Oracle Corp 10-Q for FY2021 Q1

Oracle Corp (ORCL)

10-Q 2020-09-15 For: 2020-08-31

Added on April 02, 2026

About this 10-Q

Oracle Corp filed this 10-Q on September 15, 2020, covering the quarter ended August 31, 2020 (FY2021 Q1).

Headline figures

Quarter ended August 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $9.37B; up 1.6% from $9.22B a year earlier
Net income: $2.25B; up 5.3% from net income of $2.14B a year earlier
Diluted EPS: $0.72; up 14.3% from $0.63 a year earlier

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Delaware		54-2185193
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 Oracle Parkway		94065
Redwood City, California		94065
(Address of principal executive offices)		(Zip Code)

Large accelerated filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
Emerging growth company ☐

		Page

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of August 31, 2020 and May 31, 2020	3

	Condensed Consolidated Statements of Operations for the Three Months Ended August 31, 2020 and 2019	4

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended August 31, 2020 and 2019	5

	Condensed Consolidated Statements of Equity for the Three Months Ended August 31, 2020 and 2019	6

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended August 31, 2020 and 2019	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	43

Item 4.	Controls and Procedures	43

PART II.	OTHER INFORMATION	45

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 6.	Exhibits	46

	Signatures	47

(in millions, except per share data)	August 31, 2020			May 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	27,276		$	37,239
Marketable securities		15,003			5,818
Trade receivables, net of allowances for doubtful accounts of $457 and $409 as of August 31, 2020 and May 31, 2020, respectively		4,576			5,551
Prepaid expenses and other current assets		3,084			3,532
Total current assets		49,939			52,140
Non-current assets:
Property, plant and equipment, net		6,401			6,244
Intangible assets, net		3,405			3,738
Goodwill, net		43,867			43,769
Deferred tax assets		3,152			3,252
Other non-current assets		6,782			6,295
Total non-current assets		63,607			63,298
Total assets	$	113,546		$	115,438
LIABILITIES AND EQUITY
Current liabilities:
Notes payable, current	$	2,997		$	2,371
Accounts payable		534			637
Accrued compensation and related benefits		1,390			1,453
Deferred revenues		9,875			8,002
Other current liabilities		3,952			4,737
Total current liabilities		18,748			17,200
Non-current liabilities:
Notes payable and other borrowings, non-current		67,769			69,226
Income taxes payable		12,690			12,463
Other non-current liabilities		4,199			3,832
Total non-current liabilities		84,658			85,521
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: 3,014 shares and 3,067 shares as of August 31, 2020 and May 31, 2020, respectively		26,238			26,486
Accumulated deficit		(15,410	)		(12,696	)
Accumulated other comprehensive loss		(1,337	)		(1,716	)
Total Oracle Corporation stockholders’ equity		9,491			12,074
Noncontrolling interests		649			643
Total equity		10,140			12,717
Total liabilities and equity	$	113,546		$	115,438

	Three Months Ended August 31,
(in millions, except per share data)	2020			2019
Revenues:
Cloud services and license support	$	6,947		$	6,805
Cloud license and on-premise license		886			812
Hardware		814			815
Services		720			786
Total revenues		9,367			9,218
Operating expenses:
Cloud services and license support⁽¹⁾		1,011			982
Hardware⁽¹⁾		246			272
Services		623			703
Sales and marketing⁽¹⁾		1,854			2,018
Research and development		1,589			1,557
General and administrative		295			292
Amortization of intangible assets		345			414
Acquisition related and other		19			25
Restructuring		174			78
Total operating expenses		6,156			6,341
Operating income		3,211			2,877
Interest expense		(614	)		(494	)
Non-operating (expenses) income, net		(2	)		99
Income before provision for income taxes		2,595			2,482
Provision for income taxes		344			345
Net income	$	2,251		$	2,137
Earnings per share:
Basic	$	0.74		$	0.64
Diluted	$	0.72		$	0.63
Weighted average common shares outstanding:
Basic		3,041			3,317
Diluted		3,107			3,410

	Three Months Ended August 31,
(in millions)	2020		2019
Net income	$	2,251	$	2,137
Other comprehensive income, net of tax:
Net foreign currency translation gains (losses)		325		(8	)
Net unrealized gains on defined benefit plans		46		4
Net unrealized gains on marketable securities		3		85
Net unrealized gains (losses) on cash flow hedges		5		(24	)
Total other comprehensive income, net		379		57
Comprehensive income	$	2,630	$	2,194

	August 31, 2020						May 31, 2020
	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:
Corporate debt securities and other	$	3,661	$	7,200	$	10,861	$	4,036	$	2,589	$	6,625
Commercial paper debt securities		—		9,029		9,029		—		5,640		5,640
Money market funds		8,378		—		8,378		18,587		—		18,587
Derivative financial instruments		—		79		79		—		29		29
Total assets	$	12,039	$	16,308	$	28,347	$	22,623	$	8,258	$	30,881
Liabilities:
Derivative financial instruments	$	—	$	143	$	143	$	—	$	268	$	268

	Intangible Assets, Gross						Accumulated Amortization									Intangible Assets, Net
(in millions)	May 31, 2020		Additions & Adjustments, net⁽¹⁾		August 31, 2020		May 31, 2020			Expense			August 31, 2020			May 31, 2020		August 31, 2020
Developed technology	$	4,471	$	3	$	4,474	$	(3,290	)	$	(158	)	$	(3,448	)	$	1,181	$	1,026
Cloud services and license support agreements and related relationships		5,589		9		5,598		(3,271	)		(164	)		(3,435	)		2,318		2,163
Other		1,341		—		1,341		(1,102	)		(23	)		(1,125	)		239		216
Total intangible assets, net	$	11,401	$	12	$	11,413	$	(7,663	)	$	(345	)	$	(8,008	)	$	3,738	$	3,405

Remainder of fiscal 2021	$	1,012
Fiscal 2022		1,106
Fiscal 2023		682
Fiscal 2024		445
Fiscal 2025		126
Fiscal 2026		24
Thereafter		10
Total intangible assets, net	$	3,405

(in millions)	Cloud and License		Hardware		Services		Total Goodwill, net
Balances as of May 31, 2020	$	39,637	$	2,367	$	1,765	$	43,769
Goodwill adjustments, net⁽¹⁾		88		—		10		98
Balances as of August 31, 2020	$	39,725	$	2,367	$	1,775	$	43,867

	Accrued May 31, 2020⁽²⁾		Three Months Ended August 31, 2020											Accrued August 31, 2020⁽²⁾		Total Costs Accrued to Date		Total Expected Program Costs
(in millions)	Accrued May 31, 2020⁽²⁾		Initial Costs⁽³⁾		Adj. to Cost⁽⁴⁾			Cash Payments			Others⁽⁵⁾			Accrued August 31, 2020⁽²⁾		Total Costs Accrued to Date		Total Expected Program Costs
2019 Restructuring Plan⁽¹⁾
Cloud and license	$	75	$	86	$	(6	)	$	(74	)	$	6		$	87	$	383	$	386
Hardware		14		18		—			(14	)		—			18		98		99
Services		27		21		—			(18	)		2			32		112		113
Other⁽⁶⁾		22		53		—			(15	)		2			62		316		317
Total 2019 Restructuring Plan	$	138	$	178	$	(6	)	$	(121	)	$	10		$	199	$	909	$	915
Total other restructuring plans⁽⁷⁾	$	13	$	2	$	—		$	(1	)	$	(1	)	$	13
Total restructuring plans	$	151	$	180	$	(6	)	$	(122	)	$	9		$	212

		Fair Value as of
(in millions)	Balance Sheet Location	August 31, 2020		May 31, 2020
Derivative assets:
Interest rate swap agreements designated as fair value hedges	Other current assets	$	24	$	—
Cross-currency interest rate swap agreements designated as fair value hedges	Other non-current assets		55		—
Interest rate swap agreements designated as fair value hedges	Other non-current assets		—		29
Total derivative assets		$	79	$	29
Derivative liabilities:
Cross-currency swap agreements designated as cash flow hedges	Other current liabilities	$	143	$	251
Cross-currency interest rate swap agreements designated as fair value hedges	Other non-current liabilities		—		17
Total derivative liabilities		$	143	$	268

	Three Months Ended August 31,
	2020						2019
(in millions)	Non-operating (expenses) income, net			Interest expense			Non-operating (expenses) income, net			Interest expense
Condensed consolidated statements of operations line amounts in which the hedge effects were recorded	$	(2	)	$	(614	)	$	99		$	(494	)
Gain (loss) on hedges recognized in income:
Interest rate swaps agreements designated as fair value hedges:
Derivative instruments	$	—		$	(5	)	$	—		$	16
Hedged items		—			5			—			(16	)
Cross-currency interest rate swaps agreements designated as fair value hedges:
Derivative instruments		72			2			(18	)		23
Hedged items		(63	)		(2	)		15			(23	)
Cross-currency swap agreements designated as cash flow hedges:
Amount of gain (loss) reclassified from accumulated OCI		103			—			(8	)		—
Total gain (loss) on hedges recognized in income	$	112		$	—		$	(11	)	$	—

Total margin for operating segments	$	5,855		$	5,486
Cloud and license revenues⁽¹⁾		(1	)		(2	)
Research and development		(1,589	)		(1,557	)
General and administrative		(295	)		(292	)
Amortization of intangible assets		(345	)		(414	)
Acquisition related and other		(19	)		(25	)
Restructuring		(174	)		(78	)
Stock-based compensation for operating segments		(116	)		(136	)
Expense allocations and other, net		(105	)		(105	)
Interest expense		(614	)		(494	)
Non-operating (expenses) income, net		(2	)		99
Income before provision for income taxes	$	2,595		$	2,482

	Three Months Ended August 31,
			Percent Change
(Dollars in millions)	2020		Actual	Constant	2019
Total Revenues by Geography:
Americas	$	5,068	-2%	0%	$	5,150
EMEA⁽¹⁾		2,738	7%	5%		2,553
Asia Pacific		1,561	3%	3%		1,515
Total revenues		9,367	2%	2%		9,218
Total Operating Expenses		6,156	-3%	-3%		6,341
Total Operating Margin	$	3,211	12%	11%	$	2,877
Total Operating Margin %	34%				31%
% Revenues by Geography:
Americas	54%				56%
EMEA	29%				28%
Asia Pacific	17%				16%
Total Revenues by Business:
Cloud and license	$	7,833	3%	3%	$	7,617
Hardware		814	0%	0%		815
Services		720	-8%	-8%		786
Total revenues	$	9,367	2%	2%	$	9,218
% Revenues by Business:
Cloud and license	83%				83%
Hardware	9%				9%
Services	8%				8%

	Trailing 4-Quarters Ended August 31,
(Dollars in millions)	2020			Change	2019
Net cash provided by operating activities	$	13,092		-5%	$	13,829
Capital expenditures		(1,614	)	-3%		(1,663	)
Free cash flow	$	11,478		-6%	$	12,166
Net income	$	10,249			$	10,955
Free cash flow as percent of net income	112%				111%

(in millions, except per share amounts)	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
June 1, 2020—June 30, 2020		28.8	$	54.53		28.8	$	15,077.0
July 1, 2020—July 31, 2020		49.9	$	56.34		49.9	$	12,264.5
August 1, 2020—August 31, 2020		11.1	$	55.59		11.1	$	11,648.4
Total		89.8	$	55.67		89.8

	ORACLE CORPORATION

Date: September 14, 2020	By:	/s/ Safra A. Catz
		Safra A. Catz Chief Executive Officer and Director (Principal Executive and Financial Officer)

Date: September 14, 2020	By:	/s/ William Corey West
		William Corey West
		Executive Vice President, Corporate Controller and Chief Accounting Officer

Date: September 14, 2020	By:	/s/ Safra A. Catz
		Safra A. Catz
		Chief Executive Officer and Director (Principal Executive and Financial Officer)