EX-99.1 2 d740679dex991.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 BECOMES THE SECOND LARGEST CLOUD SAAS COMPANY IN THE WORLD

Q4 SaaS and PaaS Subscriptions Up 25% to $322 million, Q4 IaaS Subscription Revenue Up 13% to $128 million

REDWOOD SHORES, Calif., June 19, 2014 — Oracle Corporation (NYSE: ORCL) today announced that fiscal 2014 Q4 total revenues were up 3% to $11.3 billion. Software and Cloud revenues were up 4% to $8.9 billion. GAAP Cloud software-as-a-service (SaaS) and platform-as-a-service (PaaS) revenues were up 25% to $322 million, while non-GAAP SaaS and PaaS revenues were up 23% to $327 million. In addition, Cloud infrastructure-as-a-service (IaaS) revenues were up 13% to $128 million. New software licenses revenues were unchanged at $3.8 billion. Software license updates and product support revenues were up 7% to $4.7 billion. Overall hardware systems revenues were up 2% to $1.5 billion with hardware systems products up 2% to $870 million, and hardware systems support up 2% to $596 million.

In Q4, both GAAP and non-GAAP earnings per share were lowered by $0.02 due to a non-operating loss caused by exchange rate changes in Venezuela. Furthermore, last year’s Q4 GAAP earnings per share increased $0.04 because of a $269 million acquisition price reduction. As a result of these two factors, Q4 GAAP earnings per share were unchanged at $0.80 compared with last year, while GAAP net income was down 4% to $3.6 billion, and GAAP operating income was down 2% to $4.9 billion. Q4 GAAP operating margin was 43% in the quarter. Non-GAAP earnings per share were up 6% to $0.92, but would have been $0.94 if not for the currency loss in Venezuela. Non-GAAP net income was up 2% to $4.2 billion while non-GAAP operating income was up 3% to $5.8 billion. The non-GAAP operating margin was 51%. GAAP operating cash flow on a trailing twelve-month basis was $14.9 billion.

For fiscal year 2014, total revenues were up 3% at $38.3 billion. GAAP Software and Cloud revenues were up 5%. GAAP Cloud SaaS and PaaS revenues were up 23% to $1.1 billion while Cloud IaaS revenues were $456 million. New software licenses revenues were unchanged at $9.4 billion while software license updates and product support revenues were up 6% to $18.2 billion. Total hardware system revenues were flat at $5.4 billion. GAAP operating income was up 1% to $14.8 billion, and GAAP operating margin was 39%. Non-GAAP operating income was up 3% to $18.1 billion, and non-GAAP operating margin was 47%. GAAP net income was unchanged at $11.0 billion, while non-GAAP net income was up 2% to $13.2 billion. GAAP earnings per share were $2.38, up 5% compared to last year while non-GAAP earnings per share were $2.87, up 7%.


“Our cloud subscription business is now approaching a run rate of $2 billion a year,” said Oracle President and CFO Safra Catz. “As this business has transitioned, more software revenues are being recognized over the life of a subscription rather than upfront. We’re making this transition to cloud subscriptions and ratable revenue recognition while continuously increasing our top-line revenue and our bottom-line profits year-after-year.”

“We have transformed Sun’s commodity hardware business into a profitable and growing Engineered Systems business,” said Oracle President Mark Hurd. “Our overall hardware business grew 2% in constant currency this past year. We saw record levels of Engineered Systems shipments and expect to deliver our 10,000th unit in Q1.”

“Oracle is now the second largest SaaS company in the world,” said Oracle CEO Larry Ellison. “In SaaS, we’re in front of everybody but salesforce.com. In IaaS we’re larger and more profitable than Rackspace. We have by far the most complete portfolio of modern SaaS and PaaS products in the industry: CRM: Sales, Service & Marketing; HCM: HR, Payroll & Talent; ERP: Accounting, Procurement, Supply Chain & more. All these SaaS products run on the world’s most powerful PaaS: the Oracle in-memory multitenant database and Java. We plan to increase our focus on the Cloud and become number one in both the SaaS and the PaaS businesses.”

The Board of Directors declared a quarterly cash dividend of $0.12 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on July 9, 2014, with a payment date of July 30, 2014.

Q4 Fiscal 2014 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (913) 312-6699, Passcode: 822011. 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 Q4 results and Fiscal 2014 financial tables are available on the Oracle Investor Relations website.

A replay of the conference call will also be available by dialing (719) 457-0820 or (888) 203-1112, Passcode: 1625971.

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 cloud subscription run rate, the timing of the delivery of our 10,000th Engineered Systems unit, and our plans to increase our focus on the Cloud and become number one in SaaS and PaaS, 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 continued slow economic recovery in the U.S. and other parts of the world, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for support contracts. (3) Our cloud computing strategy, including our Oracle Cloud Software-as-a-Service, Platform-as-a-Service and Infrastructure-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 June 19, 2014. Oracle undertakes no duty to update any statement in light of new information or future events.


ORACLE CORPORATION

Q4 FISCAL 2014 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

     Three Months Ended May 31,     % Increase    

% Increase

(Decrease)

 
      2014     % of
Revenues
    2013     % of
Revenues
    (Decrease)
in US $
    in Constant
Currency (1)
 

REVENUES

            

New software licenses

   $   3,769        33%      $   3,769        35%        0%        (1% )

Cloud software-as-a-service and platform-as-a-service

     322        3%        257        2%        25%        25%  

Cloud infrastructure-as-a-service

     128        1%        113        1%        13%        13%  

Software license updates and product support

     4,695        42%        4,402        40%        7%        6%  
  

 

 

     

Software and Cloud Revenues

     8,914        79%        8,541        78%        4%        4%  
  

 

 

     

Hardware systems products

     870        8%        849        8%        2%        3%  

Hardware systems support

     596        5%        582        5%        2%        2%  
  

 

 

     

Hardware Systems Revenues

     1,466        13%        1,431        13%        2%        3%  
  

 

 

     

Services Revenues

     940        8%        975        9%        (4%     (3% )
  

 

 

     

Total Revenues

     11,320        100%        10,947        100%        3%        3%  
  

 

 

     

OPERATING EXPENSES

            

Sales and marketing

     2,241        20%        2,125        19%        6%        5%  

Cloud software-as-a-service and platform-as-a-service

     137        1%        101        1%        36%        35%  

Cloud infrastructure-as-a-service

     84        1%        76        1%        10%        11%  

Software license updates and product support

     303        3%        316        3%        (4%     (4% )

Hardware systems products

     443        4%        413        4%        7%        8%  

Hardware systems support

     205        2%        220        2%        (7%     (6% )

Services

     759        7%        785        7%        (3%     (3% )

Research and development

     1,349        12%        1,264        12%        7%        7%  

General and administrative

     265        2%        274        2%        (3%     (3% )

Amortization of intangible assets

     568        5%        596        5%        (5%     (5% )

Acquisition related and other (2)

     20        0%        (257     (2%     108%        108%  

Restructuring

     37        0%        34        0%        8%        4%  
  

 

 

     

Total Operating Expenses

     6,411        57%        5,947        54%        8%        8%  
  

 

 

     

OPERATING INCOME

     4,909        43%        5,000        46%        (2%     (3% )

Interest expense

     (239     (2%     (210     (2%     14%        14%  

Non-operating (expense) income, net

     (81     0%        35        0%        328%        324%  
  

 

 

     

INCOME BEFORE PROVISION FOR INCOME TAXES

     4,589        41%        4,825        44%        (5%     (6% )
  

 

 

     

Provision for income taxes

     943        9%        1,018        9%        (7%     (8% )
  

 

 

     

NET INCOME

   $ 3,646        32%      $ 3,807        35%        (4%     (5% )
  

 

 

     

EARNINGS PER SHARE:

            

Basic

   $ 0.81        $ 0.81         

Diluted

   $ 0.80        $ 0.80         

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

            

Basic

     4,475          4,684         

Diluted

     4,569          4,756         
                                                  

 

(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended May 31, 2014 compared with the corresponding prior year period increased our operating income by 1 percentage point.

 

(2) Acquisition related and other expenses for the quarter ended May 31, 2013 included a net benefit of $269 million due to an acquisition related item.

 

1


ORACLE CORPORATION

Q4 FISCAL 2014 FINANCIAL RESULTS

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

($ in millions, except per share data)

 

    Three Months Ended May 31,     % Increase (Decrease)
in US $
    % Increase (Decrease) in
Constant Currency (2)
 
     2014
GAAP
    Adj.     2014
Non-GAAP
    2013
GAAP
    Adj.     2013
Non-GAAP
    GAAP     Non-GAAP     GAAP     Non-GAAP  

 

TOTAL REVENUES (3) (4) 

  $   11,320      $ 6     $   11,326     $   10,947      $ 14     $   10,961       3%        3%        3%        3%  

TOTAL SOFTWARE AND CLOUD REVENUES (3)

  $ 8,914      $ 5     $ 8,919     $ 8,541      $ 10     $ 8,551       4%        4%        4%        4%  

New software licenses

    3,769               3,769       3,769               3,769       0%        0%        (1%     (1% )

Cloud software-as-a-service and platform-as-a-service (3)

    322        5       327       257        8       265       25%        23%        25%        23%  

Cloud infrastructure-as-a-service

    128               128       113               113       13%        13%        13%        13%  

Software license updates and product support

    4,695               4,695       4,402        2       4,404       7%        7%        6%        6%  

 

TOTAL HARDWARE SYSTEMS REVENUES (4)

  $ 1,466      $ 1     $ 1,467     $ 1,431      $ 4     $ 1,435       2%        2%        3%        2%  

Hardware systems products

    870               870       849               849       2%        2%        3%        3%  

Hardware systems support (4)

    596        1       597       582        4       586       2%        2%        2%        2%  

TOTAL OPERATING EXPENSES

  $ 6,411      $   (841 )   $ 5,570     $ 5,947      $   (559 )   $ 5,388       8%        3%        8%        3%  

Stock-based compensation (5)

    216        (216 )            186        (186 )            16%        *          16%        *     

Amortization of intangible assets (6)

    568        (568 )            596        (596 )            (5%     *          (5%     *     

Acquisition related and other

    20        (20 )            (257     257              108%        *          108%        *     

Restructuring

    37        (37 )            34        (34 )            8%        *          4%        *     

 

OPERATING INCOME

  $ 4,909      $ 847     $ 5,756     $ 5,000      $ 573     $ 5,573       (2%     3%        (3%     2%  

OPERATING MARGIN %

    43%          51%       46%          51%       (231) bp.        (2) bp.        (255) bp.        (24) bp.   

 

INCOME TAX EFFECTS (7)

  $ 943      $ 308     $ 1,251     $ 1,018      $ 266     $ 1,284       (7%     (3%     (8%     (4% )

NET INCOME

  $ 3,646      $ 539     $ 4,185     $ 3,807      $ 307     $ 4,114       (4%     2%        (5%     1%  

 

DILUTED EARNINGS PER SHARE

  $ 0.80        $ 0.92     $ 0.80        $ 0.87       0%        6%        (1%     5%  

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

    4,569               4,569       4,756               4,756       (4%     (4%     (4%     (4% )
                                                                                 

 

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

 

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

 

(3) As of May 31, 2014, approximately $3 million in estimated revenues related to assumed cloud software-as-a-service and platform-as-a-service contracts will not be recognized for fiscal 2015 due to business combination accounting rules.

 

(4) As of May 31, 2014, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for fiscal 2015 due to business combination accounting rules.

 

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

 

      Three Months Ended
May 31, 2014
     Three Months Ended
May 31, 2013
 
   GAAP      Adj.      Non-GAAP      GAAP      Adj.      Non-GAAP  

Sales and marketing

   $ 46       $ (46 )    $       $ 33       $ (33 )    $   

Cloud software-as-a-service and platform-as-a-service

     3         (3 )              2         (2 )        

Cloud infrastructure-as-a-service

     1         (1 )              2         (2 )        

Software license updates and product support

     6         (6 )              5         (5 )        

Hardware systems products

     1         (1 )              1         (1 )        

Hardware systems support

     1         (1 )              1         (1 )        

Services

     12         (12 )              6         (6 )        

Research and development

     101         (101 )              93         (93 )        

General and administrative

     45         (45 )              43         (43 )        
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

     216         (216 )              186         (186 )        
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquisition related and other

     7         (7 )              4         (4 )        
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation

   $   223       $   (223 )    $   —       $   190       $   (190 )    $   —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(6) Estimated future annual amortization expense related to intangible assets as of May 31, 2014 was as follows:

 

Fiscal 2015

   $ 1,934   

Fiscal 2016

     1,337  

Fiscal 2017

     741  

Fiscal 2018

     607  

Fiscal 2019

     508  

Thereafter

     980  
  

 

 

 

Total intangible assets subject to amortization

     6,107  

In-process research and development

     30  
  

 

 

 

Total intangible assets, net

   $   6,137  
  

 

 

 

 

(7) Income tax effects were calculated reflecting an effective GAAP tax rate of 20.5% and 21.1% in the fourth quarter of fiscal 2014 and 2013, respectively, and an effective non-GAAP tax rate of 23.0% and 23.8% in the fourth quarter of fiscal 2014 and 2013, respectively. The differences between our GAAP and non-GAAP tax rates in the fourth quarter of fiscal 2014 and 2013 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.

 

* Not meaningful

 

2


ORACLE CORPORATION

FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

     Year Ended May 31,     % Increase    

% Increase

(Decrease)

 
      2014     % of
Revenues
    2013     % of
Revenues
   

(Decrease)

in US $

   

in Constant

Currency (1)

 

REVENUES

            

New software licenses

   $   9,416        25%      $   9,411        25%        0%        1%  

Cloud software-as-a-service and platform-as-a-service

     1,121        3%        910        3%        23%        24%  

Cloud infrastructure-as-a-service

     456        1%        457        1%        0%        1%  

Software license updates and product support

     18,206        47%        17,142        46%        6%        7%  
  

 

 

     

Software and Cloud Revenues

     29,199        76%        27,920        75%        5%        5%  
  

 

 

     

Hardware systems products

     2,976        8%        3,033        8%        (2%     (1% )

Hardware systems support

     2,396        6%        2,313        6%        4%        5%  
  

 

 

     

Hardware Systems Revenues

     5,372        14%        5,346        14%        0%        2%  
  

 

 

     

Services Revenues

     3,704        10%        3,914        11%        (5%     (4% )
  

 

 

     

Total Revenues

     38,275        100%        37,180        100%        3%        4%  
  

 

 

     

OPERATING EXPENSES

            

Sales and marketing

     7,567        20%        7,062        19%        7%        8%  

Cloud software-as-a-service and platform-as-a-service

     455        1%        327        1%        39%        40%  

Cloud infrastructure-as-a-service

     308        1%        304        1%        1%        3%  

Software license updates and product support

     1,162        3%        1,175        3%        (1%     1%  

Hardware systems products

     1,521        4%        1,501        4%        1%        3%  

Hardware systems support

     836        2%        890        2%        (6%     (5% )

Services

     2,954        8%        3,182        9%        (7%     (6% )

Research and development

     5,151        13%        4,850        13%        6%        7%  

General and administrative

     1,038        3%        1,072        3%        (3%     (2% )

Amortization of intangible assets

     2,300        6%        2,385        7%        (4%     (4% )

Acquisition related and other (2)

     41        0%        (604     (2%     107%        107%  

Restructuring

     183        0%        352        1%        (48%     (49% )
  

 

 

     

Total Operating Expenses

     23,516        61%        22,496        61%        5%        6%  
  

 

 

     

OPERATING INCOME

     14,759        39%        14,684        39%        1%        1%  

Interest expense

     (914     (3%     (797     (2%     15%        15%  

Non-operating (expense) income, net

     (141     0%        11        0%        1,343%        1,749%  
  

 

 

     

INCOME BEFORE PROVISION FOR INCOME TAXES

     13,704        36%        13,898        37%        (1%     0%  
  

 

 

     

Provision for income taxes

     2,749        7%        2,973        8%        (7%     (6% )
  

 

 

     

NET INCOME

   $ 10,955        29%      $ 10,925        29%        0%        1%  
  

 

 

     

EARNINGS PER SHARE:

            

Basic

   $ 2.42        $ 2.29         

Diluted

   $ 2.38        $ 2.26         

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

            

Basic

     4,528          4,769         

Diluted

     4,604          4,844         
                                                  

 

(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the year ended May 31, 2014 compared with the corresponding prior year period decreased our revenues by 1 percentage point and operating expenses by 1 percentage point.

 

(2) Acquisition related and other expenses for the year ended May 31, 2013 included a benefit of $306 million related to certain litigation and a net benefit of $387 million due to an acquisition related item.

 

3


ORACLE CORPORATION

FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)

 

    Year Ended May 31,     % Increase (Decrease)
in US $
    % Increase (Decrease) in
Constant Currency (2)
 
     2014
GAAP
    Adj.     2014
Non-GAAP
    2013
GAAP
    Adj.     2013
Non-GAAP
    GAAP     Non-GAAP     GAAP     Non-GAAP  

 

TOTAL REVENUES (3) (4)

  $   38,275      $ 31     $   38,306     $   37,180     $ 73      $   37,253       3%        3%        4%        4%  

TOTAL SOFTWARE AND CLOUD REVENUES (3)

  $ 29,199      $ 20     $ 29,219     $ 27,920     $ 59      $ 27,979       5%        4%        5%        5%  

New software licenses

    9,416               9,416       9,411              9,411       0%        0%        1%        1%  

Cloud software-as-a-service and platform-as-a-service (3)

    1,121        17       1,138       910       45        955       23%        19%        24%        20%  

Cloud infrastructure-as-a-service

    456               456       457              457       0%        0%        1%        1%  

Software license updates and product support

    18,206        3       18,209       17,142       14        17,156       6%        6%        7%        7%  

 

TOTAL HARDWARE SYSTEMS REVENUES (4)

  $ 5,372      $ 11     $ 5,383     $ 5,346     $ 14      $ 5,360       0%        0%        2%        2%  

Hardware systems products

    2,976               2,976       3,033              3,033       (2%     (2%     (1%     (1% )

Hardware systems support (4)

    2,396        11       2,407       2,313       14        2,327       4%        3%        5%        5%  

TOTAL OPERATING EXPENSES

  $ 23,516      $   (3,319 )   $ 20,197     $ 22,496     $   (2,855   $ 19,641       5%        3%        6%        4%  

Stock-based compensation (5)

    795        (795 )            722       (722            10%        *          10%        *     

Amortization of intangible assets (6)

    2,300        (2,300 )            2,385       (2,385            (4%     *          (4%     *     

Acquisition related and other

    41        (41 )            (604 )     604               107%        *          107%        *     

Restructuring

    183        (183 )            352       (352            (48%     *          (49%     *     

 

OPERATING INCOME

  $ 14,759      $ 3,350     $ 18,109     $ 14,684     $ 2,928      $ 17,612       1%        3%        1%        4%  

OPERATING MARGIN %

    39%          47%       39%         47%       (93) bp.        0 bp.        (94) bp.        (8) bp.   

 

INCOME TAX EFFECTS (7)

  $ 2,749      $ 1,091     $ 3,840     $ 2,973     $ 896      $ 3,869       (7%     (1%     (6%     0%  

NET INCOME

  $ 10,955      $ 2,259     $ 13,214     $ 10,925     $ 2,032      $ 12,957       0%        2%        1%        3%  

 

DILUTED EARNINGS PER SHARE

  $ 2.38        $ 2.87     $ 2.26       $ 2.68       5%        7%        7%        8%  

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

    4,604               4,604       4,844              4,844       (5%     (5%     (5%     (5% )
                                                                                 

 

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

 

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

 

(3) As of May 31, 2014, approximately $3 million in estimated revenues related to assumed cloud software-as-a-service and platform-as-a-service contracts will not be recognized for fiscal 2015 due to business combination accounting rules.

 

(4) As of May 31, 2014, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for fiscal 2015 due to business combination accounting rules.

 

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

 

      Year Ended
May 31, 2014
     Year Ended
May 31, 2013
 
   GAAP      Adj.      Non-GAAP      GAAP      Adj.      Non-GAAP  

Sales and marketing

   $ 165       $ (165    $       $ 137       $ (137 )    $   

Cloud software-as-a-service and platform-as-a-service

     8         (8              10         (10 )        

Cloud infrastructure-as-a-service

     4         (4              8         (8 )        

Software license updates and product support

     22         (22              20         (20 )        

Hardware systems products

     5         (5              3         (3 )        

Hardware systems support

     6         (6              5         (5 )        

Services

     29         (29              23         (23 )        

Research and development

     385         (385              352         (352 )        

General and administrative

     171         (171              164         (164 )        
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

     795         (795              722         (722 )        
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquisition related and other

     10         (10              33         (33 )        
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation

   $   805       $   (805    $   —       $   755       $   (755 )    $   —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(6) Estimated future annual amortization expense related to intangible assets as of May 31, 2014 was as follows:

 

Fiscal 2015

   $ 1,934   

Fiscal 2016

     1,337  

Fiscal 2017

     741  

Fiscal 2018

     607  

Fiscal 2019

     508  

Thereafter

     980  
  

 

 

 

Total intangible assets subject to amortization

     6,107  

In-process research and development

     30  
  

 

 

 

Total intangible assets, net

   $ 6,137  
  

 

 

 

 

(7) Income tax effects were calculated reflecting an effective GAAP tax rate of 20.1% and 21.4% in fiscal 2014 and 2013, respectively, and an effective non-GAAP tax rate of 22.5% and 23.0% in fiscal 2014 and 2013, respectively. The differences between our GAAP and non-GAAP tax rates in fiscal 2014 and 2013 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.

 

* Not meaningful

 

4


ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

 

     

 

May 31,
2014

     May 31,
2013
 

 

ASSETS

     

Current Assets:

     

Cash and cash equivalents

   $   17,769       $   14,613  

Marketable securities

     21,050         17,603  

Trade receivables, net

     6,087         6,049  

Inventories

     189         240  

Deferred tax assets

     914         974  

Prepaid expenses and other current assets

     2,129         2,213  
  

 

 

 

 

Total Current Assets

     48,138         41,692  

 

Non-Current Assets:

     

Property, plant and equipment, net

     3,061         3,053  

Intangible assets, net

     6,137         6,640  

Goodwill

     29,652         27,343  

Deferred tax assets

     837         766  

Other assets

     2,519         2,318  
  

 

 

 

Total Non-Current Assets

     42,206         40,120  
  

 

 

 

 

TOTAL ASSETS

   $ 90,344       $ 81,812  
  

 

 

 

 

LIABILITIES AND EQUITY

     

 

Current Liabilities:

     

Notes payable, current and other current borrowings

   $ 1,508       $   

Accounts payable

     471         419  

Accrued compensation and related benefits

     1,940         1,851  

Income taxes payable

     416         911  

Deferred revenues

     7,269         7,118  

Other current liabilities

     2,785         2,573  
  

 

 

 

 

Total Current Liabilities

     14,389         12,872  

 

Non-Current Liabilities:

     

Notes payable and other non-current borrowings

     22,667         18,494  

Income taxes payable

     4,184         3,899  

Other non-current liabilities

     1,657         1,402  
  

 

 

 

 

Total Non-Current Liabilities

     28,508         23,795  

Equity

     47,447         45,145  
  

 

 

 

 

TOTAL LIABILITIES AND EQUITY

   $ 90,344       $ 81,812  
  

 

 

 
                   

 

5


ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

 

     Year Ended May 31,  
     2014     2013  

Cash Flows From Operating Activities:

                

Net income

   $ 10,955     $ 10,925   

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

    

Depreciation

     608       546   

Amortization of intangible assets

     2,300       2,385   

Deferred income taxes

     (248 )     (117

Stock-based compensation

     805       755   

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

     480       410   

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

     (250 )     (241

Other, net

     311       155   

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

    

Decrease in trade receivables, net

     146       385   

Decrease (increase) in inventories

     57       (66

Increase in prepaid expenses and other assets

     (143 )     (555

Increase (decrease) in accounts payable and other liabilities

     48       (541

(Decrease) increase in income taxes payable

     (320 )     35   

Increase in deferred revenues

     172       148   
  

 

 

 

 

Net cash provided by operating activities

     14,921       14,224   
  

 

 

 

 

Cash Flows From Investing Activities:

    

Purchases of marketable securities and other investments

     (32,316 )     (32,160

Proceeds from maturities and sales of marketable securities and other investments

     28,845       30,159   

Acquisitions, net of cash acquired

     (3,488 )     (3,305

Capital expenditures

     (580 )     (650
  

 

 

 

 

Net cash used for investing activities

     (7,539 )     (5,956
  

 

 

 

 

Cash Flows From Financing Activities:

    

Payments for repurchases of common stock

     (9,813 )     (11,021

Proceeds from issuances of common stock

     2,135       1,527   

Payments of dividends to stockholders

     (2,178 )     (1,433

Proceeds from borrowings, net of issuance costs

     5,566       4,974   

Repayments of borrowings

            (2,950

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

     250       241   

Distributions to noncontrolling interests

     (28 )     (31

Other, net

            193   
  

 

 

 

 

Net cash used for financing activities

     (4,068 )     (8,500
  

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (158 )     (110
  

 

 

 

Net increase (decrease) in cash and cash equivalents

     3,156       (342
  

 

 

 

Cash and cash equivalents at beginning of period

     14,613       14,955   
  

 

 

 

Cash and cash equivalents at end of period

   $ 17,769     $ 14,613   
  

 

 

 
                  

 

6


ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

FREE CASH FLOW—TRAILING 4-QUARTERS (1)

($ in millions)

 

     Fiscal 2013      Fiscal 2014  
      Q1      Q2      Q3      Q4      Q1      Q2          Q3          Q4  

 

GAAP Operating Cash Flow

   $       13,993       $       13,533       $       13,717       $       14,224       $     14,845       $     15,196       $     15,029       $     14,921   

Capital Expenditures (2)

     (627      (710      (684      (650      (664      (578      (609      (580
  

 

 

 

 

Free Cash Flow

   $ 13,366       $ 12,823       $ 13,033       $ 13,574       $ 14,181       $ 14,618       $ 14,420       $ 14,341   
  

 

 

 

% Growth over prior year

     8%         2%         1%         4%         6%         14%         11%         6%   

 

GAAP Net Income

   $ 10,175       $ 10,564       $ 10,571       $ 10,925       $ 11,082       $ 11,054       $ 11,115       $ 10,955   

Free Cash Flow as a % of Net Income

     131%         121%         123%         124%         128%         132%         130%         131%   
                                                                         

 

(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

FISCAL 2014 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)

($ in millions)

 

     Fiscal 2013     Fiscal 2014  
  Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3     Q4     TOTAL  

 

REVENUES

                   

New software licenses

  $ 1,371      $ 2,171      $ 2,101      $ 3,769      $ 9,411      $ 1,399      $ 2,121      $ 2,128      $ 3,769      $ 9,416  

Cloud software-as-a-service and platform-as-a-service

    203        218        231        257        910        254        259        287        322        1,121  

Cloud infrastructure-as-a-service

    119        114        110        113        457        109        97        121        128        456  

Software license updates and product support

    4,140        4,260        4,340        4,402        17,142        4,431        4,516        4,564        4,695        18,206  
 

 

 

 

Software and Cloud Revenues

    5,833        6,763        6,782        8,541        27,920        6,193        6,993        7,100        8,914        29,199  

 

Hardware systems products

    779        734        671        849        3,033        669        714        725        870        2,976  

Hardware systems support

    574        587        570        582        2,313        592        609        598        596        2,396  
 

 

 

 

Hardware Systems Revenues

    1,353        1,321        1,241        1,431        5,346        1,261        1,323        1,323        1,466        5,372  

 

Services Revenues

    995        1,010        935        975        3,914        918        959        884        940        3,704  
 

 

 

 

 

Total Revenues

  $ 8,181      $ 9,094      $ 8,958      $ 10,947      $   37,180      $ 8,372      $ 9,275      $ 9,307      $ 11,320      $   38,275  
 

 

 

 

AS REPORTED REVENUE GROWTH RATES

                   

New software licenses

    (3%     11%        (7%     (1%     0%        2%        (2%     1%        0%        0%  

Cloud software-as-a-service and platform-as-a-service

    138%        145%        111%        50%        100%        25%        19%        24%        25%        23%  

Cloud infrastructure-as-a-service

    13%        5%        (1%     (4%     3%        (9%     (15%     10%        13%        0%  

Software license updates and product support

    3%        7%        7%        6%        6%        7%        6%        5%        7%        6%  

Software and Cloud Revenues

    4%        10%        4%        3%        5%        6%        3%        5%        4%        5%  

Hardware systems products

    (24%     (23%     (23%     (13%     (21%     (14%     (3%     8%        2%        (2% )

Hardware systems support

    (11%     (6%     (6%     (3%     (7%     3%        4%        5%        2%        4%  

Hardware Systems Revenues

    (19%     (16%     (16%     (9%     (15%     (7%     0%        7%        2%        0%  

 

Services Revenues

    (7%     (6%     (9%     (10%     (8%     (8%     (5%     (5%     (4%     (5% )

Total Revenues

    (2%     3%        (1%     0%        0%        2%        2%        4%        3%        3%  

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

New software licenses

    2%        12%        (6%     0%        1%        5%        0%        3%        (1%     1%  

Cloud software-as-a-service and platform-as-a-service

    139%        145%        111%        51%        100%        26%        20%        25%        25%        24%  

Cloud infrastructure-as-a-service

    18%        6%        0%        (2%     5%        (7%     (14%     11%        13%        1%  

Software license updates and product support

    8%        8%        8%        8%        8%        8%        7%        7%        6%        7%  

Software and Cloud Revenues

    9%        11%        5%        5%        7%        8%        5%        6%        4%        5%  

 

Hardware systems products

    (21%     (23%     (22%     (12%     (19%     (13%     (2%     10%        3%        (1% )

Hardware systems support

    (6%     (5%     (5%     (1%     (4%     5%        5%        7%        2%        5%  

Hardware Systems Revenues

    (15%     (16%     (15%     (8%     (13%     (6%     1%        9%        3%        2%  

Services Revenues

    (2%     (4%     (8%     (9%     (6%     (6%     (3%     (3%     (3%     (4% )

 

Total Revenues

    3%        5%        0%        2%        2%        4%        3%        6%        3%        4%  
                                                                                  

GEOGRAPHIC REVENUES

                   

 

REVENUES

                   

Americas

  $ 4,324      $ 4,787      $ 4,698      $ 5,911      $ 19,719      $ 4,517      $ 4,995      $ 4,953      $ 5,857      $ 20,323  

Europe, Middle East & Africa

    2,383        2,701        2,745        3,328        11,158        2,439        2,817        2,923        3,768        11,946  

Asia Pacific

    1,474        1,606        1,515        1,708        6,303        1,416        1,463        1,431        1,695        6,006  
 

 

 

 

 

Total Revenues

  $ 8,181      $ 9,094      $ 8,958      $ 10,947      $   37,180      $ 8,372      $ 9,275      $ 9,307      $ 11,320      $   38,275  
 

 

 

 
                                                                                  

HEADCOUNT

                   

 

GEOGRAPHIC AREA

                   

Americas

    49,145        49,584        50,402        51,519          53,465        53,073        53,799        53,827     

Europe, Middle East & Africa

    22,584        22,594        22,592        22,860          23,349        23,178        23,350        23,339     

Asia Pacific

    44,170        45,051        45,663        45,855          45,513        45,617        45,561        45,108     
 

 

 

 

 

Total Company

      115,899          117,229          118,657          120,234            122,327          121,868        122,710        122,274     
 

 

 

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

 

(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013 and 2012 for the fiscal 2014 and fiscal 2013 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

8


ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)

($ in millions)

 

 

    Fiscal 2013     Fiscal 2014  
       Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3     Q4     TOTAL  

 

AMERICAS

                   

Software and cloud revenues

  $ 3,164      $ 3,641      $ 3,651      $ 4,686      $ 15,142      $ 3,434      $ 3,808      $ 3,847      $ 4,649      $ 15,737   
 

 

 

 

Hardware systems revenues

  $ 652      $ 648      $ 577      $ 728      $ 2,604      $ 640      $ 694      $ 655      $ 747      $ 2,736   
 

 

 

 

AS REPORTED GROWTH RATES

                   

Software and cloud revenues

    8%        13%        4%        5%        7%        9%        5%        5%        (1%     4%   

Hardware systems revenues

    (16%     (17%     (17%     (7%     (14%     (2%     7%        14%        3%        5%   

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

Software and cloud revenues

    10%        13%        5%        6%        8%        9%        6%        7%        1%        5%   

Hardware systems revenues

    (15%     (17%     (17%     (7%     (14%     (1%     8%        16%        5%        6%   
           

 

EUROPE / MIDDLE EAST / AFRICA

                   

 

Software and cloud revenues

  $ 1,699      $ 1,993      $ 2,073      $ 2,627      $ 8,393      $ 1,816      $ 2,155      $ 2,245      $ 3,032      $ 9,249   
 

 

 

 

Hardware systems revenues

  $ 402      $ 391      $ 390      $ 411      $ 1,594      $ 358      $ 372      $ 403      $ 440      $ 1,572   
 

 

 

 

 

AS REPORTED GROWTH RATES

                   

Software and cloud revenues

    (4%     5%        5%        5%        3%        7%        8%        8%        15%        10%   

Hardware systems revenues

    (31%     (22%     (18%     (10%     (21%     (11%     (5%     3%        7%        (1%

CONSTANT CURRENCY GROWTH RATES (2)

                   

Software and cloud revenues

    7%        8%        5%        6%        6%        4%        6%        6%        10%        7%   

Hardware systems revenues

    (22%     (19%     (18%     (9%     (17%     (13%     (6%     2%        3%        (3%
                                                                                 

 

ASIA PACIFIC

                   

Software and cloud revenues

  $ 970      $ 1,129      $ 1,058      $ 1,228      $ 4,385      $ 943      $ 1,030      $ 1,008      $ 1,233      $ 4,213   
 

 

 

 

Hardware systems revenues

  $ 299      $ 282      $ 274      $ 292      $ 1,148      $ 263      $ 257      $ 265      $ 279      $ 1,064   
 

 

 

 

AS REPORTED GROWTH RATES

                   

Software and cloud revenues

    6%        10%        1%        (5%     2%        (3%     (9%     (5%     0%        (4%

Hardware systems revenues

    (7%     (5%     (10%     (12%     (9%     (12%     (9%     (3%     (4%     (7%

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

Software and cloud revenues

    10%        10%        5%        0%        6%        8%        0%        3%        3%        3%   

Hardware systems revenues

    (4%     (6%     (7%     (9%     (7%     (5%     (3%     3%        (3%     (2%
           

TOTAL COMPANY

                   

 

Software and cloud revenues

  $   5,833      $   6,763      $   6,782      $   8,541      $   27,920      $   6,193      $   6,993      $   7,100      $   8,914      $   29,199   
 

 

 

 

Hardware systems revenues

  $ 1,353      $ 1,321      $ 1,241      $ 1,431      $ 5,346      $ 1,261      $ 1,323      $ 1,323      $ 1,466      $ 5,372   
 

 

 

 

 

AS REPORTED GROWTH RATES

                   

Software and cloud revenues

    4%        10%        4%        3%        5%        6%        3%        5%        4%        5%   

Hardware systems revenues

    (19%     (16%     (16%     (9%     (15%     (7%     0%        7%        2%        0%   

CONSTANT CURRENCY GROWTH RATES (2)

                   

Software and cloud revenues

    9%        11%        5%        5%        7%        8%        5%        6%        4%        5%   

Hardware systems revenues

    (15%     (16%     (15%     (8%     (13%     (6%     1%        9%        3%        2%   
                                                                                 

 

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

 

(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013 and 2012 for the fiscal 2014 and fiscal 2013 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

9


APPENDIX A

ORACLE CORPORATION

Q4 FISCAL 2014 FINANCIAL RESULTS

EXPLANATION OF NON-GAAP MEASURES

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

 

 

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.

 

10