SOURCE: Oracle Corporation

Oracle Corporation

December 18, 2013 16:04 ET

Oracle Reports GAAP EPS up 5% to 56 Cents, Non-GAAP EPS up 7% to 69 Cents

TTM Operating Cash Flow Increases to Record $15.2 Billion, TTM Free Cash Flow up 14%

REDWOOD SHORES, CA--(Marketwired - Dec 18, 2013) - 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,
       
   
2013
    % of
Revenues
 
2012
    % of
Revenues
  % Increase
(Decrease)

in US $ 
 % Increase
(Decrease)

in Constant
Currency (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,   % Increase (Decrease)
in US $
  % Increase (Decrease) in Constant Currency (2)
    2013
GAAP
   
Adj.
    2013
Non-GAAP
    2012
GAAP
   
Adj.
    2012
Non-GAAP
  GAAP   Non-GAAP   GAAP   Non-GAAP
                                                               
TOTAL REVENUES (3) (4)   $ 9,275     $ 8     $ 9,283     $ 9,094     $ 19     $ 9,113   2%   2%   3%   3%
                                                               
TOTAL SOFTWARE REVENUES (3)   $ 6,896     $ 4     $ 6,900     $ 6,649     $ 16     $ 6,665   4%   4%   5%   5%
  New software licenses and cloud software subscriptions (3)     2,380       3       2,383       2,389       12       2,401   0%   (1%)   1%   1%
  Software license updates and product support     4,516       1       4,517       4,260       4       4,264   6%   6%   7%   7%
                                                               
TOTAL HARDWARE SYSTEMS REVENUES (4)   $ 1,323     $ 4     $ 1,327     $ 1,321     $ 3     $ 1,324   0%   0%   2%   2%
  Hardware systems products     714       -       714       734       -       734   (3%)   (3%)   (2%)   (2%)
  Hardware systems support (4)     609       4       613       587       3       590   4%   4%   5%   5%
                                                               
TOTAL OPERATING EXPENSES   $ 5,865     $ (828 )   $ 5,037     $ 5,623     $ (782 )   $ 4,841   4%   4%   6%   5%
  Stock-based compensation (5)     182       (182 )     -       188       (188 )     -   (3%)   *   (3%)   *
  Amortization of intangible assets (6)     577       (577 )     -       584       (584 )     -   (1%)   *   (1%)   *
  Acquisition related and other     17       (17 )     -       (121 )     121       -   113%   *   114%   *
  Restructuring     52       (52 )     -       131       (131 )     -   (60%)   *   (61%)   *
                                                                 
OPERATING INCOME   $ 3,410     $ 836     $ 4,246     $ 3,471     $ 801     $ 4,272   (2%)   (1%)   0%   1%
                                                               
OPERATING MARGIN %     37 %             46 %     38 %             47 % (141) bp.   (115) bp.   (128) bp.   (114) bp.
                                                               
INCOME TAX EFFECTS (7)   $ 650     $ 234     $ 884     $ 699     $ 260     $ 959   (7%)   (8%)   (5%)   (6%)
                                                               
NET INCOME   $ 2,553     $ 602     $ 3,155     $ 2,581     $ 541     $ 3,122   (1%)   1%   1%%   3%
                                                               
DILUTED EARNINGS PER SHARE   $ 0.56             $ 0.69     $ 0.53             $ 0.64   5%   7%   7%   9%
                                                               
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,600       -       4,600       4,868       -       4,868   (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
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-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,        
   
2013
    % of
Revenues
 
2012
    % of
Revenues
  %
Increase
(Decrease)

in US $ 
%
Increase
(Decrease)

in Constant
Currency
(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,   % Increase (Decrease)
in US $
  % Increase (Decrease) in Constant Currency (2)
    2013
GAAP
   
Adj.
    2013
Non-GAAP
    2012
GAAP
   
Adj.
    2012
Non-GAAP
  GAAP   Non-GAAP   GAAP   Non-GAAP
                                                               
TOTAL REVENUES (3) (4)   $ 17,647     $ 18     $ 17,665     $ 17,275     $ 47     $ 17,322   2%   2%   4%   3%
                                                               
TOTAL SOFTWARE REVENUES (3)   $ 12,980     $ 8     $ 12,988     $ 12,363     $ 39     $ 12,402   5%   5%   6%   6%
  New software licenses and cloud software subscriptions (3)     4,032       7       4,039       3,963       31       3,994   2%   1%   4%   3%
  Software license updates and product support     8,948       1       8,949       8,400       8       8,408   7%   6%   8%   8%
                                                               
TOTAL HARDWARE SYSTEMS REVENUES (4)   $ 2,584     $ 10     $ 2,594     $ 2,674     $ 8     $ 2,682   (3%)   (3%)   (2%)   (2%)
  Hardware systems products     1,383       -       1,383       1,513       -       1,513   (9%)   (9%)   (8%)   (8%)
  Hardware systems support (4)     1,201       10       1,211       1,161       8       1,169   3%   4%   5%   5%
                                                               
TOTAL OPERATING EXPENSES   $ 11,364     $ (1,685 )   $ 9,679     $ 10,925     $ (1,464 )   $ 9,461   4%   2%   5%   4%
  Stock-based compensation (5)     378       (378 )     -       365       (365 )     -   4%   *   4%   *
  Amortization of intangible assets (6)     1,172       (1,172 )     -       1,203       (1,203 )     -   (3%)   *   (3%)   *
  Acquisition related and other     27       (27 )     -       (380 )     380       -   107%   *   107%   *
  Restructuring     108       (108 )     -       276       (276 )     -   (61%)   *   (62%)   *
                                                                 
OPERATING INCOME   $ 6,283     $ 1,703     $ 7,986     $ 6,350     $ 1,511     $ 7,861   (1%)   2%   1%   3%
                                                               
OPERATING MARGIN %     36 %             45 %     37 %             45 % (116) bp.   (17) bp.   (98) bp.   (12) bp.
                                                               
INCOME TAX EFFECTS (7)   $ 1,122     $ 531     $ 1,653     $ 1,367     $ 390     $ 1,757   (18%)   (6%)   (16%)   (4%)
                                                               
NET INCOME   $ 4,744     $ 1,172     $ 5,916     $ 4,615     $ 1,121     $ 5,736   3%   3%   5%   5%
                                                               
DILUTED EARNINGS PER SHARE   $ 1.02             $ 1.28     $ 0.94             $ 1.17   9%   9%   11%   11%
                                                               
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,637       -       4,637       4,904       -       4,904   (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
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-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   Fiscal 2014  
Q1   Q2   Q3   Q4   TOTAL   Q1   Q2   Q3   Q4   TOTAL  
REVENUES                                                        
  New software licenses and cloud software subscriptions $ 1,574   $ 2,389   $ 2,332   $ 4,026   $ 10,321   $ 1,653   $ 2,380           $ 4,032  
  Software license updates and product support   4,140     4,260     4,340     4,402     17,142     4,431     4,516             8,948  
    Software Revenues   5,714     6,649     6,672     8,428     27,463     6,084     6,896             12,980  
                                                         
  Hardware systems products   779     734     671     849     3,033     669     714             1,383  
  Hardware systems support   574     587     570     582     2,313     592     609             1,201  
    Hardware Systems Revenues   1,353     1,321     1,241     1,431     5,346     1,261     1,323             2,584  
                                                         
    Services Revenues   1,114     1,124     1,045     1,088     4,371     1,027     1,056             2,083  
                                                         
      Total Revenues $ 8,181   $ 9,094   $ 8,958   $ 10,947   $ 37,180   $ 8,372   $ 9,275           $ 17,647  
                                                         
AS REPORTED REVENUE GROWTH RATES                                                        
  New software licenses and cloud software subscriptions   5 %   17 %   (2 %)   1 %   4 %   5 %   0 %           2 %
  Software license updates and product support   3 %   7 %   7 %   6 %   6 %   7 %   6 %           7 %
    Software Revenues   4 %   10 %   4 %   4 %   5 %   6 %   4 %           5 %
                                                         
  Hardware systems products   (24 %)   (23 %)   (23 %)   (13 %)   (21 %)   (14 %)   (3 %)           (9 %)
  Hardware systems support   (11 %)   (6 %)   (6 %)   (3 %)   (7 %)   3 %   4 %           3 %
    Hardware Systems Revenues   (19 %)   (16 %)   (16 %)   (9 %)   (15 %)   (7 %)   0 %           (3 %)
                                                         
    Services Revenues   (6 %)   (5 %)   (8 %)   (9 %)   (7 %)   (8 %)   (6 %)           (7 %)
                                                         
      Total Revenues   (2 %)   3 %   (1 %)   0 %   0 %   2 %   2 %           2 %
                                                         
CONSTANT CURRENCY GROWTH RATES (2)                                                        
  New software licenses and cloud software subscriptions   10 %   18 %   0 %   2 %   6 %   7 %   1 %           4 %
  Software license updates and product support   8 %   8 %   8 %   8 %   8 %   8 %   7 %           8 %
    Software Revenues   9 %   11 %   5 %   5 %   7 %   8 %   5 %           6 %
                                                         
  Hardware systems products   (21 %)   (23 %)   (22 %)   (12 %)   (19 %)   (13 %)   (2 %)           (8 %)
  Hardware systems support   (6 %)   (5 %)   (5 %)   (1 %)   (4 %)   5 %   5 %           5 %
    Hardware Systems Revenues   (15 %)   (16 %)   (15 %)   (8 %)   (13 %)   (6 %)   2 %           (2 %)
                                                         
    Services Revenues   0 %   (3 %)   (7 %)   (8 %)   (5 %)   (6 %)   (5 %)           (5 %)
                                                         
      Total Revenues   3 %   5 %   0 %   2 %   2 %   4 %   3 %           4 %
                                                         
                                                         
GEOGRAPHIC REVENUES                                                        
                                                         
  REVENUES                                                        
    Americas $ 4,324   $ 4,787   $ 4,698   $ 5,911   $ 19,719   $ 4,517   $ 4,995           $ 9,512  
    Europe, Middle East & Africa   2,383     2,701     2,745     3,328     11,158     2,439     2,817             5,256  
    Asia Pacific   1,474     1,606     1,515     1,708     6,303     1,416     1,463             2,879  
      Total Revenues $ 8,181   $ 9,094   $ 8,958   $ 10,947   $ 37,180   $ 8,372   $ 9,275           $ 17,647  
                                                         
                                                         
HEADCOUNT                                                        
                                                         
  GEOGRAPHIC AREA                                                        
    Americas   49,145     49,584     50,402     51,519           53,465     53,073                
    Europe, Middle East & Africa   22,584     22,594     22,592     22,860           23,349     23,178                
    Asia Pacific   44,170     45,051     45,663     45,855           45,513     45,617                
        Total Company   115,899     117,229     118,657     120,234           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   Fiscal 2014  
    Q1   Q2   Q3   Q4   TOTAL   Q1   Q2   Q3   Q4   TOTAL  
                                                           
AMERICAS                                                          
                                                           
  New software licenses and cloud software subscriptions   $ 814   $ 1,253   $ 1,205   $ 2,194   $ 5,465   $ 926   $ 1,295           $ 2,220  
  Hardware systems products   $ 380   $ 370   $ 307   $ 439   $ 1,495   $ 335   $ 381           $ 716  
                                                           
AS REPORTED GROWTH RATES                                                          
  New software licenses and cloud software subscriptions     12 %   22 %   (2 %)   3 %   7 %   14 %   3 %           7 %
  Hardware systems products     (20 %)   (25 %)   (25 %)   (12 %)   (20 %)   (12 %)   3 %           (4 %)
                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                          
  New software licenses and cloud software subscriptions     14 %   22 %   (1 %)   4 %   8 %   15 %   5 %           9 %
  Hardware systems products     (19 %)   (25 %)   (25 %)   (12 %)   (20 %)   (11 %)   4 %           (4 %)
                                                           
                                                           
EUROPE / MIDDLE EAST / AFRICA                                                          
                                                           
  New software licenses and cloud software subscriptions   $ 403   $ 641   $ 690   $ 1,224   $ 2,959   $ 388   $ 675           $ 1,063  
  Hardware systems products   $ 214   $ 198   $ 201   $ 228   $ 842   $ 177   $ 184           $ 361  
                                                           
AS REPORTED GROWTH RATES                                                          
  New software licenses and cloud software subscriptions     (8 %)   10 %   0 %   5 %   3 %   (4 %)   5 %           2 %
  Hardware systems products     (38 %)   (27 %)   (24 %)   (12 %)   (26 %)   (18 %)   (7 %)           (13 %)
                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                          
  New software licenses and cloud software subscriptions     1 %   12 %   1 %   5 %   5 %   (5 %)   3 %           0 %
  Hardware systems products     (30 %)   (25 %)   (24 %)   (11 %)   (23 %)   (20 %)   (8 %)           (14 %)
                                                           
                                                           
ASIA PACIFIC                                                          
                                                           
  New software licenses and cloud software subscriptions   $ 357   $ 495   $ 437   $ 608   $ 1,897   $ 339   $ 410           $ 749  
  Hardware systems products   $ 185   $ 166   $ 163   $ 182   $ 696   $ 157   $ 149           $ 306  
                                                           
AS REPORTED GROWTH RATES                                                          
  New software licenses and cloud software subscriptions     8 %   13 %   (3 %)   (12 %)   (1 %)   (5 %)   (17 %)           (12 %)
  Hardware systems products     (12 %)   (10 %)   (16 %)   (17 %)   (14 %)   (15 %)   (10 %)           (13 %)
                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                          
  New software licenses and cloud software subscriptions     12 %   13 %   1 %   (7 %)   3 %   5 %   (10 %)           (4 %)
  Hardware systems products     (10 %)   (12 %)   (14 %)   (14 %)   (12 %)   (10 %)   (6 %)           (8 %)
                                                           
                                                           
TOTAL COMPANY                                                          
                                                           
  New software licenses and cloud software subscriptions   $ 1,574   $ 2,389   $ 2,332   $ 4,026   $ 10,321   $ 1,653   $ 2,380           $ 4,032  
  Hardware systems products   $ 779   $ 734   $ 671   $ 849   $ 3,033   $ 669   $ 714           $ 1,383  
                                                           
AS REPORTED GROWTH RATES                                                          
  New software licenses and cloud software subscriptions     5 %   17 %   (2 %)   1 %   4 %   5 %   0 %           2 %
  Hardware systems products     (24 %)   (23 %)   (23 %)   (13 %)   (21 %)   (14 %)   (3 %)           (9 %)
                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                          
  New software licenses and cloud software subscriptions     10 %   18 %   0 %   2 %   6 %   7 %   1 %           4 %
  Hardware systems products     (21 %)   (23 %)   (22 %)   (12 %)   (19 %)   (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 Information

  • Contact:
    Ken Bond
    Oracle Investor Relations
    1.650.607.0349
    Email Contact

    Deborah Hellinger
    Oracle Corporate Communications
    1.212.508.7935
    Email Contact