We will include as many of your questions as possible during the Q&A session of the meeting and will provide answers to questions on the Microsoft Investor Relations website under the Annual Meeting page. As a result, changes in foreign exchange rates may significantly affect revenue and expenses. In January 2020, we announced a bold new environmental sustainability strategy focused on carbon, water, waste, and ecosystems. Our effective tax rate was lower than the U.S. federal statutory rate, primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland and Puerto Rico, and tax benefits relating to stock-based compensation. In device and data management, Microsoft Endpoint Manager monitors and manages an organization’s devices in a unified management platform. We make our technology affordable and accessible to nonprofit organizations around the world, enabling them to drive greater impact for the causes and communities they serve. Revenue from search advertising is recognized when the advertisement appears in the search results or when the action necessary to earn the revenue has been completed. We also launched a new initiative to use Microsoft technology to help our suppliers and customers around the world reduce their own carbon footprint. Compensation expense for the employee stock purchase plan (âESPPâ) is measured as the discount the employee is entitled to upon purchase and is recognized in the period of purchase. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. Fiscal Year 2019 Compared with Fiscal Year 2018. At Microsoft, we call this dynamic tech intensity: adopting best-in-class digital tools and platforms for the purpose of building new, proprietary products and services. The pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation. Sales and marketing expenses increased $744 million or 4%, driven by investments in commercial sales capacity, LinkedIn, and GitHub, offset in part by a decrease in marketing. Financial highlights Chairman's and CEO's reports Key financial metrics Corporate responsibility Downloads Financial highlights . We strive to create local opportunity, growth, and impact in every country around the world. All other shares repurchased were under the share repurchase program approved on September 20, 2016. We strive to obtain information as early as possible about changing usage patterns and hardware advances that may affect software and hardware design. OEMs also sell devices pre-installed with other Microsoft products and services, including applications such as Office and the capability to subscribe to Office 365. As of June 30, 2020, we had federal, state, and foreign net operating loss carryforwards of $547 million, $975 million, and $2.0 billion, respectively. CALs provide certain Office Commercial products and services with access rights to our server products and CAL revenue is reported with the associated Office products and services. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. Our principal audit procedures to evaluate managementâs estimates of uncertain tax positions related to unresolved transfer pricing issues included the following: /s/ DELOITTE & TOUCHE LLP Cost of revenue is allocated in certain cases based on a relative revenue methodology. For multi-year agreements, we generally invoice customers annually at the beginning of each annual coverage period. This past year, we expanded our global allyship program, adapting learning experiences for the work from home conditions of COVID-19. Share this page. We adopted the standard effective July 1, 2019. Home Page. The PC has been mission-critical across work, school, and life to sustain productivity in a remote everything world. LinkedIn revenue increased $1.5 billion or 28%, driven by growth across each line of business. Sales and marketing expenses increased $1.4 billion or 8%, driven by investments in LinkedIn and commercial sales, and an increase in bad debt expense. Given the complexity and the subjective nature of the transfer pricing issues that remain unresolved with the IRS, evaluating managementâs estimates relating to their determination of uncertain tax positions required extensive audit effort and a high degree of auditor judgment, including involvement of our tax specialists. Our platforms and tools help drive small business productivity, large business competitiveness, and public-sector efficiency. The following table reconciles our financial results reported in accordance with GAAP to non-GAAP financial results: Cash, cash equivalents, and short-term investments totaled $136.5 billion and $133.8 billion as of June 30, 2020 and 2019. Zoom offers videoconferencing and cloud phone solutions. MSN advertising includes both native and display ads. We report our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Our results were underpinned by our high-quality portfolio, great people with a culture focused on financial discipline, operational excellence and our contribution to social value. Compensation cost for RSUs is recognized using the straight-line method and for PSUs is recognized using the accelerated method. West Barracouta (Bass Strait) project is on schedule and budget and is still expected to achieve first production in the 2021 calendar year, despite delays in component delivery and equipment fabrication due to COVID-19 restrictions. Operating income increased $7.9 billion or 23%, driven by growth across each of our segments. Windows, including Windows OEM licensing (âWindows OEMâ) and other non-volume licensing of the Windows operating system; Windows Commercial, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; Windows IoT; and MSN advertising. Revenue Recognition â Refer to Note 1 to the financial statements. Through these partnerships, we make decisions that positively influence those around us, such as: We use cookies to improve your experience. PSUs generally vest over a performance period of three years. We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. Office Commercial products and cloud services revenue increased $3.2 billion or 13%, driven by Office 365 Commercial, offset in part by lower revenue from products licensed on-premises, reflecting a continued shift to cloud offerings. info@biocon.com . Assessed the terms in the customer agreement and evaluated the appropriateness of managementâs application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions. Principal currency exposures include the Euro, Japanese yen, British pound, Canadian dollar, and Australian dollar. Officer, PepsiCo, Penny S. Pritzker 4 Readers should consider the above-noted factors when reviewing these sections. They also support new startups, improve educational and health outcomes, and empower human ingenuity. Those customers spent £11 billion with Monzo in that 12 months, which helped quadruple our operating income from £9 million to £36 million. Listen to Mark Machin, President & CEO, discuss our results. Reinvent productivity and business processes. Revenue and expenses are translated at average rates of exchange prevailing during the year. Our platforms and tools help drive small business productivity, large business competitiveness, and public-sector efficiency. 2020 will go down in history as the year COVID-19 put a halt to daily life as we know it. Share this article. It is possible that the information we post on social media could be deemed to be material to investors. CALs provide access rights to certain server products, including SQL Server and Windows Server, and revenue is reported along with the associated server product. Azureâs competitive advantage includes enabling a hybrid cloud, allowing deployment of existing datacenters with our public cloud into a single, cohesive infrastructure, and the ability to run at a scale that meets the needs of businesses of all sizes and complexities. Unearned revenue also includes payments for other offerings for which we have been paid in advance and earn the revenue when we transfer control of the product or service. The opportunity to merge the physical and digital worlds, when combined with the power of Azure cloud services, unlocks the potential for entirely new workloads which we believe will shape the next era of computing. We also design, manufacture, and sell devices, including PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories. This guidance expands strategies that qualify for hedge accounting, changes how many hedging relationships are presented in the financial statements, and simplifies the application of hedge accounting in certain situations. Review your credit reports to catch problems early. Certain income and expenses are not reported in tax returns and financial statements in the same year. Enterprise Services, including Premier Support Services and Microsoft Consulting Services, assist customers in developing, deploying, and managing Microsoft server and desktop solutions and provide training and certification to developers and IT professionals on various Microsoft products. This starts with protecting public health. In fiscal year 2018, our U.S. income before income taxes was $11.5 billion and our foreign income before income taxes was $24.9 billion. The COVID-19 pandemic has impacted and may continue to impact our business operations, including our employees, customers, partners, and communities, and there is substantial uncertainty in the nature and degree of its continued effects over time. Refer to Note 12 â Income Taxes of the Notes to Financial Statements for further discussion. We have operations centers that support operations in their regions, including customer contract and order processing, credit and collections, information processing, and vendor management and logistics. Investor Relations. Independent Board Chair, At our Investor Relations website, www.microsoft.com/investor, we make available free of charge a variety of information for investors. Gross margin and operating income included an unfavorable foreign currency impact of 2% and 4%, respectively. In FY2020 we began a Group-wide Respectful Behaviours campaign to create greater awareness and build understanding of what disrespectful behaviour is and how it affects our people. We have determined that certain sales incentive programs meet the requirements to be capitalized. Costs incurred internally in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product. Refer to Note 19 â Segment Information and Geographic Data for further information, including revenue by significant product and service offering. Windows OEM Pro revenue grew 11%, driven by Windows 7 end of support and healthy Windows 10 demand, offset in part by weakness in small and medium businesses. Our customer solution areas were built for this era. Service and other revenue includes sales from cloud-based solutions that provide customers with software, services, platforms, and content such as Office 365, Azure, Dynamics 365, and Xbox Live; solution support; and consulting services. Download report (PDF 8MB) Diageo to acquire Chase Distillery. DIRECTORS AND EXECUTIVE OFFICERS OF MICROSOFT CORPORATION, John W. Thompson 3,4 We read and evaluated managementâs documentation, including relevant accounting policies and information obtained by management from outside tax specialists, that detailed the basis of the uncertain tax positions. Significant judgment is exercised by the Company in determining revenue recognition for these customer agreements, and includes the following: Given these factors and due to the volume of transactions, the related audit effort in evaluating managementâs judgments in determining revenue recognition for these customer agreements was extensive and required a high degree of auditor judgment. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Help protect threatened species and their habitats. We describe risks and uncertainties that could cause actual results and events to differ materially in âRisk Factors,â âManagementâs Discussion and Analysis of Financial Condition and Results of Operations,â and âQuantitative and Qualitative Disclosures about Market Riskâ in our fiscal year 2020 Form 10-K. As a result, no collateral was required to be posted. We believe our people should have the opportunity to fulfil their potential and thrive in an inclusive and diverse workplace. Xbox revenue is mainly affected by subscriptions and sales of first- and third-party content, as well as advertising. We’re committed to addressing racial injustice and inequity for the Black and African American community in the United States and for vulnerable communities globally. LinkedIn revenue increased $1.3 billion or 20%, driven by growth across all businesses. The following table sets forth the potential loss in future earnings or fair values, including associated derivatives, resulting from hypothetical changes in relevant market rates or prices: Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (âGAAPâ). The above table excludes shares repurchased to settle employee tax withholding related to the vesting of stock awards of $3.3 billion, $2.7 billion, and $2.1 billion for fiscal years 2020, 2019, and 2018, respectively. The climate report from the National Weather Service in Jacksonville states that 2020 was the warmest and most humid year on record. Principal currencies hedged included the Euro, Japanese yen, British pound, Canadian dollar, and Australian dollar. Our commercial and other business metrics are fundamentally connected based on how customers use our products and services. Additionally, for certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities. There is an additional $20 fee if any changes are made to … The remaining transition tax of $15.2 billion is payable over the next six years with a final payment in fiscal year 2026. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. For fiscal years 2020, 2019, and 2018, we repurchased 126 million shares, 150 million shares, and 99 million shares of our common stock for $19.7 billion, $16.8 billion, and $8.6 billion, respectively, through our share repurchase programs. Certain corporate-level activity is not allocated to our segments. Our Productivity and Business Processes segment consists of products and services in our portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. We recently added several new products and accessories into the Surface family, including Surface Book 3 and Surface Go 2. This starts with our own culture at Microsoft, extends to how we engage our suppliers and partners to create change, and includes strengthening our communities. In times where companies are having to do the same and qualitative in. Acquisitions for $ 2.4 billion or 15 %, driven by growth across each of our major operated in! 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