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Financial News Details

Oracle Becomes the Second Largest Cloud SaaS Company in the World

June 19, 2014

Q4 SaaS and PaaS Subscriptions Up 25% to $322 Million, Q4 IaaS Subscription Revenue Up 13% to $128 Million

REDWOOD SHORES, CA -- (Marketwired) -- 06/19/14 -- Oracle Corporation (NYSE: ORCL) today announced that fiscal 2014 Q4 total revenues were up 3% to $11.3 billion. Software and Cloud revenues were up 4% to $8.9 billion. GAAP Cloud software-as-a-service (SaaS) and platform-as-a-service (PaaS) revenues were up 25% to $322 million, while non-GAAP SaaS and PaaS revenues were up 23% to $327 million. In addition, Cloud infrastructure-as-a-service (IaaS) revenues were up 13% to $128 million. New software licenses revenues were unchanged at $3.8 billion. Software license updates and product support revenues were up 7% to $4.7 billion. Overall hardware systems revenues were up 2% to $1.5 billion with hardware systems products up 2% to $870 million, and hardware systems support up 2% to $596 million.

In Q4, both GAAP and non-GAAP earnings per share were lowered by $0.02 due to a non-operating loss caused by exchange rate changes in Venezuela. Furthermore, last year's Q4 GAAP earnings per share increased $0.04 because of a $269 million acquisition price reduction. As a result of these two factors, Q4 GAAP earnings per share were unchanged at $0.80 compared with last year, while GAAP net income was down 4% to $3.6 billion, and GAAP operating income was down 2% to $4.9 billion. Q4 GAAP operating margin was 43% in the quarter. Non-GAAP earnings per share were up 6% to $0.92, but would have been $0.94 if not for the currency loss in Venezuela. Non-GAAP net income was up 2% to $4.2 billion while non-GAAP operating income was up 3% to $5.8 billion. The non-GAAP operating margin was 51%. GAAP operating cash flow on a trailing twelve-month basis was $14.9 billion.

For fiscal year 2014, total revenues were up 3% at $38.3 billion. GAAP Software and Cloud revenues were up 5%. GAAP Cloud SaaS and PaaS revenues were up 23% to $1.1 billion while Cloud IaaS revenues were $456 million. New software licenses revenues were unchanged at $9.4 billion while software license updates and product support revenues were up 6% to $18.2 billion. Total hardware system revenues were flat at $5.4 billion. GAAP operating income was up 1% to $14.8 billion, and GAAP operating margin was 39%. Non-GAAP operating income was up 3% to $18.1 billion, and non-GAAP operating margin was 47%. GAAP net income was unchanged at $11.0 billion, while non-GAAP net income was up 2% to $13.2 billion. GAAP earnings per share were $2.38, up 5% compared to last year while non-GAAP earnings per share were $2.87, up 7%.

"Our cloud subscription business is now approaching a run rate of $2 billion a year," said Oracle President and CFO Safra Catz. "As our business has transitioned, more software revenues are being recognized over the life of a subscription rather than upfront. We're making this transition to cloud subscriptions and ratable revenue recognition while continuously increasing our top-line revenue and our bottom-line profits year-after-year."

"We have transformed Sun's commodity hardware business into a profitable and growing Engineered Systems business," said Oracle President Mark Hurd. "Our overall hardware business grew 2% in constant currency this past year. We saw record levels of Engineered Systems shipments and expect to deliver our 10,000th unit in Q1."

"Oracle is now the second largest SaaS company in the world," said Oracle CEO Larry Ellison. "In SaaS, we're in front of everybody but salesforce.com. In IaaS we're larger and more profitable than Rackspace. We have by far the most complete portfolio of modern SaaS and PaaS products in the industry: CRM: Sales, Service & Marketing; HCM: HR, Payroll & Talent; ERP: Accounting, Procurement, Supply Chain & more. All these SaaS products run on the world's most powerful PaaS: the Oracle in-memory multitenant database and Java. We plan to increase our focus on the Cloud and become number one in both the SaaS and the PaaS businesses."

The Board of Directors declared a quarterly cash dividend of $0.12 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on July 9, 2014, with a payment date of July 30, 2014.

Q4 Fiscal 2014 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (913) 312-6699, Passcode: 822011. To access the live webcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle's Q4 results and Fiscal 2014 financial tables are available on the Oracle Investor Relations website.

A replay of the conference call will also be available by dialing (719) 457-0820 or (888) 203-1112, Passcode: 1625971.

About Oracle
Oracle engineers hardware and software to work together in the cloud and in your data center. For more information about Oracle (NYSE: ORCL), visit www.oracle.com or contact Investor Relations at investor_us@oracle.com or (650) 506-4073.

Trademarks
Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.

"Safe Harbor" Statement: Statements in this press release relating to Oracle's future plans, expectations, beliefs, intentions and prospects, including statements regarding our cloud subscription run rate, the timing of the delivery of our 10,000th Engineered Systems unit, and our plans to increase our focus on the Cloud and become number one in SaaS and PaaS, are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, political and market conditions, including the continued slow economic recovery in the U.S. and other parts of the world, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for support contracts. (3) Our cloud computing strategy, including our Oracle Cloud Software-as-a-Service, Platform-as-a-Service and Infrastructure-as-a-Service offerings, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses, cloud software subscriptions or hardware systems products or purchase or renew support contracts. (5) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (6) If the security measures for our software, hardware, services or Oracle Cloud offerings are compromised or if such offerings contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and financial exposure. (7) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle's Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of June 19, 2014. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION
Q4 FISCAL 2014 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Three Months Ended May 31,
2014 % of Revenues 2013 % of Revenues % Increase (Decrease) in US $ % Increase (Decrease) in Constant Currency (1)
REVENUES
New software licenses $ 3,769 33% $ 3,769 35% 0% (1%)
Cloud software-as-a-service and platform-as-a-service 322 3% 257 2% 25% 25%
Cloud infrastructure-as-a-service 128 1% 113 1% 13% 13%
Software license updates and product support 4,695 42% 4,402 40% 7% 6%
Software and Cloud Revenues 8,914 79% 8,541 78% 4% 4%
Hardware systems products 870 8% 849 8% 2% 3%
Hardware systems support 596 5% 582 5% 2% 2%
Hardware Systems Revenues 1,466 13% 1,431 13% 2% 3%
Services Revenues 940 8% 975 9% (4%) (3%)
Total Revenues 11,320 100% 10,947 100% 3% 3%
OPERATING EXPENSES
Sales and marketing 2,241 20% 2,125 19% 6% 5%
Cloud software-as-a-service and platform-as-a-service 137 1% 101 1% 36% 35%
Cloud infrastructure-as-a-service 84 1% 76 1% 10% 11%
Software license updates and product support 303 3% 316 3% (4%) (4%)
Hardware systems products 443 4% 413 4% 7% 8%
Hardware systems support 205 2% 220 2% (7%) (6%)
Services 759 7% 785 7% (3%) (3%)
Research and development 1,349 12% 1,264 12% 7% 7%
General and administrative 265 2% 274 2% (3%) (3%)
Amortization of intangible assets 568 5% 596 5% (5%) (5%)
Acquisition related and other (2) 20 0% (257 ) (2%) 108% 108%
Restructuring 37 0% 34 0% 8% 4%
Total Operating Expenses 6,411 57% 5,947 54% 8% 8%
OPERATING INCOME 4,909 43% 5,000 46% (2%) (3%)
Interest expense (239 ) (2%) (210 ) (2%) 14% 14%
Non-operating (expense) income, net (81 ) 0% 35 0% 328% 324%
INCOME BEFORE PROVISION FOR INCOME TAXES 4,589 41% 4,825 44% (5%) (6%)
Provision for income taxes 943 9% 1,018 9% (7%) (8%)
NET INCOME $ 3,646 32% $ 3,807 35% (4%) (5%)
EARNINGS PER SHARE:
Basic $ 0.81 $ 0.81
Diluted $ 0.80 $ 0.80
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 4,475 4,684
Diluted 4,569 4,756
(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended May 31, 2014 compared with the corresponding prior year period increased our operating income by 1 percentage point.
(2) Acquisition related and other expenses for the quarter ended May 31, 2013 included a net benefit of $269 million due to an acquisition related item.
ORACLE CORPORATION
Q4 FISCAL 2014 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Three Months Ended May 31, % Increase (Decrease)
in US $
% Increase (Decrease) in Constant Currency (2)
2014 GAAP Adj. 2014 Non-GAAP 2013 GAAP Adj. 2013 Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
TOTAL REVENUES (3) (4) $ 11,320 $ 6 $ 11,326 $ 10,947 $ 14 $ 10,961 3% 3% 3% 3%
TOTAL SOFTWARE AND CLOUD REVENUES (3) $ 8,914 $ 5 $ 8,919 $ 8,541 $ 10 $ 8,551 4% 4% 4% 4%
New software licenses 3,769 - 3,769 3,769 - 3,769 0% 0% (1%) (1%)
Cloud software-as-a-service and platform-as-a-service (3) 322 5 327 257 8 265 25% 23% 25% 23%
Cloud infrastructure-as-a-service 128 - 128 113 - 113 13% 13% 13% 13%
Software license updates and product support 4,695 - 4,695 4,402 2 4,404 7% 7% 6% 6%
TOTAL HARDWARE SYSTEMS REVENUES (4) $ 1,466 $ 1 $ 1,467 $ 1,431 $ 4 $ 1,435 2% 2% 3% 2%
Hardware systems products 870 - 870 849 - 849 2% 2% 3% 3%
Hardware systems support (4) 596 1 597 582 4 586 2% 2% 2% 2%
TOTAL OPERATING EXPENSES $ 6,411 $ (841 ) $ 5,570 $ 5,947 $ (559 ) $ 5,388 8% 3% 8% 3%
Stock-based compensation (5) 216 (216 ) - 186 (186 ) - 16% * 16% *
Amortization of intangible assets (6) 568 (568 ) - 596 (596 ) - (5%) * (5%) *
Acquisition related and other 20 (20 ) - (257 ) 257 - 108% * 108% *
Restructuring 37 (37 ) - 34 (34 ) - 8% * 4% *
OPERATING INCOME $ 4,909 $ 847 $ 5,756 $ 5,000 $ 573 $ 5,573 (2%) 3% (3%) 2%
OPERATING MARGIN % 43 % 51 % 46 % 51 % (231) bp. (2) bp. (255) bp. (24) bp.
INCOME TAX EFFECTS (7) $ 943 $ 308 $ 1,251 $ 1,018 $ 266 $ 1,284 (7%) (3%) (8%) (4%)
NET INCOME $ 3,646 $ 539 $ 4,185 $ 3,807 $ 307 $ 4,114 (4%) 2% (5%) 1%
DILUTED EARNINGS PER SHARE $ 0.80 $ 0.92 $ 0.80 $ 0.87 0% 6% (1%) 5%
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,569 - 4,569 4,756 - 4,756 (4%) (4%) (4%) (4%)
(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.
(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
(3) As of May 31, 2014, approximately $3 million in estimated revenues related to assumed cloud software-as-a-service and platform-as-a-service contracts will not be recognized for fiscal 2015 due to business combination accounting rules.
(4) As of May 31, 2014, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for fiscal 2015 due to business combination accounting rules.
(5) Stock-based compensation was included in the following GAAP operating expense categories:
Three Months Ended Three Months Ended
May 31, 2014 May 31, 2013
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
Sales and marketing $ 46 $ (46 ) $ - $ 33 $ (33 ) $ -
Cloud software-as-a-service and platform-as-a-service 3 (3 ) - 2 (2 ) -
Cloud infrastructure-as-a-service 1 (1 ) - 2 (2 ) -
Software license updates and product support 6 (6 ) - 5 (5 ) -
Hardware systems products 1 (1 ) - 1 (1 ) -
Hardware systems support 1 (1 ) - 1 (1 ) -
Services 12 (12 ) - 6 (6 ) -
Research and development 101 (101 ) - 93 (93 ) -
General and administrative 45 (45 ) - 43 (43 ) -
Subtotal 216 (216 ) - 186 (186 ) -
Acquisition related and other 7 (7 ) - 4 (4 ) -
Total stock-based compensation $ 223 $ (223 ) $ - $ 190 $ (190 ) $ -
(6) Estimated future annual amortization expense related to intangible assets as of May 31, 2014 was as follows:
Fiscal 2015 $ 1,934
Fiscal 2016 1,337
Fiscal 2017 741
Fiscal 2018 607
Fiscal 2019 508
Thereafter 980
Total intangible assets subject to amortization 6,107
In-process research and development 30
Total intangible assets, net $ 6,137
(7) Income tax effects were calculated reflecting an effective GAAP tax rate of 20.5% and 21.1% in the fourth quarter of fiscal 2014 and 2013, respectively, and an effective non-GAAP tax rate of 23.0% and 23.8% in the fourth quarter of fiscal 2014 and 2013, respectively. The differences between our GAAP and non-GAAP tax rates in the fourth quarter of fiscal 2014 and 2013 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
* Not meaningful
ORACLE CORPORATION
FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Year Ended May 31,
2014 % of Revenues 2013 % of Revenues % Increase (Decrease) in US $ % Increase (Decrease) in Constant Currency (1)
REVENUES
New software licenses $ 9,416 25% $ 9,411 25% 0% 1%
Cloud software-as-a-service and platform-as-a-service 1,121 3% 910 3% 23% 24%
Cloud infrastructure-as-a-service 456 1% 457 1% 0% 1%
Software license updates and product support 18,206 47% 17,142 46% 6% 7%
Software and Cloud Revenues 29,199 76% 27,920 75% 5% 5%
Hardware systems products 2,976 8% 3,033 8% (2%) (1%)
Hardware systems support 2,396 6% 2,313 6% 4% 5%
Hardware Systems Revenues 5,372 14% 5,346 14% 0% 2%
Services Revenues 3,704 10% 3,914 11% (5%) (4%)
Total Revenues 38,275 100% 37,180 100% 3% 4%
OPERATING EXPENSES
Sales and marketing 7,567 20% 7,062 19% 7% 8%
Cloud software-as-a-service and platform-as-a-service 455 1% 327 1% 39% 40%
Cloud Infrastructure-as-a-service 308 1% 304 1% 1% 3%
Software license updates and product support 1,162 3% 1,175 3% (1%) 1%
Hardware systems products 1,521 4% 1,501 4% 1% 3%
Hardware systems support 836 2% 890 2% (6%) (5%)
Services 2,954 8% 3,182 9% (7%) (6%)
Research and development 5,151 13% 4,850 13% 6% 7%
General and administrative 1,038 3% 1,072 3% (3%) (2%)
Amortization of intangible assets 2,300 6% 2,385 7% (4%) (4%)
Acquisition related and other (2) 41 0% (604 ) (2%) 107% 107%
Restructuring 183 0% 352 1% (48%) (49%)
Total Operating Expenses 23,516 61% 22,496 61% 5% 6%
OPERATING INCOME 14,759 39% 14,684 39% 1% 1%
Interest expense (914 ) (3%) (797 ) (2%) 15% 15%
Non-operating (expense) income, net (141 ) 0% 11 0% 1,343% 1,749%
INCOME BEFORE PROVISION FOR INCOME TAXES 13,704 36% 13,898 37% (1%) 0%
Provision for income taxes 2,749 7% 2,973 8% (7%) (6%)
NET INCOME $ 10,955 29% $ 10,925 29% 0% 1%
EARNINGS PER SHARE:
Basic $ 2.42 $ 2.29
Diluted $ 2.38 $ 2.26
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 4,528 4,769
Diluted 4,604 4,844
(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the year ended May 31, 2014 compared with the corresponding prior year period decreased our revenues by 1 percentage point and operating expenses by 1 percentage point.
(2) Acquisition related and other expenses for the year ended May 31, 2013 included a benefit of $306 million related to certain litigation and a net benefit of $387 million due to an acquisition related item.
ORACLE CORPORATION
FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Year Ended May 31, % Increase (Decrease)
in US $
% Increase (Decrease) in Constant Currency (2)
2014 GAAP Adj. 2014 Non-GAAP 2013 GAAP Adj. 2013 Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
TOTAL REVENUES (3) (4) $ 38,275 $ 31 $ 38,306 $ 37,180 $ 73 $ 37,253 3% 3% 4% 4%
TOTAL SOFTWARE AND CLOUD REVENUES (3) $ 29,199 $ 20 $ 29,219 $ 27,920 $ 59 $ 27,979 5% 4% 5% 5%
New software licenses 9,416 - 9,416 9,411 - 9,411 0% 0% 1% 1%
Cloud software-as-a-service and platform-as-a-service (3) 1,121 17 1,138 910 45 955 23% 19% 24% 20%
Cloud infrastructure-as-a-service 456 - 456 457 - 457 0% 0% 1% 1%
Software license updates and product support 18,206 3 18,209 17,142 14 17,156 6% 6% 7% 7%
TOTAL HARDWARE SYSTEMS REVENUES (4) $ 5,372 $ 11 $ 5,383 $ 5,346 $ 14 $ 5,360 0% 0% 2% 2%
Hardware systems products 2,976 - 2,976 3,033 - 3,033 (2%) (2%) (1%) (1%)
Hardware systems support (4) 2,396 11 2,407 2,313 14 2,327 4% 3% 5% 5%
TOTAL OPERATING EXPENSES $ 23,516 $ (3,319 ) $ 20,197 $ 22,496 $ (2,855 ) $ 19,641 5% 3% 6% 4%
Stock-based compensation (5) 795 (795 ) - 722 (722 ) - 10% * 10% *
Amortization of intangible assets (6) 2,300 (2,300 ) - 2,385 (2,385 ) - (4%) * (4%) *
Acquisition related and other 41 (41 ) - (604 ) 604 - 107% * 107% *
Restructuring 183 (183 ) - 352 (352 ) - (48%) * (49%) *
OPERATING INCOME $ 14,759 $ 3,350 $ 18,109 $ 14,684 $ 2,928 $ 17,612 1% 3% 1% 4%
OPERATING MARGIN % 39 % 47 % 39 % 47 % (93) bp. 0 bp. (94) bp. (8) bp.
INCOME TAX EFFECTS (7) $ 2,749 $ 1,091 $ 3,840 $ 2,973 $ 896 $ 3,869 (7%) (1%) (6%) 0%
NET INCOME $ 10,955 $ 2,259 $ 13,214 $ 10,925 $ 2,032 $ 12,957 0% 2% 1% 3%
DILUTED EARNINGS PER SHARE $ 2.38 $ 2.87 $ 2.26 $ 2.68 5% 7% 7% 8%
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,604 - 4,604 4,844 - 4,844 (5%) (5%) (5%) (5%)
(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.
(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
(3) As of May 31, 2014, approximately $3 million in estimated revenues related to assumed cloud software-as-a-service and platform-as-a-service contracts will not be recognized for fiscal 2015 due to business combination accounting rules.
(4) As of May 31, 2014, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for fiscal 2015 due to business combination accounting rules.
(5) Stock-based compensation was included in the following GAAP operating expense categories:
Year Ended Year Ended
May 31, 2014 May 31, 2013
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
Sales and marketing $ 165 $ (165 ) $ - $ 137 $ (137 ) $ -
Cloud software-as-a-service and platform-as-a-service 8 (8 ) - 10 (10 ) -
Cloud infrastructure-as-a-service 4 (4 ) - 8 (8 ) -
Software license updates and product support 22 (22 ) - 20 (20 ) -
Hardware systems products 5 (5 ) - 3 (3 ) -
Hardware systems support 6 (6 ) - 5 (5 ) -
Services 29 (29 ) - 23 (23 ) -
Research and development 385 (385 ) - 352 (352 ) -
General and administrative 171 (171 ) - 164 (164 ) -
Subtotal 795 (795 ) - 722 (722 ) -
Acquisition related and other 10 (10 ) - 33 (33 ) -
Total stock-based compensation $ 805 $ (805 ) $ - $ 755 $ (755 ) $ -
(6) Estimated future annual amortization expense related to intangible assets as of May 31, 2014 was as follows:
Fiscal 2015 $ 1,934
Fiscal 2016 1,337
Fiscal 2017 741
Fiscal 2018 607
Fiscal 2019 508
Thereafter 980
Total intangible assets subject to amortization 6,107
In-process research and development 30
Total intangible assets, net $ 6,137
(7) Income tax effects were calculated reflecting an effective GAAP tax rate of 20.1% and 21.4% in fiscal 2014 and 2013, respectively, and an effective non-GAAP tax rate of 22.5% and 23.0% in fiscal 2014 and 2013, respectively. The differences between our GAAP and non-GAAP tax rates in fiscal 2014 and 2013 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
* Not meaningful
ORACLE CORPORATION
FISCAL 2014 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
May 31, May 31,
2014 2013
ASSETS
Current Assets:
Cash and cash equivalents $ 17,769 $ 14,613
Marketable securities 21,050 17,603
Trade receivables, net 6,087 6,049
Inventories 189 240
Deferred tax assets 914 974
Prepaid expenses and other current assets 2,129 2,213
Total Current Assets 48,138 41,692
Non-Current Assets:
Property, plant and equipment, net 3,061 3,053
Intangible assets, net 6,137 6,640
Goodwill 29,652 27,343
Deferred tax assets 837 766
Other assets 2,519 2,318
Total Non-Current Assets 42,206 40,120
TOTAL ASSETS $ 90,344 $ 81,812
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable, current and other current borrowings $ 1,508 $ -
Accounts payable 471 419
Accrued compensation and related benefits 1,940 1,851
Income taxes payable 416 911
Deferred revenues 7,269 7,118
Other current liabilities 2,785 2,573
Total Current Liabilities 14,389 12,872
Non-Current Liabilities:
Notes payable and other non-current borrowings 22,667 18,494
Income taxes payable 4,184 3,899
Other non-current liabilities 1,657 1,402
Total Non-Current Liabilities 28,508 23,795
Equity 47,447 45,145
TOTAL LIABILITIES AND EQUITY $ 90,344 $ 81,812
ORACLE CORPORATION
FISCAL 2014 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Year Ended May 31,
2014 2013
Cash Flows From Operating Activities:
Net income $ 10,955 $ 10,925
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 608 546
Amortization of intangible assets 2,300 2,385
Deferred income taxes (248 ) (117 )
Stock-based compensation 805 755
Tax benefits on the exercise of stock options and vesting of restricted stock-based awards 480 410
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards (250 ) (241 )
Other, net 311 155
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net 146 385
Decrease (increase) in inventories 57 (66 )
Increase in prepaid expenses and other assets (143 ) (555 )
Increase (decrease) in accounts payable and other liabilities 48 (541 )
(Decrease) increase in income taxes payable (320 ) 35
Increase in deferred revenues 172 148
Net cash provided by operating activities 14,921 14,224
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments (32,316 ) (32,160 )
Proceeds from maturities and sales of marketable securities and other investments 28,845 30,159
Acquisitions, net of cash acquired (3,488 ) (3,305 )
Capital expenditures (580 ) (650 )
Net cash used for investing activities (7,539 ) (5,956 )
Cash Flows From Financing Activities:
Payments for repurchases of common stock (9,813 ) (11,021 )
Proceeds from issuances of common stock 2,135 1,527
Payments of dividends to stockholders (2,178 ) (1,433 )
Proceeds from borrowings, net of issuance costs 5,566 4,974
Repayments of borrowings - (2,950 )
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards 250 241
Distributions to noncontrolling interests (28 ) (31 )
Other, net - 193
Net cash used for financing activities (4,068 ) (8,500 )
Effect of exchange rate changes on cash and cash equivalents (158 ) (110 )
Net increase (decrease) in cash and cash equivalents 3,156 (342 )
Cash and cash equivalents at beginning of period 14,613 14,955
Cash and cash equivalents at end of period $ 17,769 $ 14,613
ORACLE CORPORATION
FISCAL 2014 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($in millions)
Fiscal 2013 Fiscal 2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
GAAP Operating Cash Flow $ 13,993 $ 13,533 $ 13,717 $ 14,224 $ 14,845 $ 15,196 $ 15,029 $ 14,921
Capital Expenditures (2) (627 ) (710 ) (684 ) (650 ) (664 ) (578 ) (609 ) (580 )
Free Cash Flow $ 13,366 $ 12,823 $ 13,033 $ 13,574 $ 14,181 $ 14,618 $ 14,420 $ 14,341
% Growth over prior year 8 % 2 % 1 % 4 % 6 % 14 % 11 % 6 %
GAAP Net Income $ 10,175 $ 10,564 $ 10,571 $ 10,925 $ 11,082 $ 11,054 $ 11,115 $ 10,955
Free Cash Flow as a % of Net Income 131 % 121 % 123 % 124 % 128 % 132 % 130 % 131 %
(1) 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 flow generated from operations. We believe free cash flow is also useful as one of the bases for comparing our performance with 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.
(2) Derived from capital expenditures as reported in cash flows from investing activities as per our consolidated statements of cash flows presented in accordance with GAAP.
ORACLE CORPORATION
FISCAL 2014 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
($in millions)
Fiscal 2013 Fiscal 2014
Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
REVENUES
New software licenses $ 1,371 $ 2,171 $ 2,101 $ 3,769 $ 9,411 $ 1,399 $ 2,121 $ 2,128 $ 3,769 $ 9,416
Cloud software-as-a-service and platform-as-a-service 203 218 231 257 910 254 259 287 322 1,121
Cloud infrastructure-as-a-service 119 114 110 113 457 109 97 121 128 456
Software license updates and product support 4,140 4,260 4,340 4,402 17,142 4,431 4,516 4,564 4,695 18,206
Software and Cloud Revenues 5,833 6,763 6,782 8,541 27,920 6,193 6,993 7,100 8,914 29,199
Hardware systems products 779 734 671 849 3,033 669 714 725 870 2,976
Hardware systems support 574 587 570 582 2,313 592 609 598 596 2,396
Hardware Systems Revenues 1,353 1,321 1,241 1,431 5,346 1,261 1,323 1,323 1,466 5,372
Services Revenues 995 1,010 935 975 3,914 918 959 884 940 3,704
Total Revenues $ 8,181 $ 9,094 $ 8,958 $ 10,947 $ 37,180 $ 8,372 $ 9,275 $ 9,307 $ 11,320 $ 38,275
AS REPORTED REVENUE GROWTH RATES
New software licenses (3 %) 11 % (7 %) (1 %) 0 % 2 % (2 %) 1 % 0 % 0 %
Cloud software-as-a-service and platform-as-a-service 138 % 145 % 111 % 50 % 100 % 25 % 19 % 24 % 25 % 23 %
Cloud infrastructure-as-a-service 13 % 5 % (1 %) (4 %) 3 % (9 %) (15 %) 10 % 13 % 0 %
Software license updates and product support 3 % 7 % 7 % 6 % 6 % 7 % 6 % 5 % 7 % 6 %
Software and Cloud Revenues 4 % 10 % 4 % 3 % 5 % 6 % 3 % 5 % 4 % 5 %
Hardware systems products (24 %) (23 %) (23 %) (13 %) (21 %) (14 %) (3 %) 8 % 2 % (2 %)
Hardware systems support (11 %) (6 %) (6 %) (3 %) (7 %) 3 % 4 % 5 % 2 % 4 %
Hardware Systems Revenues (19 %) (16 %) (16 %) (9 %) (15 %) (7 %) 0 % 7 % 2 % 0 %
Services Revenues (7 %) (6 %) (9 %) (10 %) (8 %) (8 %) (5 %) (5 %) (4 %) (5 %)
Total Revenues (2 %) 3 % (1 %) 0 % 0 % 2 % 2 % 4 % 3 % 3 %
CONSTANT CURRENCY GROWTH RATES (2)
New software licenses 2 % 12 % (6 %) 0 % 1 % 5 % 0 % 3 % (1 %) 1 %
Cloud software-as-a-service and platform-as-a-service 139 % 145 % 111 % 51 % 100 % 26 % 20 % 25 % 25 % 24 %
Cloud infrastructure-as-a-service 18 % 6 % 0 % (2 %) 5 % (7 %) (14 %) 11 % 13 % 1 %
Software license updates and product support 8 % 8 % 8 % 8 % 8 % 8 % 7 % 7 % 6 % 7 %
Software and Cloud Revenues 9 % 11 % 5 % 5 % 7 % 8 % 5 % 6 % 4 % 5 %
Hardware systems products (21 %) (23 %) (22 %) (12 %) (19 %) (13 %) (2 %) 10 % 3 % (1 %)
Hardware systems support (6 %) (5 %) (5 %) (1 %) (4 %) 5 % 5 % 7 % 2 % 5 %
Hardware Systems Revenues (15 %) (16 %) (15 %) (8 %) (13 %) (6 %) 1 % 9 % 3 % 2 %
Services Revenues (2 %) (4 %) (8 %) (9 %) (6 %) (6 %) (3 %) (3 %) (3 %) (4 %)
Total Revenues 3 % 5 % 0 % 2 % 2 % 4 % 3 % 6 % 3 % 4 %
GEOGRAPHIC REVENUES
REVENUES
Americas $ 4,324 $ 4,787 $ 4,698 $ 5,911 $ 19,719 $ 4,517 $ 4,995 $ 4,953 $ 5,857 $ 20,323
Europe, Middle East & Africa 2,383 2,701 2,745 3,328 11,158 2,439 2,817 2,923 3,768 11,946
Asia Pacific 1,474 1,606 1,515 1,708 6,303 1,416 1,463 1,431 1,695 6,006
Total Revenues $ 8,181 $ 9,094 $ 8,958 $ 10,947 $ 37,180 $ 8,372 $ 9,275 $ 9,307 $ 11,320 $ 38,275
HEADCOUNT
GEOGRAPHIC AREA
Americas 49,145 49,584 50,402 51,519 53,465 53,073 53,799 53,827
Europe, Middle East & Africa 22,584 22,594 22,592 22,860 23,349 23,178 23,350 23,339
Asia Pacific 44,170 45,051 45,663 45,855 45,513 45,617 45,561 45,108
Total Company 115,899 117,229 118,657 120,234 122,327 121,868 122,710 122,274
(1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.
(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013 and 2012 for the fiscal 2014 and fiscal 2013 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
ORACLE CORPORATION
FISCAL 2014 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)
($ in millions)
Fiscal 2013 Fiscal 2014
Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
AMERICAS
Software and cloud revenues $ 3,164 $ 3,641 $ 3,651 $ 4,686 $ 15,142 $ 3,434 $ 3,808 $ 3,847 $ 4,649 $ 15,737
Hardware systems revenues $ 652 $ 648 $ 577 $ 728 $ 2,604 $ 640 $ 694 $ 655 $ 747 $ 2,736
AS REPORTED GROWTH RATES
Software and cloud revenues 8 % 13 % 4 % 5 % 7 % 9 % 5 % 5 % (1 %) 4 %
Hardware systems revenues (16 %) (17 %) (17 %) (7 %) (14 %) (2 %) 7 % 14 % 3 % 5 %
CONSTANT CURRENCY GROWTH RATES (2)
Software and cloud revenues 10 % 13 % 5 % 6 % 8 % 9 % 6 % 7 % 1 % 5 %
Hardware systems revenues (15 %) (17 %) (17 %) (7 %) (14 %) (1 %) 8 % 16 % 5 % 6 %
EUROPE / MIDDLE EAST / AFRICA
Software and cloud revenues $ 1,699 $ 1,993 $ 2,073 $ 2,627 $ 8,393 $ 1,816 $ 2,155 $ 2,245 $ 3,032 $ 9,249
Hardware systems revenues $ 402 $ 391 $ 390 $ 411 $ 1,594 $ 358 $ 372 $ 403 $ 440 $ 1,572
AS REPORTED GROWTH RATES
Software and cloud revenues (4 %) 5 % 5 % 5 % 3 % 7 % 8 % 8 % 15 % 10 %
Hardware systems revenues (31 %) (22 %) (18 %) (10 %) (21 %) (11 %) (5 %) 3 % 7 % (1 %)
CONSTANT CURRENCY GROWTH RATES (2)
Software and cloud revenues 7 % 8 % 5 % 6 % 6 % 4 % 6 % 6 % 10 % 7 %
Hardware systems revenues (22 %) (19 %) (18 %) (9 %) (17 %) (13 %) (6 %) 2 % 3 % (3 %)
ASIA PACIFIC
Software and cloud revenues $ 970 $ 1,129 $ 1,058 $ 1,228 $ 4,385 $ 943 $ 1,030 $ 1,008 $ 1,233 $ 4,213
Hardware systems revenues $ 299 $ 282 $ 274 $ 292 $ 1,148 $ 263 $ 257 $ 265 $ 279 $ 1,064
AS REPORTED GROWTH RATES
Software and cloud revenues 6 % 10 % 1 % (5 %) 2 % (3 %) (9 %) (5 %) 0 % (4 %)
Hardware systems revenues (7 %) (5 %) (10 %) (12 %) (9 %) (12 %) (9 %) (3 %) (4 %) (7 %)
CONSTANT CURRENCY GROWTH RATES (2)
Software and cloud revenues 10 % 10 % 5 % 0 % 6 % 8 % 0 % 3 % 3 % 3 %
Hardware systems revenues (4 %) (6 %) (7 %) (9 %) (7 %) (5 %) (3 %) 3 % (3 %) (2 %)
TOTAL COMPANY
Software and cloud revenues $ 5,833 $ 6,763 $ 6,782 $ 8,541 $ 27,920 $ 6,193 $ 6,993 $ 7,100 $ 8,914 $ 29,199
Hardware systems revenues $ 1,353 $ 1,321 $ 1,241 $ 1,431 $ 5,346 $ 1,261 $ 1,323 $ 1,323 $ 1,466 $ 5,372
AS REPORTED GROWTH RATES
Software and cloud revenues 4 % 10 % 4 % 3 % 5 % 6 % 3 % 5 % 4 % 5 %
Hardware systems revenues (19 %) (16 %) (16 %) (9 %) (15 %) (7 %) 0 % 7 % 2 % 0 %
CONSTANT CURRENCY GROWTH RATES (2)
Software and cloud revenues 9 %