SOURCE: Oracle Corporation

Oracle Corporation

March 17, 2015 16:00 ET

Total Revenue Unchanged at $9.3 Billion but Up 6% in Constant Currency

Total SaaS, PaaS and IaaS Cloud Revenue Up 29% to $527 Million and Up 33% in Constant Currency

REDWOOD SHORES, CA--(Marketwired - Mar 17, 2015) - Oracle Corporation (NYSE: ORCL) today announced that fiscal 2015 Q3 Total Revenues were unchanged at $9.3 billion. The strengthening of the U.S. dollar compared to foreign currencies had a significant impact on results in the quarter. Without the strengthening of the U.S. dollar, Total Revenues would have been up 6% as measured in constant currency. Software and Cloud Revenues were up 1% to $7.2 billion, and up 7% in constant currency. Cloud software-as-a-service (SaaS) and platform-as-a-service (PaaS) grew 30% to $372 million, and grew 34% in constant currency. Hardware Systems Revenues were down 2% to $1.3 billion, but were up 5% in constant currency.

GAAP Operating Income was down 5% to $3.4 billion, and the GAAP operating margin was 36%. Non-GAAP Operating Income was down 4% to $4.2 billion, and the non-GAAP operating margin was 45%. Without the impact of the U.S. dollar strengthening compared to foreign currencies, GAAP Operating Income would have been up 4% and the operating margin would have been 37%, while non-GAAP Operating Income would have been up 4% and the operating margin would have been 46%. GAAP Net Income was down 3% to $2.5 billion while non-GAAP Net Income was down 1% to $3.1 billion. In constant currency, both GAAP and non-GAAP Net Income were up 7%. GAAP Earnings Per Share was $0.56, down 1%, while non-GAAP Earnings Per Share was $0.68, unchanged from last year. In constant currency, both GAAP and non-GAAP Earnings Per Share would have been up 9%.  

Short-term Deferred revenue was $6.4 billion, up 6% in constant currency compared with a year ago. Operating cash flow on a trailing twelve-month basis was $14.5 billion.     

"We beat the midpoint of my constant currency guidance on every single financial metric this past quarter," said Oracle CEO, Safra Catz. "EPS was up 9%, Total Revenue was up 6%, Hardware Revenues were up 5%, Software and Cloud revenues were up 7%, and Total Cloud SaaS, PaaS and IaaS revenues were up 33%. Once you normalize for exchange rates, it was a very strong growth quarter for us."

"In Q3, we sold nearly $200 million of new SaaS and PaaS business as measured in annual recurring revenue," said Oracle CEO, Mark Hurd. "In Q4, we expect to sell over $300 million of new SaaS and PaaS annual recurring revenue. That means we have a real chance to sell more SaaS and PaaS new business this coming quarter than any other cloud services provider. I think our hyper-growth in the cloud comes as a big surprise to a lot of people."

"We are well on our way to selling over $1 billion of new SaaS and PaaS business in calendar 2015," said Oracle Chairman and CTO Larry Ellison. "Salesforce.com has announced that it also expects to add about $1 billion of new SaaS and PaaS business this year. So it's going to be a close race who sells more in the cloud this year, us or them. Stay tuned."

Oracle also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per share of outstanding common stock, reflecting a 25% increase over the current quarterly dividend of $0.12. Larry Ellison, Oracle's Chairman of the Board, Chief Technology Officer and largest stockholder, did not participate in the deliberation or the vote on this matter. This increased dividend will be paid to stockholders of record as of the close of business on April 7, 2015, with a payment date of April 28, 2015.

Q3 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 Q3 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: 2334187.

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 expectations of future revenues from our SaaS and PaaS business and the competitive landscape for such business, are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, 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, 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 March 17, 2015. Oracle undertakes no duty to update any statement in light of new information or future events.

 
ORACLE CORPORATION
 
Q3 FISCAL 2015 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
 
    Three Months Ended February 28,         
    2015   % of Revenues   2014   % of Revenues   % Increase 
(Decrease)
in US $
  % Increase
(Decrease)
in Constant Currency (1)
REVENUES                            
  New software licenses   $ 1,982   21%   $ 2,128   23%   (7%)   0%
  Cloud software-as-a-service and platform-as-a-service     372   4%     287   3%   30%   34%
  Cloud infrastructure-as-a-service     155   2%     121   1%   28%   32%
  Software license updates and product support     4,661   50%     4,564   49%   2%   8%
    Software and Cloud Revenues     7,170   77%     7,100   76%   1%   7%
  Hardware systems products     712   8%     725   8%   (2%)   6%
  Hardware systems support     587   6%     598   6%   (2%)   4%
    Hardware Systems Revenues     1,299   14%     1,323   14%   (2%)   5%
    Services Revenues     858   9%     884   10%   (3%)   3%
      Total Revenues     9,327   100%     9,307   100%   0%   6%
OPERATING EXPENSES                            
  Sales and marketing     1,839   20%     1,829   20%   1%   7%
  Cloud software-as-a-service and platform-as-a-service     203   2%     112   1%   81%   87%
  Cloud infrastructure-as-a-service     88   1%     76   1%   16%   19%
  Software license updates and product support     300   3%     286   3%   5%   10%
  Hardware systems products     367   4%     379   4%   (3%)   5%
  Hardware systems support     218   2%     207   2%   5%   11%
  Services     724   8%     715   8%   1%   8%
  Research and development     1,370   15%     1,292   14%   6%   8%
  General and administrative     252   3%     251   3%   0%   4%
  Amortization of intangible assets     527   6%     560   6%   (6%)   (6%)
  Acquisition related and other     8   0%     (5)   0%   241%   227%
  Restructuring     48   0%     38   0%   28%   43%
      Total Operating Expenses     5,944   64%     5,740   62%   4%   8%
OPERATING INCOME     3,383   36%     3,567   38%   (5%)   4%
  Interest expense     (273)   (2%)     (228)   (2%)   20%   20%
  Non-operating income (expense), net     40   0%     (90)   (1%)   145%   158%
INCOME BEFORE PROVISION FOR INCOME TAXES     3,150   34%     3,249   35%   (3%)   7%
  Provision for income taxes     655   7%     684   7%   (4%)   6%
NET INCOME   $ 2,495   27%   $ 2,565   28%   (3%)   7%
                             
EARNINGS PER SHARE:                            
  Basic   $ 0.57       $ 0.57            
  Diluted   $ 0.56       $ 0.56            
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                            
  Basic     4,389         4,496            
  Diluted     4,494         4,575            
                             
(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 February 28, 2015 compared with the corresponding prior year period decreased our revenues by 6 percentage points, operating expenses by 4 percentage points and operating income by 9 percentage points.
   
   
   
ORACLE CORPORATION
 
Q3 FISCAL 2015 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
                                       
  Three Months Ended February 28,   % Increase (Decrease)
in US $
  % Increase (Decrease) in Constant Currency (2)
  2015 GAAP   Adj.   2015 Non-GAAP   2014 GAAP   Adj.   2014 Non-GAAP   GAAP   Non-GAAP   GAAP   Non-GAAP
                                                   
TOTAL REVENUES (3) (4) (5) $ 9,327   $ 7   $ 9,334   $ 9,307   $ 8   $ 9,315   0%   0%   6%   6%
                                                   
TOTAL SOFTWARE AND CLOUD REVENUES (3) (4) $ 7,170   $ 6   $ 7,176   $ 7,100   $ 6   $ 7,106   1%   1%   7%   7%
  New software licenses   1,982     -     1,982     2,128     -     2,128   (7%)   (7%)   0%   0%
  Cloud software-as-a-service and platform-as-a-service (3)   372     3     375     287     5     292   30%   29%   34%   33%
  Cloud infrastructure-as-a-service   155     -     155     121     -     121   28%   28%   32%   32%
  Software license updates and product support (4)   4,661     3     4,664     4,564     1     4,565   2%   2%   8%   8%
                                                   
TOTAL HARDWARE SYSTEMS REVENUES (5) $ 1,299   $ 1   $ 1,300   $ 1,323   $ 2   $ 1,325   (2%)   (2%)   5%   5%
  Hardware systems products   712     -     712     725     -     725   (2%)   (2%)   6%   6%
  Hardware systems support (5)   587     1     588     598     2     600   (2%)   (2%)   4%   4%
                                                   
TOTAL OPERATING EXPENSES $ 5,944   $ (816)   $ 5,128   $ 5,740   $ (791)   $ 4,949   4%   4%   8%   9%
  Stock-based compensation (6)   233     (233)     -     198     (198)     -   18%   *   18%   *
  Amortization of intangible assets (7)   527     (527)     -     560     (560)     -   (6%)   *   (6%)   *
  Acquisition related and other   8     (8)     -     (5)     5     -   241%   *   227%   *
  Restructuring   48     (48)     -     38     (38)     -   28%   *   43%   *
                                                   
OPERATING INCOME $ 3,383   $ 823   $ 4,206   $ 3,567   $ 799   $ 4,366   (5%)   (4%)   4%   4%
                                                   
OPERATING MARGIN %   36%           45%     38%           47%   (205) bp.   (181) bp.   (97) bp.   (119) bp.
                                                   
INCOME TAX EFFECTS (8) $ 655   $ 247   $ 902   $ 684   $ 251   $ 935   (4%)   (4%)   6%   4%
                                                   
NET INCOME $ 2,495   $ 576   $ 3,071   $ 2,565   $ 548   $ 3,113   (3%)   (1%)   7%   7%
                                                   
DILUTED EARNINGS PER SHARE $ 0.56         $ 0.68   $ 0.56         $ 0.68   (1%)   0%   9%   9%
                                                   
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   4,494     -     4,494     4,575     -     4,575   (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 February 28, 2015, approximately $3 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 February 28, 2015, approximately $2 million in estimated revenues related to assumed software license updates and product support contracts will not be recognized for each of the remainder of fiscal 2015 and fiscal 2016 due to business combination accounting rules.
   
(5) As of February 28, 2015, 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
    February 28, 2015   February 28, 2014
    GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing $ 45   $ (45 )   $ -   $ 40   $ (40 )   $ -
  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   6     (6 )     -     6     (6 )     -
  Hardware systems products   1     (1 )     -     1     (1 )     -
  Hardware systems support   2     (2 )     -     1     (1 )     -
  Services   8     (8 )     -     6     (6 )     -
  Research and development   138     (138 )     -     99     (99 )     -
  General and administrative   29     (29 )     -     42     (42 )     -
    Subtotal   233     (233 )     -     198     (198 )     -
  Acquisition related and other   1     (1 )     -     -     -       -
    Total stock-based compensation $ 234   $ (234 )   $ -   $ 198   $ (198 )   $ -
                         
(7) Estimated future annual amortization expense related to intangible assets as of February 28, 2015 was as follows:
  Remainder of Fiscal 2015 $ 491                    
  Fiscal 2016   1,601                    
  Fiscal 2017   976                    
  Fiscal 2018   831                    
  Fiscal 2019   725                    
  Fiscal 2020   574                    
  Thereafter   1,644                    
    Total intangible assets, net $ 6,842                    
                           
(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 20.8% and 21.0% in the third quarter of fiscal 2015 and 2014, respectively, and an effective non-GAAP tax rate of 22.7% and 23.1% in the third quarter of fiscal 2015 and 2014, respectively. The differences between our GAAP and non-GAAP tax rates in the third 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
                       
Q3 FISCAL 2015 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
                       
  Nine Months Ended February 28,         
  2015   % of Revenues   2014   % of Revenues   % Increase (Decrease)in US $   % Increase 
(Decrease)in
Constant Currency (1)
REVENUES                          
  New software licenses $ 5,397   19%   $ 5,647   21%   (4%)   (1%)
  Cloud software-as-a-service and platform-as-a-service   1,069   4%     800   3%   34%   36%
  Cloud infrastructure-as-a-service   448   2%     327   1%   37%   38%
  Software license updates and product support   14,161   51%     13,511   50%   5%   8%
    Software and Cloud Revenues   21,075   76%     20,285   75%   4%   7%
  Hardware systems products   2,007   7%     2,108   8%   (5%)   (1%)
  Hardware systems support   1,791   7%     1,800   7%   0%   2%
    Hardware Systems Revenues   3,798   14%     3,908   15%   (3%)   0%
    Services Revenues   2,647   10%     2,762   10%   (4%)   (1%)
      Total Revenues   27,520   100%     26,955   100%   2%   5%
OPERATING EXPENSES                          
  Sales and marketing   5,443   20%     5,326   20%   2%   5%
  Cloud software-as-a-service and platform-as-a-service   517   2%     318   1%   63%   65%
  Cloud infrastructure-as-a-service   254   1%     224   1%   14%   15%
  Software license updates and product support   867   3%     860   3%   1%   4%
  Hardware systems products   1,034   4%     1,078   4%   (4%)   0%
  Hardware systems support   628   2%     630   2%   0%   2%
  Services   2,179   8%     2,194   8%   (1%)   2%
  Research and development   4,088   15%     3,803   14%   8%   8%
  General and administrative   799   3%     773   3%   3%   5%
  Amortization of intangible assets   1,642   6%     1,732   6%   (5%)   (5%)
  Acquisition related and other   12   0%     21   0%   (45%)   (47%)
  Restructuring   168   0%     146   1%   16%   20%
      Total Operating Expenses   17,631   64%     17,105   63%   3%   5%
OPERATING INCOME   9,889   36%     9,850   37%   0%   5%
  Interest expense   (817)   (3%)     (674)   (3%)   21%   21%
  Non-operating income (expense), net   65   0%     (60)   0%   208%   242%
INCOME BEFORE PROVISION FOR INCOME TAXES   9,137   33%     9,116   34%   0%   5%
  Provision for income taxes   1,956   7%     1,807   7%   8%   14%
NET INCOME $ 7,181   26%   $ 7,309   27%   (2%)   3%
                           
EARNINGS PER SHARE:                          
  Basic $ 1.63       $ 1.61            
  Diluted $ 1.59       $ 1.58            
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                          
  Basic   4,419         4,546            
  Diluted   4,516         4,616            
                           
(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 nine months ended February 28, 2015 compared with the corresponding prior year period decreased our revenues by 3 percentage points, operating expenses by 2 percentage points and operating income by 5 percentage points.
   
   
   
ORACLE CORPORATION
 
Q3 FISCAL 2015 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
 
    Nine Months Ended February 28,   % Increase (Decrease)
in US $
  % Increase (Decrease) in Constant Currency (2)
    2015 GAAP   Adj.   2015 Non-GAAP   2014 GAAP   Adj.   2014 Non-GAAP   GAAP   Non-GAAP   GAAP   Non-GAAP
                                                     
TOTAL REVENUES (3) (4) (5)   $ 27,520   $ 21   $ 27,541   $ 26,955   $ 25   $ 26,980   2%   2%   5%   5%
                                                     
TOTAL SOFTWARE AND CLOUD REVENUES (3) (4)   $ 21,075   $ 18   $ 21,093   $ 20,285   $ 14   $ 20,299   4%   4%   7%   7%
New software licenses     5,397     -     5,397     5,647     -     5,647   (4%)   (4%)   (1%)   (1%)
  Cloud software-as-a-service and platform-as-a-service (3)     1,069     9     1,078     800     12     812   34%   33%   36%   35%
  Cloud infrastructure-as-a-service     448     -     448     327     -     327   37%   37%   38%   38%
  Software license updates and product support (4)     14,161     9     14,170     13,511     2     13,513   5%   5%   8%   8%
                                                     
TOTAL HARDWARE SYSTEMS REVENUES (5)   $ 3,798   $ 3   $ 3,801   $ 3,908   $ 11   $ 3,919   (3%)   (3%)   0%   0%
  Hardware systems products     2,007     -     2,007     2,108     -     2,108   (5%)   (5%)   (1%)   (1%)
  Hardware systems support (5)     1,791     3     1,794     1,800     11     1,811   0%   (1%)   2%   2%
                                                     
TOTAL OPERATING EXPENSES   $ 17,631   $ (2,506)   $ 15,125   $ 17,105   $ (2,478)   $ 14,627   3%   3%   5%   6%
  Stock-based compensation (6)     684     (684)     -     579     (579)     -   18%   *   18%   *
  Amortization of intangible assets (7)     1,642     (1,642)     -     1,732     (1,732)     -   (5%)   *   (5%)   *
  Acquisition related and other     12     (12)     -     21     (21)     -   (45%)   *   (47%)   *
  Restructuring     168     (168)     -     146     (146)     -   16%   *   20%   *
                                                     
OPERATING INCOME   $ 9,889   $ 2,527   $ 12,416   $ 9,850   $ 2,503   $ 12,353   0%   1%   5%   4%
                                                     
OPERATING MARGIN %     36%           45%     37%           46%   (61) bp.   (70) bp.   (4) bp.   (38) bp.
                                                     
INCOME TAX EFFECTS (8)   $ 1,956   $ 715   $ 2,671   $ 1,807   $ 783   $ 2,590   8%   3%   14%   7%
                                                     
NET INCOME   $ 7,181   $ 1,812   $ 8,993   $ 7,309   $ 1,720   $ 9,029   (2%)   0%   3%   4%
                                                     
DILUTED EARNINGS PER SHARE   $ 1.59         $ 1.99   $ 1.58         $ 1.96   0%   2%   6%   6%
                                                     
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,516     -     4,516     4,616     -     4,616   (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 February 28, 2015, approximately $3 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 February 28, 2015, approximately $2 million in estimated revenues related to assumed software license updates and product support contracts will not be recognized for each of the remainder of fiscal 2015 and fiscal 2016 due to business combination accounting rules.
   
(5) As of February 28, 2015, 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:
                             
    Nine Months Ended   Nine Months Ended
    February 28, 2015   February 28, 2014
    GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing $ 131   $ (131 )   $ -   $ 118   $ (118 )   $ -
  Cloud software-as-a-service and platform-as-a-service   8     (8 )     -     5     (5 )     -
  Cloud infrastructure-as-a-service   3     (3 )     -     2     (2 )     -
  Software license updates and product support   15     (15 )     -     16     (16 )     -
  Hardware systems products   4     (4 )     -     4     (4 )     -
  Hardware systems support   4     (4 )     -     4     (4 )     -
  Services   23     (23 )     -     18     (18 )     -
  Research and development   380     (380 )     -     285     (285 )     -
  General and administrative   116     (116 )     -     127     (127 )     -
    Subtotal   684     (684 )     -     579     (579 )     -
  Acquisition related and other   5     (5 )     -     4     (4 )     -
    Total stock-based compensation $ 689   $ (689 )   $ -   $ 583   $ (583 )   $ -
                                           
(7) Estimated future annual amortization expense related to intangible assets as of February 28, 2015 was as follows:
  Remainder of Fiscal 2015 $ 491                    
  Fiscal 2016   1,601                    
  Fiscal 2017   976                    
  Fiscal 2018   831                    
  Fiscal 2019   725                    
  Fiscal 2020   574                    
  Thereafter   1,644                    
    Total intangible assets, net $ 6,842                    
                           
(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.4% and 19.8% in the first nine months of fiscal 2015 and 2014, respectively, and an effective non-GAAP tax rate of 22.9% and 22.3% in the first nine months of fiscal 2015 and 2014, respectively. The differences between our GAAP and non-GAAP tax rates in the first nine months 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
         
Q3 FISCAL 2015 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
         
    February 28,   May 31,
    2015   2014
ASSETS            
  Current Assets:            
    Cash and cash equivalents   $ 13,701   $ 17,769
    Marketable securities     30,076     21,050
    Trade receivables, net     4,178     6,087
    Inventories     285     189
    Deferred tax assets     931     914
    Prepaid expenses and other current assets     2,123     2,129
      Total Current Assets     51,294     48,138
  Non-Current Assets:            
    Property, plant and equipment, net     3,335     3,061
    Intangible assets, net     6,842     6,137
    Goodwill     34,328     29,652
    Deferred tax assets     674     837
    Other assets     2,343     2,519
      Total Non-Current Assets     47,522     42,206
TOTAL ASSETS   $ 98,816   $ 90,344
             
LIABILITIES AND EQUITY            
  Current Liabilities:            
    Notes payable, current   $ 1,999   $ 1,508
    Accounts payable     626     471
    Accrued compensation and related benefits     1,564     1,940
    Income taxes payable     318     416
    Deferred revenues     6,443     7,269
    Other current liabilities     2,842     2,785
      Total Current Liabilities     13,792     14,389
  Non-Current Liabilities:            
    Notes payable, non-current     30,258     22,667
    Income taxes payable     4,297     4,184
    Other non-current liabilities     1,937     1,657
      Total Non-Current Liabilities     36,492     28,508
               
  Equity     48,532     47,447
TOTAL LIABILITIES AND EQUITY   $ 98,816   $ 90,344
             
             
             
   
ORACLE CORPORATION  
   
Q3 FISCAL 2015 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
($ in millions)  
             
    Nine Months Ended
February 28,
 
    2015     2014  
Cash Flows From Operating Activities:                
  Net income   $ 7,181     $ 7,309  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation     502       452  
    Amortization of intangible assets     1,642       1,732  
    Deferred income taxes     (486 )     (307 )
    Stock-based compensation     689       583  
    Tax benefits on the exercise of stock options and vesting of restricted stock-based awards     284       288  
    Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     (167 )     (162 )
    Other, net     126       72  
    Changes in operating assets and liabilities, net of effects from acquisitions:                
      Decrease in trade receivables, net     1,867       2,006  
      (Increase) decrease in inventories     (78 )     20  
      Decrease in prepaid expenses and other assets     362       181  
      Decrease in accounts payable and other liabilities     (1,204 )     (730 )
      Decrease in income taxes payable     (369 )     (457 )
      Decrease in deferred revenues     (296 )     (522 )
        Net cash provided by operating activities     10,053       10,465  
Cash Flows From Investing Activities:                
  Purchases of marketable securities and other investments     (23,339 )     (25,550 )
  Proceeds from maturities and sales of marketable securities and other investments     15,042       23,110  
  Acquisitions, net of cash acquired     (6,232 )     (3,066 )
  Capital expenditures     (794 )     (426 )
        Net cash used for investing activities     (15,323 )     (5,932 )
Cash Flows From Financing Activities:                
  Payments for repurchases of common stock     (6,079 )     (7,841 )
  Proceeds from issuances of common stock     1,445       1,519  
  Payments of dividends to stockholders     (1,600 )     (1,640 )
  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     167       162  
  Distributions to noncontrolling interests     (196 )     (28 )
        Net cash provided by (used for) financing activities     2,182       (2,262 )
Effect of exchange rate changes on cash and cash equivalents     (980 )     (52 )
Net (decrease) increase in cash and cash equivalents     (4,068 )     2,219  
Cash and cash equivalents at beginning of period     17,769       14,613  
Cash and cash equivalents at end of period   $ 13,701     $ 16,832  
                 
                 
                 
ORACLE CORPORATION
Q3 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   $ 14,509    
                                             
Capital Expenditures (2)   (664 )   (578 )   (609 )   (580 )   (628 )   (727 )   (948 )  
                                             
Free Cash Flow $ 14,181   $ 14,618   $ 14,420   $ 14,341   $ 14,729   $ 14,546   $ 13,561    
                                             
% Growth over prior year   6 %   14 %   11 %   6 %   4 %   0 %   (6 )%  
                                             
                                             
GAAP Net Income $ 11,082   $ 11,054   $ 11,115   $ 10,955   $ 10,948   $ 10,896   $ 10,827    
                                             
Free Cash Flow as a % of Net Income   128 %   132 %   130 %   131 %   135 %   133 %   125 %  
                                             
(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 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     $ 1,982         $ 5,397  
  Cloud software-as-a-service and platform-as-a-service     254       259       287       322       1,121       337       361       372           1,069  
  Cloud infrastructure-as-a-service     109       97       121       128       456       138       155       155           448  
  Software license updates and product support     4,431       4,516       4,564       4,695       18,206       4,731       4,768       4,661           14,161  
    Software and Cloud Revenues     6,193       6,993       7,100       8,914       29,199       6,576       7,329       7,170           21,075  
                                                                               
  Hardware systems products     669       714       725       870       2,976       578       717       712           2,007  
  Hardware systems support     592       609       598       596       2,396       587       617       587           1,791  
    Hardware Systems Revenues     1,261       1,323       1,323       1,466       5,372       1,165       1,334       1,299           3,798  
                                                                               
    Services Revenues     918       959       884       940       3,704       855       935       858           2,647  
                                                                               
      Total Revenues   $ 8,372     $ 9,275     $ 9,307     $ 11,320     $ 38,275     $ 8,596     $ 9,598     $ 9,327         $ 27,520  
                                                                             
AS REPORTED REVENUE GROWTH RATES                                                                            
  New software licenses     2 %     (2 %)     1 %     0 %     0 %     (2 %)     (4 %)     (7 %)         (4 %)
  Cloud software-as-a-service and platform-as-a-service     25 %     19 %     24 %     25 %     23 %     32 %     39 %     30 %         34 %
  Cloud infrastructure-as-a-service     (9 %)     (15 %)     10 %     13 %     0 %     26 %     60 %     28 %         37 %
  Software license updates and product support     7 %     6 %     5 %     7 %     6 %     7 %     6 %     2 %         5 %
    Software and Cloud Revenues     6 %     3 %     5 %     4 %     5 %     6 %     5 %     1 %         4 %
                                                                               
  Hardware systems products     (14 %)     (3 %)     8 %     2 %     (2 %)     (14 %)     0 %     (2 %)         (5 %)
  Hardware systems support     3 %     4 %     5 %     2 %     4 %     (1 %)     1 %     (2 %)         0 %
    Hardware Systems Revenues     (7 %)     0 %     7 %     2 %     0 %     (8 %)     1 %     (2 %)         (3 %)
                                                                               
    Services Revenues     (8 %)     (5 %)     (5 %)     (4 %)     (5 %)     (7 %)     (3 %)     (3 %)         (4 %)
                                                                               
      Total Revenues     2 %     2 %     4 %     3 %     3 %     3 %     3 %     0 %         2 %
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  New software licenses     5 %     0 %     3 %     (1 %)     1 %     (2 %)     0 %     0 %         (1 %)
  Cloud software-as-a-service and platform-as-a-service     26 %     20 %     25 %     25 %     24 %     32 %     41 %     34 %         36 %
  Cloud infrastructure-as-a-service     (7 %)     (14 %)     11 %     13 %     1 %     25 %     62 %     32 %         38 %
  Software license updates and product support     8 %     7 %     7 %     6 %     7 %     6 %     9 %     8 %         8 %
    Software and Cloud Revenues     8 %     5 %     6 %     4 %     5 %     6 %     8 %     7 %         7 %
                                                                               
  Hardware systems products     (13 %)     (2 %)     10 %     3 %     (1 %)     (14 %)     4 %     6 %         (1 %)
  Hardware systems support     5 %     5 %     7 %     2 %     5 %     (2 %)     5 %     4 %         2 %
    Hardware Systems Revenues     (6 %)     1 %     9 %     3 %     2 %     (8 %)     4 %     5 %         0 %
                                                                               
    Services Revenues     (6 %)     (3 %)     (3 %)     (3 %)     (4 %)     (8 %)     1 %     3 %         (1 %)
                                                                               
      Total Revenues     4 %     3 %     6 %     3 %     4 %     2 %     7 %     6 %         5 %
                                                                             
                                                                             
GEOGRAPHIC REVENUES                                                                            
                                                                             
REVENUES                                                                            
  Americas   $ 4,517     $ 4,995     $ 4,953     $ 5,857     $ 20,323     $ 4,620     $ 5,221     $ 5,134         $ 14,974  
  Europe, Middle East & Africa     2,439       2,817       2,923       3,768       11,946       2,589       2,911       2,813           8,313  
  Asia Pacific     1,416       1,463       1,431       1,695       6,006       1,387       1,466       1,380           4,233  
      Total Revenues   $ 8,372     $ 9,275     $ 9,307     $ 11,320     $ 38,275     $ 8,596     $ 9,598     $ 9,327         $ 27,520  
                                                                             
                                                                             
HEADCOUNT                                                                            
                                                                             
GEOGRAPHIC AREA                                                                            
  Americas     53,465       53,073       53,799       53,827               54,073       57,243       58,117              
  Europe, Middle East & Africa     23,349       23,178       23,350       23,339               23,349       26,997       26,989              
  Asia Pacific     45,513       45,617       45,561       45,108               45,496       46,312       46,456              
      Total Company     122,327       121,868       122,710       122,274               122,918       130,552       131,562              
                                                                                   
(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
Q3 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     $ 4,021         $ 11,678  
  Hardware systems revenues   $ 640     $ 694     $ 655     $ 747     $ 2,736     $ 583     $ 716     $ 686         $ 1,986  
                                                                             
AS REPORTED GROWTH RATES                                                                            
  Software and cloud revenues     9 %     5 %     5 %     (1 %)     4 %     5 %     6 %     5 %         5 %
  Hardware systems revenues     (2 %)     7 %     14 %     3 %     5 %     (9 %)     3 %     5 %         0 %
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  Software and cloud revenues     9 %     6 %     7 %     1 %     5 %     6 %     8 %     7 %         7 %
  Hardware systems revenues     (1 %)     8 %     16 %     5 %     6 %     (8 %)     5 %     7 %         1 %
                                                                             
                                                                             
EUROPE / MIDDLE EAST / AFRICA                                                                            
  Software and cloud revenues   $ 1,816     $ 2,155     $ 2,245     $ 3,032     $ 9,249     $ 1,992     $ 2,234     $ 2,169         $ 6,397  
  Hardware systems revenues   $ 358     $ 372     $ 403     $ 440     $ 1,572     $ 338     $ 380     $ 379         $ 1,096  
                                                                             
AS REPORTED GROWTH RATES                                                                            
  Software and cloud revenues     7 %     8 %     8 %     15 %     10 %     10 %     4 %     (3 %)         3 %
  Hardware systems revenues     (11 %)     (5 %)     3 %     7 %     (1 %)     (6 %)     2 %     (6 %)         (3 %)
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  Software and cloud revenues     4 %     6 %     6 %     10 %     7 %     7 %     9 %     9 %         9 %
  Hardware systems revenues     (13 %)     (6 %)     2 %     3 %     (3 %)     (7 %)     8 %     8 %         3 %
                                                                             
                                                                             
ASIA PACIFIC                                                                            
  Software and cloud revenues   $ 943     $ 1,030     $ 1,008     $ 1,233     $ 4,213     $ 970     $ 1,051     $ 980         $ 3,000  
  Hardware systems revenues   $ 263     $ 257     $ 265     $ 279     $ 1,064     $ 244     $ 238     $ 234         $ 716  
                                                                             
AS REPORTED GROWTH RATES                                                                            
  Software and cloud revenues     (3 %)     (9 %)     (5 %)     0 %     (4 %)     3 %     2 %     (3 %)         1 %
  Hardware systems revenues     (12 %)     (9 %)     (3 %)     (4 %)     (7 %)     (8 %)     (7 %)     (12 %)         (9 %)
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  Software and cloud revenues     8 %     0 %     3 %     3 %     3 %     2 %     7 %     4 %         4 %
  Hardware systems revenues     (5 %)     (3 %)     3 %     (3 %)     (2 %)     (8 %)     (3 %)     (6 %)         (6 %)
                                                                             
                                                                             
TOTAL COMPANY                                                                            
  Software and cloud revenues   $ 6,193     $ 6,993     $ 7,100     $ 8,914     $ 29,199     $ 6,576     $ 7,329     $ 7,170         $ 21,075  
  Hardware systems revenues   $ 1,261     $ 1,323     $ 1,323     $ 1,466     $ 5,372     $ 1,165     $ 1,334     $ 1,299         $ 3,798  
                                                                             
AS REPORTED GROWTH RATES                                                                            
  Software and cloud revenues     6 %     3 %     5 %     4 %     5 %     6 %     5 %     1 %         4 %
  Hardware systems revenues     (7 %)     0 %     7 %     2 %     0 %     (8 %)     1 %     (2 %)         (3 %)
                                                                             
CONSTANT CURRENCY GROWTH RATES (2)                                                                            
  Software and cloud revenues     8 %     5 %     6 %     4 %     5 %     6 %     8 %     7 %         7 %
  Hardware systems revenues     (6 %)     1 %     9 %     3 %     2 %     (8 %)     4 %     5 %         0 %
                                                                             
(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.
   
   
   
APPENDIX A
 
ORACLE CORPORATION
Q3 FISCAL 2015 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:

  • Cloud software-as-a-service and platform-as-a-service, 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-as-a-service and platform-as-a-service 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 and support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment to our cloud software-as-a-service and platform-as-a-service 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-as-a-service and platform-as-a-service and hardware systems support contracts; however, we cannot be certain that our customers will renew our cloud software-as-a-service and platform-as-a-service contracts, software license updates and product support contracts or our hardware systems support contracts.

  • Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.

  • Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP operating expenses and net income measures. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.

  • Acquisition related and other expenses; and restructuring expenses: We have excluded the effect of acquisition related and other expenses and the effect of restructuring expenses from our non-GAAP operating expenses and net income measures. We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related and other expenses consist of personnel related costs for transitional employees, other acquired employee related costs, stock-based compensation expenses (in addition to the stock-based compensation expenses described above), integration related professional services, certain business combination adjustments including adjustments after the measurement period has ended and certain other operating items, net. Substantially all of the stock-based compensation expenses included in acquisition related and other expenses resulted from unvested options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the original terms of those options. Restructuring expenses consist of employee severance and other exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses. Although acquisition related expenses and restructuring expenses generally diminish over time with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions.

Contact Information

  • Contact:
    Ken Bond
    Oracle Investor Relations
    1.650.607.0349
    Email Contact



    Deborah Hellinger
    Oracle Corporate Communications
    1.212.508.7935
    Email Contact