TTM Operating Cash Flow Increases to Record $15.2 Billion, TTM Free Cash Flow up 14%
REDWOOD SHORES, CA -- (Marketwired) -- 12/18/13 --
Oracle Corporation (NYSE: ORCL) today announced that both fiscal 2014 Q2 GAAP and non-GAAP total revenues were up 2% to $9.3 billion. GAAP new software licenses and cloud software subscriptions revenues were unchanged at $2.4 billion, while non-GAAP new software licenses and cloud software subscriptions revenues were down 1% to $2.4 billion. Both GAAP and non-GAAP software license updates and product support revenues were up 6% to $4.5 billion. Hardware Systems revenues, including hardware systems products and hardware systems support, were unchanged at $1.3 billion. Hardware systems products revenues were down 3% to $714 million. GAAP operating income was down 2% to $3.4 billion, and the GAAP operating margin was 37%. Non-GAAP operating income was down 1% at $4.2 billion, and the non-GAAP operating margin was 46%. GAAP net income was down 1% to $2.6 billion, while non-GAAP net income was up 1% to $3.2 billion. GAAP earnings per share were up 5% to $0.56, while non-GAAP earnings per share were up 7% to $0.69. GAAP operating cash flow on a trailing twelve-month basis was $15.2 billion.
Without the impact of the US dollar strengthening compared to foreign currencies, Oracle's reported Q2 GAAP earnings per share would have been up 7% and non-GAAP earnings per share would have been up 9%. GAAP and non-GAAP total revenues also would have been up 3%; GAAP and non-GAAP new software licenses and cloud software subscriptions revenues would have been up 1%. Hardware Systems revenues, including hardware systems products and hardware systems support, would have been up 2%.
"We're very pleased with our results as new software license and cloud software subscription revenue grew 1% in constant currency over the 18% growth reported last year," said Oracle President and CFO,
Safra Catz
. "Software revenue grew 5% helping drive our tremendous cash flow and for the first time ever, we generated more than $15 billion in operating cash flow over four quarters."
"Our hardware business, including support, grew 2% in constant currency this quarter driven by double-digit revenue growth in Exadata, Exalogic and Exalytics," said Oracle President
Mark Hurd
. "The SPARC SuperCluster and Big Data Appliance were even better, with triple-digit growth and we expect hardware products will show growth next quarter."
"Our billion dollar SaaS business delivered overall bookings growth of 35% in the quarter," said Oracle CEO,
Larry Ellison
. "Our fastest growing cloud services were Fusion Human Capital Management and Fusion Salesforce Automation, each growing bookings at a triple-digit rate."
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 January 7, 2014, with a payment date of January 28, 2014.
Q2 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) 312-9303, Passcode: 493332. 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 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: 1722810.
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 expected future growth in Oracle's hardware business, 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 current European economic crisis and slowing economic conditions in 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 hardware systems revenues and profitability could decline further, and we may fail to achieve our financial forecasts with respect to this business. (4) 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. (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) Our periodic workforce restructurings, including reorganizations of our sales force, can be disruptive. (7) 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. 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 18, 2013. Oracle undertakes no duty to update any statement in light of new information or future events.
ORACLE CORPORATION
Q2 FISCAL 2014 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Three Months Ended November 30,
---------------------------------
%
Increase
(Decrease)
in
% Increase Constant
% of % of (Decrease) Currency
2013 Revenues 2012 Revenues in US $ (1)
------ -------- ------ -------- ---------- ----------
REVENUES
New software
licenses and
cloud software
subscriptions $2,380 25% $2,389 26% 0% 1%
Software license
updates and
product support 4,516 49% 4,260 47% 6% 7%
------ -------- ------ --------
Software
Revenues 6,896 74% 6,649 73% 4% 5%
------ -------- ------ --------
Hardware systems
products 714 8% 734 8% (3%) (2%)
Hardware systems
support 609 6% 587 7% 4% 5%
------ -------- ------ --------
Hardware Systems
Revenues 1,323 14% 1,321 15% 0% 2%
------ -------- ------ --------
Services
Revenues 1,056 12% 1,124 12% (6%) (5%)
------ -------- ------ --------
Total Revenues 9,275 100% 9,094 100% 2% 3%
------ -------- ------ --------
OPERATING EXPENSES
Sales and
marketing 1,965 21% 1,773 20% 11% 12%
Software license
updates and
product support 285 3% 270 3% 6% 8%
Hardware systems
products 369 4% 367 4% 1% 2%
Hardware systems
support 214 2% 227 3% (6%) (4%)
Services 851 9% 930 10% (8%) (7%)
Research and
development 1,273 14% 1,199 13% 6% 7%
General and
administrative 262 3% 263 3% (1%) 1%
Amortization of
intangible assets 577 6% 584 6% (1%) (1%)
Acquisition
related and other
(2) 17 0% (121) (1%) 113% 114%
Restructuring 52 1% 131 1% (60%) (61%)
------ -------- ------ --------
Total
Operating
Expenses 5,865 63% 5,623 62% 4% 6%
------ -------- ------ --------
OPERATING INCOME 3,410 37% 3,471 38% (2%) 0%
Interest expense (230) (2%) (195) (2%) 18% 18%
Non-operating
income, net 23 0% 4 0% 508% 964%
------ -------- ------ --------
INCOME BEFORE
PROVISION FOR
INCOME TAXES 3,203 35% 3,280 36% (2%) 0%
------ -------- ------ --------
Provision for
income taxes 650 7% 699 8% (7%) (5%)
------ -------- ------ --------
NET INCOME $2,553 28% $2,581 28% (1%) 1%
====== ======== ====== ========
EARNINGS PER SHARE:
Basic $ 0.56 $ 0.54
Diluted $ 0.56 $ 0.53
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 4,535 4,792
Diluted 4,600 4,868
(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
November 30, 2013 compared with the corresponding prior year period
decreased our revenues by 1 percentage point, operating expenses by 2
percentage points and operating income by 2 percentage points.
(2) Acquisition related and other expenses for the three months ended
November 30, 2012 included a net benefit of $145 million due to an
acquisition related item.
ORACLE CORPORATION
Q2 FISCAL 2014 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($in millions, except per share data)
Three Months Ended November 30,
--------------------------------------------------------
2013 2013 2012 2012
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
-------- ------- -------- -------- ------- --------
TOTAL REVENUES (3)
(4) $ 9,275 $ 8 $ 9,283 $ 9,094 $ 19 $ 9,113
TOTAL SOFTWARE
REVENUES (3) $ 6,896 $ 4 $ 6,900 $ 6,649 $ 16 $ 6,665
New software
licenses and
cloud software
subscriptions
(3) 2,380 3 2,383 2,389 12 2,401
Software license
updates and
product support 4,516 1 4,517 4,260 4 4,264
TOTAL HARDWARE
SYSTEMS REVENUES
(4) $ 1,323 $ 4 $ 1,327 $ 1,321 $ 3 $ 1,324
Hardware systems
products 714 - 714 734 - 734
Hardware systems
support (4) 609 4 613 587 3 590
TOTAL OPERATING
EXPENSES $ 5,865 $ (828) $ 5,037 $ 5,623 $ (782) $ 4,841
Stock-based
compensation
(5) 182 (182) - 188 (188) -
Amortization of
intangible
assets (6) 577 (577) - 584 (584) -
Acquisition
related and
other 17 (17) - (121) 121 -
Restructuring 52 (52) - 131 (131) -
OPERATING INCOME $ 3,410 $ 836 $ 4,246 $ 3,471 $ 801 $ 4,272
OPERATING MARGIN % 37% 46% 38% 47%
INCOME TAX EFFECTS
(7) $ 650 $ 234 $ 884 $ 699 $ 260 $ 959
NET INCOME $ 2,553 $ 602 $ 3,155 $ 2,581 $ 541 $ 3,122
DILUTED EARNINGS
PER SHARE $ 0.56 $ 0.69 $ 0.53 $ 0.64
DILUTED WEIGHTED
AVERAGE COMMON
SHARES
OUTSTANDING 4,600 - 4,600 4,868 - 4,868
% Increase (Decrease)
% Increase (Decrease) in Constant Currency
in US $ (2)
--------------------- ---------------------
GAAP Non-GAAP GAAP Non-GAAP
---------- ---------- ---------- ----------
TOTAL REVENUES (3)
(4) 2% 2% 3% 3%
TOTAL SOFTWARE
REVENUES (3) 4% 4% 5% 5%
New software
licenses and
cloud software
subscriptions
(3) 0% (1%) 1% 1%
Software license
updates and
product support 6% 6% 7% 7%
TOTAL HARDWARE
SYSTEMS REVENUES
(4) 0% 0% 2% 2%
Hardware systems
products (3%) (3%) (2%) (2%)
Hardware systems
support (4) 4% 4% 5% 5%
TOTAL OPERATING
EXPENSES 4% 4% 6% 5%
Stock-based
compensation
(5) (3%) * (3%) *
Amortization of
intangible
assets (6) (1%) * (1%) *
Acquisition
related and
other 113% * 114% *
Restructuring (60%) * (61%) *
OPERATING INCOME (2%) (1%) 0% 1%
OPERATING MARGIN % (141) bp. (115) bp. (128) bp. (114) bp.
INCOME TAX EFFECTS
(7) (7%) (8%) (5%) (6%)
NET INCOME (1%) 1% 1%% 3%
DILUTED EARNINGS
PER SHARE 5% 7% 7% 9%
DILUTED WEIGHTED
AVERAGE COMMON
SHARES
OUTSTANDING (6%) (6%) (6%) (6%)
(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 November 30, 2013, approximately $8 million and $3 million in
estimated revenues related to assumed cloud software subscriptions
contracts will not be recognized for the remainder of fiscal 2014 and
fiscal 2015, respectively, due to business combination accounting
rules.
(4) As of November 30, 2013, approximately $2 million in estimated revenues
related to hardware systems support contracts will not be recognized
for each of the remainder of fiscal 2014 and 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
November 30, 2013 November 30, 2012
------------------------ ------------------------
Non- Non-
GAAP Adj. GAAP GAAP Adj. GAAP
------- ------- ------- ------- ------- -------
Sales and marketing $ 39 $ (39) $ - $ 43 $ (43) $ -
Software license
updates and product
support 5 (5) - 5 (5) -
Hardware systems
products 1 (1) - 1 (1) -
Hardware systems
support 1 (1) - 1 (1) -
Services 7 (7) - 8 (8) -
Research and
development 87 (87) - 89 (89) -
General and
administrative 42 (42) - 41 (41) -
------- ------- ------- ------- ------- -------
Subtotal 182 (182) - 188 (188) -
------- ------- ------- ------- ------- -------
Acquisition related
and other 1 (1) - 4 (4) -
------- ------- ------- ------- ------- -------
Total stock-based
compensation $ 183 $ (183) $ - $ 192 $ (192) $ -
======= ======= ======= ======= ======= =======
(6) Estimated future annual amortization expense related to intangible
assets as of November 30, 2013 was as follows:
Remainder of Fiscal
2014 $ 1,086
Fiscal 2015 1,807
Fiscal 2016 1,235
Fiscal 2017 660
Fiscal 2018 528
Fiscal 2019 429
Thereafter 727
-------
Total intangible
assets subject to
amortization 6,472
In-process research
and development 49
-------
Total intangible
assets, net $ 6,521
=======
(7) Income tax effects were calculated reflecting an effective GAAP tax
rate of 20.3% and 21.3% in the second quarter of fiscal 2014 and 2013,
respectively, and an effective non-GAAP tax rate of 21.9% and 23.5% in
the second quarter of fiscal 2014 and 2013, respectively. The
differences between our GAAP and non-GAAP tax rates in the second
quarters 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
Q2 FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Six Months Ended November 30,
-----------------------------------
%
Increase
(Decrease)
% in
Increase Constant
% of % of (Decrease) Currency
2013 Revenues 2012 Revenues in US $ (1)
------- -------- ------- -------- --------- ---------
REVENUES
New software
licenses and
cloud software
subscriptions $ 4,032 23% $ 3,963 23% 2% 4%
Software license
updates and
product support 8,948 50% 8,400 49% 7% 8%
------- -------- ------- --------
Software
Revenues 12,980 73% 12,363 72% 5% 6%
------- -------- ------- --------
Hardware systems
products 1,383 8% 1,513 9% (9%) (8%)
Hardware systems
support 1,201 7% 1,161 6% 3% 5%
------- -------- ------- --------
Hardware Systems
Revenues 2,584 15% 2,674 15% (3%) (2%)
------- -------- ------- --------
Services
Revenues 2,083 12% 2,238 13% (7%) (5%)
------- -------- ------- --------
Total Revenues 17,647 100% 17,275 100% 2% 4%
------- -------- ------- --------
OPERATING EXPENSES
Sales and
marketing 3,673 21% 3,319 19% 11% 12%
Software license
updates and
product support 573 3% 553 3% 4% 6%
Hardware systems
products 699 4% 751 4% (7%) (6%)
Hardware systems
support 423 2% 451 3% (6%) (5%)
Services 1,657 9% 1,814 10% (9%) (7%)
Research and
development 2,510 14% 2,400 14% 5% 6%
General and
administrative 522 3% 538 3% (3%) (2%)
Amortization of
intangible assets 1,172 7% 1,203 7% (3%) (3%)
Acquisition
related and other
(2) 27 0% (380) (2%) 107% 107%
Restructuring 108 1% 276 2% (61%) (62%)
------- -------- ------- --------
Total
Operating
Expenses 11,364 64% 10,925 63% 4% 5%
------- -------- ------- --------
OPERATING INCOME 6,283 36% 6,350 37% (1%) 1%
Interest expense (446) (3%) (382) (2%) 17% 17%
Non-operating
income, net 29 0% 14 0% 101% 225%
------- -------- ------- --------
INCOME BEFORE
PROVISION FOR
INCOME TAXES 5,866 33% 5,982 35% (2%) 0%
------- -------- ------- --------
Provision for
income taxes 1,122 6% 1,367 8% (18%) (16%)
------- -------- ------- --------
NET INCOME $ 4,744 27% $ 4,615 27% 3% 5%
======= ======== ======= ========
EARNINGS PER SHARE:
Basic $ 1.04 $ 0.96
Diluted $ 1.02 $ 0.94
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 4,571 4,829
Diluted 4,637 4,904
(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 six months ended
November 30, 2013 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.
(2) Acquisition related and other expenses for the six months ended
November 30, 2012 included a benefit of $306 million related to certain
litigation and a net benefit of $129 million due to an acquisition
related item.
ORACLE CORPORATION
Q2 FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($in millions, except per share data)
Six Months Ended November 30,
--------------------------------------------------------
2013 2013 2012 2012
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
-------- ------- -------- -------- ------- --------
TOTAL REVENUES (3)
(4) $ 17,647 $ 18 $ 17,665 $ 17,275 $ 47 $ 17,322
TOTAL SOFTWARE
REVENUES (3) $ 12,980 $ 8 $ 12,988 $ 12,363 $ 39 $ 12,402
New software
licenses and
cloud software
subscriptions
(3) 4,032 7 4,039 3,963 31 3,994
Software license
updates and
product support 8,948 1 8,949 8,400 8 8,408
TOTAL HARDWARE
SYSTEMS REVENUES
(4) $ 2,584 $ 10 $ 2,594 $ 2,674 $ 8 $ 2,682
Hardware systems
products 1,383 - 1,383 1,513 - 1,513
Hardware systems
support (4) 1,201 10 1,211 1,161 8 1,169
TOTAL OPERATING
EXPENSES $ 11,364 $(1,685) $ 9,679 $ 10,925 $(1,464) $ 9,461
Stock-based
compensation
(5) 378 (378) - 365 (365) -
Amortization of
intangible
assets (6) 1,172 (1,172) - 1,203 (1,203) -
Acquisition
related and
other 27 (27) - (380) 380 -
Restructuring 108 (108) - 276 (276) -
OPERATING INCOME $ 6,283 $ 1,703 $ 7,986 $ 6,350 $ 1,511 $ 7,861
OPERATING MARGIN % 36% 45% 37% 45%
INCOME TAX EFFECTS
(7) $ 1,122 $ 531 $ 1,653 $ 1,367 $ 390 $ 1,757
NET INCOME $ 4,744 $ 1,172 $ 5,916 $ 4,615 $ 1,121 $ 5,736
DILUTED EARNINGS
PER SHARE $ 1.02 $ 1.28 $ 0.94 $ 1.17
DILUTED WEIGHTED
AVERAGE COMMON
SHARES
OUTSTANDING 4,637 - 4,637 4,904 - 4,904
% Increase (Decrease)
% Increase (Decrease) in Constant Currency
in US $ (2)
--------------------- ---------------------
GAAP Non-GAAP GAAP Non-GAAP
---------- ---------- ---------- ----------
TOTAL REVENUES (3)
(4) 2% 2% 4% 3%
TOTAL SOFTWARE
REVENUES (3) 5% 5% 6% 6%
New software
licenses and
cloud software
subscriptions
(3) 2% 1% 4% 3%
Software license
updates and
product support 7% 6% 8% 8%
TOTAL HARDWARE
SYSTEMS REVENUES
(4) (3%) (3%) (2%) (2%)
Hardware systems
products (9%) (9%) (8%) (8%)
Hardware systems
support (4) 3% 4% 5% 5%
TOTAL OPERATING
EXPENSES 4% 2% 5% 4%
Stock-based
compensation
(5) 4% * 4% *
Amortization of
intangible
assets (6) (3%) * (3%) *
Acquisition
related and
other 107% * 107% *
Restructuring (61%) * (62%) *
OPERATING INCOME (1%) 2% 1% 3%
OPERATING MARGIN % (116) bp. (17) bp. (98) bp. (12) bp.
INCOME TAX EFFECTS
(7) (18%) (6%) (16%) (4%)
NET INCOME 3% 3% 5% 5%
DILUTED EARNINGS
PER SHARE 9% 9% 11% 11%
DILUTED WEIGHTED
AVERAGE COMMON
SHARES
OUTSTANDING (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 November 30, 2013, approximately $8 million and $3 million in
estimated revenues related to assumed cloud software subscriptions
contracts will not be recognized for the remainder of fiscal 2014 and
fiscal 2015, respectively, due to business combination accounting
rules.
(4) As of November 30, 2013, approximately $2 million in estimated revenues
related to hardware systems support contracts will not be recognized
for each of the remainder of fiscal 2014 and fiscal 2015 due to
business combination accounting rules.
(5) Stock-based compensation was included in the following GAAP operating
expense categories:
Six Months Ended Six Months Ended
November 30, 2013 November 30, 2012
------------------------ ------------------------
Non- Non-
GAAP Adj. GAAP GAAP Adj. GAAP
------- ------- ------- ------- ------- -------
Sales and marketing $ 81 $ (81) $ - $ 81 $ (81) $ -
Software license
updates and product
support 11 (11) - 10 (10) -
Hardware systems
products 3 (3) - 1 (1) -
Hardware systems
support 3 (3) - 2 (2) -
Services 13 (13) - 17 (17) -
Research and
development 184 (184) - 172 (172) -
General and
administrative 83 (83) - 82 (82) -
------- ------- ------- ------- ------- -------
Subtotal 378 (378) - 365 (365) -
------- ------- ------- ------- ------- -------
Acquisition related
and other 4 (4) - 21 (21) -
------- ------- ------- ------- ------- -------
Total stock-based
compensation $ 382 $ (382) $ - $ 386 $ (386) $ -
======= ======= ======= ======= ======= =======
(6) Estimated future annual amortization expense related to intangible
assets as of November 30, 2013 was as follows:
Remainder of Fiscal
2014 $ 1,086
Fiscal 2015 1,807
Fiscal 2016 1,235
Fiscal 2017 660
Fiscal 2018 528
Fiscal 2019 429
Thereafter 727
-------
Total intangible
assets subject to
amortization 6,472
In-process research
and development 49
-------
Total intangible
assets, net $ 6,521
=======
(7) Income tax effects were calculated reflecting an effective GAAP tax
rate of 19.1% and 22.9% in the first half of fiscal 2014 and 2013,
respectively, and an effective non-GAAP tax rate of 21.9% and 23.5% in
the first half of fiscal 2014 and 2013, respectively. The difference
between our GAAP and non-GAAP tax rates in the first half of fiscal
2014 was primarily due to the net tax effects of acquisition related
items, including the tax effect of amortization of intangible assets.
The difference between our GAAP and non-GAAP tax rates in the first
half of fiscal 2013 was primarily due to the net tax effects of
acquisition related items, including the tax effect of amortization of
intangible assets, partially offset by the disproportionate tax rate
impact of certain discrete items for the period.
* Not meaningful
ORACLE CORPORATION
Q2 FISCAL 2014 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
November 30, May 31,
2013 2013
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 14,894 $ 14,613
Marketable securities 22,080 17,603
Trade receivables, net 4,192 6,049
Inventories 234 240
Deferred tax assets 963 974
Prepaid expenses and other current assets 1,889 2,213
------------- -------------
Total Current Assets 44,252 41,692
Non-Current Assets:
Property, plant and equipment, net 3,039 3,053
Intangible assets, net 6,521 6,640
Goodwill 28,269 27,343
Deferred tax assets 760 766
Other assets 2,397 2,318
------------- -------------
Total Non-Current Assets 40,986 40,120
------------- -------------
TOTAL ASSETS $ 85,238 $ 81,812
============= =============
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable, current and other current
borrowings $ 1,525 $ -
Accounts payable 408 419
Accrued compensation and related benefits 1,566 1,851
Income taxes payable 543 911
Deferred revenues 6,667 7,118
Other current liabilities 2,401 2,573
------------- -------------
Total Current Liabilities 13,110 12,872
Non-Current Liabilities:
Notes payable and other non-current
borrowings 22,641 18,494
Income taxes payable 3,950 3,899
Other non-current liabilities 1,471 1,402
------------- -------------
Total Non-Current Liabilities 28,062 23,795
Equity 44,066 45,145
------------- -------------
TOTAL LIABILITIES AND EQUITY $ 85,238 $ 81,812
============= =============
ORACLE CORPORATION
Q2 FISCAL 2014 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Six Months Ended
November 30,
--------------------
2013 2012
--------- ---------
Cash Flows From Operating Activities:
Net income $ 4,744 $ 4,615
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 302 261
Amortization of intangible assets 1,172 1,203
Deferred income taxes (207) (40)
Stock-based compensation 382 386
Tax benefits on the exercise of stock options and
vesting of restricted stock-based awards 129 179
Excess tax benefits on the exercise of stock
options and vesting of restricted stock-based
awards (71) (95)
Other, net 51 80
Changes in operating assets and liabilities, net
of effects from acquisitions:
Decrease in trade receivables, net 1,989 2,038
Decrease in inventories 13 -
Decrease (increase) in prepaid expenses and
other assets 247 (213)
Decrease in accounts payable and other
liabilities (533) (790)
Decrease in income taxes payable (343) (559)
Decrease in deferred revenues (437) (599)
--------- ---------
Net cash provided by operating activities 7,438 6,466
--------- ---------
Cash Flows From Investing Activities:
Purchases of marketable securities and other
investments (18,558) (17,314)
Proceeds from maturities and sales of marketable
securities and other investments 13,955 15,263
Acquisitions, net of cash acquired (1,748) (660)
Capital expenditures (279) (351)
--------- ---------
Net cash used for investing activities (6,630) (3,062)
--------- ---------
Cash Flows From Financing Activities:
Payments for repurchases of common stock (5,801) (6,072)
Proceeds from issuances of common stock 765 752
Payments of dividends to stockholders (1,099) (583)
Proceeds from borrowings, net of issuance costs 5,566 4,974
Repayments of borrowings - (1,700)
Excess tax benefits on the exercise of stock options
and vesting of restricted stock-based awards 71 95
Distributions to noncontrolling interests (28) (31)
--------- ---------
Net cash used for financing activities (526) (2,565)
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents (1) 118
--------- ---------
Net increase in cash and cash equivalents 281 957
--------- ---------
Cash and cash equivalents at beginning of period 14,613 14,955
--------- ---------
Cash and cash equivalents at end of period $ 14,894 $ 15,912
========= =========
ORACLE CORPORATION
Q2 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
Capital
Expenditures (2) (627) (710) (684) (650) (664) (578)
------- ------- ------- ------- ------- ------- ---- ----
Free Cash Flow $13,366 $12,823 $13,033 $13,574 $14,181 $14,618
======= ======= ======= ======= ======= ======= ==== ====
% Growth over
prior year 8% 2% 1% 4% 6% 14%
------- ------- ------- ------- ------- ------- ---- ----
GAAP Net Income $10,175 $10,564 $10,571 $10,925 $11,082 $11,054
Free Cash Flow as
a % of Net Income 131% 121% 123% 124% 128% 132%
(1) To supplement our statements of cash flows presented on a GAAP basis,
we use non-GAAP measures of cash flows on a trailing 4-quarter basis to
analyze cash flow generated from operations. We believe free cash flow
is also useful as one of the bases for comparing our performance with
our competitors. The presentation of non-GAAP free cash flow is not
meant to be considered in isolation or as an alternative to net income
as an indicator of our performance, or as an alternative to cash flows
from operating activities as a measure of liquidity.
(2) Derived from capital expenditures as reported in cash flows from
investing activities as per our consolidated statements of cash flows
presented in accordance with GAAP.
ORACLE CORPORATION
Q2 FISCAL 2014 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
($in millions)
Fiscal 2013
-----------------------------------------------------
Q1 Q2 Q3 Q4 TOTAL
--------- --------- --------- --------- ---------
REVENUES
New software
licenses and cloud
software
subscriptions $ 1,574 $ 2,389 $ 2,332 $ 4,026 $ 10,321
Software license
updates and
product support 4,140 4,260 4,340 4,402 17,142
--------- --------- --------- --------- ---------
Software Revenues 5,714 6,649 6,672 8,428 27,463
Hardware systems
products 779 734 671 849 3,033
Hardware systems
support 574 587 570 582 2,313
--------- --------- --------- --------- ---------
Hardware Systems
Revenues 1,353 1,321 1,241 1,431 5,346
Services Revenues 1,114 1,124 1,045 1,088 4,371
--------- --------- --------- --------- ---------
Total Revenues $ 8,181 $ 9,094 $ 8,958 $ 10,947 $ 37,180
========= ========= ========= ========= =========
AS REPORTED REVENUE
GROWTH RATES
New software
licenses and cloud
software
subscriptions 5% 17% (2%) 1% 4%
Software license
updates and
product support 3% 7% 7% 6% 6%
Software Revenues 4% 10% 4% 4% 5%
Hardware systems
products (24%) (23%) (23%) (13%) (21%)
Hardware systems
support (11%) (6%) (6%) (3%) (7%)
Hardware Systems
Revenues (19%) (16%) (16%) (9%) (15%)
Services Revenues (6%) (5%) (8%) (9%) (7%)
Total Revenues (2%) 3% (1%) 0% 0%
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and cloud
software
subscriptions 10% 18% 0% 2% 6%
Software license
updates and
product support 8% 8% 8% 8% 8%
Software Revenues 9% 11% 5% 5% 7%
Hardware systems
products (21%) (23%) (22%) (12%) (19%)
Hardware systems
support (6%) (5%) (5%) (1%) (4%)
Hardware Systems
Revenues (15%) (16%) (15%) (8%) (13%)
Services Revenues 0% (3%) (7%) (8%) (5%)
Total Revenues 3% 5% 0% 2% 2%
--------- --------- --------- --------- ---------
GEOGRAPHIC REVENUES
REVENUES
Americas $ 4,324 $ 4,787 $ 4,698 $ 5,911 $ 19,719
Europe, Middle
East & Africa 2,383 2,701 2,745 3,328 11,158
Asia Pacific 1,474 1,606 1,515 1,708 6,303
--------- --------- --------- --------- ---------
Total Revenues $ 8,181 $ 9,094 $ 8,958 $ 10,947 $ 37,180
========= ========= ========= ========= =========
HEADCOUNT
GEOGRAPHIC AREA
Americas 49,145 49,584 50,402 51,519
Europe, Middle
East & Africa 22,584 22,594 22,592 22,860
Asia Pacific 44,170 45,051 45,663 45,855
--------- --------- --------- --------- ---------
Total Company 115,899 117,229 118,657 120,234
========= ========= ========= ========= =========
Fiscal 2014
-----------------------------------------
Q1 Q2 Q3 Q4 TOTAL
--------- --------- ---- ---- ---------
REVENUES
New software
licenses and cloud
software
subscriptions $ 1,653 $ 2,380 $ 4,032
Software license
updates and
product support 4,431 4,516 8,948
--------- --------- ---- ---- ---------
Software Revenues 6,084 6,896 12,980
Hardware systems
products 669 714 1,383
Hardware systems
support 592 609 1,201
--------- --------- ---- ---- ---------
Hardware Systems
Revenues 1,261 1,323 2,584
Services Revenues 1,027 1,056 2,083
--------- --------- ---- ---- ---------
Total Revenues $ 8,372 $ 9,275 $ 17,647
========= ========= ==== ==== =========
AS REPORTED REVENUE
GROWTH RATES
New software
licenses and cloud
software
subscriptions 5% 0% 2%
Software license
updates and
product support 7% 6% 7%
Software Revenues 6% 4% 5%
Hardware systems
products (14%) (3%) (9%)
Hardware systems
support 3% 4% 3%
Hardware Systems
Revenues (7%) 0% (3%)
Services Revenues (8%) (6%) (7%)
Total Revenues 2% 2% 2%
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and cloud
software
subscriptions 7% 1% 4%
Software license
updates and
product support 8% 7% 8%
Software Revenues 8% 5% 6%
Hardware systems
products (13%) (2%) (8%)
Hardware systems
support 5% 5% 5%
Hardware Systems
Revenues (6%) 2% (2%)
Services Revenues (6%) (5%) (5%)
Total Revenues 4% 3% 4%
--------- --------- ---- ---- ---------
GEOGRAPHIC REVENUES
REVENUES
Americas $ 4,517 $ 4,995 $ 9,512
Europe, Middle
East & Africa 2,439 2,817 5,256
Asia Pacific 1,416 1,463 2,879
--------- --------- ---- ---- ---------
Total Revenues $ 8,372 $ 9,275 $ 17,647
========= ========= ==== ==== =========
HEADCOUNT
GEOGRAPHIC AREA
Americas 53,465 53,073
Europe, Middle
East & Africa 23,349 23,178
Asia Pacific 45,513 45,617
--------- --------- ---- ---- ---------
Total Company 122,327 121,868
========= ========= ==== ==== =========
(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
Q2 FISCAL 2014 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)
($in millions)
Fiscal 2013
-----------------------------------------------------
Q1 Q2 Q3 Q4 TOTAL
--------- --------- --------- --------- ---------
AMERICAS
New software
licenses and
cloud software
subscriptions $ 814 $ 1,253 $ 1,205 $ 2,194 $ 5,465
========= ========= ========= ========= =========
Hardware systems
products $ 380 $ 370 $ 307 $ 439 $ 1,495
========= ========= ========= ========= =========
AS REPORTED GROWTH
RATES
New software
licenses and
cloud software
subscriptions 12% 22% (2%) 3% 7%
Hardware systems
products (20%) (25%) (25%) (12%) (20%)
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and
cloud software
subscriptions 14% 22% (1%) 4% 8%
Hardware systems
products (19%) (25%) (25%) (12%) (20%)
--------- --------- --------- --------- ---------
EUROPE / MIDDLE EAST
/ AFRICA
New software
licenses and
cloud software
subscriptions $ 403 $ 641 $ 690 $ 1,224 $ 2,959
========= ========= ========= ========= =========
Hardware systems
products $ 214 $ 198 $ 201 $ 228 $ 842
========= ========= ========= ========= =========
AS REPORTED GROWTH
RATES
New software
licenses and
cloud software
subscriptions (8%) 10% 0% 5% 3%
Hardware systems
products (38%) (27%) (24%) (12%) (26%)
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and
cloud software
subscriptions 1% 12% 1% 5% 5%
Hardware systems
products (30%) (25%) (24%) (11%) (23%)
--------- --------- --------- --------- ---------
ASIA PACIFIC
New software
licenses and
cloud software
subscriptions $ 357 $ 495 $ 437 $ 608 $ 1,897
========= ========= ========= ========= =========
Hardware systems
products $ 185 $ 166 $ 163 $ 182 $ 696
========= ========= ========= ========= =========
AS REPORTED GROWTH
RATES
New software
licenses and
cloud software
subscriptions 8% 13% (3%) (12%) (1%)
Hardware systems
products (12%) (10%) (16%) (17%) (14%)
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and
cloud software
subscriptions 12% 13% 1% (7%) 3%
Hardware systems
products (10%) (12%) (14%) (14%) (12%)
--------- --------- --------- --------- ---------
TOTAL COMPANY
New software
licenses and
cloud software
subscriptions $ 1,574 $ 2,389 $ 2,332 $ 4,026 $ 10,321
========= ========= ========= ========= =========
Hardware systems
products $ 779 $ 734 $ 671 $ 849 $ 3,033
========= ========= ========= ========= =========
AS REPORTED GROWTH
RATES
New software
licenses and
cloud software
subscriptions 5% 17% (2%) 1% 4%
Hardware systems
products (24%) (23%) (23%) (13%) (21%)
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and
cloud software
subscriptions 10% 18% 0% 2% 6%
Hardware systems
products (21%) (23%) (22%) (12%) (19%)
Fiscal 2014
-----------------------------------------
Q1 Q2 Q3 Q4 TOTAL
--------- --------- ---- ---- ---------
AMERICAS
New software
licenses and
cloud software
subscriptions $ 926 $ 1,295 $ 2,220
========= ========= ==== ==== =========
Hardware systems
products $ 335 $ 381 $ 716
========= ========= ==== ==== =========
AS REPORTED GROWTH
RATES
New software
licenses and
cloud software
subscriptions 14% 3% 7%
Hardware systems
products (12%) 3% (4%)
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and
cloud software
subscriptions 15% 5% 9%
Hardware systems
products (11%) 4% (4%)
--------- --------- ---- ---- ---------
EUROPE / MIDDLE EAST
/ AFRICA
New software
licenses and
cloud software
subscriptions $ 388 $ 675 $ 1,063
========= ========= ==== ==== =========
Hardware systems
products $ 177 $ 184 $ 361
========= ========= ==== ==== =========
AS REPORTED GROWTH
RATES
New software
licenses and
cloud software
subscriptions (4%) 5% 2%
Hardware systems
products (18%) (7%) (13%)
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and
cloud software
subscriptions (5%) 3% 0%
Hardware systems
products (20%) (8%) (14%)
--------- --------- ---- ---- ---------
ASIA PACIFIC
New software
licenses and
cloud software
subscriptions $ 339 $ 410 $ 749
========= ========= ==== ==== =========
Hardware systems
products $ 157 $ 149 $ 306
========= ========= ==== ==== =========
AS REPORTED GROWTH
RATES
New software
licenses and
cloud software
subscriptions (5%) (17%) (12%)
Hardware systems
products (15%) (10%) (13%)
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and
cloud software
subscriptions 5% (10%) (4%)
Hardware systems
products (10%) (6%) (8%)
--------- --------- ---- ---- ---------
TOTAL COMPANY
New software
licenses and
cloud software
subscriptions $ 1,653 $ 2,380 $ 4,032
========= ========= ==== ==== =========
Hardware systems
products $ 669 $ 714 $ 1,383
========= ========= ==== ==== =========
AS REPORTED GROWTH
RATES
New software
licenses and
cloud software
subscriptions 5% 0% 2%
Hardware systems
products (14%) (3%) (9%)
CONSTANT CURRENCY
GROWTH RATES (2)
New software
licenses and
cloud software
subscriptions 7% 1% 4%
Hardware systems
products (13%) (2%) (8%)
(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.
APPENDIX A
ORACLE CORPORATION
Q2 FISCAL 2014 FINANCIAL RESULTS
EXPLANATION OF NON-GAAP MEASURES
To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, which exclude certain business combination accounting entries and expenses related to acquisitions, as well as other significant expenses including stock-based compensation, that we believe are helpful in understanding our past financial performance and our future results. Our non-GAAP financial 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. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
- New software licenses and cloud software subscriptions, software license updates and product support and hardware systems support deferred revenues: Business combination accounting rules require us to account for the fair values of cloud software subscriptions contracts, software license updates and product support contracts and hardware systems support contracts assumed in connection with our acquisitions. Because these contracts are generally one year in duration, our GAAP revenues generally for the one year period subsequent to our acquisition of a business do not reflect the full amount of revenues on these assumed cloud software subscriptions contracts and support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment to our new software licenses and cloud software subscriptions revenues, software license updates and product support revenues and hardware systems support revenues is intended to include, and thus reflect, the full amount of such revenues. We believe the adjustment to these revenues is useful to investors as a measure of the ongoing performance of our business. We have historically experienced high renewal rates on our software license updates and product support contracts and our objective is to increase the renewal rates on acquired and new cloud software subscriptions and hardware systems support contracts; however, we cannot be certain that our customers will renew our cloud software subscriptions contracts, software license updates and product support contracts or our hardware systems support contracts.
- Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.
- Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP operating expenses and net income measures. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.
- Acquisition related and other expenses; and restructuring expenses: We have excluded the effect of acquisition related and other expenses and the effect of restructuring expenses from our non-GAAP operating expenses and net income measures. We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related and other expenses consist of personnel related costs for transitional employees, other acquired employee related costs, stock-based compensation expenses (in addition to the stock-based compensation expenses described above), integration related professional services, certain business combination adjustments including adjustments after the measurement period has ended and certain other operating items, net. Substantially all of the stock-based compensation expenses included in acquisition related and other expenses resulted from unvested options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the original terms of those options. Restructuring expenses consist of employee severance and other exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses. Although acquisition related expenses and restructuring expenses generally diminish over time with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions.
Contact:
Ken Bond
Oracle Investor Relations
1.650.607.0349
Email Contact
Deborah Hellinger
Oracle Corporate Communications
1.212.508.7935
Email Contact
Source: Oracle Corporation