SOURCE: Oracle Corporation

Oracle Corporation

December 17, 2014 16:00 ET

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

Software and Cloud Revenue up 5% to $7.3 Billion

REDWOOD SHORES, CA--(Marketwired - Dec 17, 2014) - Oracle Corporation (NYSE: ORCL) today announced that fiscal 2015 Q2 Total Revenues were up 3% to $9.6 billion. Software and Cloud Revenues was up 5% to $7.3 billion. Cloud software-as-a-service (SaaS), platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) revenue was up 45% to $516 million. Hardware Systems revenues were up 1% to $1.3 billion. GAAP operating income was up 4% to $3.5 billion, and the GAAP operating margin was 37%. Non-GAAP operating income was up 3% to $4.4 billion, and the non-GAAP operating margin was 46%. GAAP net income was down 2% to $2.5 billion while non-GAAP net income was down 1% to $3.1 billion. GAAP earnings per share were $0.56, unchanged from last year, while non-GAAP earnings per share were up 1% at $0.69. GAAP operating cash flow on a trailing twelve-month basis was $15.3 billion.

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

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

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

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

The Board of Directors also declared a quarterly cash dividend of $0.12 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on January 7, 2015, with a payment date of January 28, 2015.

Q2 Fiscal 2015 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (816) 287-5563, Passcode: 425392. To access the live webcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle's Q2 results and Fiscal 2015 financial tables are available on the Oracle Investor Relations website.

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

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

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

"Safe Harbor" Statement: Statements in this press release relating to Oracle's future plans, expectations, beliefs, intentions and prospects, including statements regarding our new cloud bookings and new cloud sales, are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, geopolitical and market conditions, including the continued slow economic recovery in the U.S. and other parts of the world, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for support contracts. (3) Our cloud computing strategy, including our Oracle Cloud Software-as-a-Service, Platform-as-a-Service, Infrastructure-as-a-Service and our new Database as a Service offerings, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses, cloud software subscriptions or hardware systems products or purchase or renew support contracts. (5) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (6) If the security measures for our software, hardware, services or Oracle Cloud offerings are compromised or if such offerings contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and financial exposure. (7) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle's Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of December 17, 2014. Oracle undertakes no duty to update any statement in light of new information or future events. 

                             
ORACLE CORPORATION  
   
Q2 FISCAL 2015 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
($ in millions, except per share data)  
                             
      Three Months Ended November 30,          
     
2014
  % of
Revenues
 
2013
  % of
Revenues
  % Increase
(Decrease)

in US $
  % Increase
(Decrease)

in Constant
Currency (1)
 
REVENUES                              
  New software licenses   $ 2,045   21 % $ 2,121   23 % (4 %) 0 %
  Cloud software-as-a-service and platform-as-a-service     361   4 %   259   2 % 39 % 41 %
  Cloud infrastructure-as-a-service     155   1 %   97   1 % 60 % 62 %
  Software license updates and product support     4,768   50 %   4,516   49 % 6 % 9 %
    Software and Cloud Revenues     7,329   76 %   6,993   75 % 5 % 8 %
  Hardware systems products     717   8 %   714   8 % 0 % 4 %
  Hardware systems support     617   6 %   609   6 % 1 % 5 %
    Hardware Systems Revenues     1,334   14 %   1,323   14 % 1 % 4 %
    Services Revenues     935   10 %   959   11 % (3 %) 1 %
      Total Revenues     9,598   100 %   9,275   100 % 3 % 7 %
OPERATING EXPENSES                              
  Sales and marketing     1,897   20 %   1,877   20 % 1 % 4 %
  Cloud software-as-a-service and platform-as-a-service     165   2 %   104   1 % 58 % 60 %
  Cloud infrastructure-as-a-service     87   1 %   76   1 % 15 % 17 %
  Software license updates and product support     296   3 %   285   3 % 4 % 8 %
  Hardware systems products     369   4 %   369   4 % 0 % 4 %
  Hardware systems support     218   2 %   214   2 % 2 % 5 %
  Services     764   8 %   759   8 % 1 % 4 %
  Research and development     1,389   14 %   1,273   14 % 9 % 10 %
  General and administrative     272   3 %   262   3 % 4 % 5 %
  Amortization of intangible assets     568   6 %   577   6 % (2 %) (2 %)
  Acquisition related and other     (20 ) 0 %   17   0 % (224 %) (221 %)
  Restructuring     51   0 %   52   1 % (2 %) 3 %
      Total Operating Expenses     6,056   63 %   5,865   63 % 3 % 6 %
OPERATING INCOME     3,542   37 %   3,410   37 % 4 % 9 %
  Interest expense     (282 ) (3 %)   (230 ) (2 %) 23 % 23 %
  Non-operating income, net     9   0 %   23   0 % (61 %) (56 %)
INCOME BEFORE PROVISION FOR INCOME TAXES     3,269   34 %   3,203   35 % 2 % 7 %
  Provision for income taxes     767   8 %   650   7 % 18 % 24 %
NET INCOME   $ 2,502   26 % $ 2,553   28 % (2 %) 3 %
                                 
EARNINGS PER SHARE:                              
  Basic   $ 0.57       $ 0.56              
  Diluted   $ 0.56       $ 0.56              
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                              
  Basic     4,417         4,535              
  Diluted     4,505         4,600              
                                 
   
(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2014, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended November 30, 2014 compared with the corresponding prior year period decreased our revenues by 4 percentage points, operating expenses by 3 percentage points and operating income by 5 percentage points.
 
 
 
ORACLE CORPORATION
 
Q2 FISCAL 2015 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
 
    Three Months Ended November 30,     % Increase (Decrease)
in US $
    % Increase (Decrease) in Constant Currency (2)  
    2014           2014     2013           2013                          
    GAAP     Adj.     Non-GAAP     GAAP     Adj.     Non-GAAP     GAAP     Non-GAAP     GAAP     Non-GAAP  
                                                                         
TOTAL REVENUES (3) (4) (5)   $ 9,598     $ 10     $ 9,608     $ 9,275     $ 8     $ 9,283     3 %   3 %   7 %   7 %
                                                                         
TOTAL SOFTWARE AND CLOUD REVENUES (3) (4)   $ 7,329     $ 8     $ 7,337     $ 6,993     $ 4     $ 6,997     5 %   5 %   8 %   8 %
  New software licenses     2,045       -       2,045       2,121       -       2,121     (4 %)   (4 %)   0 %   0 %
  Cloud software-as-a-service and platform-as-a-service (3)     361       3       364       259       3       262     39 %   39 %   41 %   41 %
  Cloud infrastructure-as-a-service     155       -       155       97       -       97     60 %   60 %   62 %   62 %
  Software license updates and product support (4)     4,768       5       4,773       4,516       1       4,517     6 %   6 %   9 %   9 %
                                                                         
TOTAL HARDWARE SYSTEMS REVENUES (5)   $ 1,334     $ 2     $ 1,336     $ 1,323     $ 4     $ 1,327     1 %   1 %   4 %   4 %
  Hardware systems products     717       -       717       714       -       714     0 %   0 %   4 %   4 %
  Hardware systems support (5)     617       2       619       609       4       613     1 %   1 %   5 %   4 %
                                                                         
TOTAL OPERATING EXPENSES   $ 6,056     $ (839 )   $ 5,217     $ 5,865     $ (828 )   $ 5,037     3 %   4 %   6 %   6 %
  Stock-based compensation (6)     240       (240 )     -       182       (182 )     -     32 %   *     32 %   *  
  Amortization of intangible assets (7)     568       (568 )     -       577       (577 )     -     (2 %)   *     (2 %)   *  
  Acquisition related and other     (20 )     20       -       17       (17 )     -     (224 %)   *     (221 %)   *  
  Restructuring     51       (51 )     -       52       (52 )     -     (2 %)   *     3 %   *  
OPERATING INCOME   $ 3,542     $ 849     $ 4,391     $ 3,410     $ 836     $ 4,246     4 %   3 %   9 %   7 %
OPERATING MARGIN %     37 %             46 %     37 %             46 %   15 bp.     (4) bp.     70 bp.     28 bp.  
INCOME TAX EFFECTS (8)   $ 767     $ 234     $ 1,001     $ 650     $ 234     $ 884     18 %   13 %   24 %   18 %
NET INCOME   $ 2,502     $ 615     $ 3,117     $ 2,553     $ 602     $ 3,155     (2 %)   (1 %)   3 %   3 %
DILUTED EARNINGS PER SHARE   $ 0.56             $ 0.69     $ 0.56             $ 0.69     0 %   1 %   5 %   5 %
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,505       -       4,505       4,600       -       4,600     (2 %)   (2 %)   (2 %)   (2 %)
                                                                         
   
(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.
   
(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2014, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
   
(3) As of November 30, 2014, approximately $6 million and $4 million in estimated revenues related to assumed cloud software-as-a-service and platform-as-a-service contracts will not be recognized for the remainder of fiscal 2015 and fiscal 2016, respectively, due to business combination accounting rules.
   
(4) As of November 30, 2014, approximately $5 million and $2 million in estimated revenues related to assumed software license updates and product support contracts will not be recognized for the remainder of fiscal 2015 and fiscal 2016, respectively, due to business combination accounting rules.
   
(5) As of November 30, 2014, approximately $1 million in estimated revenues related to hardware systems support contracts will not be recognized for each of the remainder of fiscal 2015 and fiscal 2016 due to business combination accounting rules.
   
(6) Stock-based compensation was included in the following GAAP operating expense categories:
                               
      Three Months Ended   Three Months Ended
      November 30, 2014   November 30, 2013
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing   $ 43   $ (43 )   $ -   $ 37   $ (37 )   $ -
  Cloud software-as-a-service and platform-as-a-service     3     (3 )     -     2     (2 )     -
  Cloud infrastructure-as-a-service     1     (1 )     -     1     (1 )     -
  Software license updates and product support     4     (4 )     -     5     (5 )     -
  Hardware systems products     1     (1 )     -     1     (1 )     -
  Hardware systems support     2     (2 )     -     1     (1 )     -
  Services     9     (9 )     -     6     (6 )     -
  Research and Development     134     (134 )     -     87     (87 )     -
  General and administrative     43     (43 )     -     42     (42 )     -
    Subtotal     240     (240 )     -     182     (182 )     -
  Acquisition related and other     1     (1 )     -     1     (1 )     -
    Total stock-based compensation   $ 241   $ (241 )   $ -   $ 183   $ (183 )   $ -
                                           
(7) Estimated future annual amortization expense related to intangible assets as of November 30, 2014 was as follows:
  Remainder of Fiscal 2015   $ 1,008                                  
  Fiscal 2016     1,574                                  
  Fiscal 2017     951                                  
  Fiscal 2018     806                                  
  Fiscal 2019     699                                  
  Fiscal 2020     549                                  
  Thereafter     1,580                                  
    Total intangible assets, net   $ 7,167                                  
                                           
(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 23.5% and 20.3% in the second quarter of fiscal 2015 and 2014, respectively, and an effective non-GAAP tax rate of 24.3% and 21.9% in the second quarter of fiscal 2015 and 2014, respectively. The differences between our GAAP and non-GAAP tax rates in the second quarter of fiscal 2015 and 2014 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
                                           
* Not meaningful                                        
                                     
   
   
ORACLE CORPORATION  
   
Q2 FISCAL 2015 YEAR TO DATE FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
($ in millions, except per share data)  
                                     
          Six Months Ended November 30,              
         
2014
    % of
Revenues 
 
2013
    % of
Revenues 
 % Increase
(Decrease)

in US $  
  % Increase
(Decrease)

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