EX-99.1 2 f36108exv99w1.htm EXHIBIT 99.1 exv99w1
 

Exhibit 99.1

(ORACLE LOGO)
For Immediate Release
         
Contacts:
  Roy Lobo   Deborah Hellinger
 
  Oracle Investor Relations   Oracle Corporate Communications
 
  +1.650.506.4073   +1.650.506.5158
 
  investor_us@oracle.com   deborah.hellinger@oracle.com
ORACLE REPORTS Q2 GAAP EPS UP 36% TO 25 CENTS, NON-GAAP EPS UP 40% TO 31 CENTS

Applications New License Revenues Up 63%, Database and Middleware New License Revenues Up 28%
     REDWOOD SHORES, Calif., December 19, 2007 — Oracle Corporation (NASDAQ: ORCL) today announced fiscal 2008 Q2 GAAP earnings per share were up 36% to $0.25, compared to the same quarter last year. Second quarter total GAAP revenues were up 28% to $5.3 billion, while quarterly GAAP net income was up 35% to $1.3 billion. Total GAAP software revenues were up 29% to $4.2 billion with GAAP new software license revenues up 38% to $1.7 billion. Database and middleware new license revenues were up 28% and applications new license revenues were up 63%. Services revenues were up 22% to $1.2 billion, compared to the same quarter last year.
     Second quarter non-GAAP earnings per share were up 40% to $0.31, and non-GAAP net income was up 38% to $1.6 billion, compared to the same quarter last year.
     “In Q1 we reported new software license revenues up 35%, the strongest growth of any quarter in ten years,” said Oracle President and CFO, Safra Catz. “In Q2 we did even better with new software license sales up 38%. GAAP EPS were up 36%; non-GAAP EPS were up 40%. We exceeded our guidance and our best case forecast with strong revenue growth across all product lines and geographies.”
     “In Q2 Oracle’s applications new license sales grew 63% compared to SAP’s new license sales growth rate of 15% in their most recently completed quarter,” said Oracle President, Charles Phillips. “We like our growth strategy of expanding beyond ERP into high-end industry specific vertical software in contrast to SAP’s strategy of moving down market to sell ERP systems to small companies.”
     “Our database and middleware new license sales grew 28% in Q2,” said CEO, Larry Ellison. “We continue to take market share from IBM in both product categories.”

 

 

Q2 Earnings Announcement
Oracle will hold a conference call and web broadcast today to discuss these results at 2:00 p.m. (PST) / 5:00 p.m. (EST). To access the live web broadcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. Please hold down your control key while pressing refresh to ensure that the weblink is visible.
About Oracle
Oracle is the world’s largest enterprise software company. For more information about Oracle, including supplemental financial information, please visit http://www.oracle.com/investor or call Investor Relations at (650) 506-4073.
# # #
Trademarks
Oracle is a registered trademark of Oracle Corporation 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 and prospects 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 could adversely affect our revenue growth and profitability through reductions in IT budgets and expenditures. (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) We cannot assure market acceptance of new products or new versions of existing or acquired products. (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) Periodic changes to our pricing model and sales organization could temporarily disrupt operations and cause a decline or delay in sales. (6) Intense competitive forces demand rapid technological advances and frequent new product introductions, and could require us to reduce prices. 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 release is current as of December 19, 2007. Oracle undertakes no duty to update any statement in light of new information or future events.

 

 

ORACLE CORPORATION
Q2 FISCAL 2008 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
                                                 
                                            % Increase  
    Three Months Ended November 30,     % Increase     (Decrease)  
            % of             % of     (Decrease)     in Constant  
    2007     Revenues     2006     Revenues     in US $     Currency (1)  
 
REVENUES
                                                
New software licenses
   $  1,668       31%     $  1,207       29%       38%       31%  
Software license updates and product support
     2,491       47%       2,007       48%       24%       18%  
                     
Software Revenues
     4,159       78%       3,214       77%       29%       23%  
                     
Services
     1,154       22%       949       23%       22%       15%  
                     
Total Revenues
     5,313       100%       4,163       100%       28%       21%  
                     
 
                                                
OPERATING EXPENSES
                                                
Sales and marketing
     1,095       21%       915       22%       20%       14%  
Software license updates and product support
     246       5%       205       5%       20%       14%
Cost of services
     992       19%       820       20%       21%       14%  
Research and development
     674       12%       519       12%       30%       27%  
General and administrative
     206       4%       170       4%       21%       16%  
Amortization of intangible assets
     290       5%       202       5%       43%       43%  
Acquisition related (2)
     22       0%       (36 )     (1% )     160%       158%  
Restructuring
     6       0%       11       0%       (49% )     (51% )
                     
Total Operating Expenses
     3,531       66%       2,806       67%       26%       20%  
                     
 
                                                
OPERATING INCOME
     1,782       34%       1,357       33%       31%       22%  
Interest expense
     (89 )     (2% )     (82 )     (2% )     8%       8%  
Non-operating income, net
     122       2%       79       2%       52%       48%  
                     
INCOME BEFORE PROVISION FOR INCOME TAXES
     1,815       34%       1,354       33%       34%       25%
                     
Provision for income taxes
     512       9%       387       10%       32%       28%  
                     
NET INCOME
   $ 1,303       25%     $ 967       23%       35%       24%  
                     
EARNINGS PER SHARE:
                                                
Basic
   $ 0.25             $ 0.19               36%            
Diluted
   $ 0.25             $ 0.18               36%            
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
                                                
Basic
     5,125               5,184               (1% )        
Diluted
     5,232               5,287               (1% )        
 
(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 rate in effect on May 31, 2007, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. The United States dollar weakened relative to major international currencies in the three months ended November 30, 2007 compared with the corresponding prior year period, contributing 7 percentage points of revenue, 6 percentage points of operating expense and 9 percentage points of operating income growth.
 
(2)   Acquisition related costs for the three months ended November 30, 2006 include a benefit of $52 million related to the settlement of a pre-acquisition lawsuit against PeopleSoft, Inc. Please see Appendix A for further discussion.

 

ORACLE CORPORATION
Q2 FISCAL 2008 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
 
(in millions, except per share data)
                                                                     
                                                    % Increase (Decrease)
      Three Months Ended November 30,   in US $
      2007           2007   2006           2006        
      GAAP   Adj.   Non-GAAP   GAAP   Adj.   Non-GAAP   GAAP   Non-GAAP
 
 
                                                                
TOTAL REVENUES (2)
   $ 5,313     $ 51     $ 5,364     $ 4,163     $ 53     $ 4,216       28 %     27 %
 
                                                                
TOTAL SOFTWARE REVENUES (2)
   $ 4,159     $ 51     $ 4,210     $ 3,214     $ 53     $ 3,267       29 %     29 %
New software licenses
     1,668       —       1,668       1,207       —       1,207       38 %     38 %
Software license updates and product support (2)
     2,491       51       2,542       2,007       53       2,060       24 %     23 %
 
                                                                
TOTAL OPERATING EXPENSES
   $  3,531     $  (381 )   $  3,150     $  2,806     $  (224 )   $  2,582       26 %     22 %
Stock-based compensation (3)
     63       (63 )     —       47       (47 )     —       35 %        
Amortization of intangible assets (4)
     290       (290 )     —       202       (202 )     —       43 %        
Acquisition related
     22       (22 )     —       (36 )     36       —       160 %        
Restructuring
     6       (6 )     —       11       (11 )     —       (49 %)        
 
                                                                
OPERATING INCOME
   $ 1,782     $ 432     $ 2,214     $ 1,357     $ 277     $ 1,634       31 %     36 %
 
                                                                
OPERATING MARGIN %
     34 %             41 %     33 %             39 %     1 %     2 %
 
                                                                
INCOME TAX EFFECTS ON ABOVE ADJUSTMENTS (5)
   $ 512     $ 122     $ 634     $ 387     $ 79     $ 466       32 %     36 %
 
                                                                
NET INCOME
   $ 1,303     $ 310     $ 1,613     $ 967     $ 198     $ 1,165       35 %     38 %
 
                                                                
DILUTED EARNINGS PER SHARE (6)
   $ 0.25             $ 0.31     $ 0.18             $ 0.22       36 %     40 %
 
                                                                
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (6)
     5,232       1       5,233       5,287       16       5,303       (1 %)     (1 %)
 
                                                                
 
(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 condensed 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)   As of November 30, 2007, approximately $31 million in estimated revenues related to assumed support contracts will not be recognized in fiscal 2008 due to business combination accounting rules.
 
(3)   Stock-based compensation is included in the following GAAP operating expense categories:
                                                 
    Three Months Ended     Three Months Ended  
    November 30, 2007     November 30, 2006  
    GAAP     Adj.     Non-GAAP     GAAP     Adj.     Non-GAAP  
 
Sales and marketing
   $ 13     $ (13 )   $ —     $ 8     $ (8 )   $ —  
Software license updates and product support
     3       (3 )     —       3       (3 )     —  
Cost of services
     3       (3 )     —       3       (3 )     —  
Research and development
     25       (25 )     —       21       (21 )     —  
General and administrative
     19       (19 )     —       12       (12 )     —  
 
                                    
Subtotal
     63       (63 )     —       47       (47 )     —  
 
                                    
Acquisition related
     4       (4 )     —       —       —       —  
 
                                    
Total stock-based compensation
   $ 67     $ (67 )   $ —     $ 47     $ (47 )   $ —  
 
                                    
(4)   Estimated future annual amortization expense related to intangible assets as of November 30, 2007 is as follows:
         
Remainder of Fiscal 2008
   $ 616  
Fiscal 2009
     1,146  
Fiscal 2010
     1,022  
Fiscal 2011
     793  
Fiscal 2012
     658  
Fiscal 2013
     308  
Thereafter
     1,140  
 
      
Total
   $ 5,683  
 
      
(5)   The income tax provision was calculated reflecting an effective tax rate of 28.2% and 28.6% in the second quarter of fiscal 2008 and 2007, respectively.
 
(6)   Non-GAAP diluted earnings per share and non-GAAP diluted weighted average shares outstanding were calculated excluding the effects of expensing stock options under Statement 123R.

 

 

ORACLE CORPORATION
Q2 FISCAL 2008 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(in millions, except per share data)
                                                 
                                            % Increase
    Six Months Ended November 30,   % Increase   (Decrease)
            % of           % of   (Decrease)   in Constant
    2007   Revenues   2006   Revenues   in US $   Currency (1)
 
 
                                                
REVENUES
                                                
New software licenses
   $   2,756       28 %   $ 2,011       26 %     37 %     31 %
Software license updates and product support
     4,873       50 %     3,948       51 %     23 %     18 %
                     
Software Revenues
     7,629       78 %     5,959       77 %     28 %     23 %
                     
Services
     2,213       22 %     1,795       23 %     23 %     17 %
                     
Total Revenues
     9,842       100 %     7,754       100 %     27 %     22 %
                     
 
                                                
OPERATING EXPENSES
                                                
Sales and marketing
     2,070       21 %     1,665       21 %     24 %     19 %
Software license updates and product support
     474       5 %     404       5 %     17 %     12 %
Cost of services
     1,922       20 %     1,599       21 %     20 %     14 %
Research and development
     1,326       13 %     1,026       14 %     29 %     27 %
General and administrative
     402       4 %     328       4 %     23 %     18 %
Amortization of intangible assets
     575       6 %     401       5 %     44 %     43 %
Acquisition related (2)
     68       0 %     12       0 %     467 %     453 %
Restructuring
     6       0 %     20       0 %     (71 %)     (73 %)
                     
Total Operating Expenses
     6,843       69 %     5,455       70 %     25 %     21 %
                     
 
                                                
OPERATING INCOME
     2,999       31 %     2,299       30 %     30 %     23 %
Interest expense
     (183 )     (2 %)     (166 )     (2 %)     10 %     10 %
Non-operating income, net
     199       2 %     183       2 %     9 %     6 %
                     
INCOME BEFORE PROVISION FOR INCOME TAXES
     3,015       31 %     2,316       30 %     30 %     23 %
                     
Provision for income taxes
     871       9 %     679       9 %     28 %     26 %
                     
NET INCOME
   $ 2,144       22 %   $   1,637       21 %     31 %     22 %
                     
EARNINGS PER SHARE:
                                                
Basic
   $ 0.42             $ 0.31               33 %        
Diluted
   $ 0.41             $ 0.31               33 %        
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
                                                
Basic
     5,117               5,200               (2 %)        
Diluted
     5,224               5,297               (1 %)        
 
                                                
 
(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 rate in effect on May 31, 2007, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. The United States dollar weakened relative to major international currencies in the six months ended November 30, 2007 compared with the corresponding prior year period, contributing 5 percentage points of revenue, 4 percentage points of operating expense and 7 percentage points of operating income growth.
 
(2)   Acquisition related costs for the six months ended November 30, 2006 include a benefit of $52 million related to the settlement of a pre-acquisition lawsuit against PeopleSoft, Inc. Please see Appendix A for further discussion.

 

 

ORACLE CORPORATION
Q2 FISCAL 2008 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
 
(in millions, except per share data)
                                                                 
                                                    % Increase (Decrease)
    Six Months Ended November 30,   in US $
    2007           2007   2006           2006        
    GAAP   Adj.   Non-GAAP   GAAP   Adj.   Non-GAAP   GAAP   Non-GAAP
 
 
                                                                
TOTAL REVENUES (2)
   $  9,842     $ 115     $  9,957     $  7,754     $ 122     $  7,876       27 %     26 %
 
                                                                
TOTAL SOFTWARE REVENUES (2)
   $ 7,629     $ 115     $ 7,744     $ 5,959     $ 122     $ 6,081       28 %     27 %
New software licenses
     2,756       —       2,756       2,011       —       2,011       37 %     37 %
Software license updates and product support (2)
     4,873       115       4,988       3,948       122       4,070       23 %     23 %
 
                                                                
TOTAL OPERATING EXPENSES
   $ 6,843     $  (780 )   $ 6,063     $ 5,455     $  (530 )   $ 4,925       25 %     23 %
Stock-based compensation (3)
     131       (131 )     —       97       (97 )     —       36 %        
Amortization of intangible assets (4)
     575       (575 )     —       401       (401 )     —       44 %        
Acquisition related
     68       (68 )     —       12       (12 )     —       467 %        
Restructuring
     6       (6 )     —       20       (20 )     —       (71 %)        
 
                                                                
OPERATING INCOME
   $ 2,999     $ 895     $ 3,894     $ 2,299     $ 652     $ 2,951       30 %     32 %
 
                                                                
OPERATING MARGIN %
     31 %             39 %     30 %             37 %     1 %     2 %
 
                                                                
INCOME TAX EFFECTS ON ABOVE ADJUSTMENTS (5)
   $ 871     $ 259     $ 1,130     $ 679     $ 193     $ 872       28 %     30 %
 
                                                                
NET INCOME
   $ 2,144     $ 636     $ 2,780     $ 1,637     $ 459     $ 2,096       31 %     33 %
 
                                                                
DILUTED EARNINGS PER SHARE (6)
   $ 0.41             $ 0.53     $ 0.31             $ 0.39       33 %     35 %
 
                                                                
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (6)
     5,224       3       5,227       5,297       12       5,309       (1 %)     (2 %)
 
 
(1)   This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed 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)   As of November 30, 2007, approximately $31 million in estimated revenues related to assumed support contracts will not be recognized in fiscal 2008 due to business combination accounting rules.
 
(3)   Stock-based compensation is included in the following GAAP operating expenses:
                                                 
    Six Months Ended     Six Months Ended  
    November 30, 2007     November 30, 2006  
    GAAP     Adj.     Non-GAAP     GAAP     Adj.     Non-GAAP  
 
Sales and marketing
   $ 26     $ (26 )   $ —     $ 18     $ (18 )   $ —  
Software license updates and product support
     7       (7 )     —       6       (6 )     —  
Cost of services
     8       (8 )     —       6       (6 )     —  
Research and development
     52       (52 )     —       43       (43 )     —  
General and administrative
     38       (38 )     —       24       (24 )     —  
 
                                    
Subtotal
     131       (131 )     —       97       (97 )     —  
 
                                    
Acquisition related
     37       (37 )     —       1       (1 )     —  
 
                                    
Total stock-based compensation
   $ 168     $ (168 )   $ —     $ 98     $ (98 )   $ —  
 
                                    
(4)   Estimated future amortization expense related to intangible assets as of November 30, 2007 is as follows:
         
Remainder of Fiscal 2008
   $ 616  
Fiscal 2009
     1,146  
Fiscal 2010
     1,022  
Fiscal 2011
     793  
Fiscal 2012
     658  
Fiscal 2013
     308  
Thereafter
     1,140  
 
      
Total
   $      5,683  
 
      
(5)   The income tax provision was calculated reflecting a tax rate of 28.9% and 29.3% in the first six months of fiscal 2008 and 2007, respectively.
 
(6)   Non-GAAP diluted earnings per share and non-GAAP diluted weighted average shares outstanding were calculated excluding the effects of expensing stock options under Statement 123R.

 

 

ORACLE CORPORATION
Q2 FISCAL 2008 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
 
($ in millions)
                 
    November 30,   May 31,
    2007   2007
 
 
                
ASSETS
                
 
                
Current Assets:
                
Cash and cash equivalents
   $ 6,733     $ 6,218  
Marketable securities
     1,699       802  
Trade receivables, net
     3,264       4,074  
Deferred tax assets
     969       968  
Other current assets
     893       821  
     
Total Current Assets
     13,558       12,883  
 
                
Non-Current Assets:
                
Property, net
     1,655       1,603  
Intangible assets, net
     5,683       5,964  
Goodwill
     13,663       13,479  
Deferred tax assets
     412       48  
Other assets
     682       595  
     
Total Non-Current Assets
     22,095       21,689  
     
 
                
TOTAL ASSETS
   $  35,653     $  34,572  
     
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current Liabilities:
                
Commercial paper and other short-term borrowings
   $ 2     $ 1,358  
Accounts payable
     346       315  
Income taxes payable
     —       1,237  
Accrued compensation and related benefits
     1,191       1,349  
Accrued restructuring
     169       201  
Deferred revenues
     3,577       3,492  
Other current liabilities
     1,264       1,435  
     
Total Current Liabilities
     6,549       9,387  
 
                
Non-Current Liabilities:
                
Notes payable, non-current
     6,236       6,235  
Income taxes payable
     1,382       —  
Deferred tax liabilities
     1,045       1,121  
Accrued restructuring
     243       258  
Deferred revenues
     263       93  
Minority interests
     338       316  
Other long-term liabilities
     302       243  
     
Total Non-Current Liabilities
     9,809       8,266  
 
                
Stockholders’ Equity
     19,295       16,919  
     
 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 35,653     $ 34,572  
     
 

 

 

ORACLE CORPORATION
Q2 FISCAL 2008 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
($ in millions)
                 
    Six Months Ended November 30,
    2007   2006
 
Cash Flows From Operating Activities:
                
Net income
   $ 2,144     $ 1,637  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation
     137       124  
Amortization of intangible assets
     575       401  
Deferred income taxes
     (72 )     5  
Minority interests in income
     29       32  
Stock-based compensation
     168       98  
Tax benefit on the exercise of stock options
     262       205  
Excess tax benefits from stock-based compensation
     (187 )     (159 )
In-process research and development
     7       50  
Net investment gains related to equity securities
     (2 )     (18 )
Changes in operating assets and liabilities, net of effects from acquisitions:
                
Decrease in trade receivables, net
     937       681  
Decrease in prepaid expenses and other assets
     27       23  
Decrease in accounts payable and other liabilities
     (551 )     (855 )
Decrease in income taxes payable
     (241 )     (196 )
Increase (decrease) in deferred revenues
     70       (162 )
     
Net cash provided by operating activities
     3,303       1,866  
     
 
                
Cash Flows From Investing Activities:
                
Purchases of marketable securities and investments
     (1,953 )     (4,251 )
Proceeds from maturities and sales of marketable securities and investments
     1,273       2,204  
Acquisitions, net of cash acquired
     (651 )     (488 )
Capital expenditures
     (156 )     (106 )
     
Net cash used for investing activities
     (1,487 )     (2,641 )
     
 
                
Cash Flows From Financing Activities:
                
Payments for repurchases of common stock
     (1,023 )     (1,936 )
Proceeds from issuance of common stock
     682       566  
Payments of debt
     (1,362 )     (8 )
Excess tax benefits from stock-based compensation
     187       159  
Distributions to minority interests
     (28 )     (29 )
     
Net cash used for financing activities
     (1,544 )     (1,248 )
     
 
                
Effect of exchange rate changes on cash and cash equivalents
     243       48  
     
 
                
Net increase (decrease) in cash and cash equivalents
     515       (1,975 )
     
 
                
Cash and cash equivalents at beginning of period
     6,218       6,659  
     
Cash and cash equivalents at end of period
   $ 6,733     $ 4,684  
     
 

 

 

ORACLE CORPORATION
Q2 FISCAL 2008 FINANCIAL RESULTS
FREE CASH FLOW — TRAILING 4-QUARTERS (1)
 
($ in millions)
                                                                 
    Fiscal 2007   Fiscal 2008
    Q1   Q2   Q3   Q4   Q1   Q2   Q3   Q4
 
 
                                                                
GAAP Operating Cash Flow
   $  4,706     $  4,651     $  4,984     $  5,520     $  6,598     $  6,957                  
 
                                                                
Capital Expenditures (2)
     (233 )     (256 )     (258 )     (319 )     (357 )     (369 )                
     
 
                                                                
Free Cash Flow
   $  4,473     $  4,395     $  4,726     $  5,201     $  6,241     $  6,588                  
     
 
                                                                
% Growth over prior year
     32 %     32 %     29 %     21 %     40 %     50 %                
 
                                                                
 
 
                                                                
GAAP Net Income
   $  3,532     $  3,702     $  3,970     $  4,274     $  4,444     $  4,781                  
 
                                                                
Free Cash Flow as a % of Net Income
     127 %     119 %     119 %     122 %     140 %     138 %                
 
(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)   Represents capital expenditures as reported in cash flows from investing activities on our cash flow statements presented in accordance with GAAP.

 

 

ORACLE CORPORATION
Q2 FISCAL 2008 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
 
(in millions, except headcount data)
                                                                                 
    Fiscal 2007   Fiscal 2008
    Q1   Q2   Q3   Q4   TOTAL   Q1   Q2   Q3   Q4   TOTAL
 
 
                                                                                
REVENUES
                                                                                
New software licenses
   $ 804     $ 1,207     $ 1,390     $ 2,481     $ 5,882     $ 1,087     $ 1,668                     $  2,756  
Software license updates and product support
     1,941       2,007       2,108       2,272       8,329       2,383       2,491                       4,873  
     
Software Revenues
     2,745       3,214       3,498       4,753       14,211       3,470       4,159                       7,629  
 
                                                                                
Consulting
     640       716       694       819       2,869       801       877                       1,678  
On Demand
     125       140       142       151       557       158       167                       325  
Education
     81       93       80       105       359       100       110                       210  
     
Services Revenues
     846       949       916       1,075       3,785       1,059       1,154                       2,213  
     
 
                                                                                
Total Revenues
   $ 3,591     $ 4,163     $ 4,414     $ 5,828     $ 17,996     $ 4,529     $ 5,313                     $ 9,842  
     
 
                                                                                
AS REPORTED REVENUE GROWTH RATES
                                                                                
New software licenses
     28 %     14 %     27 %     17 %     20 %     35 %     38 %                     37 %
Software license updates and product support
     29 %     29 %     24 %     21 %     25 %     23 %     24 %                     23 %
Software Revenues
     29 %     23 %     25 %     19 %     23 %     26 %     29 %                     28 %
 
                                                                                
Consulting
     33 %     42 %     38 %     30 %     35 %     25 %     23 %                     24 %
On Demand
     49 %     61 %     48 %     16 %     40 %     27 %     20 %                     23 %
Education
     13 %     14 %     8 %     10 %     11 %     24 %     17 %                     20 %
Services Revenues
     33 %     41 %     36 %     26 %     33 %     25 %     22 %                     23 %
 
                                                                                
Total Revenues
     30 %     26 %     27 %     20 %     25 %     26 %     28 %                     27 %
 
                                                                                
CONSTANT CURRENCY GROWTH RATES
                                                                                
New software licenses
     26 %     10 %     23 %     13 %     17 %     32 %     31 %                     31 %
Software license updates and product support
     27 %     25 %     20 %     17 %     22 %     19 %     18 %                     18 %
Software Revenues
     27 %     19 %     21 %     15 %     20 %     23 %     23 %                     23 %
 
                                                                                
Consulting
     31 %     37 %     34 %     24 %     31 %     20 %     15 %                     18 %
On Demand
     47 %     56 %     43 %     12 %     37 %     23 %     15 %                     19 %
Education
     11 %     11 %     4 %     6 %     8 %     20 %     10 %                     15 %
Services Revenues
     31 %     36 %     32 %     20 %     29 %     21 %     15 %                     17 %
 
                                                                                
Total Revenues
     28 %     23 %     23 %     16 %     22 %     22 %     21 %                     22 %
 
                                                                                
 
 
                                                                                
GEOGRAPHIC REVENUES
                                                                                
 
                                                                                
REVENUES
                                                                                
Americas
   $ 1,956     $ 2,170     $ 2,315     $ 3,018     $ 9,460     $ 2,375     $ 2,674                     $ 5,049  
Europe, Middle East & Africa
     1,140       1,422       1,484       1,992       6,037       1,530       1,865                       3,394  
Asia Pacific
     495       571       615       818       2,499       624       774                       1,399  
     
Total Revenues
   $ 3,591     $ 4,163     $ 4,414     $ 5,828     $ 17,996     $ 4,529     $ 5,313                     $ 9,842  
     
 
                                                                                
 
 
                                                                                
HEADCOUNT (2)
                                                                                
 
                                                                                
GEOGRAPHIC AREA
                                                                                
Americas
     26,798       27,444       27,874       29,830               30,455       30,654                          
Europe, Middle East & Africa
     14,199       14,640       14,758       15,680               15,985       16,140                          
Asia Pacific
     24,129       26,350       27,850       29,164               31,212       32,855                          
     
Total Company
     65,126       68,434       70,482       74,674               77,652       79,649                          
     
 
(1)   The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.
 
(2)   Headcount has increased primarily due to our acquisitions.

 

 

ORACLE CORPORATION
Q2 FISCAL 2008 FINANCIAL RESULTS
SUPPLEMENTAL TOTAL SOFTWARE PRODUCT REVENUE ANALYSIS (1)
 
($ in millions)
                                                                                 
    Fiscal 2007   Fiscal 2008
    Q1   Q2   Q3   Q4   TOTAL   Q1   Q2   Q3   Q4   TOTAL
 
 
                                                                                
APPLICATIONS REVENUES
                                                                                
 
                                                                                
New software licenses
   $ 228     $ 340     $ 423     $ 726     $ 1,716     $ 376     $ 553                     $ 929  
Software license updates and product support
     703       728       769       832       3,032       886       929                       1,815  
     
Software Revenues
   $ 931     $ 1,068     $ 1,192     $ 1,558     $ 4,748     $ 1,262     $ 1,482                     $ 2,744  
     
 
                                                                                
AS REPORTED GROWTH RATES
                                                                                
New software licenses
     80 %     28 %     57 %     13 %     32 %     65 %     63 %                     64 %
Software license updates and product support
     51 %     45 %     27 %     23 %     35 %     26 %     28 %                     27 %
Software Revenues
     57 %     39 %     36 %     18 %     34 %     36 %     39 %                     37 %
 
                                                                                
CONSTANT CURRENCY GROWTH RATES
                                                                                
New software licenses
     78 %     25 %     52 %     10 %     29 %     61 %     56 %                     58 %
Software license updates and product support
     49 %     41 %     23 %     19 %     32 %     22 %     21 %                     22 %
Software Revenues
     55 %     35 %     32 %     15 %     31 %     32 %     32 %                     32 %
 
                                                                                
 
 
                                                                                
DATABASE & MIDDLEWARE REVENUES
                                                                                
 
                                                                                
New software licenses
   $ 576     $ 867     $ 967     $ 1,755     $ 4,166     $ 711     $ 1,115                     $ 1,827  
Software license updates and product support
     1,238       1,279       1,339       1,440       5,297       1,497       1,562                       3,058  
     
Software Revenues
   $  1,814     $  2,146     $  2,306     $  3,195     $  9,463     $  2,208     $  2,677                     $  4,885  
     
 
                                                                                
AS REPORTED GROWTH RATES
                                                                                
New software licenses
     15 %     9 %     17 %     18 %     16 %     23 %     29 %                     27 %
Software license updates and product support
     19 %     21 %     22 %     20 %     21 %     21 %     22 %                     21 %
Software Revenues
     18 %     16 %     20 %     19 %     18 %     22 %     25 %                     23 %
 
                                                                                
CONSTANT CURRENCY GROWTH RATES
                                                                                
New software licenses
     13 %     5 %     13 %     15 %     12 %     20 %     22 %                     21 %
Software license updates and product support
     18 %     18 %     19 %     17 %     18 %     17 %     16 %                     17 %
Software Revenues
     16 %     13 %     16 %     16 %     15 %     18 %     18 %                     18 %
 
(1)   The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.

 

 

ORACLE CORPORATION
Q2 FISCAL 2008 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC NEW SOFTWARE LICENSE REVENUE ANALYSIS (1) (2)
 
($ in millions)
                                                                                 
    Fiscal 2007   Fiscal 2008
    Q1   Q2   Q3   Q4   TOTAL   Q1   Q2   Q3   Q4   TOTAL
 
 
                                                                                
AMERICAS
                                                                                
 
                                                                                
Database & Middleware
   $  232     $ 333     $ 383     $ 795     $ 1,743     $ 286     $ 438                     $ 724  
Applications
     126       195       250       415       986       199       306                       505  
     
New Software License Revenues
   $ 358     $ 528     $ 633     $  1,210     $ 2,729     $ 485     $ 744                     $ 1,229  
     
 
                                                                                
AS REPORTED GROWTH RATES
                                                                                
Database & Middleware
     19 %     2 %     15 %     20 %     15 %     23 %     32 %                     28 %
Applications
     69 %     19 %     69 %     5 %     26 %     58 %     57 %                     57 %
New Software License Revenues
     33 %     8 %     31 %     14 %     19 %     35 %     41 %                     39 %
 
                                                                                
CONSTANT CURRENCY GROWTH RATES
                                                                                
Database & Middleware
     18 %     2 %     15 %     19 %     14 %     22 %     29 %                     26 %
Applications
     69 %     19 %     69 %     4 %     26 %     57 %     54 %                     55 %
New Software License Revenues
     32 %     7 %     31 %     13 %     18 %     34 %     38 %                     37 %
 
                                                                                
 
 
                                                                                
EUROPE / MIDDLE EAST / AFRICA
                                                                                
 
                                                                                
Database & Middleware
   $ 184     $ 341     $ 363     $ 619     $ 1,507     $ 253     $ 420                     $ 673  
Applications
     69       101       124       224       518       123       174                       297  
     
New Software License Revenues
   $ 253     $ 442     $ 487     $ 843     $ 2,025     $ 376     $ 594                     $ 970  
     
 
                                                                                
AS REPORTED GROWTH RATES
                                                                                
Database & Middleware
     12 %     21 %     15 %     20 %     18 %     38 %     23 %                     28 %
Applications
     83 %     35 %     29 %     42 %     42 %     77 %     72 %                     74 %
New Software License Revenues
     25 %     24 %     18 %     25 %     23 %     49 %     34 %                     40 %
 
                                                                                
CONSTANT CURRENCY GROWTH RATES
                                                                                
Database & Middleware
     8 %     11 %     6 %     12 %     10 %     30 %     12 %                     19 %
Applications
     78 %     25 %     19 %     34 %     33 %     69 %     58 %                     62 %
New Software License Revenues
     21 %     14 %     9 %     18 %     15 %     41 %     23 %                     29 %
 
                                                                                
 
 
                                                                                
ASIA PACIFIC
                                                                                
 
                                                                                
Database & Middleware
   $ 149     $ 185     $ 213     $ 322     $ 869     $ 155     $ 244                     $ 399  
Applications
     33       44       49       87       212       54       73                       127  
     
New Software License Revenues
   $ 182     $ 229     $ 262     $ 409     $ 1,081     $ 209     $ 317                     $ 526  
     
 
                                                                                
AS REPORTED GROWTH RATES
                                                                                
Database & Middleware
     12 %     5 %     26 %     10 %     13 %     4 %     32 %                     19 %
Applications
     126 %     58 %     89 %     (1 %)     36 %     67 %     66 %                     67 %
New Software License Revenues
     23 %     12 %     34 %     8 %     17 %     15 %     39 %                     28 %
 
                                                                                
CONSTANT CURRENCY GROWTH RATES
                                                                                
Database & Middleware
     13 %     2 %     24 %     7 %     11 %     1 %     26 %                     15 %
Applications
     124 %     53 %     83 %     (4 %)     33 %     60 %     57 %                     58 %
New Software License Revenues
     24 %     9 %     32 %     5 %     15 %     12 %     32 %                     23 %
 
                                                                                
 
 
                                                                                
TOTAL COMPANY
                                                                                
 
                                                                                
Database & Middleware
   $ 565     $ 859     $ 959     $ 1,736     $ 4,119     $ 694     $ 1,102                     $ 1,796  
Applications
     228       340       423       726       1,716       376       553                       929  
     
New Software License Revenues
   $ 793     $  1,199     $  1,382     $  2,462     $  5,835     $  1,070     $  1,655                     $  2,725  
     
 
                                                                                
AS REPORTED GROWTH RATES
                                                                                
Database & Middleware
     15 %     9 %     17 %     18 %     15 %     23 %     28 %                     26 %
Applications
     80 %     28 %     57 %     13 %     32 %     65 %     63 %                     64 %
New Software License Revenues
     28 %     14 %     27 %     17 %     20 %     35 %     38 %                     37 %
 
                                                                                
CONSTANT CURRENCY GROWTH RATES
                                                                                
Database & Middleware
     13 %     5 %     13 %     14 %     12 %     19 %     21 %                     21 %
Applications
     78 %     25 %     52 %     10 %     29 %     61 %     56 %                     58 %
New Software License Revenues
     27 %     10 %     23 %     13 %     16 %     31 %     31 %                     31 %
 
(1)   The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.
 
(2)   New Software License Revenues presented exclude documentation and miscellaneous revenues.

 

 

APPENDIX A
ORACLE CORPORATION
Q2 FISCAL 2008 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 table, 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:
• Support deferred revenue: Business combination accounting rules require us to account for the fair value of support contracts assumed in connection with our acquisitions. Because these are typically one-year contracts, our GAAP revenues for the one-year period subsequent to our acquisitions do not reflect the full amount of software license updates and product support revenues on assumed support contracts that would have otherwise been recorded by the acquired entities. The non-GAAP adjustment is intended to reflect the full amount of such revenues. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we have historically experienced high renewal rates on support contracts, although we cannot be certain that customers will renew these contracts.
• Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP operating expenses and net income. 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 expenses: We have excluded the effect of amortization of intangibles from our non-GAAP operating expenses and net income. Amortization of intangible assets expense 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 revenues earned during the periods presented and will contribute to future period revenues as well. Amortization expenses will recur in future periods.
• Acquisition related charges and restructuring expenses: We incurred significant expenses in connection with acquisitions, which we would not have otherwise incurred in the periods presented. Acquisition related charges primarily consist of in-process research and development expenses, integration-related professional services, stock-based compensation expenses (in addition to the stock-based compensation expenses described above) and personnel related expenses for transitional employees. Stock-based compensation expenses included in acquisition related charges primarily resulted from unvested options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the terms of the options. Restructuring expenses consist of Oracle employee severance and other exit costs, generally in connection with our acquisitions. We believe it is useful for investors to understand the effect of these expenses on our cost structure. Although acquisition related charges and restructuring costs are not recurring with respect to past acquisitions, we will incur these expenses in connection with future acquisitions.
For the three and six months ended November 30, 2006, acquisition related charges also included a benefit related to the settlement of a lawsuit filed against PeopleSoft, Inc. on behalf of the U.S. government. This lawsuit was filed in October 2003, prior to our acquisition of PeopleSoft and represented a pre-acquisition contingency that we identified and assumed in connection with our acquisition of PeopleSoft. In October 2006, we agreed to pay the U.S. government $98 million to settle this lawsuit. Business combination accounting standards require that after the end of the purchase price allocation period, any adjustment that results from a pre-acquisition contingency should be included as an element of net income in the period of settlement, versus an adjustment to the original purchase price allocation. Since the purchase price allocation period for PeopleSoft ended in the third quarter of fiscal 2006, the favorable difference of $52 million between the estimated exposure recorded for this lawsuit during the purchase price allocation period and the actual settlement amount has been included in our consolidated statement of operations for the three and six months ended November 30, 2006 as a component of acquisition related charges.