three and Six Months Ended November 30, 2022 and 2021

(Unaudited)

 

 

 

Three Months Ended

November 30,

 

 

Six Months Ended

November 30,

 

(in millions, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Common stock and additional paid in capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

27,224

 

 

$

25,534

 

 

$

26,808

 

 

$

26,533

 

Common stock issued

 

 

146

 

 

 

157

 

 

 

661

 

 

 

305

 

Stock-based compensation

 

 

909

 

 

 

681

 

 

 

1,659

 

 

 

1,226

 

Repurchases of common stock

 

 

(61

)

 

 

(711

)

 

 

(134

)

 

 

(1,583

)

Other, net

 

 

(70

)

 

 

(70

)

 

 

(846

)

 

 

(890

)

Balance, end of period

 

$

28,148

 

 

$

25,591

 

 

$

28,148

 

 

$

25,591

 

Accumulated deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(31,134

)

 

$

(25,679

)

 

$

(31,336

)

 

$

(20,120

)

Repurchases of common stock

 

 

(361

)

 

 

(6,289

)

 

 

(847

)

 

 

(13,417

)

Cash dividends declared

 

 

(863

)

 

 

(861

)

 

 

(1,723

)

 

 

(1,748

)

Net income (loss)

 

 

1,741

 

 

 

(1,247

)

 

 

3,289

 

 

 

1,209

 

Balance, end of period

 

$

(30,617

)

 

$

(34,076

)

 

$

(30,617

)

 

$

(34,076

)

Other stockholders' deficit, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(1,539

)

 

$

(985

)

 

$

(1,240

)

 

$

(461

)

Other comprehensive income (loss), net

 

 

188

 

 

 

(220

)

 

 

(85

)

 

 

(441

)

Other, net

 

 

44

 

 

 

32

 

 

 

18

 

 

 

(271

)

Balance, end of period

 

$

(1,307

)

 

$

(1,173

)

 

$

(1,307

)

 

$

(1,173

)

Total stockholders' deficit

 

$

(3,776

)

 

$

(9,658

)

 

$

(3,776

)

 

$

(9,658

)

Cash dividends declared per common share

 

$

0.32

 

 

$

0.32

 

 

$

0.64

 

 

$

0.64

 

 

 

 

See notes to condensed consolidated financial statements.

 

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ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended November 30, 2022 and 2021

(Unaudited)

 

 

 

Six Months Ended

November 30,

 

(in millions)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

3,289

 

 

$

1,209

 

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

 

 

 

 

 

 

 

 

Depreciation

 

 

1,138

 

 

 

913

 

Amortization of intangible assets

 

 

1,826

 

 

 

603

 

Deferred income taxes

 

 

(852

)

 

 

(820

)

Stock-based compensation

 

 

1,659

 

 

 

1,226

 

Other, net

 

 

289

 

 

 

(176

)

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

 

 

 

 

 

 

 

 

Decrease in trade receivables, net

 

 

516

 

 

 

789

 

Decrease in prepaid expenses and other assets

 

 

121

 

 

 

263

 

Decrease in accounts payable and other liabilities

 

 

(785

)

 

 

(918

)

Decrease in income taxes payable

 

 

(327

)

 

 

(849

)

Increase (decrease) in deferred revenues

 

 

369

 

 

 

(531

)

Net cash provided by operating activities

 

 

7,243

 

 

 

1,709

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of marketable securities and other investments

 

 

(603

)

 

 

(9,631

)

Proceeds from sales and maturities of marketable securities and other investments

 

 

462

 

 

 

21,617

 

Acquisitions, net of cash acquired

 

 

(27,799

)

 

 

(50

)

Capital expenditures

 

 

(4,154

)

 

 

(1,987

)

Net cash (used for) provided by investing activities

 

 

(32,094

)

 

 

9,949

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments for repurchases of common stock

 

 

(1,000

)

 

 

(15,001

)

Proceeds from issuances of common stock

 

 

661

 

 

 

305

 

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

 

 

(895

)

 

 

(890

)

Payments of dividends to stockholders

 

 

(1,723

)

 

 

(1,748

)

Proceeds from issuances of commercial paper, net of repayments

 

 

1,880

 

 

 

 

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

 

 

28,280

 

 

 

 

Repayments of senior notes and other borrowings

 

 

(16,692

)

 

 

(5,750

)

Other, net

 

 

(56

)

 

 

(437

)

Net cash provided by (used for) financing activities

 

 

10,455

 

 

 

(23,521

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(174

)