SOURCE: Oracle Corporation

Oracle Corporation

March 20, 2013 16:01 ET

Oracle Reports Q3 GAAP EPS Up 6% to 52 Cents; Q3 Non-GAAP EPS Up 5% to 65 Cents

Cloud Software as a Service Revenue Up 111%, Trailing Twelve Month Operating Cash Flow of $13.7 Billion

REDWOOD SHORES, CA--(Marketwire - Mar 20, 2013) - Oracle Corporation (NASDAQ: ORCL) today announced that fiscal 2013 Q3 total revenues were down 1% to $9.0 billion. New software licenses and cloud software subscriptions revenues were down 2% to $2.3 billion. Software license updates and product support revenues were up 7% to $4.3 billion. Hardware systems products revenues were $671 million. GAAP operating income was up 1% to $3.3 billion, and GAAP operating margin was 37%. Non-GAAP operating income was down 1% to $4.2 billion, and non-GAAP operating margin was 47%. GAAP net income was unchanged at $2.5 billion, while non-GAAP net income was down 1% to $3.1 billion. GAAP earnings per share were $0.52, up 6% compared to last year while non-GAAP earnings per share were up 5% to $0.65. GAAP operating cash flow on a trailing twelve-month basis was $13.7 billion.

Without the impact of the US dollar strengthening compared to foreign currencies, Oracle's reported Q3 GAAP earnings per share would have been $0.01 higher at $0.53, up 8%, and Q3 non-GAAP earnings per share would have been approximately $0.01 higher. Total revenues also would have been 1% higher and new software licenses and cloud software subscription revenues would have been 2% higher than reported.

"Our non-GAAP operating margin increased to a Q3 record of 47%, and we expect it to reach an all-time high for the fiscal year," said Oracle President and CFO, Safra Catz. "Both operating cash flow and free cash flow were at record levels for a Q3, with operating cash flow of $13.7 billion over the last twelve months."

"The Oracle Cloud is the most robust and comprehensive cloud platform available with services at the infrastructure (IaaS), platform (PaaS) and application (SaaS) level," said Oracle President, Mark Hurd. "In Q3, our SaaS revenue alone grew well over 100% as lots of new customers adopted our Sales, Service, Marketing and Human Capital Management applications in the Cloud."

"This month we will begin deliveries of servers based on our new SPARC T5 microprocessor: the fastest microprocessor in the world," said Oracle CEO, Larry Ellison. "The new T5 servers can have up to eight microprocessors while our new M5 system can be configured with up to thirty-two microprocessors. The M5 runs the Oracle database 10 times faster than the M9000 it replaces."

Q3 Fiscal 2013 Earnings Conference Call and Webcast
Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (913) 312-6699, Passcode: 591704. 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 2013 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: 1437646.

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

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

"Safe Harbor" Statement: Statements in this press release relating to Oracle's future plans, expectations, beliefs, intentions and prospects, including statements regarding our non-GAAP operating margin reaching an all-time high for the fiscal year, the deliveries of servers based on our new SPARC T5 microprocessor and the configurations of the SPARC T5 servers and M5 systems, 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 debt crisis, 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 software license updates and product support. (3) Our hardware systems business may not be successful, 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 and risks relating to compliance with international and U.S. laws that apply to our international operations. (6) Intense competitive forces demand rapid technological advances and frequent new product introductions and could require us to reduce prices or cause us to lose customers. (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 20, 2013. Oracle undertakes no duty to update any statement in light of new information or future events.

                         
ORACLE CORPORATION  
                         
Q3 FISCAL 2013 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
($ in millions, except per share data)  
                         
  Three Months Ended          
           
                      % Increase  
  February 28, 2013   % of Revenues   February 29, 2012   % of Revenues   % Increase (Decrease) in US $   (Decrease)
 in Constant Currency (1)
 
REVENUES                            
  New software licenses and cloud software subscriptions $ 2,332   26 % $ 2,374   26 % (2 %) 0 %
  Software license updates and product support   4,340   48 %   4,051   45 % 7 % 8 %
    Software Revenues   6,672   74 %   6,425   71 % 4 % 5 %
  Hardware systems products   671   8 %   869   10 % (23 %) (22 %)
  Hardware systems support   570   6 %   604   6 % (6 %) (5 %)
    Hardware Systems Revenues   1,241   14 %   1,473   16 % (16 %) (15 %)
    Services Revenues   1,045   12 %   1,141   13 % (8 %) (7 %)
                                 
      Total Revenues   8,958   100 %   9,039   100 % (1 %) 0 %
                                   
OPERATING EXPENSES                            
  Sales and marketing   1,802   20 %   1,700   19 % 6 % 7 %
  Software license updates and product support   306   3 %   305   3 % 1 % 2 %
  Hardware systems products   337   4 %   424   5 % (21 %) (20 %)
  Hardware systems support   219   2 %   257   3 % (15 %) (14 %)
  Services   854   10 %   922   10 % (7 %) (6 %)
  Research and development   1,186   13 %   1,145   13 % 4 % 4 %
  General and administrative   260   3 %   261   3 % 0 % 1 %
  Amortization of intangible assets   586   7 %   606   7 % (3 %) (3 %)
  Acquisition related and other   32   0 %   38   0 % (16 %) (17 %)
  Restructuring   42   1 %   64   0 % (35 %) (36 %)
                               
      Total Operating Expenses   5,624   63 %   5,722   63 % (2 %) (1 %)
                                   
OPERATING INCOME   3,334   37 %   3,317   37 % 1 % 2 %
  Interest expense   (205 ) (2 %)   (190 ) (2 %) 8 % 8 %
  Non-operating (expense) income, net   (39 ) (1 %)   21   0 % 284 % 298 %
                               
INCOME BEFORE PROVISION FOR INCOME TAXES   3,090   34 %   3,148   35 % (2 %) 0 %
  Provision for income taxes   586   6 %   650   7 % (10 %) (8 %)
                               
NET INCOME $ 2,504   28 % $ 2,498   28 % 0 % 2 %
                             
EARNINGS PER SHARE:                            
  Basic $ 0.53       $ 0.50              
  Diluted $ 0.52       $ 0.49              
                               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                            
  Basic   4,735         5,007              
  Diluted   4,812         5,080              
                             
                             
(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, 2012, 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, 2013 compared with the corresponding prior year period decreased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 1 percentage point.
   
   
   
ORACLE CORPORATION
 
Q3 FISCAL 2013 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
                                                           
  Three Months Ended     % Increase (Decrease) in US $     % Increase (Decrease) in Constant Currency (2)  
                                                           
  February 28, 2013 GAAP     Adj.     February 28, 2013 Non-GAAP     February 29, 2012 GAAP     Adj.     February 29, 2012 Non-GAAP     GAAP  Non-GAAP  GAAP  Non-GAAP 
                                                                       
TOTAL REVENUES (3) (4) (5) $ 8,958     $ 12     $ 8,970     $ 9,039     $ 23     $ 9,062     (1 %)   (1 %)   0 %   0 %
                                                                       
TOTAL SOFTWARE REVENUES (3) (4) $ 6,672     $ 10     $ 6,682     $ 6,425     $ 17     $ 6,442     4 %   4 %   5 %   5 %
  New software licenses and cloud software subscriptions (3)   2,332       6       2,338       2,374       -       2,374     (2 %)   (2 %)   0 %   0 %
  Software license updates and product support (4)   4,340       4       4,344       4,051       17       4,068     7 %   7 %   8 %   8 %
                                                                       
TOTAL HARDWARE SYSTEMS REVENUES (5) $ 1,241     $ 2     $ 1,243     $ 1,473     $ 6     $ 1,479     (16 %)   (16 %)   (15 %)   (15 %)
  Hardware systems products   671       -       671       869       -       869     (23 %)   (23 %)   (22 %)   (22 %)
  Hardware systems support (5)   570       2       572       604       6       610     (6 %)   (6 %)   (5 %)   (5 %)
                                                                       
TOTAL OPERATING EXPENSES $ 5,624     $ (832 )   $ 4,792     $ 5,722     $ (865 )   $ 4,857     (2 %)   (1 %)   (1 %)   0 %
  Stock-based compensation (6)   172       (172 )     -       157       (157 )     -     9 %   *     9 %   *  
  Amortization of intangible assets (7)   586       (586 )     -       606       (606 )     -     (3 %)   *     (3 %)   *  
  Acquisition related and other   32       (32 )     -       38       (38 )     -     (16 %)   *     (17 %)   *  
  Restructuring   42       (42 )     -       64       (64 )     -     (35 %)   *     (36 %)   *  
                                                                         
OPERATING INCOME $ 3,334     $ 844     $ 4,178     $ 3,317     $ 888     $ 4,205     1 %   (1 %)   2 %   0 %
                                                                       
OPERATING MARGIN %   37 %             47 %     37 %             46 %   52 bp.     17 bp.     65 bp.     17 bp.  
                                                                       
INCOME TAX EFFECTS (8) $ 586     $ 240     $ 826     $ 650     $ 258     $ 908     (10 %)   (9 %)   (8 %)   (8 %)
                                                                       
NET INCOME $ 2,504     $ 604     $ 3,108     $ 2,498     $ 630     $ 3,128     0 %   (1 %)   2 %   1 %
                                                                       
DILUTED EARNINGS PER SHARE $ 0.52             $ 0.65     $ 0.49             $ 0.62     6 %   5 %   8 %   6 %
                                                                       
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   4,812       -       4,812       5,080       -       5,080     (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, 2012, 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, 2013, approximately $7 million and $6 million in estimated revenues related to assumed cloud software subscriptions contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.
   
(4) As of February 28, 2013, approximately $3 million and $2 million in estimated revenues related to assumed software support contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.
   
(5) As of February 28, 2013, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for each of the remainder of fiscal 2013 and fiscal 2014 due to business combination accounting rules.
   
(6) Stock-based compensation was included in the following GAAP operating expense categories:
   
                               
                               
      Three Months Ended   Three Months Ended
      February 28, 2013   February 29, 2012
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing   $ 32   $ (32 )   $ -   $ 30   $ (30 )   $ -
  Software license updates and product support     5     (5 )     -     5     (5 )     -
  Hardware systems products     1     (1 )     -     -     -       -
  Hardware systems support     1     (1 )     -     1     (1 )     -
  Services     7     (7 )     -     6     (6 )     -
  Research and development     86     (86 )     -     74     (74 )     -
  General and administrative     40     (40 )     -     41     (41 )     -
    Subtotal     172     (172 )     -     157     (157 )     -
  Acquisition related and other     8     (8 )     -     18     (18 )     -
    Total stock-based compensation   $ 180   $ (180 )   $ -   $ 175   $ (175 )   $ -
                                           
(7) Estimated future annual amortization expense related to intangible assets as of February 28, 2013 was as follows:
   
  Remainder of Fiscal 2013 $ 582
  Fiscal 2014   2,043
  Fiscal 2015   1,582
  Fiscal 2016   1,020
  Fiscal 2017   450
  Fiscal 2018   324
  Thereafter   661
  Total intangible assets, net $ 6,662
   
(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 19.0% and 20.7% in the third quarter of fiscal 2013 and 2012, respectively, and an effective non-GAAP tax rate of 21.0% and 22.5% in the third quarter of fiscal 2013 and 2012, respectively. 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. The difference between our GAAP and non-GAAP tax rates in the third quarter of fiscal 2012 was primarily due to income tax effects related to acquired tax exposures, the differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses, and the disproportionate rate impact of discrete items for the quarter.
   
* Not meaningful
   
   
   
ORACLE CORPORATION 
 
Q3 FISCAL 2013 YEAR TO DATE FINANCIAL RESULTS 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
($ in millions, except per share data) 
                         
  Nine Months Ended          
           
                      % Increase  
  February 28, 2013   % of Revenues   February 29, 2012   % of Revenues   % Increase (Decrease)in US $   (Decrease) in Constant Currency (1)  
REVENUES                            
  New software licenses and cloud software subscriptions $ 6,295   24 % $ 5,921   23 % 6 % 9 %
  Software license updates and product support   12,740   49 %   12,058   46 % 6 % 8 %
    Software Revenues   19,035   73 %   17,979   69 % 6 % 8 %
  Hardware systems products   2,185   8 %   2,851   11 % (23 %) (22 %)
  Hardware systems support   1,730   7 %   1,874   7 % (8 %) (5 %)
    Hardware Systems Revenues   3,915   15 %   4,725   18 % (17 %) (15 %)
    Services Revenues   3,283   12 %   3,501   13 % (6 %) (3 %)
                                 
      Total Revenues   26,233   100 %   26,205   100 % 0 % 2 %
OPERATING EXPENSES                            
  Sales and marketing   5,120   19 %   5,027   19 % 2 % 4 %
  Software license updates and product support   860   3 %   899   3 % (4 %) (2 %)
  Hardware systems products   1,087   4 %   1,367   5 % (20 %) (19 %)
  Hardware systems support   670   3 %   798   3 % (16 %) (14 %)
  Services   2,668   10 %   2,788   11 % (4 %) (1 %)
  Research and development   3,586   14 %   3,297   13 % 9 % 10 %
  General and administrative   798   3 %   848   3 % (6 %) (4 %)
  Amortization of intangible assets   1,789   7 %   1,790   7 % 0 % 0 %
  Acquisition related and other (2)   (347 ) (1 %)   63   0 % (652 %) (660 %)
  Restructuring   318   1 %   217   1 % 46 % 52 %
                               
      Total Operating Expenses   16,549   63 %   17,094   65 % (3 %) (1 %)
                                   
OPERATING INCOME   9,684   37 %   9,111   35 % 6 % 10 %
  Interest expense   (588 ) (2 %)   (574 ) (2 %) 2 % 3 %
  Non-operating (expense) income, net   (24 ) 0 %   42   0 % 158 % 166 %
                               
INCOME BEFORE PROVISION FOR INCOME TAXES   9,072   35 %   8,579   33 % 6 % 9 %
  Provision for income taxes   1,953   8 %   2,050   8 % (5 %) (1 %)
                               
NET INCOME $ 7,119   27 % $ 6,529   25 % 9 % 13 %
                             
EARNINGS PER SHARE:                            
  Basic $ 1.48       $ 1.30              
  Diluted $ 1.46       $ 1.28              
                               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                            
  Basic   4,798         5,037              
  Diluted   4,873         5,118              
   
(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, 2012, 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, 2013 compared with the corresponding prior year period decreased our revenues by 2 percentage points, operating expenses by 2 percentage points and operating income by 4 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 2013 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
                                                     
  Nine Months Ended     % Increase (Decrease) in US $   % Increase (Decrease) in Constant Currency (2)  
                                                     
  February 28, 2013 GAAP     Adj.     February 28, 2013 Non-GAAP     February 29, 2012 GAAP     Adj.     February 29, 2012 Non-GAAP     GAAP   Non-GAAP   GAAP   Non-GAAP  
                                                                 
TOTAL REVENUES (3) (4) (5) $ 26,233     $ 59     $ 26,292     $ 26,205     $ 66     $ 26,271     0 % 0 % 2 % 2 %
                                                                 
TOTAL SOFTWARE REVENUES (3) (4) $ 19,035     $ 49     $ 19,084     $ 17,979     $ 40     $ 18,019     6 % 6 % 8 % 8 %
  New software licenses and cloud software subscriptions (3)   6,295       37       6,332       5,921       -       5,921     6 % 7 % 9 % 9 %
  Software license updates and product support (4)   12,740       12       12,752       12,058       40       12,098     6 % 5 % 8 % 8 %
                                                                 
TOTAL HARDWARE SYSTEMS REVENUES (5) $ 3,915     $ 10     $ 3,925     $ 4,725     $ 26     $ 4,751     (17 %) (17 %) (15 %) (16 %)
  Hardware systems products   2,185       -       2,185       2,851       -       2,851     (23 %) (23 %) (22 %) (22 %)
  Hardware systems support (5)   1,730       10       1,740       1,874       26       1,900     (8 %) (8 %) (5 %) (6 %)
                                                                 
TOTAL OPERATING EXPENSES $ 16,549     $ (2,296 )   $ 14,253     $ 17,094     $ (2,523 )   $ 14,571     (3 %) (2 %) (1 %) 0 %
  Stock-based compensation (6)   536       (536 )     -       453       (453 )     -     18 % *   18 % *  
  Amortization of intangible assets (7)   1,789       (1,789 )     -       1,790       (1,790 )     -     0 % *   0 % *  
  Acquisition related and other   (347 )     347       -       63       (63 )     -     (652 %) *   (660 %) *  
  Restructuring   318       (318 )     -       217       (217 )     -     46 % *   52 % *  
                                                                 
OPERATING INCOME $ 9,684     $ 2,355     $ 12,039     $ 9,111     $ 2,589     $ 11,700     6 % 3 % 10 % 5 %
                                                                 
OPERATING MARGIN %   37 %             46 %     35 %             45 %   215 bp.   125 bp.   238 bp.   127 bp.  
                                                                 
INCOME TAX EFFECTS (8) $ 1,953     $ 630     $ 2,583     $ 2,050     $ 740     $ 2,790     (5 %) (7 %) (1 %) (5 %)
                                                                 
NET INCOME $ 7,119     $ 1,725     $ 8,844     $ 6,529     $ 1,849     $ 8,378     9 % 6 % 13 % 8 %
                                                                 
DILUTED EARNINGS PER SHARE $ 1.46             $ 1.81     $ 1.28             $ 1.64     15 % 11 % 18 % 14 %
                                                                 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   4,873       -       4,873       5,118       -       5,118     (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, 2012, 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, 2013, approximately $7 million and $6 million in estimated revenues related to assumed cloud software subscriptions contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.
   
(4) As of February 28, 2013, approximately $3 million and $2 million in estimated revenues related to assumed software support contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.
   
(5) As of February 28, 2013, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for each of the remainder of fiscal 2013 and fiscal 2014 due to business combination accounting rules.
   
(6) Stock-based compensation was included in the following GAAP operating expense categories:
   
      Nine Months Ended   Nine Months Ended
      February 28, 2013   February 29, 2012
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing   $ 112   $ (112 )   $ -   $ 86   $ (86 )   $ -
  Software license updates and product support     15     (15 )     -     13     (13 )     -
  Hardware systems products     2     (2 )     -     1     (1 )     -
  Hardware systems support     3     (3 )     -     4     (4 )     -
  Services     24     (24 )     -     16     (16 )     -
  Research and development     258     (258 )     -     213     (213 )     -
  General and administrative     122     (122 )     -     120     (120 )     -
    Subtotal     536     (536 )     -     453     (453 )     -
  Acquisition related and other     30     (30 )     -     21     (21 )     -
    Total stock-based compensation   $ 566   $ (566 )   $ -   $ 474   $ (474 )   $ -
                                           
(7) Estimated future annual amortization expense related to intangible assets as of February 28, 2013 was as follows:
   
   
  Remainder of Fiscal 2013 $ 582
  Fiscal 2014   2,043
  Fiscal 2015   1,582
  Fiscal 2016   1,020
  Fiscal 2017   450
  Fiscal 2018   324
  Thereafter   661
    Total intangible assets, net $ 6,662
       
   
   
(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.5% and 23.9% in the first nine months of fiscal 2013 and 2012, respectively, and an effective non-GAAP tax rate of 22.6% and 25.0% in the first nine months of fiscal 2013 and 2012, respectively. The differences between our GAAP and non-GAAP tax rates in the first nine months of fiscal 2013 were 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 nine months of fiscal 2012 was primarily due to income tax effects related to acquired tax exposures, the differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses, and the disproportionate rate impact of discrete items for the first nine months of fiscal 2012.
   
* Not meaningful
   
   
   
ORACLE CORPORATION
         
Q3 FISCAL 2013 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
         
    February 28,   May 31,
    2013   2012
ASSETS            
             
Current Assets:            
  Cash and cash equivalents   $ 16,101   $ 14,955
  Marketable securities     17,306     15,721
  Trade receivables, net     4,169     6,377
  Inventories     211     158
  Deferred tax assets     829     877
  Prepaid expenses and other current assets     2,070     1,935
    Total Current Assets     40,686     40,023
             
Non-Current Assets:            
  Property, plant and equipment, net     3,034     3,021
  Intangible assets, net     6,662     7,899
  Goodwill     26,102     25,119
  Deferred tax assets     651     595
  Other assets     2,315     1,670
    Total Non-Current Assets     38,764     38,304
             
TOTAL ASSETS   $ 79,450   $ 78,327
             
LIABILITIES AND EQUITY            
             
Current Liabilities:            
  Notes payable, current and other current borrowings   $ 1,250   $ 2,950
  Accounts payable     361     438
  Accrued compensation and related benefits     1,557     2,002
  Deferred revenues     6,278     7,035
  Other current liabilities     2,470     2,963
    Total Current Liabilities     11,916     15,388
             
Non-Current Liabilities:            
  Notes payable and other non-current borrowings     18,502     13,524
  Income taxes payable     3,775     3,759
  Other non-current liabilities     1,467     1,569
    Total Non-Current Liabilities     23,744     18,852
             
Equity     43,790     44,087
             
TOTAL LIABILITIES AND EQUITY   $ 79,450   $ 78,327
             
             
             
ORACLE CORPORATION  
   
Q3 FISCAL 2013 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
($ in millions)  
             
    Nine Months Ended  
    February 28, 2013     February 29, 2012  
Cash Flows From Operating Activities:                
  Net income   $ 7,119     $ 6,529  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation     400       350  
    Amortization of intangible assets     1,789       1,790  
    Deferred income taxes     108       (200 )
    Stock-based compensation     566       474  
    Tax benefits on the exercise of stock options and vesting of restricted stock-based awards     372       123  
    Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     (220 )     (71 )
    Other, net     120       67  
    Changes in operating assets and liabilities, net of effects from acquisitions:                
      Decrease in trade receivables, net     2,269       2,028  
      (Increase) decrease in inventories     (48 )     139  
      (Increase) decrease in prepaid expenses and other assets     (241 )     87  
      Decrease in accounts payable and other liabilities     (912 )     (1,353 )
      (Decrease) increase in income taxes payable     (853 )     259  
      Decrease in deferred revenues     (809 )     (536 )
                       
        Net cash provided by operating activities     9,660       9,686  
                         
Cash Flows From Investing Activities:                
  Purchases of marketable securities and other investments     (24,027 )     (29,745 )
  Proceeds from maturities and sales of marketable securities and other investments     22,359       26,472  
  Acquisitions, net of cash acquired     (1,592 )     (2,833 )
  Capital expenditures     (467 )     (431 )
                   
        Net cash used for investing activities     (3,727 )     (6,537 )
                         
Cash Flows From Financing Activities:                
  Payments for repurchases of common stock     (8,204 )     (3,457 )
  Proceeds from issuances of common stock     1,300       513  
  Payments of dividends to stockholders     (1,433 )     (909 )
  Proceeds from borrowings, net of issuance costs     4,974       -  
  Repayments of borrowings     (1,700 )     (1,405 )
  Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     220       71  
  Distributions to noncontrolling interests     (31 )     (163 )
                   
        Net cash used for financing activities     (4,874 )     (5,350 )
                         
Effect of exchange rate changes on cash and cash equivalents     87       (181 )
                 
Net increase (decrease) in cash and cash equivalents     1,146       (2,382 )
                 
Cash and cash equivalents at beginning of period     14,955       16,163  
                 
Cash and cash equivalents at end of period   $ 16,101     $ 13,781  
                 
                 
                 
ORACLE CORPORATION
Q3 FISCAL 2013 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($ in millions)
                               
  Fiscal 2012   Fiscal 2013
  Q1   Q2   Q3   Q4   Q1   Q2   Q3   Q4
                                             
GAAP Operating Cash Flow $ 12,818   $ 13,129   $ 13,463   $ 13,743   $ 13,993   $ 13,533   $ 13,717    
                                             
Capital Expenditures (2)   (492 )   (500 )   (509 )   (648 )   (627 )   (710 )   (684 )  
                                             
Free Cash Flow $ 12,326   $ 12,629   $ 12,954   $ 13,095   $ 13,366   $ 12,823   $ 13,033    
                                             
% Growth over prior year   46 %   45 %   36 %   22 %   8 %   2 %   1 %  
                                             
                                             
GAAP Net Income $ 9,035   $ 9,356   $ 9,738   $ 9,981   $ 10,175   $ 10,564   $ 10,571    
                                             
Free Cash Flow as a % of Net Income   136 %   135 %   133 %   131 %   131 %   121 %   123 %  
                                             
(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 2013 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
($in millions)
                                                         
                                                         
  Fiscal 2012     Fiscal 2013  
Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3     Q4   TOTAL  
REVENUES                                                                          
New software licenses and cloud software subscriptions $ 1,498     $ 2,048     $ 2,374     $ 3,985     $ 9,906     $ 1,574     $ 2,389     $ 2,332         $ 6,295  
Software license updates and product support   4,022       3,986       4,051       4,152       16,210       4,140       4,260       4,340           12,740  
    Software Revenues   5,520       6,034       6,425       8,137       26,116       5,714       6,649       6,672           19,035  
                                                                           
Hardware systems products   1,029       953       869       977       3,827       779       734       671           2,185  
Hardware systems support   645       625       604       600       2,475       574       587       570           1,730  
    Hardware Systems Revenues   1,674       1,578       1,473       1,577       6,302       1,353       1,321       1,241           3,915  
                                                                           
    Services Revenues   1,180       1,180       1,141       1,202       4,703       1,114       1,124       1,045           3,283  
                                                                           
      Total Revenues $ 8,374     $ 8,792     $ 9,039     $ 10,916     $ 37,121     $ 8,181     $ 9,094     $ 8,958         $ 26,233  
                                                                           
AS REPORTED REVENUE GROWTH RATES                                                                          
New software licenses and cloud software subscriptions   17%       2%       7%       7%       7%       5%       17%       (2% )         6%  
Software license updates and product support   17%       9%       8%       5%       10%       3%       7%       7%           6%  
  Software Revenues   17%       7%       8%       6%       9%       4%       10%       4%           6%  
                                                                           
Hardware systems products   (5% )     (14% )     (16% )     (16% )     (13% )     (24% )     (23% )     (23% )         (23% )
Hardware systems support   4%       (2% )     (4% )     (11% )     (3% )     (11% )     (6% )     (6% )         (8% )
  Hardware Systems Revenues   (1% )     (10% )     (11% )     (14% )     (9% )     (19% )     (16% )     (16% )         (17% )
                                                                           
  Services Revenues   10%       0%       0%       (4% )     1%       (6% )     (5% )     (8% )         (6% )
                                                                           
      Total Revenues   12%       2%       3%       1%       4%       (2% )     3%       (1% )         0%  
                                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                                          
New software licenses and cloud software subscriptions   11%       3%       8%       11%       8%       10%       18%       0%           9%  
Software license updates and product support   10%       9%       9%       8%       9%       8%       8%       8%           8%  
    Software Revenues   11%       7%       9%       10%       9%       9%       11%       5%           8%  
                                                                           
Hardware systems products   (11% )     (14% )     (16% )     (13% )     (14% )     (21% )     (23% )     (22% )         (22% )
Hardware systems support   (3% )     (3% )     (3% )     (7% )     (4% )     (6% )     (5% )     (5% )         (5% )
  Hardware Systems Revenues   (8% )     (10% )     (11% )     (11% )     (10% )     (15% )     (16% )     (15% )         (15% )
                                                                           
  Services Revenues   5%       0%       1%       0%       1%       0%       (3% )     (7% )         (3% )
                                                                           
      Total Revenues   5%       2%       4%       5%       4%       3%       5%       0%           2%  
                                                                           
                                                                           
GEOGRAPHIC REVENUES                                                                          
                                                                           
REVENUES                                                                          
  Americas $ 4,226     $ 4,532     $ 4,707     $ 5,771     $ 19,236     $ 4,324     $ 4,787     $ 4,698         $ 13,808  
  Europe, Middle East & Africa   2,704       2,756       2,787       3,314       11,561       2,383       2,701       2,745           7,829  
  Asia Pacific   1,444       1,504       1,545       1,831       6,324       1,474       1,606       1,515           4,596  
      Total Revenues $ 8,374     $ 8,792     $ 9,039     $ 10,916     $ 37,121     $ 8,181     $ 9,094     $ 8,958         $ 26,233  
                                                                           
                                                                           
HEADCOUNT                                                                          
                                                                           
GEOGRAPHIC AREA                                                                          
  Americas   46,338       46,672       47,884       48,901               49,145       49,584       50,402              
  Europe, Middle East & Africa   22,210       22,725       22,852       22,957               22,584       22,594       22,592              
  Asia Pacific   40,840       41,901       42,908       43,308               44,170       45,051       45,663              
      Total Company   109,388       111,298       113,644       115,166               115,899       117,229       118,657              
                                                                           
(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, 2012 and 2011 for the fiscal 2013 and fiscal 2012 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
   
   
   
 ORACLE CORPORATION
 Q3 FISCAL 2013 FINANCIAL RESULTS
 SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)
 ($in millions)
                                                         
  Fiscal 2012     Fiscal 2013  
  Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3     Q4   TOTAL  
                                                                           
AMERICAS                                                                          
                                                                           
  New software licenses and cloud software subscriptions $ 727     $ 1,027     $ 1,228     $ 2,126     $ 5,107     $ 814     $ 1,253     $ 1,205         $ 3,271  
  Hardware systems products $ 475     $ 496     $ 410     $ 498     $ 1,880     $ 380     $ 370     $ 307         $ 1,056  
                                                                           
AS REPORTED GROWTH RATES                                                                          
  New software licenses and cloud software subscriptions   10%       0%       11%       14%       10%       12%       22%       (2% )         10%  
  Hardware systems products   (12% )     (17% )     (19% )     (17% )     (16% )     (20% )     (25% )     (25% )         (24% )
                                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                                          
  New software licenses and cloud software subscriptions   9%       1%       11%       16%       11%       14%       22%       (1% )         11%  
  Hardware systems products   (13% )     (17% )     (18% )     (16% )     (16% )     (19% )     (25% )     (25% )         (23% )
                                                                           
                                                                           
EUROPE / MIDDLE EAST / AFRICA                                                                          
                                                                           
  New software licenses and cloud software subscriptions $ 440     $ 584     $ 693     $ 1,166     $ 2,884     $ 403     $ 641     $ 690         $ 1,734  
  Hardware systems products $ 344     $ 272     $ 265     $ 260     $ 1,140     $ 214     $ 198     $ 201         $ 615  
                                                                           
AS REPORTED GROWTH RATES                                                                          
  New software licenses and cloud software subscriptions   25%       2%       (1% )     (5% )     1%       (8% )     10%       0%           1%  
  Hardware systems products   2%       (17% )     (20% )     (24% )     (15% )     (38% )     (27% )     (24% )         (30% )
                                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                                          
  New software licenses and cloud software subscriptions   15%       3%       1%       2%       4%       1%       12%       1%           5%  
  Hardware systems products   (11% )     (17% )     (18% )     (18% )     (16% )     (30% )     (25% )     (24% )         (27% )
                                                                           
                                                                           
ASIA PACIFIC                                                                          
                                                                           
  New software licenses and cloud software subscriptions $ 331     $ 437     $ 453     $ 693     $ 1,915     $ 357     $ 495     $ 437         $ 1,290  
  Hardware systems products $ 210     $ 185     $ 194     $ 219     $ 807     $ 185     $ 166     $ 163         $ 514  
                                                                           
AS REPORTED GROWTH RATES                                                                          
  New software licenses and cloud software subscriptions   20%       11%       13%       8%       12%       8%       13%       (3% )         6%  
  Hardware systems products   6%       2%       (3% )     1%       1%       (12% )     (10% )     (16% )         (13% )
                                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                                          
  New software licenses and cloud software subscriptions   9%       8%       11%       13%       11%       12%       13%       1%           8%  
  Hardware systems products   (5% )     (1% )     (6% )     1%       (3% )     (10% )     (12% )     (14% )         (12% )
                                                                           
                                                                           
TOTAL COMPANY                                                                          
                                                                           
  New software licenses and cloud software subscriptions $ 1,498     $ 2,048     $ 2,374     $ 3,985     $ 9,906     $ 1,574     $ 2,389     $ 2,332         $ 6,295  
  Hardware systems products $ 1,029     $ 953     $ 869     $ 977     $ 3,827     $ 779     $ 734     $ 671         $ 2,185  
                                                                           
AS REPORTED GROWTH RATES                                                                          
  New software licenses and cloud software subscriptions   17%       2%       7%       7%       7%       5%       17%       (2% )         6%  
  Hardware systems products   (5% )     (14% )     (16% )     (16% )     (13% )     (24% )     (23% )     (23% )         (23% )
                                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                                          
  New software licenses and cloud software subscriptions   11%       3%       8%       11%       8%       10%       18%       0%           9%  
  Hardware systems products   (11% )     (14% )     (16% )     (13% )     (14% )     (21% )     (23% )     (22% )         (22% )
                                                                           
   
(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, 2012 and 2011 for the fiscal 2013 and fiscal 2012 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 2013 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 changes in fair value of contingent consideration payable, 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