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Financial News Details

SaaS, PaaS and IaaS Cloud Revenue up 45% to $516 Million

December 17, 2014

Software and Cloud Revenue up 5% to $7.3 Billion

REDWOOD SHORES, CA -- (Marketwired) -- 12/17/14 -- Oracle Corporation (NYSE: ORCL) today announced that fiscal 2015 Q2 Total Revenues were up 3% to $9.6 billion. Software and Cloud Revenues was up 5% to $7.3 billion. Cloud software-as-a-service (SaaS), platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) revenue was up 45% to $516 million. Hardware Systems revenues were up 1% to $1.3 billion. GAAP operating income was up 4% to $3.5 billion, and the GAAP operating margin was 37%. Non-GAAP operating income was up 3% to $4.4 billion, and the non-GAAP operating margin was 46%. GAAP net income was down 2% to $2.5 billion while non-GAAP net income was down 1% to $3.1 billion. GAAP earnings per share were $0.56, unchanged from last year, while non-GAAP earnings per share were up 1% at $0.69. GAAP operating cash flow on a trailing twelve-month basis was $15.3 billion.

Without the impact of the US dollar strengthening compared to foreign currencies, Oracle's reported Q2 GAAP and non-GAAP earnings per share would have been up 5%; Q2 Total Revenues would have been up 7%; Software and Cloud revenues would have been up 8%; and Hardware Systems revenues would have been up 4%.

"We continue to deliver industry-leading operating margins and cash flow even after adding the thousands of specialized sales people and engineers necessary to accelerate the growth of our new cloud businesses," said Oracle CEO, Safra Catz.

"Total Q2 new cloud bookings grew at a rate of more than 140%," said Oracle CEO, Mark Hurd. "We now have over 600 ERP Fusion Cloud customers -- that's five-times more ERP customers than Workday."

"By Q4 of this year we expect our new cloud bookings to exceed $250 million," said Oracle Chairman and Chief Technology Officer Larry Ellison. "Next fiscal year our new cloud bookings will be well over the billion dollars mark."

The Board of Directors also 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 January 7, 2015, with a payment date of January 28, 2015.

Q2 Fiscal 2015 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 (816) 287-5563, Passcode: 425392. 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 Q2 results and Fiscal 2015 financial tables are available on the Oracle Investor Relations website.

A replay of the conference call will also be available by dialing (855) 859-2056 or (404) 537-3406, Pass Code: 46975514.

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 new cloud bookings and new cloud sales, 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, geopolitical 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, Infrastructure-as-a-Service and our new Database 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 December 17, 2014. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION
Q2 FISCAL 2015 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Three Months Ended November 30,

2014
% of
Revenues

2013
% of
Revenues
% Increase
(Decrease)

in US $
% Increase
(Decrease)

in Constant
Currency (1)
REVENUES
New software licenses $ 2,045 21 % $ 2,121 23 % (4 %) 0 %
Cloud software-as-a-service and platform-as-a-service 361 4 % 259 2 % 39 % 41 %
Cloud infrastructure-as-a-service 155 1 % 97 1 % 60 % 62 %
Software license updates and product support 4,768 50 % 4,516 49 % 6 % 9 %
Software and Cloud Revenues 7,329 76 % 6,993 75 % 5 % 8 %
Hardware systems products 717 8 % 714 8 % 0 % 4 %
Hardware systems support 617 6 % 609 6 % 1 % 5 %
Hardware Systems Revenues 1,334 14 % 1,323 14 % 1 % 4 %
Services Revenues 935 10 % 959 11 % (3 %) 1 %
Total Revenues 9,598 100 % 9,275 100 % 3 % 7 %
OPERATING EXPENSES
Sales and marketing 1,897 20 % 1,877 20 % 1 % 4 %
Cloud software-as-a-service and platform-as-a-service 165 2 % 104 1 % 58 % 60 %
Cloud infrastructure-as-a-service 87 1 % 76 1 % 15 % 17 %
Software license updates and product support 296 3 % 285 3 % 4 % 8 %
Hardware systems products 369 4 % 369 4 % 0 % 4 %
Hardware systems support 218 2 % 214 2 % 2 % 5 %
Services 764 8 % 759 8 % 1 % 4 %
Research and development 1,389 14 % 1,273 14 % 9 % 10 %
General and administrative 272 3 % 262 3 % 4 % 5 %
Amortization of intangible assets 568 6 % 577 6 % (2 %) (2 %)
Acquisition related and other (20 ) 0 % 17 0 % (224 %) (221 %)
Restructuring 51 0 % 52 1 % (2 %) 3 %
Total Operating Expenses 6,056 63 % 5,865 63 % 3 % 6 %
OPERATING INCOME 3,542 37 % 3,410 37 % 4 % 9 %
Interest expense (282 ) (3 %) (230 ) (2 %) 23 % 23 %
Non-operating income, net 9 0 % 23 0 % (61 %) (56 %)
INCOME BEFORE PROVISION FOR INCOME TAXES 3,269 34 % 3,203 35 % 2 % 7 %
Provision for income taxes 767 8 % 650 7 % 18 % 24 %
NET INCOME $ 2,502 26 % $ 2,553 28 % (2 %) 3 %
EARNINGS PER SHARE:
Basic $ 0.57 $ 0.56
Diluted $ 0.56 $ 0.56
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 4,417 4,535
Diluted 4,505 4,600
(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, 2014, 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 November 30, 2014 compared with the corresponding prior year period decreased our revenues by 4 percentage points, operating expenses by 3 percentage points and operating income by 5 percentage points.
ORACLE CORPORATION
Q2 FISCAL 2015 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Three Months Ended November 30, % Increase (Decrease)
in US $
% Increase (Decrease) in Constant Currency (2)
2014 2014 2013 2013
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
TOTAL REVENUES (3) (4) (5) $ 9,598 $ 10 $ 9,608 $ 9,275 $ 8 $ 9,283 3 % 3 % 7 % 7 %
TOTAL SOFTWARE AND CLOUD REVENUES (3) (4) $ 7,329 $ 8 $ 7,337 $ 6,993 $ 4 $ 6,997 5 % 5 % 8 % 8 %
New software licenses 2,045 - 2,045 2,121 - 2,121 (4 %) (4 %) 0 % 0 %
Cloud software-as-a-service and platform-as-a-service (3) 361 3 364 259 3 262 39 % 39 % 41 % 41 %
Cloud infrastructure-as-a-service 155 - 155 97 - 97 60 % 60 % 62 % 62 %
Software license updates and product support (4) 4,768 5 4,773 4,516 1 4,517 6 % 6 % 9 % 9 %
TOTAL HARDWARE SYSTEMS REVENUES (5) $ 1,334 $ 2 $ 1,336 $ 1,323 $ 4 $ 1,327 1 % 1 % 4 % 4 %
Hardware systems products 717 - 717 714 - 714 0 % 0 % 4 % 4 %
Hardware systems support (5) 617 2 619 609 4 613 1 % 1 % 5 % 4 %
TOTAL OPERATING EXPENSES $ 6,056 $ (839 ) $ 5,217 $ 5,865 $ (828 ) $ 5,037 3 % 4 % 6 % 6 %
Stock-based compensation (6) 240 (240 ) - 182 (182 ) - 32 % * 32 % *
Amortization of intangible assets (7) 568 (568 ) - 577 (577 ) - (2 %) * (2 %) *
Acquisition related and other (20 ) 20 - 17 (17 ) - (224 %) * (221 %) *
Restructuring 51 (51 ) - 52 (52 ) - (2 %) * 3 % *
OPERATING INCOME $ 3,542 $ 849 $ 4,391 $ 3,410 $ 836 $ 4,246 4 % 3 % 9 % 7 %
OPERATING MARGIN % 37 % 46 % 37 % 46 % 15 bp. (4) bp. 70 bp. 28 bp.
INCOME TAX EFFECTS (8) $ 767 $ 234 $ 1,001 $ 650 $ 234 $ 884 18 % 13 % 24 % 18 %
NET INCOME $ 2,502 $ 615 $ 3,117 $ 2,553 $ 602 $ 3,155 (2 %) (1 %) 3 % 3 %
DILUTED EARNINGS PER SHARE $ 0.56 $ 0.69 $ 0.56 $ 0.69 0 % 1 % 5 % 5 %
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,505 - 4,505 4,600 - 4,600 (2 %) (2 %) (2 %) (2 %)
(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, 2014, 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 November 30, 2014, approximately $6 million and $4 million in estimated revenues related to assumed cloud software-as-a-service and platform-as-a-service contracts will not be recognized for the remainder of fiscal 2015 and fiscal 2016, respectively, due to business combination accounting rules.
(4) As of November 30, 2014, approximately $5 million and $2 million in estimated revenues related to assumed software license updates and product support contracts will not be recognized for the remainder of fiscal 2015 and fiscal 2016, respectively, due to business combination accounting rules.
(5) As of November 30, 2014, approximately $1 million in estimated revenues related to hardware systems support contracts will not be recognized for each of the remainder of fiscal 2015 and fiscal 2016 due to business combination accounting rules.
(6) Stock-based compensation was included in the following GAAP operating expense categories:
Three Months Ended Three Months Ended
November 30, 2014 November 30, 2013
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
Sales and marketing $ 43 $ (43 ) $ - $ 37 $ (37 ) $ -
Cloud software-as-a-service and platform-as-a-service 3 (3 ) - 2 (2 ) -
Cloud infrastructure-as-a-service 1 (1 ) - 1 (1 ) -
Software license updates and product support 4 (4 ) - 5 (5 ) -
Hardware systems products 1 (1 ) - 1 (1 ) -
Hardware systems support 2 (2 ) - 1 (1 ) -
Services 9 (9 ) - 6 (6 ) -
Research and Development 134 (134 ) - 87 (87 ) -
General and administrative 43 (43 ) - 42 (42 ) -
Subtotal 240 (240 ) - 182 (182 ) -
Acquisition related and other 1 (1 ) - 1 (1 ) -
Total stock-based compensation $ 241 $ (241 ) $ - $ 183 $ (183 ) $ -
(7) Estimated future annual amortization expense related to intangible assets as of November 30, 2014 was as follows:
Remainder of Fiscal 2015 $ 1,008
Fiscal 2016 1,574
Fiscal 2017 951
Fiscal 2018 806
Fiscal 2019 699
Fiscal 2020 549
Thereafter 1,580
Total intangible assets, net $ 7,167
(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 23.5% and 20.3% in the second quarter of fiscal 2015 and 2014, respectively, and an effective non-GAAP tax rate of 24.3% and 21.9% in the second quarter of fiscal 2015 and 2014, respectively. The differences between our GAAP and non-GAAP tax rates in the second quarter of fiscal 2015 and 2014 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
Q2 FISCAL 2015 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Six Months Ended November 30,

2014
% of
Revenues

2013
% of
Revenues
% Increase
(Decrease)

in US $
% Increase
(Decrease)

in Constant
Currency (1)
REVENUES
New software licenses $ 3,415 19 % $ 3,519 20 % (3 %) (1 %)
Cloud software-as-a-service and platform-as-a-service 698 4 % 513 3 % 36 % 37 %
Cloud infrastructure-as-a-service 293 1 % 206 1 % 42 % 42 %
Software license updates and product support 9,499 52 % 8,948 50 % 6 % 7 %
Software and Cloud Revenues 13,905 76 % 13,186 74 % 5 % 7 %
Hardware systems products 1,295 7 % 1,383 8 % (6 %) (5 %)
Hardware systems support 1,204 7 % 1,201 7 % 0 % 2 %
Hardware Systems Revenues 2,499 14 % 2,584 15 % (3 %) (2 %)
Services Revenues 1,790 10 % 1,877 11 % (5 %) (3 %)
Total Revenues 18,194 100 % 17,647 100 % 3 % 5 %
OPERATING EXPENSES
Sales and marketing 3,603 20 % 3,497 20 % 3 % 4 %
Cloud software-as-a-service and platform-as-a-service 314 2 % 206 1 % 53 % 53 %
Cloud infrastructure-as-a-service 166 1 % 148 1 % 12 % 13 %
Software license updates and product support 568 3 % 573 3 % (1 %) 1 %
Hardware systems products 667 4 % 699 4 % (5 %) (3 %)
Hardware systems support 410 2 % 423 2 % (3 %) (2 %)
Services 1,455 8 % 1,479 8 % (2 %) 0 %
Research and development 2,718 15 % 2,510 14 % 8 % 8 %
General and administrative 547 3 % 522 3 % 5 % 5 %
Amortization of intangible assets 1,116 6 % 1,172 7 % (5 %) (5 %)
Acquisition related and other 4 0 % 27 0 % (85 %) (83 %)
Restructuring 120 0 % 108 1 % 11 % 13 %
Total Operating Expenses 11,688 64 % 11,364 64 % 3 % 4 %
OPERATING INCOME 6,506 36 % 6,283 36 % 4 % 6 %
Interest expense (544 ) (3 %) (446 ) (3 %) 22 % 22 %
Non-operating income, net 25 0 % 29 0 % (16 %) (18 %)
INCOME BEFORE PROVISION FOR INCOME TAXES 5,987 33 % 5,866 33 % 2 % 4 %
Provision for income taxes 1,302 7 % 1,122 6 % 16 % 19 %
NET INCOME $ 4,685 26 % $ 4,744 27 % (1 %) 1 %
EARNINGS PER SHARE:
Basic $ 1.06 $ 1.04
Diluted $ 1.04 $ 1.02
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 4,434 4,571
Diluted 4,527 4,637
(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, 2014, 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 six months ended November 30, 2014 compared with the corresponding prior year period decreased our revenues by 2 percentage points, operating expenses by 1 percentage point and operating income by 2 percentage points.
ORACLE CORPORATION
Q2 FISCAL 2015 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Six Months Ended November 30, % 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) (5) $ 18,194 $ 13 $ 18,207 $ 17,647 $ 18 $ 17,665 3 % 3 % 5 % 5 %
TOTAL SOFTWARE AND CLOUD REVENUES (3) (4) $ 13,905 $ 11 $ 13,916 $ 13,186 $ 8 $ 13,194 5 % 5 % 7 % 7 %
New software licenses 3,415 - 3,415 3,519 - 3,519 (3 %) (3 %) (1 %) (1 %)
Cloud software-as-a-service and platform-as-a-service (3) 698 5 703 513 7 520 36 % 35 % 37 % 36 %
Cloud infrastructure-as-a-service 293 - 293 206 - 206 42 % 42 % 42 % 42 %
Software license updates and product support (4) 9,499 6 9,505 8,948 1 8,949 6 % 6 % 7 % 8 %
TOTAL HARDWARE SYSTEMS REVENUES (5) $ 2,499 $ 2 $ 2,501 $ 2,584 $ 10 $ 2,594 (3 %) (4 %) (2 %) (2 %)
Hardware systems products 1,295 - 1,295 1,383 - 1,383 (6 %) (6 %) (5 %) (5 %)
Hardware systems support (5) 1,204 2 1,206 1,201 10 1,211 0 % 0 % 2 % 1 %
TOTAL OPERATING EXPENSES $ 11,688 $ (1,691 ) $ 9,997 $ 11,364 $ (1,685 ) $ 9,679 3 % 3 % 4 % 4 %
Stock-based compensation (6) 451 (451 ) - 378 (378 ) - 19 % * 19 % *
Amortization of intangible assets (7) 1,116 (1,116 ) - 1,172 (1,172 ) - (5 %) * (5 %) *
Acquisition related and other 4 (4 ) - 27 (27 ) - (85 %) * (83 %) *
Restructuring 120 (120 ) - 108 (108 ) - 11 % * 13 % *
OPERATING INCOME $ 6,506 $ 1,704 $ 8,210 $ 6,283 $ 1,703 $ 7,986 4 % 3 % 6 % 5 %
OPERATING MARGIN % 36 % 45 % 36 % 45 % 15 bp. (12) bp. 44 bp. 4 bp.
INCOME TAX EFFECTS (8) $ 1,302 $ 467 $ 1,769 $ 1,122 $ 531 $ 1,653 16 % 7 % 19 % 9 %
NET INCOME $ 4,685 $ 1,237 $ 5,922 $ 4,744 $ 1,172 $ 5,916 (1 %) 0 % 1 % 2 %
DILUTED EARNINGS PER SHARE $ 1.04 $ 1.31 $ 1.02 $ 1.28 1 % 3 % 4 % 4 %
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,527 - 4,527 4,637 - 4,637 (2 %) (2 %) (2 %) (2 %)
(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, 2014, 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 November 30, 2014, approximately $6 million and $4 million in estimated revenues related to assumed cloud software-as-a-service and platform-as-a-service contracts will not be recognized for the remainder of fiscal 2015 and fiscal 2016, respectively, due to business combination accounting rules.
(4) As of November 30, 2014, approximately $5 million and $2 million in estimated revenues related to assumed software license updates and product support contracts will not be recognized for the remainder of fiscal 2015 and fiscal 2016, respectively, due to business combination accounting rules.
(5) As of November 30, 2014, approximately $1 million in estimated revenues related to hardware systems support contracts will not be recognized for each of the remainder of fiscal 2015 and fiscal 2016 due to business combination accounting rules.
(6) Stock-based compensation was included in the following GAAP operating expense categories:
Six Months Ended Six Months Ended
November 30, 2014 November 30, 2013
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
Sales and marketing $ 86 $ (86 ) $ - $ 77 $ (77 ) $ -
Cloud software-as-a-service and platform-as-a-service 5 (5 ) - 4 (4 ) -
Cloud infrastructure-as-a-service 2 (2 ) - 2 (2 ) -
Software license updates and product support 9 (9 ) - 11 (11 ) -
Hardware systems products 3 (3 ) - 3 (3 ) -
Hardware systems support 3 (3 ) - 3 (3 ) -
Services 14 (14 ) - 11 (11 ) -
Research and Development 242 (242 ) - 184 (184 ) -
General and administrative 87 (87 ) - 83 (83 ) -
Subtotal 451 (451 ) - 378 (378 ) -
Acquisition related and other 4 (4 ) - 4 (4 ) -
Total stock-based compensation $ 455 $ (455 ) $ - $ 382 $ (382 ) $ -
(7) Estimated future annual amortization expense related to intangible assets as of November 30, 2014 was as follows:
Remainder of Fiscal 2015 $ 1,008
Fiscal 2016 1,574
Fiscal 2017 951
Fiscal 2018 806
Fiscal 2019 699
Fiscal 2020 549
Thereafter 1,580
Total intangible assets, net $ 7,167
(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.7% and 19.1% in the first half of fiscal 2015 and 2014, respectively, and an effective non-GAAP tax rate of 23.0% and 21.9% in the first half of fiscal 2015 and 2014, respectively. The differences between our GAAP and non-GAAP tax rates in the first half of fiscal 2015 and 2014 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
Q2 FISCAL 2015 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
November 30, May 31,
2014 2014
ASSETS
Current Assets:
Cash and cash equivalents $ 16,153 $ 17,769
Marketable securities 28,580 21,050
Trade receivables, net 4,326 6,087
Inventories 208 189
Deferred tax assets 907 914
Prepaid expenses and other current assets 1,866 2,129
Total Current Assets 52,040 48,138
Non-Current Assets:
Property, plant and equipment, net 3,169 3,061
Intangible assets, net 7,167 6,137
Goodwill 33,383 29,652
Deferred tax assets 427 837
Other assets 2,119 2,519
Total Non-Current Assets 46,265 42,206
TOTAL ASSETS $ 98,305 $ 90,344
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable, current and other current borrowings $ - $ 1,508
Accounts payable 490 471
Accrued compensation and related benefits 1,546 1,940
Income taxes payable 440 416
Deferred revenues 6,816 7,269
Other current liabilities 2,693 2,785
Total Current Liabilities 11,985 14,389
Non-Current Liabilities:
Notes payable and other non-current borrowings 32,456 22,667
Income taxes payable 4,231 4,184
Other non-current liabilities 1,671 1,657
Total Non-Current Liabilities 38,358 28,508
Equity 47,962 47,447
TOTAL LIABILITIES AND EQUITY $ 98,305 $ 90,344
ORACLE CORPORATION
Q2 FISCAL 2015 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Six Months Ended November 30,
2014 2013
Cash Flows From Operating Activities:
Net income $ 4,685 $ 4,744
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 324 302
Amortization of intangible assets 1,116 1,172
Deferred income taxes (321 ) (207 )
Stock-based compensation 455 382
Tax benefits on the exercise of stock options and vesting of restricted stock-based awards 136 129
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards (74 ) (71 )
Other, net 103 51
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net 1,813 1,989
Decrease in inventories 14 13
Decrease in prepaid expenses and other assets 439 247
Decrease in accounts payable and other liabilities (861 ) (533 )
Increase (decrease) in income taxes payable 191 (343 )
Decrease in deferred revenues (230 ) (437 )
Net cash provided by operating activities 7,790 7,438
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments (17,514 ) (18,558 )
Proceeds from maturities and sales of marketable securities and other investments 10,153 13,955
Acquisitions, net of cash acquired (5,122 ) (1,748 )
Capital expenditures (426 ) (279 )
Net cash used for investing activities (12,909 ) (6,630 )
Cash Flows From Financing Activities:
Payments for repurchases of common stock (4,087 ) (5,801 )
Proceeds from issuances of common stock 900 765
Payments of dividends to stockholders (1,070 ) (1,099 )
Proceeds from borrowings, net of issuance costs 9,945 5,566
Repayments of borrowings (1,500 ) -
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards 74 71
Distributions to noncontrolling interests (196 ) (28 )
Net cash provided by (used for) financing activities 4,066 (526 )
Effect of exchange rate changes on cash and cash equivalents (563 ) (1 )
Net (decrease) increase in cash and cash equivalents (1,616 ) 281
Cash and cash equivalents at beginning of period 17,769 14,613
Cash and cash equivalents at end of period $ 16,153 $ 14,894
ORACLE CORPORATION
Q2 FISCAL 2015 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($ in millions)
Fiscal 2014 Fiscal 2015
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
GAAP Operating Cash Flow $ 14,845 $ 15,196 $ 15,029 $ 14,921 $ 15,357 $ 15,273
Capital Expenditures (2) (664 ) (578 ) (609 ) (580 ) (628 ) (727 )
Free Cash Flow $ 14,181 $ 14,618 $ 14,420 $ 14,341 $ 14,729 $ 14,546
% Growth over prior year 6 % 14 % 11 % 6 % 4 % 0 %
GAAP Net Income $ 11,082 $ 11,054 $ 11,115 $ 10,955 $ 10,948 $ 10,896
Free Cash Flow as a % of Net Income 128 % 132 % 130 % 131 % 135 % 133 %
(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
Q2 FISCAL 2015 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
($ in millions)
Fiscal 2014 Fiscal 2015
Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
REVENUES
New software licenses $ 1,399 $ 2,121 $ 2,128 $ 3,769 $ 9,416 $ 1,370 $ 2,045 $ 3,415
Cloud software-as-a-service and platform-as-a-service 254 259 287 322 1,121 337 361 698
Cloud infrastructure-as-a-service 109 97 121 128 456 138 155 293
Software license updates and product support 4,431 4,516 4,564 4,695 18,206 4,731 4,768 9,499
Software and Cloud Revenues 6,193 6,993 7,100 8,914 29,199 6,576 7,329 13,905
Hardware systems products 669 714 725 870 2,976 578 717 1,295
Hardware systems support 592 609 598 596 2,396 587 617 1,204
Hardware Systems Revenues 1,261 1,323 1,323 1,466 5,372 1,165 1,334 2,499
Services Revenues 918 959 884 940 3,704 855 935 1,790
Total Revenues $ 8,372 $ 9,275 $ 9,307 $ 11,320 $ 38,275 $ 8,596 $ 9,598 $ 18,194
AS REPORTED REVENUE GROWTH RATES
New software licenses 2 % (2 %) 1 % 0 % 0 % (2 %) (4 %) (3 %)
Cloud software-as-a-service and platform-as-a-service 25 % 19 % 24 % 25 % 23 % 32 % 39 % 36 %
Cloud infrastructure-as-a-service (9 %) (15 %) 10 % 13 % 0 % 26 % 60 % 42 %
Software license updates and product support 7 % 6 % 5 % 7 % 6 % 7 % 6 % 6 %
Software and Cloud Revenues 6 % 3 % 5 % 4 % 5 % 6 % 5 % 5 %
Hardware systems products (14 %) (3 %) 8 % 2 % (2 %) (14 %) 0 % (6 %)
Hardware systems support 3 % 4 % 5 % 2 % 4 % (1 %) 1 % 0 %
Hardware Systems Revenues (7 %) 0 % 7 % 2 % 0 % (8 %) 1 % (3 %)
Services Revenues (8 %) (5 %) (5 %) (4 %) (5 %) (7 %) (3 %) (5 %)
Total Revenues 2 % 2 % 4 % 3 % 3 % 3 % 3 % 3 %
CONSTANT CURRENCY GROWTH RATES (2)
New software licenses 5 % 0 % 3 % (1 %) 1 % (2 %) 0 % (1 %)
Cloud software-as-a-service and platform-as-a-service 26 % 20 % 25 % 25 % 24 % 32 % 41 % 37 %
Cloud infrastructure-as-a-service (7 %) (14 %) 11 % 13 % 1 % 25 % 62 % 42 %
Software license updates and product support 8 % 7 % 7 % 6 % 7 % 6 % 9 % 7 %
Software and Cloud Revenues 8 % 5 % 6 % 4 % 5 % 6 % 8 % 7 %
Hardware systems products (13 %) (2 %) 10 % 3 % (1 %) (14 %) 4 % (5 %)
Hardware systems support 5 % 5 % 7 % 2 % 5 % (2 %) 5 % 2 %
Hardware Systems Revenues (6 %) 1 % 9 % 3 % 2 % (8 %) 4 % (2 %)
Services Revenues (6 %) (3 %) (3 %) (3 %) (4 %) (8 %) 1 % (3 %)
Total Revenues 4 % 3 % 6 % 3 % 4 % 2 % 7 % 5 %
GEOGRAPHIC REVENUES
REVENUES
Americas $ 4,517 $ 4,995 $ 4,953 $ 5,857 $ 20,323 $ 4,620 $ 5,221 $ 9,841
Europe, Middle East & Africa 2,439 2,817 2,923 3,768 11,946 2,589 2,911 5,500
Asia Pacific 1,416 1,463 1,431 1,695 6,006 1,387 1,466 2,853
Total Revenues $ 8,372 $ 9,275 $ 9,307 $ 11,320 $ 38,275 $ 8,596 $ 9,598 $ 18,194
HEADCOUNT
GEOGRAPHIC AREA
Americas 53,465 53,073 53,799 53,827 54,073 57,243
Europe, Middle East & Africa 23,349 23,178 23,350 23,339 23,349 26,997
Asia Pacific 45,513 45,617 45,561 45,108 45,496 46,312
Total Company 122,327 121,868 122,710 122,274 122,918 130,552
(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, 2014 and 2013 for the fiscal 2015 and fiscal 2014 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
ORACLE CORPORATION
Q2 FISCAL 2015 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)
($ in millions)
Fiscal 2014 Fiscal 2015
Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
AMERICAS
Software and cloud revenues $ 3,434 $ 3,808 $ 3,847 $ 4,649 $ 15,737 $ 3,614 $ 4,044 $ 7,657
Hardware systems revenues $ 640 $ 694 $ 655 $ 747 $ 2,736 $ 583 $ 716 $ 1,300
AS REPORTED GROWTH RATES
Software and cloud revenues 9 % 5 % 5 % (1 %) 4 % 5 % 6 % 6 %
Hardware systems revenues (2 %) 7 % 14 % 3 % 5 % (9 %) 3 % (3 %)
CONSTANT CURRENCY GROWTH RATES (2)
Software and cloud revenues 9 % 6 % 7 % 1 % 5 % 6 % 8 % 7 %
Hardware systems revenues (1 %) 8 % 16 % 5 % 6 % (8 %) 5 % (2 %)
EUROPE / MIDDLE EAST / AFRICA
Software and cloud revenues $ 1,816 $ 2,155 $ 2,245 $ 3,032 $ 9,249 $ 1,992 $ 2,234 $ 4,227
Hardware systems revenues $ 358 $ 372 $ 403 $ 440 $ 1,572 $ 338 $ 380 $ 717
AS REPORTED GROWTH RATES
Software and cloud revenues 7 % 8 % 8 % 15 % 10 % 10 % 4 % 6 %
Hardware systems revenues (11 %) (5 %) 3 % 7 % (1 %) (6 %) 2 % (2 %)
CONSTANT CURRENCY GROWTH RATES (2)
Software and cloud revenues 4 % 6 % 6 % 10 % 7 % 7 % 9 % 8 %
Hardware systems revenues (13 %) (6 %) 2 % 3 % (3 %) (7 %) 8 % 0 %
ASIA PACIFIC
Software and cloud revenues $ 943 $ 1,030 $ 1,008 $ 1,233 $ 4,213 $ 970 $ 1,051 $ 2,021
Hardware systems revenues $ 263 $ 257 $ 265 $ 279 $ 1,064 $ 244 $ 238 $ 482