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Item 2. Management’s Discussion and Analysis

2024-09-10 compared with 2024-03-12 · 148 added, 179 removed, 310 unchanged (51% of the section changed)

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We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our businesses and significant trends.

This overview is followed by a summary of our critical accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

This overview is followed by a summary of our critical accounting estimates that we believe are important to understanding significant assumptions and judgments incorporated in our reported financial results.

We then provide a more detailed analysis of our results of operations and financial condition.

Business Overview

Oracle provides products and services that address enterprise information technology (IT) environments.

Oracle provides products and services that address enterprise information technology (IT) needs.

Our products and services include enterprise applications and infrastructure offerings that are delivered worldwide through a variety of flexible and interoperable IT deployment models.

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o cloud services revenues, which are earned by providing customers access to Oracle Cloud applications and infrastructure technologies via cloud-based deployment models that Oracle develops, provides unspecified updates and enhancements for, deploys, hosts, manages and supports and that customers access by entering into a subscription agreement with us for a stated period.

Oracle SaaS and OCI (collectively Oracle Cloud Services) arrangements are generally billed in advance of the cloud services being delivered;

generally have durations of one to three years;

are generally renewed at the customer’s option;

and are generally recognized as revenues ratably over the contractual period of the cloud contract or, in the case of usage model contracts, as the cloud services are consumed over time;

Oracle Cloud Applications and Oracle Cloud Infrastructure (collectively Oracle Cloud Services) arrangements generally:

are billed in advance of the cloud services being delivered;

have durations of one to four years;

are renewed at the customer’s option;

and are recognized as revenues ratably over the contractual period of the cloud contract or, in the case of usage model contracts, as the cloud services are consumed over time;

o license support revenues, which are earned by providing Oracle license support services to customers that have elected to purchase support services in connection with the purchase of Oracle applications and infrastructure software licenses for use in cloud, on-premise and other IT environments.

Substantially all license support customers renew their support contracts with us upon expiration in order to continue to benefit from technical support services and the periodic issuance of unspecified updates and enhancements, which current license support customers are entitled to receive.

License support contracts are generally priced as a percentage of the net fees paid by the customer to purchase a cloud license and/or on-premise license;

are generally billed in advance of the support services being performed;

are generally renewed at the customer’s option;

and are generally recognized as revenues ratably over the contractual period that the support services are provided, which is generally one year.

License support contracts are generally:

priced as a percentage of the net fees paid by the customer to purchase a cloud license and/or on-premise license;

billed in advance of the support services being performed;

renewed at the customer’s option;

and recognized as revenues ratably over the contractual period that the support services are provided, which is generally one year.

• Cloud license and on-premise license revenues, which include revenues from the licensing of our software products including Oracle Applications, Oracle Database, Oracle Middleware and Java, among others, which our customers deploy within cloud-based, on-premise or other IT environments.

Our cloud license and on-premise license transactions are generally perpetual in nature and are generally recognized as revenues up

front at the point in time when the software is made available to the customer to download and use.

Revenues from usage-based royalty arrangements for distinct cloud licenses and on-premise licenses are recognized at the point in time when the software end user usage occurs.

Our cloud license and on-premise license transactions are generally perpetual in nature and are generally recognized as revenues up front at the point in time when the software is made available to the customer to download and use.

Revenues from usage-based royalty arrangements for distinct cloud licenses and on-premise licenses are

recognized at the point in time when the software end user usage occurs.

The timing of a few large license transactions can substantially affect our quarterly license revenues due to the point-in-time nature of revenue recognition for license transactions, which is different than the typical revenue recognition pattern for our cloud services and license support revenues in which revenues are recognized over time.

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In recent periods, customer demand for our applications and infrastructure technologies delivered through our Oracle Cloud Services has increased.

To address customer demand and enable customer choice, we have introduced certain programs for customers to pivot their applications and infrastructure software licenses and the related license support to the Oracle Cloud for new deployments and to migrate to and expand with the Oracle Cloud for their existing workloads.

To address customer demand and enable customer choice, we have certain programs for customers to pivot their applications and infrastructure software licenses and the related license support to the Oracle Cloud for new deployments and to migrate to and expand with the Oracle Cloud for their existing workloads.

The proportion of our cloud services revenues relative to our total revenues has increased and we expect this trend to continue.

Cloud services revenues represented 38% and 37% of our total revenues for the three and nine months ended February 29, 2024, respectively, and 33% and 32% of our total revenues for the three and nine months ended February 28, 2023, respectively.

Cloud services revenues represented 42% and 37% of our total revenues in the first three months of fiscal 2025 and 2024, respectively.

Our cloud and license business’ revenue growth is affected by many factors, including the strength of general economic and business conditions;

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On a constant currency basis, we expect that our total cloud and license revenues generally will continue to increase due to:

• expected growth in our cloud services;

• expected growth in our cloud services offerings;

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

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Our hardware business, which represented 6% of our total revenues on a trailing 4-quarter basis, provides a broad selection of enterprise hardware products and hardware-related software products including Oracle Engineered Systems, servers, storage, industry-specific hardware offerings, operating systems, virtualization, management and other hardware-related software and related hardware support.

Each hardware product and its related software,

such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a combined performance obligation.

The revenues for this combined performance obligation are generally recognized at the point in time that the hardware product and its related software are delivered to the customer and ownership is transferred to the customer.

We expect to make investments in research and development to improve existing hardware products and services and to develop new hardware products and services.

Each hardware product and its related software, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a combined performance obligation.

The revenues for this combined performance obligation are generally recognized at the point in time that the hardware product and its related software are delivered to the customer and ownership

is transferred to the customer.

We expect to continue to make investments in research and development to improve existing hardware products and services and to develop new hardware products and services.

The majority of our hardware products are sold through indirect channels, including independent distributors and value-added resellers.

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Historically, we have invested billions of dollars to acquire a number of complementary companies, products, services and technologies.

We acquired certain companies and technologies during the first nine months of fiscal 2024 and full year fiscal 2023, including Cerner Corporation (Cerner).

Refer to Note 2 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information related to our acquisition of Cerner and our other recent acquisitions.

As compelling opportunities become available, we may acquire companies, products, services and technologies in furtherance of our corporate strategy.

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From time to time since 2017, we have made investments in Ampere Computing Holdings LLC (Ampere), a related party entity, in the form of equity and convertible debt instruments.

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.

The total carrying value of our investments in Ampere, after accounting for losses under the equity method of accounting, was $1.5 billion as of August 31, 2024.

We currently expect Ampere to continue to generate net losses in future periods but we remain confident in the long-term potential of Ampere’s server chips.

Our equity investments in Ampere represent an ownership interest of approximately 29% as of February 29, 2024.

We also own 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.

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.

Our equity investments in Ampere represent an ownership interest of approximately 29% as of August 31, 2024.

We also own convertible debt investments in Ampere which, under the terms of an agreement with Ampere and other co-investors, will mature in June 2026 and are convertible into equity securities at the holder’s option under certain circumstances.

During the three months ended August 31, 2024, we invested $75 million in convertible debt instruments issued by Ampere.

In accordance with the terms of an agreement with other co-investors, we are also a counterparty to certain put (exercisable by a co-investor) and call (exercisable by Oracle) options at prices of approximately $450 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.

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Our consolidated financial statements are prepared in accordance with U.S.

generally accepted accounting principles (GAAP) as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (ASC), and we consider various staff accounting bulletins and other applicable guidance issued by the U.S.

Securities and Exchange Commission (the SEC).

GAAP, as set forth within the ASC, requires us to make certain estimates, judgments and assumptions.

generally accepted accounting principles (GAAP), which requires us to make certain estimates, judgments and assumptions that can affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure.

Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations.

We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.

These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented.

To the extent that there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected.

The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include:

• Revenue Recognition;

• Business Combinations;

• Goodwill and Intangible Assets—Impairment Assessments;

• Accounting for Income Taxes;

• Legal and Other Contingencies.

During the first nine months of fiscal 2024, there were no significant changes to our critical accounting estimates.

Refer to “Critical Accounting Policies and Estimates” under Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2023 for a more complete discussion of our critical accounting estimates.

We have critical accounting estimates in the areas of business combinations, income taxes and non-marketable investments.

During the first quarter of fiscal 2025, we completed an assessment of the useful lives of our servers and increased the estimated useful lives from five years to six years, effective at the beginning of fiscal 2025.

Refer to Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for more information.

There were no other significant changes to our critical accounting estimates.

Refer to “Critical Accounting Estimates” under Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for a more complete discussion of our critical accounting estimates.

Results of Operations

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In addition, we discuss below the results of each of our three businesses—cloud and license, hardware and services—which are our operating segments as defined pursuant to ASC 280, Segment Reporting .

The financial reporting for

our three businesses that is presented below is presented in a manner that is consistent with that used by our CODMs.

The financial reporting for our three businesses that is presented below is presented in a manner that is consistent with that used by our CODMs.

Our operating segment presentation below reflects revenues, direct costs and sales and marketing expenses that correspond to and are directly attributable to each of our three businesses.

We also utilize these inputs to calculate and present a segment margin for each of our three businesses in the discussion below.

Consistent with our internal management reporting processes, research and development expenses, general and administrative expenses, stock-based compensation expenses, amortization of intangible assets, certain other expense allocations, acquisition related and other expenses, restructuring expenses, interest expense, non-operating expenses, net and provision for income taxes are not attributed to our three operating segments because our management does not view the performance of our three businesses including such items and/or it is impracticable to do so.

Consistent with our internal management reporting processes, research and development expenses, general and administrative expenses, stock-based compensation expenses, amortization of intangible assets, certain other expense allocations, acquisition related and other expenses, restructuring expenses, interest expense, non-operating income (expenses), net and (provision for) benefit from income taxes are not attributed to our three

operating segments because our management does not view the performance of our three businesses including such items and/or it is impracticable to do so.

Refer to “Supplemental Disclosure Related to Certain Charges” below for additional discussion of certain of these items and Note 7 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for a reconciliation of the summations of total segment margin as presented in the discussion below to total income before income taxes as presented per our condensed consolidated statements of operations for all periods presented.

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Dollars at constant exchange rates (i.e., the rates in effect on May 31, 2024, which was the last day of our prior fiscal year) rather than the actual exchange rates in effect during the respective periods.

For example, if an entity reporting in Euros had revenues of 1.0 million Euros from products sold on February 29, 2024 and February 28, 2023, our financial statements would reflect reported revenues of $1.08 million in the first nine months of fiscal 2024 (using 1.08 as the month-end average exchange rate for the period) and $1.05 million in the first nine months of fiscal 2023 (using 1.05 as the month-end average exchange rate for the period).

The constant currency presentation, however, would translate the results for each of the first nine months of fiscal 2024 and 2023 using the May 31, 2023 exchange rate and indicate, in this example, no change in revenues during the period.

For example, if an entity reporting in Euros had revenues of 1.0 million Euros from products sold on August 31, 2024 and 2023, our financial statements would reflect reported revenues of $1.11 million in the first quarter of fiscal 2025 (using 1.11 as the applicable average exchange rate for the period) and $1.08 million in the first quarter of fiscal 2024 (using 1.08 as the applicable average exchange rate for the period).

The constant currency presentation, however, would translate the results for each of the first quarters of fiscal 2025 and 2024 using the May 31, 2024 exchange rate and indicate, in this example, no change in revenues between the periods compared.

In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency.

Total Revenues and Operating Expenses

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Percent Change

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(1) Comprised of Europe, the Middle East and Africa

Excluding the effects of foreign currency rate fluctuations, our total revenues increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to growth in our cloud and license business’ revenues, which were partially offset by a decline in our hardware business’ and services business’ revenues.

The constant currency revenues increase in our cloud and license business in the fiscal 2024 periods presented, relative to the corresponding prior year periods, was attributable to growth in our cloud services and license support revenues as customers purchased our applications and infrastructure technologies via cloud and license deployment models and also renewed their related cloud contracts and license support contracts to continue to gain access to the latest versions of our technologies and to receive support services, partially offset by a decrease in our cloud license and on-premise license revenues.

In our hardware business, the decrease in revenues in the fiscal 2024 periods presented was due to the emphasis we placed on the marketing and sale of our growing cloud-based infrastructure technologies and strategic hardware offerings and the de-emphasis of our sales and marketing efforts for certain of our non-strategic hardware products and related support services.

In our services business, the constant currency decrease in revenues in the fiscal 2024 periods presented was attributable to a decrease in revenues from each of our primary services offerings.

In constant currency, the Americas region contributed 67% and 63%, the EMEA region contributed 21% and 23% and the Asia Pacific region contributed 12% and 14% of the constant currency total revenue growth during the third quarter and first nine months of fiscal 2024, respectively.

Excluding the effects of foreign currency rate fluctuations, our total operating expenses increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to higher cloud services and license support expenses, which were primarily due to higher infrastructure investments that were made to support the increase in our cloud and license business’ revenues;

higher research and development expenses, which were primarily due to higher employee related expenses;

and higher acquisition related and other expenses, which were primarily due to certain asset impairment charges.

These increases in operating expenses were partially offset by lower hardware expenses in line with lower hardware revenues;

lower sales and marketing expenses, which were primarily due to lower employee related expenses;

lower expenses for amortization of intangible assets as certain of our assets were fully amortized;

and lower general and administrative expenses.

During the third quarter of fiscal 2024, the constant currency decrease in services expenses partially offset the increase in total operating expenses, while the constant currency increase in restructuring expenses contributed to higher total operating expenses.

In constant currency, services expenses contributed to higher total operating expenses and lower restructuring expenses partially offset the increases in total operating expenses during the first nine months of fiscal 2024.

In constant currency, our total operating margin and total operating margin as a percentage of revenues increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to higher revenues.

Total revenues increased by $854 million in reported currency in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to a $1.0 billion increase in cloud and license revenues, partially offset by a decrease in hardware and services revenues by $59 million and $120 million, respectively.

Excluding the unfavorable effect of foreign currency rate fluctuations of 1%, the increase in our cloud and license business in the first quarter of fiscal

2025, relative to the first quarter of fiscal 2024, was primarily due to growth in our cloud services revenues as customers purchased our applications and infrastructure technologies and also renewed their related cloud contracts to continue to gain access to the latest versions of our technologies.

In constant currency, applications cloud services and license support and infrastructure cloud services and license support contributed 30% and 70%, respectively, of the growth in cloud services and license support revenues during the first quarter of fiscal 2025.

In our hardware business, the constant currency decrease in revenues in the first quarter of fiscal 2025 was due to the emphasis we placed on the marketing and sale of our growing cloud-based infrastructure technologies.

In our services business, the constant currency decrease in revenues in the first quarter of fiscal 2025 was attributable to a decrease in revenues from each of our primary services offerings.

In constant currency, the Americas, the EMEA and the Asia Pacific regions contributed 63%, 23% and 14%, respectively, of the constant currency total revenue growth during the first quarter of fiscal 2025.

Total GAAP operating expenses increased by $159 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

The increase in GAAP operating expenses was due to a $418 million increase in cloud services and license support expenses primarily due to higher infrastructure expenses that were incurred to support the increase in our cloud services revenues and higher employee related expenses, including increased expenses relating to stock-based compensation, and a $90 million increase in research and development expenses primarily due to higher employee related expenses.

These increases in operating expenses were partially offset by a $139 million decrease in expenses for amortization of intangible assets as certain of our assets were fully amortized;

a $65 million decrease in services expenses primarily due to lower external contractor expenses;

a $65 million decrease in restructuring expenses;

a $57 million decrease in hardware expenses primarily due to lower hardware product and support costs;

and a $35 million decrease in general and administrative expenses.

In constant currency, our total operating margin and total operating margin as a percentage of revenues increased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to higher revenues.

Supplemental Disclosure Related to Certain Charges

To supplement our condensed consolidated financial information, we believe that the following information is helpful to an overall understanding of our past financial performance and prospects for the future.

Our operating results reported pursuant to GAAP included the following business combination accounting adjustments and expenses related to acquisitions and certain other expense and income items that affected our GAAP net income:

Our operating results reported pursuant to GAAP included the following business combination accounting adjustments and expenses related to acquisitions and certain other expenses, including stock-based compensation, that affected our GAAP net income:

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Income tax effects (5)

(1) Represents the amortization of intangible assets, substantially all of which were acquired in connection with our acquisitions.

As of February 29, 2024, estimated future amortization related to intangible assets was as follows (in millions):

(1) Represents the amortization of intangible assets, all of which were acquired in connection with our acquisitions.

As of August 31, 2024, estimated future amortization related to intangible assets was as follows (in millions):

Remainder of fiscal 2025

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(2) Acquisition related and other expenses consist of personnel related costs for transitional and certain other employees, certain business combination adjustments including certain adjustments after the measurement period has ended and certain other operating items, net.

(3) Restructuring expenses in the fiscal 2024 periods presented primarily related to employee severance in connection with the Fiscal 2024 Oracle Restructuring Plan (2024 Restructuring Plan).

Restructuring expenses in the fiscal 2023 periods presented primarily related to employee severance in connection with the Fiscal 2022 Oracle Restructuring Plan (2022 Restructuring Plan).

(3) Restructuring expenses in each of the first quarters of fiscal 2025 and 2024 primarily related to employee severance in connection with the Fiscal 2024 Oracle Restructuring Plan (2024 Restructuring Plan).

Additional information regarding certain of our restructuring plans is provided in management’s discussion below under “Restructuring Expenses,” in Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and in Note 8 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

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Cloud services and license support

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(5) For all periods presented, the applicable jurisdictional tax rates applied to our income before income taxes after excluding the tax effects of items within the table above such as for stock-based compensation, amortization of intangible assets, restructuring, and certain acquisition related and other items, and after excluding the net deferred tax effects associated with a previously recorded income tax benefit that resulted from a partial realignment of our legal entity structure.

These adjustments resulted in effective tax rates of 18.9% and 18.8%, instead of 16.2% and 8.0%, respectively, for the third quarter and first nine months of fiscal 2024 and 18.4% and 19.4%, instead of 14.5% and 13.8%, respectively, for the third quarter and first nine months of fiscal 2023, which in each case represented our effective tax rates as derived per our condensed consolidated statements of operations.

These adjustments resulted in effective tax rates of 18.9% and 18.8%, instead of 7.6% and (1.9%), respectively, for the first quarter of fiscal 2025 and 2024, which represented our effective tax expense (benefit) rates as derived per our condensed consolidated statements of operations.

Cloud and License Business

Our cloud and license business engages in the sale and marketing of our applications and infrastructure technologies that are delivered through various deployment models and include:

Oracle license support offerings;

Oracle Cloud Services offerings;

and Oracle cloud license and on-premise license offerings.

Oracle cloud license and on-premise license offerings;

and Oracle license support offerings.

Our cloud services deliver applications and infrastructure technologies on a subscription basis via cloud-based deployment models that we develop, provide unspecified updates and enhancements for, deploy, host, manage and support.

Revenues for our cloud services are generally recognized ratably over the contractual term, which is generally one to four years, or in the case of usage model contracts, as the cloud services are consumed.

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 and are generally recognized up front at the point in time when the software is made available to the customer to download and use.

License support revenues are typically generated through the sale of applications and infrastructure software license support contracts related to cloud licenses and on-premise licenses;

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and are generally recognized as revenues ratably over the contractual term, which is generally one year.

Revenues for our cloud services are generally recognized ratably over the contractual term, which is generally one to three years, or in the case of usage model contracts, as the cloud services are consumed.

We continue to place significant emphasis, both domestically and internationally, on direct sales through our own sales force.

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These costs are largely personnel and infrastructure related including the cost of providing our cloud services and license support offerings, salaries and commissions earned by our sales force for the sale of our cloud and license offerings and marketing program costs.

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Also excludes amortization of intangible assets and certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.

Excluding the effects of foreign currency rate fluctuations, our cloud and license business’ total revenues increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to growth in our cloud services and license support revenues as customers purchased our applications and infrastructure technologies via cloud and license deployment models and renewed their related cloud contracts and license support contracts to continue to gain access to the latest versions of our technologies and to receive support services for which we delivered such cloud and support services during the periods presented.

The growth in our cloud services and license support revenues was partially offset by a decrease in our cloud license and on-premise license revenues.

In constant currency, the Americas region contributed 72% and 69%, the EMEA region contributed 18% and 20% and the Asia Pacific region contributed 10% and 11% of the constant currency revenue growth for this business during the third quarter and first nine months of fiscal 2024, respectively.

In constant currency, our total cloud and license business’ expenses increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, primarily due to higher technology infrastructure expenses to support the increase in our cloud and license business’ revenues.

These constant currency expense increases were partially offset by lower sales and marketing expenses, which decreased primarily due to lower employee related expenses due to lower headcount.

Our cloud services and license support expenses have grown in recent periods, and we expect this growth to continue during fiscal 2024 as we increase our existing data center capacity and establish data centers in new geographic locations in order to meet current and expected customer demand.

Excluding the effects of currency rate fluctuations, our cloud and license business’ total margin increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to increases in total revenues for this business.

In constant currency, total margin as a percentage of revenues remained flat in the third quarter of fiscal

2024 and increased in the first nine months of fiscal 2024, due to increases in total revenues, in each case relative to the corresponding prior year period.

Our cloud and license business’ total revenues increased by $1.0 billion in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024 primarily due to a $988 million increase in cloud services revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contracts to continue to gain access to the latest versions of our technologies for which we delivered such cloud services during the period presented and a $61 million increase in our cloud license and on-premise license revenues.

License support revenues decreased slightly by $16 million in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

In constant currency, the Americas, the EMEA and the Asia Pacific regions contributed 70%, 19% and 11%, respectively, of the revenue growth for this business during the first quarter of fiscal 2025.

Total cloud and license business’ expenses increased by $369 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the favorable effects of currency rate fluctuations of less than 1%, the constant currency increase in expenses was primarily due to a $255 million increase in infrastructure expenses and a $75 million increase in employee related expenses to support the increase in our cloud services revenues.

Our cloud services and license support expenses have grown in recent periods, and we expect this trend to continue during fiscal 2025 as we increase our existing data center capacity and establish data centers in new geographic locations in order to meet current and expected customer demand.

Excluding the effects of currency rate fluctuations, our cloud and license business’ total margin increased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to increases in total revenues for this business.

In constant currency, total margin as a percentage of revenues remained flat in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024.

Hardware Business

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and sales and marketing expenses, which are largely personnel related and include variable compensation earned by our sales force for the sales of our hardware offerings.

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Our constant currency hardware revenues decreased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, primarily due to our continued emphasis on the marketing and sale of our cloud-based infrastructure technologies and strategic hardware offerings and the de-emphasis of our sales and marketing efforts for certain of our non-strategic hardware products, which resulted in reduced sales volumes of certain of our hardware product lines and also impacted the volume of hardware support contracts sold in recent periods.

Geographically, we experienced constant currency revenue declines in all regions in the fiscal 2024 periods presented, except for a constant currency revenue increase in the Asia Pacific region in the first nine months of fiscal 2024.

Excluding the effects of currency rate fluctuations, total hardware expenses decreased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, primarily due to lower hardware product expenses and lower sales and marketing costs, all of which aligned to lower hardware revenues.

In constant currency, our hardware business’ total margin decreased in the fiscal 2024 periods presented due to lower total revenues for this business and total margin as a percentage of revenues increased in the fiscal 2024 periods presented due to lower total expenses for this business, in each case relative to the corresponding prior year period.

Total hardware revenues decreased by $59 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the unfavorable impact of currency rate fluctuation of less than 1%, the decrease in hardware revenues was primarily due to our continued emphasis on the marketing and sale of our cloud-based infrastructure technologies, which resulted in reduced sales volumes of certain of our hardware product lines and also impacted the volume of hardware support contracts sold in recent periods.

Geographically, we experienced constant currency hardware revenue decline in the Americas region, partially offset by increase in the EMEA region.

Constant currency hardware revenue remained flat in the Asia Pacific region in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Total hardware expenses decreased by $64 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the favorable currency rate fluctuations effect of 1%, the constant currency decrease in hardware expenses was primarily due to a $57 million decrease in hardware product and support costs, which aligned with lower hardware revenues.

In constant currency, our hardware business’ total margin and total margin as a percentage of revenues increased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to lower total expenses for this business.

Services Business

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The cost of providing our services consists primarily of personnel related expenses, technology infrastructure expenditures, facilities expenses and external contractor expenses.

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Also excludes certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.

Excluding the effects of currency rate fluctuations, our total services revenues decreased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to a decrease in revenues in each of our primary services offerings.

Constant currency decreases in services revenues in the Americas region were partially offset by constant currency increases in services revenues in the EMEA and the Asia Pacific regions in the fiscal 2024 periods presented.

In constant currency, total services expenses decreased in the third quarter of fiscal 2024, primarily due to a decrease in employee related expenses and external contractor expenses, and increased in the first nine months of fiscal 2024, primarily due to an increase in employee related expenses and bad debt expenses, partially offset by a decrease in external contractor expenses, in each case relative to the corresponding prior year period.

In constant currency, our services business’ total margin and total margin as a percentage of revenues decreased in the fiscal 2024 periods presented due to lower total revenues for this business, and in the first nine months of fiscal 2024, also due to an increase in expenses, in each case relative to the corresponding prior year period.

Total services revenues decreased by $120 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the effects of unfavorable currency rate fluctuations of 1%, the decrease in total services revenues was due to a decrease in revenues in each of our primary services offerings.

The constant currency decrease in services revenues in the Americas region was partially offset by constant currency increases in services revenues in the EMEA and the Asia Pacific regions in the first quarter of fiscal 2025.

Total services expenses decreased by $79 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the favorable effects of currency rate fluctuations of 1%, the decrease in services expenses was primarily due to a decrease in external contractor expenses of $65 million.

In constant currency, our services business’ total margin and total margin as a percentage of revenues decreased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to lower total revenues for this business.

Research and Development Expenses :

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We intend to continue to invest significantly in our research and development efforts because, in our judgment, they are essential to maintaining our competitive position.

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(1) Excluding stock-based compensation

On a constant currency basis, total research and development expenses increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, primarily due to higher employee related expenses, including higher stock-based compensation expenses.

Total research and development expenses increased by $90 million in reported currency in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to higher stock-based compensation expenses.

General and Administrative Expenses :

General and administrative expenses primarily consist of personnel related expenditures for IT, finance, legal and human resources support functions.

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(1) Excluding stock-based compensation

Excluding the effects of currency rate fluctuations, our total general and administrative expenses decreased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, primarily due to lower professional fees and lower external contractors cost.

Total general and administrative expenses decreased by $35 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the favorable effects of currency rate fluctuations of 1%, the decrease was primarily due to a $14 million decrease in facilities and related expenses and a $6 million decrease in professional fees.

Amortization of Intangible Assets :

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We also periodically review these intangible assets for potential impairment based upon relevant facts and circumstances.

Refer to Note 4 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information regarding our intangible assets and related amortization.

Three Months Ended

Nine Months Ended

Percent Change

Refer to Note 6 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for additional information regarding our intangible assets and related amortization.

Three Months Ended August 31,

Percent Change

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Total amortization of intangible assets

Amortization of intangible assets decreased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to a reduction in expenses associated with certain of our intangible assets that became fully amortized.

Amortization of intangible assets decreased by $139 million in reported currency in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to a reduction in expenses associated with certain of our intangible assets that became fully amortized.

Acquisition Related and Other Expenses :

Acquisition related and other expenses 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.

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Total acquisition related and other expenses

On a constant currency basis, acquisition related and other expenses increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to higher other expenses primarily related to certain asset impairment charges and higher expenses for business combination adjustments, partially offset by lower transitional and other employee related costs.

Not meaningful

Acquisition related and other expenses increased slightly in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to a $12 million increase in other expenses primarily related to certain asset impairment charges, partially offset by a $6 million decrease in business combination adjustments, net, and a $4 million decrease in transitional and other employee related costs.

Restructuring Expenses :

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For additional information regarding our restructuring plans, see Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and Note 8 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

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Restructuring expenses

Restructuring expenses in the fiscal 2024 periods presented primarily related to the 2024 Restructuring Plan.

Restructuring expenses in the fiscal 2023 periods presented primarily related to the 2022 Restructuring Plan, which is substantially complete.

Our management approved, committed to and initiated the 2024 Restructuring Plan and the 2022 Restructuring Plan in order to restructure and further improve efficiencies in our operations.

Restructuring expenses in each of the first quarters of fiscal 2025 and 2024 primarily related to the 2024 Restructuring Plan.

Our management approved, committed to and initiated the 2024 Restructuring Plan in order to restructure and further improve efficiencies in our operations.

We may incur additional restructuring expenses in future periods due to the initiation of new restructuring plans or from changes in estimated costs associated with existing restructuring plans.

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Interest Expense :

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Interest expense

Fiscal Third Quarter 2024 Compared to Fiscal Third Quarter 2023 :

Interest expense decreased in the third quarter of fiscal 2024, relative to the corresponding prior year period, primarily due to $1.3 billion and $3.5 billion of scheduled repayments made during the second half of fiscal 2023 and the first nine months of fiscal 2024, respectively, and the repayment of borrowings pursuant to a $15.7 billion delayed draw term loan credit agreement (Bridge Credit Agreement) in fiscal 2023.

The decrease in interest expense was partially offset by higher average borrowings resulting from our issuance of $5.3 billion of senior notes in the third quarter of fiscal 2023.

First Nine Months Fiscal 2024 Compared to First Nine Months Fiscal 2023 :

Interest expense increased in the first nine months of fiscal 2024, relative to the corresponding prior year period, primarily due to higher average borrowings resulting from our issuance of $12.3 billion of senior notes and $5.6 billion of borrowings pursuant to a term loan credit agreement in fiscal 2023 and higher average commercial paper outstanding in the first nine months of fiscal 2024.

The increase in interest expense was partially offset by lower interest expense that resulted from $3.8 billion and $3.5 billion of scheduled repayments made during fiscal 2023 and the first nine months of fiscal 2024, respectively, and the repayment of borrowings pursuant to the Bridge Credit Agreement during fiscal 2023.

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.

Three Months Ended

Nine Months Ended

Percent Change

Interest expense decreased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to $2.0 billion and $3.5 billion of scheduled repayments of senior notes made during the first quarter of fiscal 2025 and full year of fiscal 2024, respectively.

Non-Operating Income (Expenses), net :

Non-operating income (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.

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Percent Change

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Losses from equity investments, net

Other income (expenses), net

Total non-operating expenses, net

Other income, net

Total non-operating income (expenses), net

Not meaningful

Our non-operating expenses, net decreased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, primarily due to higher interest income due to a combination of higher average interest-bearing balances and higher average interest rates that were applicable to such balances;

and higher other income, net, which was primarily attributable to unrealized investment gains associated with certain marketable equity securities that we held for employee benefit plans, and for which an equal and offsetting amount was recorded to our operating expenses during the same periods.

Losses from equity investments were lower during the third quarter of fiscal 2024, contributing to lower non-operating expenses, net, and were higher for the first nine months of fiscal 2024, partially offsetting the decrease in non-operating expenses, net, in each case relative to the corresponding prior year period.

Provision for Income Taxes :

Our non-operating income, net increased by $69 million in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

The increase was primarily due to a $32 million decrease in foreign currency losses and a $49 million decrease in losses from equity investments, partially offset by higher expenses for noncontrolling interests in income.

(Provision for) Benefit from Income Taxes :

Our effective income tax rates for each of the periods presented were the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates.

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Future effective tax rates could be adversely affected by an unfavorable shift of earnings weighted to jurisdictions with higher tax rates, by unfavorable changes in tax laws and regulations, by adverse rulings in tax related litigation, or by shortfalls in stock-based compensation realized by employees relative to stock-based compensation that was recorded for book purposes, among others.

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Three Months Ended August 31,

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(Dollars in millions)

Provision for income taxes

Effective tax rate

Fiscal Third Quarter 2024 Compared to Fiscal Third Quarter 2023 :

Provision for income taxes increased in the third quarter of fiscal 2024, relative to the corresponding prior year period, primarily due to changes in unrecognized tax benefits, higher income before provision for income taxes and an unfavorable jurisdictional mix of earnings, partially offset by the realization of a one-time tax attribute.

First Nine Months Fiscal 2024 Compared to First Nine Months Fiscal 2023 :

Provision for income taxes decreased in the first nine months of fiscal 2024, relative to the corresponding prior year period, primarily due to an increase in tax benefits related to stock-based compensation, the realization of a one-time tax attribute and the revaluation of net deferred tax assets due to a change in tax rate, partially offset by the combination of higher income before provision for income taxes, an unfavorable jurisdictional mix of earnings and changes in unrecognized tax benefits.

(Provision for) benefit from income taxes

Effective tax expense (benefit) rate

Not meaningful

Provision for income taxes increased during the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to an unfavorable jurisdictional mix of earnings of $215 million and a decrease in tax benefits of $127 million related to stock-based compensation, partially offset by a $65 million benefit in unrecognized tax benefits associated with settlements with taxing authorities and other events.

Liquidity and Capital Resources

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Working capital :

The decrease in working capital as of February 29, 2024 in comparison to May 31, 2023 was primarily due to $4.0 billion of long-term senior notes that were reclassified to current liabilities, cash used to pay dividends to our stockholders, cash used for capital expenditures, cash used for purchases of non-marketable investments, net cash used for our employee stock programs and cash used for repurchases of our common stock during the first nine months of fiscal 2024.

These unfavorable impacts were partially offset by favorable impacts to our net current assets resulting from net income during the first nine months of fiscal 2024.

The increase in working capital as of August 31, 2024 in comparison to May 31, 2024 was primarily due to favorable impacts to our net current assets resulting from net income during the first quarter of fiscal 2025, substantially offset by $2.3 billion of cash used for capital expenditures, $1.1 billion of cash used to pay dividends to our stockholders, €750 million of long-term senior notes that were reclassified to current liabilities, $672 million of net cash used for our employee stock programs, $375 million of cash used for purchases of non-marketable investments and $150 million of cash used for repurchases of our common stock during the first quarter of fiscal 2025.

Our working capital may be impacted by some or all of the aforementioned factors in future periods, the amounts and timing of which are variable.

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Cash and cash equivalents primarily consist of deposits held at major banks, money market funds and other securities with original maturities of 90 days or less.

Marketable securities consist of time deposits, marketable equity securities and certain other securities.

The decrease in cash, cash equivalents and marketable securities at February 29, 2024 in comparison to May 31, 2023 was primarily due to $3.5 billion of repayment of senior notes due July 2023 and September 2023, cash used for capital expenditures and purchases of non-marketable investments, payments of cash dividends to our stockholders, net cash used for our employee stock programs and repurchases of our common stock.

This decrease was partially offset by cash inflows from our operations and our issuances of commercial paper notes, net of repayments, during the first nine months of fiscal 2024.

Marketable securities consist of time deposits, marketable equity securities and certain other securities with original maturities at the time of purchase greater than 90 days.

The increase in cash, cash equivalents and marketable securities as of August 31, 2024 in comparison to May 31, 2024 was primarily due to cash inflows from our operations during the first quarter of fiscal 2025.

This increase was partially offset by $2.4 billion of cash used for repayment of senior notes and commercial paper notes, $2.3 billion of cash used for capital expenditures, $1.1 billion of cash used to pay dividends to our stockholders, $672 million of net cash used for our employee stock programs, $375 million of cash used for purchases of non-marketable investments and $150 million of cash used for repurchases of our common stock.

Our cash and cash equivalents may be impacted by some or all of the aforementioned factors in future periods, the amounts and timing of which are variable.

Nine Months Ended

Three Months Ended August 31,

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Net cash used for investing activities

Net cash (used for) provided by financing activities

Not meaningful

Net cash used for financing activities

Cash flows from operating activities :

Our largest source of operating cash flows is cash collections from our customers following the purchase and renewal of their license support and cloud services agreements.

Customers for these license support and cloud services agreements are generally billed in advance of services being provided.

Over the course of a fiscal year, we also have historically generated cash from the sales of new licenses, hardware offerings and other services.

Our largest source of operating cash flows is cash collections from our customers following the purchase and renewal of their cloud services and license support agreements.

Customers for these cloud services and license support agreements are generally billed in advance of services being provided.

Over the course of a fiscal year, we also generate cash from the sales of new licenses, hardware offerings and other services.

Our primary uses of cash from operating activities are typically for employee related expenditures, material and manufacturing costs related to the production of our hardware products, taxes, interest payments and leased facilities.

Net cash provided by operating activities increased during the first nine months of fiscal 2024, relative to the corresponding prior year period, primarily due to higher net income, partially offset by certain cash unfavorable working capital changes, net.

Net cash provided by operating activities increased by $453 million in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to higher net income, partially offset by certain cash unfavorable working capital changes, net.

Cash flows from investing activities :

The changes in cash flows from investing activities primarily relate to our acquisitions, the timing of our purchases, maturities and sales of our investments in marketable securities and other instruments and investments in capital and other assets, including certain intangible assets, to support our growth.

Net cash used for investing activities decreased during the first nine months of fiscal 2024, relative to the corresponding prior year period, primarily due to the decrease in cash used for acquisitions, net of cash acquired and lower capital expenditures.

The changes in cash flows from investing activities primarily relate to our acquisitions, purchases, maturities and sales of our investments in marketable securities and other instruments and investments in capital assets primarily to support the growth in our cloud and license business.

Net cash used for investing activities increased by $1.2 billion in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to the increase in capital expenditures.

Cash flows from financing activities :

The changes in cash flows from financing activities primarily relate to borrowings and repayments related to our debt instruments, stock repurchases, dividend payments and net proceeds related to employee stock programs.

Net cash used for financing activities was $8.3 billion during the first nine months of fiscal 2024 compared to the net cash provided by financing activities of $10.4 billion in the first nine months of fiscal 2023.

The increase in net cash used for financing activities was primarily due to the absence of the cash proceeds from borrowings, net of repayments pursuant to the Bridge Credit Agreement, lower net proceeds from issuances and repayments of commercial paper notes, higher net cash used for our employee stock programs and higher dividend payments, partially offset by lower maturities of senior notes and lower stock repurchases, in each case during the first nine months of fiscal 2024 relative to the first nine months of fiscal 2023.

Net cash used for financing activities increased by $1.1 billion in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to higher maturities of senior notes of $1.0 billion, higher repayments of commercial paper notes of $166 million, net of issuances, partially offset by higher net cash used for other activities of $220 million, in each case in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Further, during the first quarter of fiscal 2025, we refinanced our Term Loan Credit Agreement (defined below) that resulted in no net impact on financing cash flows for the period reported.

Free cash flow :

To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flows generated from our operations.

We believe that free cash flow is also useful as one of the bases for comparing our performance with our competitors.

We believe that free cash flow is also useful as one of the bases for comparing our performance with that of our competitors.

The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity.

We calculate free cash flow as follows:

Trailing 4-Quarters Ended

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(Dollars in millions)

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Free cash flow as percent of net income

Recent Financing Activities :

Term Loan Credit Agreements :

On June 10, 2024, we terminated our term loan credit agreement that we entered into in fiscal 2023 and repaid the principal amount outstanding together with interest accrued up to the date of repayment.

Simultaneously, we borrowed up to the maximum commitment amount of $5.6 billion pursuant to a term loan credit agreement (Term Loan Credit Agreement) executed on the same date.

Any remaining unpaid principal balance under the Term Loan Credit Agreement will become fully due and payable on August 16, 2027, unless the termination date of Term Loan Credit Agreement is extended.

Refer to Note 7 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for additional details about our borrowings.

Contractual Obligations :

During the first nine months of fiscal 2024, there were no significant changes to our estimates of future payments under our fixed contractual obligations and commitments as presented in Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023, other than an increase in our operating lease commitments to $18.8 billion and an increase in our unconditional purchase obligations to $4.4 billion as of February 29, 2024.

During the first quarter of fiscal 2025, there were no significant changes to our estimates of future payments under our fixed contractual obligations and commitments as presented in Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024, other than an increase in our operating lease commitments to $36.2 billion as of August 31, 2024.

Our operating lease commitments, which are primarily for data centers, are generally expected to commence between the remainder of fiscal 2025 and fiscal 2027 and for terms of nine to fifteen years.

Our unconditional purchase obligations are primarily related to capital expenditures for our data centers and a significant majority of these obligations are expected to be settled within the next twelve months.

We have not recorded these lease commitments on our Condensed Consolidated Balance Sheets as of February 29, 2024.

We have not recorded these lease commitments on our Condensed Consolidated Balance Sheets as of August 31, 2024.

Refer to Note 10 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for more information about our lease commitments.

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This maximum potential dilution will only result if all stock-based awards vest and, if applicable, are exercised.

Of the outstanding stock options at February 29, 2024, which generally have a ten-year exercise period, substantially all have exercise prices lower than the market price of our common stock on such date.

In recent years, our stock repurchase program has partially offset the dilutive effect of our stock-based compensation program.

Of the outstanding stock options as of August 31, 2024, which generally have a ten-year exercise period, all have exercise prices lower than the market price of our common stock on such date.

In recent years, our stock repurchase program has substantially offset the dilutive effect of our stock-based compensation program.

However, we may modify the levels of our stock repurchases in the future depending on a number of factors, including the amount of cash we have available for acquisitions, to pay dividends, to repay or repurchase indebtedness or for other purposes.

At February 29, 2024, the maximum potential dilution from all outstanding stock-based awards, regardless of when granted and regardless of whether vested or unvested, was 7.2%.

As of August 31, 2024, the maximum potential dilution from all outstanding stock-based awards, regardless of when granted and regardless of whether vested or unvested, was 6.1%.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements, if any, and the impact of these pronouncements on our consolidated financial statements, if any, see Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

For information with respect to recent accounting pronouncements, and the impact of these pronouncements on our consolidated financial statements, see Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Quantitative and Qualitat ive Disclosures About Market Risk

There were no significant changes to our quantitative and qualitative disclosures about market risk during the first nine months of fiscal 2024.

There were no significant changes to our quantitative and qualitative disclosures about market risk during the first quarter of fiscal 2025.

Please refer to Part II, Item 7A Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for a more complete discussion of the market risks we encounter.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis