SOURCE: Oracle Corporation

Oracle Corporation

March 18, 2014 16:04 ET

Oracle Reports GAAP EPS up 8% to 56 Cents, Non-GAAP EPS up 5% to 68 Cents

Cloud Software Subscriptions Revenues up 24%, Hardware Systems Products Revenues up 8%

REDWOOD SHORES, CA--(Marketwired - Mar 18, 2014) - Oracle Corporation (NYSE: ORCL) today announced that fiscal 2014 Q3 total revenues were up 4% to $9.3 billion. New software licenses and cloud software subscriptions revenues were up 4% to $2.4 billion. Software license updates and product support revenues were up 5% to $4.6 billion. Hardware systems products revenues were up 8% to $725 million. GAAP operating income was up 7% to $3.6 billion and the GAAP operating margin was 38%. Non-GAAP operating income was up 5% to $4.4 billion, and the non-GAAP operating margin was 47%. GAAP net income was up 2% to $2.6 billion, while non-GAAP net income was unchanged at $3.1 billion. GAAP earnings per share were up 8% to $0.56, while non-GAAP earnings per share were up 5% to $0.68. GAAP operating cash flow on a trailing twelve-month basis was up 10% to $15 billion.

Without the impact of the US dollar strengthening compared to foreign currencies, Oracle's reported Q3 GAAP earnings per share would have been up 10% and non-GAAP earnings per share would have been up 7%. In addition, GAAP and non-GAAP earnings per share both include a non-operating $0.02 per share loss this quarter as a result of exchange rate changes in Venezuela as compared to $0.01 last year. Excluding the impact of the US dollar strengthening compared to foreign currencies and excluding Venezuela's exchange loss impact on both reporting periods, Oracle's reported Q3 GAAP earnings per share would have been $0.59, up 12%, and non-GAAP earnings per share would have been $0.71, up 8%. GAAP and non-GAAP total revenues also would have been up 6%. GAAP new software licenses and cloud software subscriptions revenues would have been up 6% and non-GAAP new software licenses and cloud software subscriptions revenues would have been up 5%. Hardware systems product revenues would have been up 10%.

"In constant currency, our Cloud Software Subscriptions revenues grew 25% and our Engineered Systems revenue grew more than 30% in the quarter," said Oracle President and CFO, Safra Catz. "Oracle Cloud Applications and Engineered Systems are both rapidly growing, billion dollar run-rate businesses. Those two high-growth businesses helped us deliver record year-to-date operating cash flow, and a record $15 billion of operating cash flow over the past twelve months."

"Sales of Oracle's Cloud Applications accelerated sharply in the quarter with bookings growth of over 60%," said Oracle President Mark Hurd. "Our quarterly Cloud Application revenue is now approaching $300 million. All of our strategic Cloud Application Suites, including Fusion Enterprise Resource Planning, Fusion Human Capital Management and Fusion Customer Experience, posted triple-digit revenue growth."

"Oracle's Engineered Server Systems, including Exadata and SPARC SuperClusters, achieved over a 30% constant currency growth rate in the quarter, while throughout the industry traditional high-end server product lines are in steep decline," said Oracle CEO, Larry Ellison. "Our Engineered Systems business is growing rapidly for the same fundamental reason that our Cloud Applications business is growing rapidly. In both cases, customers want us to integrate the hardware and software and make it work together, so they don't have to."

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 April 8, 2014, with a payment date of April 29, 2014.

Q3 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) 312-6698, Passcode: 599932. 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 Q3 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: 8881061.

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 the rapid growth of Oracle's Engineered Systems and Cloud Application businesses, 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 March 18, 2014. Oracle undertakes no duty to update any statement in light of new information or future events.

 
ORACLE CORPORATION
 
Q3 FISCAL 2014 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
 
    Three Months Ended        
    February 28,        
            % Increase
    2014     % of
Revenues
  2013     % of
Revenues
  % Increase
(Decrease)
in US $
  (Decrease)
in
Constant
Currency
(1)
REVENUES                                
  New software licenses and cloud software subscriptions   $ 2,415     26%   $ 2,332     26%   4%   6%
  Software license updates and product support     4,564     49%     4,340     48%   5%   7%
    Software Revenues     6,979     75%     6,672     74%   5%   6%
  Hardware systems products     725     8%     671     8%   8%   10%
  Hardware systems support     598     6%     570     6%   5%   7%
    Hardware Systems Revenues     1,323     14%     1,241     14%   7%   9%
    Services Revenues     1,005     11%     1,045     12%   (4%)   (2%)
      Total Revenues     9,307     100%     8,958     100%   4%   6%
                                       
OPERATING EXPENSES                                
  Sales and marketing     1,928     21%     1,802     20%   7%   9%
  Software license updates and product support     286     3%     306     3%   (7%)   (4%)
  Hardware systems products     379     4%     337     4%   13%   15%
  Hardware systems support     207     2%     219     2%   (5%)   (4%)
  Services     804     9%     854     10%   (6%)   (4%)
  Research and development     1,292     14%     1,186     13%   9%   10%
  General and administrative     251     3%     260     3%   (3%)   (2%)
  Amortization of intangible assets     560     6%     586     7%   (4%)   (4%)
  Acquisition related and other     (5 )   0%     32     0%   (117%)   (115%)
  Restructuring     38     0%     42     1%   (9%)   (9%)
      Total Operating Expenses     5,740     62%     5,624     63%   2%   4%
                                       
OPERATING INCOME     3,567     38%     3,334     37%   7%   9%
  Interest expense     (228 )   (2%)     (205 )   (2%)   11%   11%
  Non-operating expense, net     (90 )   (1%)     (39 )   (1%)   132%   113%
                                   
INCOME BEFORE PROVISION FOR INCOME TAXES     3,249     35%     3,090     34%   5%   8%
  Provision for income taxes     684     7%     586     6%   17%   19%
                                   
NET INCOME   $ 2,565     28%   $ 2,504     28%   2%   5%
                                 
EARNINGS PER SHARE:                                
  Basic   $ 0.57         $ 0.53              
  Diluted   $ 0.56         $ 0.52              
                                   
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                                
  Basic     4,496           4,735              
  Diluted     4,575           4,812              
                                 
(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 February 28, 2014 compared with the corresponding prior year period decreased our revenues by 2 percentage points, operating expenses by 2 percentage points and operating income by 2 percentage points.
   
   
   
ORACLE CORPORATION
 
Q3 FISCAL 2014 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
                                                     
    Three Months Ended February 28,     % Increase (Decrease)
in US $
  % Increase (Decrease) in Constant
Currency
(2)
    2014 GAAP     Adj.     2014 Non-GAAP     2013 GAAP     Adj.     2013 Non-GAAP     GAAP     Non-GAAP    GAAP   Non-GAAP 
                                                                 
TOTAL REVENUES (3) (4)   $ 9,307     $ 8     $ 9,315     $ 8,958     $ 12     $ 8,970     4%   4%   6%   6%
                                                                 
TOTAL SOFTWARE REVENUES (3)   $ 6,979     $ 6     $ 6,985     $ 6,672     $ 10     $ 6,682     5%   5%   6%   6%
  New software licenses and cloud software subscriptions (3)     2,415       5       2,420       2,332       6       2,338     4%   4%   6%   5%
  Software license updates and product support     4,564       1       4,565       4,340       4       4,344     5%   5%   7%   7%
                                                                 
TOTAL HARDWARE SYSTEMS REVENUES (4)   $ 1,323     $ 2     $ 1,325     $ 1,241     $ 2     $ 1,243     7%   7%   9%   9%
  Hardware systems products     725       -       725       671       -       671     8%   8%   10%   10%
  Hardware systems support (4)     598       2       600       570       2       572     5%   5%   7%   7%
                                                                 
TOTAL OPERATING EXPENSES   $ 5,740     $ (791 )   $ 4,949     $ 5,624     $ (832 )   $ 4,792     2%   3%   4%   5%
  Stock-based compensation (5)     198       (198 )     -       172       (172 )     -     15%   *   15%   *
  Amortization of intangible assets (6)     560       (560 )     -       586       (586 )     -     (4%)   *   (4%)   *
  Acquisition related and other     (5 )     5       -       32       (32 )     -     (117%)   *   (115%)   *
  Restructuring     38       (38 )     -       42       (42 )     -     (9%)   *   (9%)   *
                                                                   
OPERATING INCOME   $ 3,567     $ 799     $ 4,366     $ 3,334     $ 844     $ 4,178     7%   5%   9%   6%
                                                                 
OPERATING MARGIN %     38 %             47 %     37 %             47 %   111 bp.   30 bp.   120 bp.   24 bp.
                                                                 
INCOME TAX EFFECTS (7)   $ 684     $ 251     $ 935     $ 586     $ 240     $ 826     17%   13%   19%   15%
                                                                 
NET INCOME   $ 2,565     $ 548     $ 3,113     $ 2,504     $ 604     $ 3,108     2%   0%   5%   2%
                                                                 
DILUTED EARNINGS PER SHARE   $ 0.56             $ 0.68     $ 0.52             $ 0.65     8%   5%   10%   7%
                                                                 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,575       -       4,575       4,812       -       4,812     (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 February 28, 2014, approximately $3 million in estimated revenues related to assumed cloud software subscriptions contracts will not be recognized for each of the remainder of fiscal 2014 and fiscal 2015 due to business combination accounting rules.
                                           
(4) As of February 28, 2014, approximately $1 million and $2 million in estimated revenues related to hardware systems support contracts will not be recognized for the remainder of fiscal 2014 and fiscal 2015, respectively, 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
      February 28, 2014   February 28, 2013
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing   $ 42   $ (42 )   $ -   $ 32   $ (32 )   $ -
  Software license updates and product support     6     (6 )     -     5     (5 )     -
  Hardware systems products     1     (1 )     -     1     (1 )     -
  Hardware systems support     1     (1 )     -     1     (1 )     -
  Services     7     (7 )     -     7     (7 )     -
  Research and development     99     (99 )     -     86     (86 )     -
  General and administrative     42     (42 )     -     40     (40 )     -
    Subtotal     198     (198 )     -     172     (172 )     -
  Acquisition related and other     -     -       -     8     (8 )     -
    Total stock-based compensation   $ 198   $ (198 )   $ -   $ 180   $ (180 )   $ -
                                           
(6) Estimated future annual amortization expense related to intangible assets as of February 28, 2014 was as follows:
   
  Remainder of Fiscal 2014   $ 554                                  
  Fiscal 2015     1,894                                  
  Fiscal 2016     1,315                                  
  Fiscal 2017     722                                  
  Fiscal 2018     588                                  
  Fiscal 2019     489                                  
  Thereafter     932                                  
    Total intangible assets subject to amortization     6,494                                  
  In-process research and development     64                                  
    Total intangible assets, net   $ 6,558                                  
                                           
(7) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.0% and 19.0% in the third quarter of fiscal 2014 and 2013, respectively, and an effective non-GAAP tax rate of 23.1% and 21.0% in the third quarter of fiscal 2014 and 2013, respectively. The difference between our GAAP and non-GAAP tax rates in the third quarter 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 third quarter of fiscal 2013 was primarily due to the net tax effects of acquisition related items, including the tax effect of amortization of intangible assets, and the disproportionate rate impact of discrete items for the quarter.
                                           
* Not meaningful                                        
                                           
                                           
                                           
ORACLE CORPORATION
 
Q3 FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
 
  Nine Months Ended February 28,        
                        % Increase
  2014   % of
 Revenues
  2013     % of
Revenues
  % Increase
(Decrease)
in US $
  (Decrease)
in
Constant
Currency
(1)
REVENUES                            
  New software licenses and cloud software subscriptions $ 6,447   24%   $ 6,295     24%   2%   4%
  Software license updates and product support   13,511   50%     12,740     49%   6%   7%
    Software Revenues   19,958   74%     19,035     73%   5%   6%
  Hardware systems products   2,108   8%     2,185     8%   (3%)   (2%)
  Hardware systems support   1,800   7%     1,730     7%   4%   6%
    Hardware Systems Revenues   3,908   15%     3,915     15%   0%   1%
    Services Revenues   3,089   11%     3,283     12%   (6%)   (4%)
      Total Revenues   26,955   100%     26,233     100%   3%   4%
                             
OPERATING EXPENSES                            
  Sales and marketing   5,601   21%     5,120     19%   9%   11%
  Software license updates and product support   860   3%     860     3%   0%   2%
  Hardware systems products   1,078   4%     1,087     4%   (1%)   1%
  Hardware systems support   630   2%     670     3%   (6%)   (5%)
  Services   2,461   9%     2,668     10%   (8%)   (6%)
  Research and development   3,803   14%     3,586     14%   6%   7%
  General and administrative   773   3%     798     3%   (3%)   (2%)
  Amortization of intangible assets   1,732   6%     1,789     7%   (3%)   (3%)
  Acquisition related and other (2)   21   0%     (347 )   (1%)   106%   106%
  Restructuring   146   1%     318     1%   (54%)   (55%)
      Total Operating Expenses   17,105   63%     16,549     63%   3%   5%
                             
OPERATING INCOME   9,850   37%     9,684     37%   2%   4%
  Interest expense   (674 ) (3%)     (588 )   (2%)   15%   15%
  Non-operating expense, net   (60 ) 0%     (24 )   0%   151%   64%
                             
INCOME BEFORE PROVISION FOR INCOME TAXES   9,116   34%     9,072     35%   0%   3%
  Provision for income taxes   1,807   7%     1,953     8%   (8%)   (5%)
                             
NET INCOME $ 7,309   27%   $ 7,119     27%   3%   5%
                             
EARNINGS PER SHARE:                            
  Basic $ 1.61       $ 1.48              
  Diluted $ 1.58       $ 1.46              
                             
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                            
  Basic   4,546         4,798              
  Diluted   4,616         4,873              
                             
(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 nine months ended February 28, 2014 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 nine months ended February 28, 2013 included a benefit of $306 million related to certain litigation and a net benefit of $118 million due to an acquisition related item.
   
   
   
 
ORACLE CORPORATION
 
Q3 FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
                                                     
    Nine Months Ended February 28,     % Increase (Decrease)
in US $
  % Increase (Decrease) in Constant Currency (2)
    2014 GAAP     Adj.     2014 Non-GAAP     2013 GAAP     Adj.     2013 Non-GAAP     GAAP     Non-GAAP    GAAP   Non-GAAP 
                                                                 
TOTAL REVENUES (3) (4)   $ 26,955     $ 25     $ 26,980     $ 26,233     $ 59     $ 26,292     3%   3%   4%   4%
                                                                 
TOTAL SOFTWARE REVENUES (3)   $ 19,958     $ 14     $ 19,972     $ 19,035     $ 49     $ 19,084     5%   5%   6%   6%
  New software licenses and cloud software subscriptions (3)     6,447       12       6,459       6,295       37       6,332     2%   2%   4%   4%
  Software license updates and product support     13,511       2       13,513       12,740       12       12,752     6%   6%   7%   7%
                                                                 
TOTAL HARDWARE SYSTEMS REVENUES (4)   $ 3,908     $ 11     $ 3,919     $ 3,915     $ 10     $ 3,925     0%   0%   1%   1%
  Hardware systems products     2,108       -       2,108       2,185       -       2,185     (3%)   (3%)   (2%)   (2%)
  Hardware systems support (4)     1,800       11       1,811       1,730       10       1,740     4%   4%   6%   6%
                                                                 
TOTAL OPERATING EXPENSES   $ 17,105     $ (2,478 )   $ 14,627     $ 16,549     $ (2,296 )   $ 14,253     3%   3%   5%   4%
  Stock-based compensation (5)     579       (579 )     -       536       (536 )     -     8%   *   8%   *
  Amortization of intangible assets (6)     1,732       (1,732 )     -       1,789       (1,789 )     -     (3%)   *   (3%)   *
  Acquisition related and other     21       (21 )     -       (347 )     347       -     106%   *   106%   *
  Restructuring     146       (146 )     -       318       (318 )     -     (54%)   *   (55%)   *
                                                                 
OPERATING INCOME   $ 9,850     $ 2,503     $ 12,353     $ 9,684     $ 2,355     $ 12,039     2%   3%   4%   4%
                                                                 
OPERATING MARGIN %     37 %             46 %     37 %             46 %   (37) bp.   0 bp.   (23) bp.   1 bp.
                                                                 
INCOME TAX EFFECTS (7)   $ 1,807     $ 783     $ 2,590     $ 1,953     $ 630     $ 2,583     (8%)   0%   (5%)   2%
                                                                 
NET INCOME   $ 7,309     $ 1,720     $ 9,029     $ 7,119     $ 1,725     $ 8,844     3%   2%   5%   4%
                                                                 
DILUTED EARNINGS PER SHARE   $ 1.58             $ 1.96     $ 1.46             $ 1.81     8%   8%   11%   10%
                                                                 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,616       -       4,616       4,873       -       4,873     (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 February 28, 2014, approximately $3 million in estimated revenues related to assumed cloud software subscriptions contracts will not be recognized for each of the remainder of fiscal 2014 and fiscal 2015 due to business combination accounting rules.
                                           
(4) As of February 28, 2014, approximately $1 million and $2 million in estimated revenues related to hardware systems support contracts will not be recognized for the remainder of fiscal 2014 and fiscal 2015, respectively, due to business combination accounting rules.
                                           
(5) Stock-based compensation was included in the following GAAP operating expense categories:
                                           
      Nine Months Ended   Nine Months Ended
      February 28, 2014   February 28, 2013
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing   $ 123   $ (123 )   $ -   $ 112   $ (112 )   $ -
  Software license updates and product support     16     (16 )     -     15     (15 )     -
  Hardware systems products     4     (4 )     -     2     (2 )     -
  Hardware systems support     4     (4 )     -     3     (3 )     -
  Services     20     (20 )     -     24     (24 )     -
  Research and development     285     (285 )     -     258     (258 )     -
  General and administrative     127     (127 )     -     122     (122 )     -
    Subtotal     579     (579 )     -     536     (536 )     -
  Acquisition related and other     4     (4 )     -     30     (30 )     -
    Total stock-based compensation   $ 583   $ (583 )   $ -   $ 566   $ (566 )   $ -
                                           
(6) Estimated future annual amortization expense related to intangible assets as of February 28, 2014 was as follows:
   
  Remainder of Fiscal 2014   $ 554                                  
  Fiscal 2015     1,894                                  
  Fiscal 2016     1,315                                  
  Fiscal 2017     722                                  
  Fiscal 2018     588                                  
  Fiscal 2019     489                                  
  Thereafter     932                                  
    Total intangible assets subject to amortization     6,494                                  
  In-process research and development     64                                  
    Total intangible assets, net   $ 6,558                                  
                                           
(7) Income tax effects were calculated reflecting an effective GAAP tax rate of 19.8% and 21.5% in the first nine months of fiscal 2014 and 2013, respectively, and an effective non-GAAP tax rate of 22.3% and 22.6% in the first nine months of fiscal 2014 and 2013, respectively. The differences between our GAAP and non-GAAP tax rates in the first nine months 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
         
Q3 FISCAL 2014 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
         
    February 28,   May 31,
    2014   2013
ASSETS            
               
  Current Assets:            
    Cash and cash equivalents   $ 16,832   $ 14,613
    Marketable securities     20,393     17,603
    Trade receivables, net     4,071     6,049
    Inventories     227     240
    Deferred tax assets     1,012     974
    Prepaid expenses and other current assets     1,869     2,213
      Total Current Assets     44,404     41,692
               
  Non-Current Assets:            
    Property, plant and equipment, net     3,052     3,053
    Intangible assets, net     6,558     6,640
    Goodwill     29,322     27,343
    Deferred tax assets     720     766
    Other assets     2,506     2,318
      Total Non-Current Assets     42,158     40,120
TOTAL ASSETS   $ 86,562   $ 81,812
             
LIABILITIES AND EQUITY            
             
  Current Liabilities:            
    Notes payable, current and other current borrowings   $ 1,516   $ -
    Accounts payable     396     419
    Accrued compensation and related benefits     1,583     1,851
    Income taxes payable     438     911
    Deferred revenues     6,473     7,118
    Other current liabilities     2,686     2,573
      Total Current Liabilities     13,092     12,872
               
  Non-Current Liabilities:            
    Notes payable and other non-current borrowings     22,677     18,494
    Income taxes payable     4,055     3,899
    Other non-current liabilities     1,503     1,402
      Total Non-Current Liabilities     28,235     23,795
                   
  Equity     45,235     45,145
               
TOTAL LIABILITIES AND EQUITY   $ 86,562   $ 81,812
             
             
             
ORACLE CORPORATION  
   
Q3 FISCAL 2014 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
($ in millions)  
   
    Nine Months Ended February 28,  
    2014     2013  
Cash Flows From Operating Activities:                
  Net income   $ 7,309     $ 7,119  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation     452       400  
    Amortization of intangible assets     1,732       1,789  
    Deferred income taxes     (307 )     108  
    Stock-based compensation     583       566  
    Tax benefits on the exercise of stock options and vesting of restricted stock-based awards     288       372  
    Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     (162 )     (220 )
    Other, net     72       120  
    Changes in operating assets and liabilities, net of effects from acquisitions:                
      Decrease in trade receivables, net     2,006       2,269  
      Decrease (increase) in inventories     20       (48 )
      Decrease (increase) in prepaid expenses and other assets     181       (241 )
      Decrease in accounts payable and other liabilities     (730 )     (912 )
      Decrease in income taxes payable     (457 )     (853 )
      Decrease in deferred revenues     (522 )     (809 )
        Net cash provided by operating activities     10,465       9,660  
Cash Flows From Investing Activities:                
  Purchases of marketable securities and other investments     (25,550 )     (24,027 )
  Proceeds from maturities and sales of marketable securities and other investments     23,110       22,359  
  Acquisitions, net of cash acquired     (3,066 )     (1,592 )
  Capital expenditures     (426 )     (467 )
        Net cash used for investing activities     (5,932 )     (3,727 )
Cash Flows From Financing Activities:                
  Payments for repurchases of common stock     (7,841 )     (8,204 )
  Proceeds from issuances of common stock     1,519       1,300  
  Payments of dividends to stockholders     (1,640 )     (1,433 )
  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     162       220  
  Distributions to noncontrolling interests     (28 )     (31 )
        Net cash used for financing activities     (2,262 )     (4,874 )
Effect of exchange rate changes on cash and cash equivalents     (52 )     87  
Net increase in cash and cash equivalents     2,219       1,146  
Cash and cash equivalents at beginning of period     14,613       14,955  
Cash and cash equivalents at end of period   $ 16,832     $ 16,101  
                 
                 
                 
ORACLE CORPORATION
Q3 FISCAL 2014 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($ in millions)
                                             
    Fiscal 2013     Fiscal 2014  
    Q1     Q2     Q3     Q4     Q1     Q2     Q3   Q4
                                                           
GAAP Operating Cash Flow   $ 13,993     $ 13,533     $ 13,717     $ 14,224     $ 14,845     $ 15,196     $ 15,029    
                                                           
Capital Expenditures (2)     (627 )     (710 )     (684 )     (650 )     (664 )     (578 )     (609 )  
                                                           
Free Cash Flow   $ 13,366     $ 12,823     $ 13,033     $ 13,574     $ 14,181     $ 14,618     $ 14,420    
                                                           
% Growth over prior year     8 %     2 %     1 %     4 %     6 %     14 %     11 %  
                                                           
GAAP Net Income   $ 10,175     $ 10,564     $ 10,571     $ 10,925     $ 11,082     $ 11,054     $ 11,115    
                                                           
Free Cash Flow as a % of Net Income     131 %     121 %     123 %     124 %     128 %     132 %     130 %  
                                                           
(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
Q3 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     $ 2,415         $ 6,447  
  Software license updates and product support     4,140       4,260       4,340       4,402       17,142       4,431       4,516       4,564           13,511  
    Software Revenues     5,714       6,649       6,672       8,428       27,463       6,084       6,896       6,979           19,958  
                                                                             
  Hardware systems products     779       734       671       849       3,033       669       714       725           2,108  
  Hardware systems support     574       587       570       582       2,313       592       609       598           1,800  
    Hardware Systems Revenues     1,353       1,321       1,241       1,431       5,346       1,261       1,323       1,323           3,908  
                                                                             
    Services Revenues     1,114       1,124       1,045       1,088       4,371       1,027       1,056       1,005           3,089  
                                                                             
      Total Revenues   $ 8,181     $ 9,094     $ 8,958     $ 10,947     $ 37,180     $ 8,372     $ 9,275     $ 9,307         $ 26,955  
                                                                             
AS REPORTED REVENUE GROWTH RATES                                                                            
  New software licenses and cloud software subscriptions     5 %     17 %     (2 %)     1 %     4 %     5 %     0 %     4 %         2 %
  Software license updates and product support     3 %     7 %     7 %     6 %     6 %     7 %     6 %     5 %         6 %
    Software Revenues     4 %     10 %     4 %     4 %     5 %     6 %     4 %     5 %         5 %
                                                                             
  Hardware systems products     (24 %)     (23 %)     (23 %)     (13 %)     (21 %)     (14 %)     (3 %)     8 %         (3 %)
  Hardware systems support     (11 %)     (6 %)     (6 %)     (3 %)     (7 %)     3 %     4 %     5 %         4 %
    Hardware Systems Revenues     (19 %)     (16 %)     (16 %)     (9 %)     (15 %)     (7 %)     0 %     7 %         0 %
                                                                             
    Services Revenues     (6 %)     (5 %)     (8 %)     (9 %)     (7 %)     (8 %)     (6 %)     (4 %)         (6 %)
                                                                             
      Total Revenues     (2 %)     3 %     (1 %)     0 %     0 %     2 %     2 %     4 %         3 %
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  New software licenses and cloud software subscriptions     10 %     18 %     0 %     2 %     6 %     7 %     1 %     6 %         4 %
  Software license updates and product support     8 %     8 %     8 %     8 %     8 %     8 %     7 %     7 %         7 %
    Software Revenues     9 %     11 %     5 %     5 %     7 %     8 %     5 %     6 %         6 %
                                                                             
  Hardware systems products     (21 %)     (23 %)     (22 %)     (12 %)     (19 %)     (13 %)     (2 %)     10 %         (2 %)
  Hardware systems support     (6 %)     (5 %)     (5 %)     (1 %)     (4 %)     5 %     5 %     7 %         6 %
    Hardware Systems Revenues     (15 %)     (16 %)     (15 %)     (8 %)     (13 %)     (6 %)     2 %     9 %         1 %
                                                                             
    Services Revenues     0 %     (3 %)     (7 %)     (8 %)     (5 %)     (6 %)     (5 %)     (2 %)         (4 %)
                                                                             
      Total Revenues     3 %     5 %     0 %     2 %     2 %     4 %     3 %     6 %         4 %
                                                                             
GEOGRAPHIC REVENUES                                                                            
                                                                             
REVENUES                                                                            
  Americas   $ 4,324     $ 4,787     $ 4,698     $ 5,911     $ 19,719     $ 4,517     $ 4,995     $ 4,953         $ 14,466  
  Europe, Middle East & Africa     2,383       2,701       2,745       3,328       11,158       2,439       2,817       2,923           8,178  
  Asia Pacific     1,474       1,606       1,515       1,708       6,303       1,416       1,463       1,431           4,311  
      Total Revenues   $ 8,181     $ 9,094     $ 8,958     $ 10,947     $ 37,180     $ 8,372     $ 9,275     $ 9,307         $ 26,955  
                                                                             
HEADCOUNT                                                                            
                                                                             
GEOGRAPHIC AREA                                                                            
  Americas     49,145       49,584       50,402       51,519               53,465       53,073       53,799              
  Europe, Middle East & Africa     22,584       22,594       22,592       22,860               23,349       23,178       23,350              
  Asia Pacific     44,170       45,051       45,663       45,855               45,513       45,617       45,561              
      Total Company     115,899       117,229       118,657       120,234               122,327       121,868       122,710              
                                                                             
(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
Q3 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     $ 1,287         $ 3,507  
  Hardware systems products   $ 380     $ 370     $ 307     $ 439     $ 1,495     $ 335     $ 381     $ 348         $ 1,064  
                                                                             
AS REPORTED GROWTH RATES                                                                            
  New software licenses and cloud software subscriptions     12 %     22 %     (2 %)     3 %     7 %     14 %     3 %     7 %         7 %
  Hardware systems products     (20 %)     (25 %)     (25 %)     (12 %)     (20 %)     (12 %)     3 %     13 %         1 %
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  New software licenses and cloud software subscriptions     14 %     22 %     (1 %)     4 %     8 %     15 %     5 %     9 %         9 %
  Hardware systems products     (19 %)     (25 %)     (25 %)     (12 %)     (20 %)     (11 %)     4 %     16 %         2 %
                                                                             
                                                                             
EUROPE / MIDDLE EAST / AFRICA                                                                            
                                                                             
  New software licenses and cloud software subscriptions   $ 403     $ 641     $ 690     $ 1,224     $ 2,959     $ 388     $ 675     $ 727         $ 1,789  
  Hardware systems products   $ 214     $ 198     $ 201     $ 228     $ 842     $ 177     $ 184     $ 218         $ 579  
                                                                             
AS REPORTED GROWTH RATES                                                                            
  New software licenses and cloud software subscriptions     (8 %)     10 %     0 %     5 %     3 %     (4 %)     5 %     5 %         3 %
  Hardware systems products     (38 %)     (27 %)     (24 %)     (12 %)     (26 %)     (18 %)     (7 %)     8 %         (6 %)
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  New software licenses and cloud software subscriptions     1 %     12 %     1 %     5 %     5 %     (5 %)     3 %     3 %         1 %
  Hardware systems products     (30 %)     (25 %)     (24 %)     (11 %)     (23 %)     (20 %)     (8 %)     8 %         (7 %)
                                                                             
                                                                             
ASIA PACIFIC                                                                            
                                                                             
  New software licenses and cloud software subscriptions   $ 357     $ 495     $ 437     $ 608     $ 1,897     $ 339     $ 410     $ 401         $ 1,151  
  Hardware systems products   $ 185     $ 166     $ 163     $ 182     $ 696     $ 157     $ 149     $ 159         $ 465  
                                                                             
AS REPORTED GROWTH RATES                                                                            
  New software licenses and cloud software subscriptions     8 %     13 %     (3 %)     (12 %)     (1 %)     (5 %)     (17 %)     (8 %)         (11 %)
  Hardware systems products     (12 %)     (10 %)     (16 %)     (17 %)     (14 %)     (15 %)     (10 %)     (2 %)         (10 %)
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  New software licenses and cloud software subscriptions     12 %     13 %     1 %     (7 %)     3 %     5 %     (10 %)     (2 %)         (3 %)
  Hardware systems products     (10 %)     (12 %)     (14 %)     (14 %)     (12 %)     (10 %)     (6 %)     2 %         (5 %)
                                                                             
                                                                             
TOTAL COMPANY                                                                            
                                                                             
  New software licenses and cloud software subscriptions   $ 1,574     $ 2,389     $ 2,332     $ 4,026     $ 10,321     $ 1,653     $ 2,380     $ 2,415         $ 6,447  
  Hardware systems products   $ 779     $ 734     $ 671     $ 849     $ 3,033     $ 669     $ 714     $ 725         $ 2,108  
                                                                             
AS REPORTED GROWTH RATES                                                                            
  New software licenses and cloud software subscriptions     5 %     17 %     (2 %)     1 %     4 %     5 %     0 %     4 %         2 %
  Hardware systems products     (24 %)     (23 %)     (23 %)     (13 %)     (21 %)     (14 %)     (3 %)     8 %         (3 %)
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  New software licenses and cloud software subscriptions     10 %     18 %     0 %     2 %     6 %     7 %     1 %     6 %         4 %
  Hardware systems products     (21 %)     (23 %)     (22 %)     (12 %)     (19 %)     (13 %)     (2 %)     10 %         (2 %)
                                                                             
(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
Q3 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