EX-99.1 2 d504949dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

For Immediate Release

 

Contact:      Ken Bond      Deborah Hellinger
     Oracle Investor Relations      Oracle Corporate Communications
     1.650.607.0349      1.212.508.7935
     ken.bond@oracle.com      deborah.hellinger@oracle.com

ORACLE REPORTS Q3 GAAP EPS UP 6% TO 52 CENTS; Q3 NON-GAAP EPS UP 5% TO 65 CENTS

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

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

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

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

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

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

Q3 Fiscal 2013 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (913) 312-6699, Passcode: 591704. To access the live webcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle’s Q3 results and Fiscal 2013 financial tables are available on the Oracle Investor Relations website.

A replay of the conference call will also be available by dialing (719) 457-0820 or (888) 203-1112, Passcode: 1437646.

About Oracle

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

# # #

Trademarks

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

“Safe Harbor” Statement: Statements in this press release relating to Oracle’s future plans, expectations, beliefs, intentions and prospects, including statements regarding our non-GAAP operating margin reaching an all-time high for the fiscal year, the deliveries of servers based on our new SPARC T5 microprocessor and the configurations of the SPARC T5 servers and M5 systems, are “forward-looking statements” and are subject to material risks and uncertainties.

Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, political and market conditions, including the current European debt crisis, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for software license updates and product support. (3) Our hardware systems business may not be successful, and we may fail to achieve our financial forecasts with respect to this business. (4) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. (5) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses and risks relating to compliance with international and U.S. laws that apply to our international operations. (6) Intense competitive forces demand rapid technological advances and frequent new product introductions and could require us to reduce prices or cause us to lose customers. (7) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses, cloud software subscriptions, or hardware systems products, or purchase or renew support contracts. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading “Risk Factors.” Copies of these filings are available online from the SEC or by contacting Oracle Corporation’s Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle’s Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of March 20, 2013. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

     Three Months Ended     % Increase     % Increase
(Decrease)		  
      February 28,
2013		     % of
Revenues		     February 29,
2012		     % of
Revenues		     (Decrease)
in US $		     in Constant
Currency (1)		  

REVENUES

             

New software licenses and cloud software subscriptions

    $   2,332        26%      $   2,374        26%        (2% )      0%   

Software license updates and product support

      4,340        48%        4,051        45%        7%        8%   
  

 

 

      

Software Revenues

      6,672        74%        6,425        71%        4%        5%   
  

 

 

      

Hardware systems products

      671        8%        869        10%        (23% )      (22% ) 

Hardware systems support

      570        6%        604        6%        (6% )      (5% ) 
  

 

 

      

Hardware Systems Revenues

      1,241        14%        1,473        16%        (16% )      (15% ) 
  

 

 

      

Services Revenues

      1,045        12%        1,141        13%        (8% )      (7% ) 
  

 

 

      

Total Revenues

      8,958        100%        9,039        100%        (1% )      0%   
  

 

 

      

OPERATING EXPENSES

             

Sales and marketing

      1,802        20%        1,700        19%        6%        7%   

Software license updates and product support

      306        3%        305        3%        1%        2%   

Hardware systems products

      337        4%        424        5%        (21% )      (20% ) 

Hardware systems support

      219        2%        257        3%        (15% )      (14% ) 

Services

      854        10%        922        10%        (7% )      (6% ) 

Research and development

      1,186        13%        1,145        13%        4%        4%   

General and administrative

      260        3%        261        3%        0%        1%   

Amortization of intangible assets

      586        7%        606        7%        (3% )      (3% ) 

Acquisition related and other

      32        0%        38        0%        (16% )      (17% ) 

Restructuring

      42        1%        64        0%        (35% )      (36% ) 
  

 

 

      

Total Operating Expenses

      5,624        63%        5,722        63%        (2% )      (1% ) 
  

 

 

      

OPERATING INCOME

      3,334        37%        3,317        37%        1%        2%   

Interest expense

      (205 )      (2% )      (190 )      (2% )      8%        8%   

Non-operating (expense) income, net

      (39 )      (1% )      21        0%        284%        298%   
  

 

 

      

INCOME BEFORE PROVISION FOR INCOME TAXES

      3,090        34%        3,148        35%        (2% )      0%   
  

 

 

      

Provision for income taxes

      586        6%        650        7%        (10% )      (8% ) 
  

 

 

      

NET INCOME

    $ 2,504        28%      $ 2,498        28%        0%        2%   
  

 

 

      

EARNINGS PER SHARE:

             

Basic

    $ 0.53        $ 0.50         

Diluted

    $ 0.52        $ 0.49         

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

             

Basic

      4,735          5,007         

Diluted

      4,812          5,080         
                                                  

 

(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended February 28, 2013 compared with the corresponding prior year period decreased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 1 percentage point.

 

1

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)

($ in millions, except per share data)

 

    Three Months Ended     % Increase (Decrease)
in US $		     % Increase (Decrease) in
Constant Currency (2)		  
    

February 28,
2013

GAAP

     Adj.     February 28,
2013
Non-GAAP		    

February 29,
2012

GAAP

     Adj.     February 29,
2012
Non-GAAP		     GAAP     Non-GAAP     GAAP     Non-GAAP  

TOTAL REVENUES (3) (4) (5)

   $   8,958      $ 12      $   8,970      $   9,039      $ 23      $   9,062        (1% )      (1% )      0%        0%   

TOTAL SOFTWARE REVENUES (3) (4)

   $ 6,672      $ 10      $ 6,682      $ 6,425      $ 17      $ 6,442        4%        4%        5%        5%   

New software licenses and cloud software subscriptions (3)

     2,332        6        2,338        2,374        —        2,374        (2% )      (2% )      0%        0%   

Software license updates and product support (4)

     4,340        4        4,344        4,051        17        4,068        7%        7%        8%        8%   

TOTAL HARDWARE SYSTEMS REVENUES (5)

   $ 1,241      $ 2      $ 1,243      $ 1,473      $ 6      $ 1,479        (16% )      (16% )      (15% )      (15% ) 

Hardware systems products

     671        —        671        869        —        869        (23% )      (23% )      (22% )      (22% ) 

Hardware systems support (5)

     570        2        572        604        6        610        (6% )      (6% )      (5% )      (5% ) 

TOTAL OPERATING EXPENSES

   $ 5,624      $   (832 )    $ 4,792      $ 5,722      $   (865 )    $ 4,857        (2% )      (1% )      (1% )      0%   

Stock-based compensation (6)

     172        (172 )      —        157        (157 )      —        9%        *          9%        *     

Amortization of intangible assets (7)

     586        (586 )      —        606        (606 )      —        (3% )      *          (3% )      *     

Acquisition related and other

     32        (32 )      —        38        (38 )      —        (16% )      *          (17% )      *     

Restructuring

     42        (42 )      —        64        (64 )      —        (35% )      *          (36% )      *     

OPERATING INCOME

   $ 3,334      $ 844      $ 4,178      $ 3,317      $ 888      $ 4,205        1%        (1% )      2%        0%   

OPERATING MARGIN %

     37%          47%        37%          46%        52 bp.        17 bp.        65 bp.        17 bp.   

INCOME TAX EFFECTS (8)

   $ 586      $ 240      $ 826      $ 650      $ 258      $ 908        (10% )      (9% )      (8% )      (8% ) 

NET INCOME

   $ 2,504      $ 604      $ 3,108      $ 2,498      $ 630      $ 3,128        0%        (1% )      2%        1%   

DILUTED EARNINGS PER SHARE

   $ 0.52        $ 0.65      $ 0.49        $ 0.62        6%        5%        8%        6%   

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

     4,812        —        4,812        5,080        —        5,080        (5% )      (5% )      (5% )      (5% ) 
                                                                                 

 

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 

(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

 

(3) As of February 28, 2013, approximately $7 million and $6 million in estimated revenues related to assumed cloud software subscriptions contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

 

(4) As of February 28, 2013, approximately $3 million and $2 million in estimated revenues related to assumed software support contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

 

(5) As of February 28, 2013, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for each of the remainder of fiscal 2013 and fiscal 2014 due to business combination accounting rules.

 

(6) Stock-based compensation was included in the following GAAP operating expense categories:

 

     Three Months Ended
February 28, 2013		      Three Months Ended
February 29, 2012		  
        GAAP      Adj.      Non-GAAP      GAAP      Adj.      Non-GAAP  

Sales and marketing

    $ 32       $ (32 )     $  —       $ 30       $ (30 )     $ —   

Software license updates and product support

      5         (5 )       —         5         (5 )       —   

Hardware systems products

      1         (1 )       —         —         —         —   

Hardware systems support

      1         (1 )       —         1         (1 )       —   

Services

      7         (7 )       —         6         (6 )       —   

Research and development

      86         (86 )       —         74         (74 )       —   

General and administrative

      40         (40 )       —         41         (41 )       —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Subtotal

      172         (172 )       —         157         (157 )       —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Acquisition related and other

      8         (8 )       —         18         (18 )       —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total stock-based compensation

    $   180       $   (180 )     $   —       $   175       $   (175 )     $   —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(7) Estimated future annual amortization expense related to intangible assets as of February 28, 2013 was as follows:

 

Remainder of Fiscal 2013

    $   582   

Fiscal 2014

      2,043   

Fiscal 2015

      1,582   

Fiscal 2016

      1,020   

Fiscal 2017

      450   

Fiscal 2018

      324   

Thereafter

      661   
  

 

 

  

Total intangible assets, net

    $   6,662   
  

 

 

  

 

(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 19.0% and 20.7% in the third quarter of fiscal 2013 and 2012, respectively, and an effective non-GAAP tax rate of 21.0% and 22.5% in the third quarter of fiscal 2013 and 2012, respectively. The difference between our GAAP and non-GAAP tax rates in the third quarter of fiscal 2013 was primarily due to the net tax effects of acquisition related items, including the tax effect of amortization of intangible assets, and the disproportionate rate impact of discrete items for the quarter. The difference between our GAAP and non-GAAP tax rates in the third quarter of fiscal 2012 was primarily due to income tax effects related to acquired tax exposures, the differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses, and the disproportionate rate impact of discrete items for the quarter.

 

* Not meaningful

 

 

2

ORACLE CORPORATION

Q3 FISCAL 2013 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

     Nine Months Ended     % Increase     % Increase
(Decrease)		  
      February 28,
2013		     % of
Revenues		     February 29,
2012		     % of
Revenues		     (Decrease)
in US $		     in Constant
Currency (1)		  

REVENUES

             

New software licenses and cloud software subscriptions

    $ 6,295        24%      $ 5,921        23%        6%        9%   

Software license updates and product support

      12,740        49%        12,058        46%        6%        8%   
  

 

 

      

Software Revenues

        19,035        73%          17,979        69%        6%        8%   
  

 

 

      

Hardware systems products

      2,185        8%        2,851        11%        (23% )      (22% ) 

Hardware systems support

      1,730        7%        1,874        7%        (8% )      (5% ) 
  

 

 

      

Hardware Systems Revenues

      3,915        15%        4,725        18%        (17% )      (15% ) 
  

 

 

      

Services Revenues

      3,283        12%        3,501        13%        (6% )      (3% ) 
  

 

 

      

Total Revenues

      26,233        100%        26,205        100%        0%        2%   
  

 

 

      

OPERATING EXPENSES

             

Sales and marketing

      5,120        19%        5,027        19%        2%        4%   

Software license updates and product support

      860        3%        899        3%        (4% )      (2% ) 

Hardware systems products

      1,087        4%        1,367        5%        (20% )      (19% ) 

Hardware systems support

      670        3%        798        3%        (16% )      (14% ) 

Services

      2,668        10%        2,788        11%        (4% )      (1% ) 

Research and development

      3,586        14%        3,297        13%        9%        10%   

General and administrative

      798        3%        848        3%        (6% )      (4% ) 

Amortization of intangible assets

      1,789        7%        1,790        7%        0%        0%   

Acquisition related and other (2)

      (347 )      (1% )      63        0%        (652% )      (660% ) 

Restructuring

      318        1%        217        1%        46%        52%   
  

 

 

      

Total Operating Expenses

      16,549        63%        17,094        65%        (3% )      (1% ) 
  

 

 

      

OPERATING INCOME

      9,684        37%        9,111        35%        6%        10%   

Interest expense

      (588 )      (2% )      (574 )      (2% )      2%        3%   

Non-operating (expense) income, net

      (24 )      0%        42        0%        158%        166%   
  

 

 

      

INCOME BEFORE PROVISION FOR INCOME TAXES

      9,072        35%        8,579        33%        6%        9%   
  

 

 

      

Provision for income taxes

      1,953        8%        2,050        8%        (5% )      (1% ) 
  

 

 

      

NET INCOME

    $ 7,119        27%      $ 6,529        25%        9%        13%   
  

 

 

      

EARNINGS PER SHARE:

             

Basic

    $ 1.48        $ 1.30         

Diluted

    $ 1.46        $ 1.28         

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

             

Basic

      4,798          5,037         

Diluted

      4,873          5,118         
                                                  

 

(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the nine months ended February 28, 2013 compared with the corresponding prior year period decreased our revenues by 2 percentage points, operating expenses by 2 percentage points and operating income by 4 percentage points.

 

(2) Acquisition related and other expenses for the nine months ended February 28, 2013 included a benefit of $306 million related to certain litigation and a net benefit of $118 million due to an acquisition related item.

 

3

ORACLE CORPORATION

Q3 FISCAL 2013 YEAR TO DATE FINANCIAL RESULTS

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)

($ in millions, except per share data)

 

    Nine Months Ended     % Increase (Decrease)
in US $		     % Increase (Decrease) in
Constant Currency (2)		  
    

February 28,
2013

GAAP

     Adj.    

February 28,
2013

Non-GAAP

    

February 29,
2012

GAAP

     Adj.    

February 29,
2012

Non-GAAP

     GAAP     Non-GAAP     GAAP     Non-GAAP  

TOTAL REVENUES (3) (4) (5)

   $   26,233      $ 59      $   26,292      $   26,205      $ 66      $   26,271        0%        0%        2%        2%   

TOTAL SOFTWARE REVENUES (3) (4)

   $ 19,035      $ 49      $ 19,084      $ 17,979      $ 40      $ 18,019        6%        6%        8%        8%   

New software licenses and cloud software subscriptions (3)

     6,295        37        6,332        5,921        —        5,921        6%        7%        9%        9%   

Software license updates and product support (4)

     12,740        12        12,752        12,058        40        12,098        6%        5%        8%        8%   

TOTAL HARDWARE SYSTEMS REVENUES (5)

   $ 3,915      $ 10      $ 3,925      $ 4,725      $ 26      $ 4,751        (17% )      (17% )      (15% )      (16% ) 

Hardware systems products

     2,185        —        2,185        2,851        —        2,851        (23% )      (23% )      (22% )      (22% ) 

Hardware systems support (5)

     1,730        10        1,740        1,874        26        1,900        (8% )      (8% )      (5% )      (6% ) 

TOTAL OPERATING EXPENSES

   $ 16,549      $   (2,296 )    $ 14,253      $ 17,094      $   (2,523 )    $ 14,571        (3% )      (2% )      (1% )      0%   

Stock-based compensation (6)

     536        (536 )      —        453        (453 )      —        18%        *          18%        *     

Amortization of intangible assets (7)

     1,789        (1,789 )      —        1,790        (1,790 )      —        0%        *          0%        *     

Acquisition related and other

     (347 )      347        —        63        (63 )      —        (652% )      *          (660% )      *     

Restructuring

     318        (318 )      —        217        (217 )      —        46%        *          52%        *     

OPERATING INCOME

   $ 9,684      $ 2,355      $ 12,039      $ 9,111      $ 2,589      $ 11,700        6%        3%        10%        5%   

OPERATING MARGIN %

     37%          46%        35%          45%        215 bp.        125 bp.        238 bp.        127 bp.   

INCOME TAX EFFECTS (8)

   $ 1,953      $ 630      $ 2,583      $ 2,050      $ 740      $ 2,790        (5% )      (7% )      (1% )      (5% ) 

NET INCOME

   $ 7,119      $ 1,725      $ 8,844      $ 6,529      $ 1,849      $ 8,378        9%        6%        13%        8%   

DILUTED EARNINGS PER SHARE

   $ 1.46        $ 1.81      $ 1.28        $ 1.64        15%        11%        18%        14%   

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

     4,873        —        4,873        5,118        —        5,118        (5% )      (5% )      (5% )      (5% ) 
                                                                                 

 

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 

(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

 

(3) As of February 28, 2013, approximately $7 million and $6 million in estimated revenues related to assumed cloud software subscriptions contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

 

(4) As of February 28, 2013, approximately $3 million and $2 million in estimated revenues related to assumed software support contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

 

(5) As of February 28, 2013, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for each of the remainder of fiscal 2013 and fiscal 2014 due to business combination accounting rules.

 

(6) Stock-based compensation was included in the following GAAP operating expense categories:

 

     Nine Months Ended
February 28, 2013		      Nine Months Ended
February 29, 2012		  
        GAAP      Adj.      Non-GAAP      GAAP      Adj.      Non-GAAP  

Sales and marketing

    $ 112       $ (112 )     $ —       $ 86       $ (86 )     $ —   

Software license updates and product support

      15         (15 )       —         13         (13 )       —   

Hardware systems products

      2         (2 )       —         1         (1 )       —   

Hardware systems support

      3         (3 )       —         4         (4 )       —   

Services

      24         (24 )       —         16         (16 )       —   

Research and development

      258         (258 )       —         213         (213 )       —   

General and administrative

      122         (122 )       —         120         (120 )       —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Subtotal

      536         (536 )       —         453         (453 )       —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Acquisition related and other

      30         (30 )       —         21         (21 )       —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total stock-based compensation

    $   566       $   (566 )     $   —       $   474       $   (474 )     $   —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(7) Estimated future annual amortization expense related to intangible assets as of February 28, 2013 was as follows:

 

Remainder of Fiscal 2013

    $ 582   

Fiscal 2014

      2,043   

Fiscal 2015

      1,582   

Fiscal 2016

      1,020   

Fiscal 2017

      450   

Fiscal 2018

      324   

Thereafter

      661   
  

 

 

  

Total intangible assets, net

    $   6,662   
  

 

 

  

 

(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.5% and 23.9% in the first nine months of fiscal 2013 and 2012, respectively, and an effective non-GAAP tax rate of 22.6% and 25.0% in the first nine months of fiscal 2013 and 2012, respectively. The differences between our GAAP and non-GAAP tax rates in the first nine months of fiscal 2013 were primarily due to the net tax effects of acquisition related items, including the tax effect of amortization of intangible assets. The difference between our GAAP and non-GAAP tax rates in the first nine months of fiscal 2012 was primarily due to income tax effects related to acquired tax exposures, the differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses, and the disproportionate rate impact of discrete items for the first nine months of fiscal 2012.

 

* Not meaningful

 

4

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

 

     

 

February 28,
2013

      May 31,
2012		  

ASSETS

      

Current Assets:

      

Cash and cash equivalents

    $   16,101       $   14,955   

Marketable securities

      17,306         15,721   

Trade receivables, net

      4,169         6,377   

Inventories

      211         158   

Deferred tax assets

      829         877   

Prepaid expenses and other current assets

      2,070         1,935   
  

 

 

  

Total Current Assets

      40,686         40,023   

Non-Current Assets:

      

Property, plant and equipment, net

      3,034         3,021   

Intangible assets, net

      6,662         7,899   

Goodwill

      26,102         25,119   

Deferred tax assets

      651         595   

Other assets

      2,315         1,670   
  

 

 

  

Total Non-Current Assets

      38,764         38,304   
  

 

 

  

TOTAL ASSETS

    $ 79,450       $ 78,327   
  

 

 

  

LIABILITIES AND EQUITY

      

Current Liabilities:

      

Notes payable, current and other current borrowings

    $ 1,250       $ 2,950   

Accounts payable

      361         438   

Accrued compensation and related benefits

      1,557         2,002   

Deferred revenues

      6,278         7,035   

Other current liabilities

      2,470         2,963   
  

 

 

  

Total Current Liabilities

      11,916         15,388   

Non-Current Liabilities:

      

Notes payable and other non-current borrowings

      18,502         13,524   

Income taxes payable

      3,775         3,759   

Other non-current liabilities

      1,467         1,569   
  

 

 

  

Total Non-Current Liabilities

      23,744         18,852   

Equity

      43,790         44,087   
  

 

 

  

TOTAL LIABILITIES AND EQUITY

    $ 79,450       $ 78,327   
  

 

 

  
                   

 

5

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

 

     Nine Months Ended  
      February 28,
2013		     February 29,
2012		  

Cash Flows From Operating Activities:

     

Net income

    $ 7,119      $ 6,529   

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation

      400        350   

Amortization of intangible assets

      1,789        1,790   

Deferred income taxes

      108        (200 ) 

Stock-based compensation

      566        474   

Tax benefits on the exercise of stock options and vesting of restricted stock-based awards

      372        123   

Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards

      (220 )      (71 ) 

Other, net

      120        67   

Changes in operating assets and liabilities, net of effects from acquisitions:

     

Decrease in trade receivables, net

      2,269        2,028   

(Increase) decrease in inventories

      (48 )      139   

(Increase) decrease in prepaid expenses and other assets

      (241 )      87   

Decrease in accounts payable and other liabilities

      (912 )      (1,353 ) 

(Decrease) increase in income taxes payable

      (853 )      259   

Decrease in deferred revenues

      (809 )      (536 ) 
  

 

 

  

Net cash provided by operating activities

      9,660        9,686   
  

 

 

  

Cash Flows From Investing Activities:

     

Purchases of marketable securities and other investments

      (24,027 )      (29,745 ) 

Proceeds from maturities and sales of marketable securities and other investments

      22,359        26,472   

Acquisitions, net of cash acquired

      (1,592 )      (2,833 ) 

Capital expenditures

      (467 )      (431 ) 
  

 

 

  

Net cash used for investing activities

      (3,727 )      (6,537 ) 
  

 

 

  

Cash Flows From Financing Activities:

     

Payments for repurchases of common stock

      (8,204 )      (3,457 ) 

Proceeds from issuances of common stock

      1,300        513   

Payments of dividends to stockholders

      (1,433 )      (909 ) 

Proceeds from borrowings, net of issuance costs

      4,974        —   

Repayments of borrowings

      (1,700 )      (1,405 ) 

Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards

      220        71   

Distributions to noncontrolling interests

      (31 )      (163 ) 
  

 

 

  

Net cash used for financing activities

      (4,874 )      (5,350 ) 
  

 

 

  

Effect of exchange rate changes on cash and cash equivalents

      87        (181 ) 
  

 

 

  

Net increase (decrease) in cash and cash equivalents

      1,146        (2,382 ) 
  

 

 

  

Cash and cash equivalents at beginning of period

      14,955        16,163   
  

 

 

  

Cash and cash equivalents at end of period

    $       16,101      $       13,781   
  

 

 

  
                  

 

6

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

FREE CASH FLOW—TRAILING 4-QUARTERS (1)

($ in millions)

 

     Fiscal 2012      Fiscal 2013
        Q1      Q2      Q3      Q4      Q1      Q2      Q3          Q4    

GAAP Operating Cash Flow

    $       12,818       $       13,129       $       13,463       $       13,743       $       13,993       $       13,533       $       13,717      

Capital Expenditures (2)

      (492 )       (500 )       (509 )       (648 )       (627 )       (710 )       (684 )    
  

 

 

Free Cash Flow

    $ 12,326       $ 12,629       $ 12,954       $ 13,095       $ 13,366       $ 12,823       $ 13,033      
  

 

 

% Growth over prior year

      46%         45%         36%         22%         8%         2%         1%        

GAAP Net Income

    $ 9,035       $ 9,356       $ 9,738       $ 9,981       $ 10,175       $ 10,564       $ 10,571      

Free Cash Flow as a % of Net Income

      136%         135%         133%         131%         131%         121%         123%      
                                                                     

 

(1) To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flow generated from operations. We believe free cash flow is also useful as one of the bases for comparing our performance with our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity.

 

(2) Derived from capital expenditures as reported in cash flows from investing activities as per our consolidated statements of cash flows presented in accordance with GAAP.

 

7

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)

($ in millions)

 

    Fiscal 2012     Fiscal 2013  
       Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3     Q4     TOTAL  

REVENUES

                    

New software licenses and cloud software subscriptions

   $ 1,498      $ 2,048      $ 2,374      $ 3,985      $ 9,906      $ 1,574      $ 2,389      $ 2,332        $ 6,295   

Software license updates and product support

     4,022        3,986        4,051        4,152        16,210        4,140        4,260        4,340          12,740   
 

 

 

  

Software Revenues

     5,520        6,034        6,425        8,137        26,116        5,714        6,649        6,672          19,035   

Hardware systems products

     1,029        953        869        977        3,827        779        734        671          2,185   

Hardware systems support

     645        625        604        600        2,475        574        587        570          1,730   
 

 

 

  

Hardware Systems Revenues

     1,674        1,578        1,473        1,577        6,302        1,353        1,321        1,241          3,915   

Services Revenues

     1,180        1,180        1,141        1,202        4,703        1,114        1,124        1,045          3,283   
 

 

 

  

Total Revenues

   $ 8,374      $ 8,792      $ 9,039      $ 10,916      $ 37,121      $ 8,181      $ 9,094      $ 8,958        $ 26,233   
 

 

 

  

AS REPORTED REVENUE GROWTH RATES

                    

New software licenses and cloud software subscriptions

     17%        2%        7%        7%        7%        5%        17%        (2% )        6%   

Software license updates and product support

     17%        9%        8%        5%        10%        3%        7%        7%          6%   

Software Revenues

     17%        7%        8%        6%        9%        4%        10%        4%          6%   

Hardware systems products

     (5% )      (14% )      (16% )      (16% )      (13% )      (24% )      (23% )      (23% )        (23% ) 

Hardware systems support

     4%        (2% )      (4% )      (11% )      (3% )      (11% )      (6% )      (6% )        (8% ) 

Hardware Systems Revenues

     (1% )      (10% )      (11% )      (14% )      (9% )      (19% )      (16% )      (16% )        (17% ) 

Services Revenues

     10%        0%        0%        (4% )      1%        (6% )      (5% )      (8% )        (6% ) 

Total Revenues

     12%        2%        3%        1%        4%        (2% )      3%        (1% )        0%   

CONSTANT CURRENCY GROWTH RATES (2)

                    

New software licenses and cloud software subscriptions

     11%        3%        8%        11%        8%        10%        18%        0%          9%   

Software license updates and product support

     10%        9%        9%        8%        9%        8%        8%        8%          8%   

Software Revenues

     11%        7%        9%        10%        9%        9%        11%        5%          8%   

Hardware systems products

     (11% )      (14% )      (16% )      (13% )      (14% )      (21% )      (23% )      (22% )        (22% ) 

Hardware systems support

     (3% )      (3% )      (3% )      (7% )      (4% )      (6% )      (5% )      (5% )        (5% ) 

Hardware Systems Revenues

     (8% )      (10% )      (11% )      (11% )      (10% )      (15% )      (16% )      (15% )        (15% ) 

Services Revenues

     5%        0%        1%        0%        1%        0%        (3% )      (7% )        (3% ) 

Total Revenues

     5%        2%        4%        5%        4%        3%        5%        0%          2%   
                                                                                 

GEOGRAPHIC REVENUES

                    

REVENUES

                    

Americas

   $ 4,226      $ 4,532      $ 4,707      $ 5,771      $ 19,236      $ 4,324      $ 4,787      $ 4,698        $ 13,808   

Europe, Middle East & Africa

     2,704        2,756        2,787        3,314        11,561        2,383        2,701        2,745          7,829   

Asia Pacific

     1,444        1,504        1,545        1,831        6,324        1,474        1,606        1,515          4,596   
 

 

 

  

Total Revenues

   $ 8,374      $ 8,792      $ 9,039      $ 10,916      $   37,121      $ 8,181      $ 9,094      $ 8,958        $   26,233   
 

 

 

  
                                                                                 

HEADCOUNT

                    

GEOGRAPHIC AREA

                    

Americas

     46,338        46,672        47,884        48,901          49,145        49,584        50,402       

Europe, Middle East & Africa

     22,210        22,725        22,852        22,957          22,584        22,594        22,592       

Asia Pacific

     40,840        41,901        42,908        43,308          44,170        45,051        45,663       
 

 

 

  

Total Company

       109,388          111,298          113,644          115,166            115,899          117,229          118,657                              
 

 

 

  
                                                                                 

 

(1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.

 

(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012 and 2011 for the fiscal 2013 and fiscal 2012 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

8

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)

($ in millions)

 

    Fiscal 2012     Fiscal 2013  
       Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3     Q4     TOTAL  

AMERICAS

                    

New software licenses and cloud software subscriptions

   $ 727      $ 1,027      $ 1,228      $ 2,126      $ 5,107      $ 814      $ 1,253      $ 1,205        $ 3,271   
 

 

 

  

Hardware systems products

   $ 475      $ 496      $ 410      $ 498      $ 1,880      $ 380      $ 370      $ 307        $ 1,056   
 

 

 

  

AS REPORTED GROWTH RATES

                    

New software licenses and cloud software subscriptions

     10%        0%        11%        14%        10%        12%        22%        (2% )        10%   

Hardware systems products

     (12% )      (17% )      (19% )      (17% )      (16% )      (20% )      (25% )      (25% )        (24% ) 

CONSTANT CURRENCY GROWTH RATES (2)

                    

New software licenses and cloud software subscriptions

     9%        1%        11%        16%        11%        14%        22%        (1% )        11%   

Hardware systems products

     (13% )      (17% )      (18% )      (16% )      (16% )      (19% )      (25% )      (25% )        (23% ) 
                                                                                 

EUROPE / MIDDLE EAST / AFRICA

                    

New software licenses and cloud software subscriptions

   $ 440      $ 584      $ 693      $ 1,166      $ 2,884      $ 403      $ 641      $ 690        $ 1,734   
 

 

 

  

Hardware systems products

   $ 344      $ 272      $ 265      $ 260      $ 1,140      $ 214      $ 198      $ 201        $ 615   
 

 

 

  

AS REPORTED GROWTH RATES

                    

New software licenses and cloud software subscriptions

     25%        2%        (1% )      (5% )      1%        (8% )      10%        0%          1%   

Hardware systems products

     2%        (17% )      (20% )      (24% )      (15% )      (38% )      (27% )      (24% )        (30% ) 

CONSTANT CURRENCY GROWTH RATES (2)

                    

New software licenses and cloud software subscriptions

     15%        3%        1%        2%        4%        1%        12%        1%          5%   

Hardware systems products

     (11% )      (17% )      (18% )      (18% )      (16% )      (30% )      (25% )      (24% )        (27% ) 
                                                                                 

ASIA PACIFIC

                    

New software licenses and cloud software subscriptions

   $ 331      $ 437      $ 453      $ 693      $ 1,915      $ 357      $ 495      $ 437        $ 1,290   
 

 

 

  

Hardware systems products

   $ 210      $ 185      $ 194      $ 219      $ 807      $ 185      $ 166      $ 163        $ 514   
 

 

 

  

AS REPORTED GROWTH RATES

                    

New software licenses and cloud software subscriptions

     20%        11%        13%        8%        12%        8%        13%        (3% )        6%   

Hardware systems products

     6%        2%        (3% )      1%        1%        (12% )      (10% )      (16% )        (13% ) 

CONSTANT CURRENCY GROWTH RATES (2)

                    

New software licenses and cloud software subscriptions

     9%        8%        11%        13%        11%        12%        13%        1%          8%   

Hardware systems products

     (5% )      (1% )      (6% )      1%        (3% )      (10% )      (12% )      (14% )        (12% ) 
                                                                                 

TOTAL COMPANY

                    

New software licenses and cloud software subscriptions

   $   1,498      $   2,048      $   2,374      $   3,985      $   9,906      $   1,574      $   2,389      $   2,332                           $   6,295   
 

 

 

  

Hardware systems products

   $ 1,029      $ 953      $ 869      $ 977      $ 3,827      $ 779      $ 734      $ 671        $ 2,185   
 

 

 

  

AS REPORTED GROWTH RATES

                    

New software licenses and cloud software subscriptions

     17%        2%        7%        7%        7%        5%        17%        (2% )        6%   

Hardware systems products

     (5% )      (14% )      (16% )      (16% )      (13% )      (24% )      (23% )      (23% )        (23% ) 

CONSTANT CURRENCY GROWTH RATES (2)

                    

New software licenses and cloud software subscriptions

     11%        3%        8%        11%        8%        10%        18%        0%          9%   

Hardware systems products

     (11% )      (14% )      (16% )      (13% )      (14% )      (21% )      (23% )      (22% )        (22% ) 
                                                                                 

 

(1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.

 

(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012 and 2011 for the fiscal 2013 and fiscal 2012 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

9

APPENDIX A

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

EXPLANATION OF NON-GAAP MEASURES

To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, which exclude certain business combination accounting entries and expenses related to acquisitions, as well as other significant expenses including stock-based compensation, that we believe are helpful in understanding our past financial performance and our future results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

 

•  

New software licenses and cloud software subscriptions, software license updates and product support and hardware systems support deferred revenues: Business combination accounting rules require us to account for the fair values of cloud software subscriptions contracts, software license updates and product support contracts and hardware systems support contracts assumed in connection with our acquisitions. Because these contracts are generally one year in duration, our GAAP revenues generally for the one year period subsequent to our acquisition of a business do not reflect the full amount of revenues on these assumed cloud software subscriptions contracts and support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment to our new software licenses and cloud software subscriptions revenues, software license updates and product support revenues and hardware systems support revenues is intended to include, and thus reflect, the full amount of such revenues. We believe the adjustment to these revenues is useful to investors as a measure of the ongoing performance of our business. We have historically experienced high renewal rates on our software license updates and product support contracts and our objective is to increase the renewal rates on acquired and new cloud software subscriptions and hardware systems support contracts; however, we cannot be certain that our customers will renew our cloud software subscriptions contracts, software license updates and product support contracts or our hardware systems support contracts.

 

•  

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

 

•  

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

 

•  

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

 

10