Oracle Reports Q2 GAAP EPS Up 24% to 53 Cents; Q2 Non-GAAP EPS Up 18% to 64 Cents

December 18, 2012

REDWOOD SHORES, CA--(Marketwire - Dec 18, 2012) - Oracle Corporation ( NASDAQ : ORCL ) today announced that fiscal 2013 Q2 total revenues were up 3% to $9.1 billion. New software licenses and cloud software subscriptions revenues were up 17% to $2.4 billion. Software license updates and product support revenues were up 7% to $4.3 billion. Hardware systems products revenues were $734 million. GAAP operating income was up 12% to $3.5 billion, and GAAP operating margin was 38%. Non-GAAP operating income was up 9% to $4.3 billion, and non-GAAP operating margin was 47%. GAAP net income was up 18% to $2.6 billion, while non-GAAP net income was up 12% to $3.1 billion. GAAP earnings per share were $0.53, up 24% compared to last year while non-GAAP earnings per share were up 18% to $0.64. GAAP operating cash flow on a trailing twelve-month basis was $13.5 billion.

Without the impact of the US dollar strengthening compared to foreign currencies, Oracle's reported Q2 GAAP earnings per share would have been $0.01 higher at $0.54, up 26%, and Q2 non-GAAP earnings per share would have been $0.01 higher at $0.65, up 19%. Total revenues also would have been up 5%, and new software licenses and cloud software subscriptions revenues would have been up 18%.

"New software license sales and cloud subscriptions grew 18% in constant currency," said Oracle President and CFO, Safra Catz. "Strong organic growth in our software business coupled with a focus on the highly profitable engineered systems segment of our hardware business enabled a Q2 non-GAAP operating margin of 47%. During the last four quarters operating cash flow was more than $13.5 billion -- $10.2 billion of which was returned to our shareholders as we repurchased nearly 350 million ORCL shares during that same twelve month period."

"Q2 performance was strong and broad based as all geographies reported double-digit revenue growth in new software license and cloud subscriptions," said Oracle President, Mark Hurd. "Applications, middleware and database all had double-digit growth in new software license and cloud subscriptions, with applications leading the pack with growth of over 30%. Our cloud offering of HCM, CRM and ERP applications plus the Oracle database and Java platform services is the strongest and most complete in the industry. Already approaching a one billion dollar run rate, our Cloud business will become much bigger over time."

"Sun has proven to be one of the most strategic and profitable acquisitions we have ever made," said Oracle CEO, Larry Ellison. "Sun technology enabled Oracle to become a leader in the highly profitable engineered system segment of the hardware business. I believe that products like Exadata and the SPARC SuperCluster will not only continue to drive improved profitability in our hardware business, by the end of this fiscal year, they will also drive growth in our hardware business." 

On December 3, 2012, the Board of Directors declared an accelerated second, third and fourth quarter cash dividend totaling $0.18 per share of outstanding common stock. This accelerated dividend is intended by the Board to be in lieu of quarterly dividends Oracle would have otherwise announced with its quarterly earnings results for the second, third and fourth quarters of fiscal year 2013, and that would have been paid in calendar year 2013. This accelerated dividend will be paid to stockholders of record as of the close of business on December 14, 2012, with a payment date of December 21, 2012.

Q2 Fiscal 2013 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (913) 981-5520, Passcode: 810144. To access the live webcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle's Q2 results and Fiscal 2013 financial tables are available on the Oracle Investor Relations website.

A replay of the conference call will also be available by dialing (719) 457-0820 or (888) 203-1112, Passcode: 4005111.

About Oracle

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

Trademarks

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

"Safe Harbor" Statement: Statements in this press release relating to Oracle's future plans, expectations, beliefs, intentions and prospects, including statements regarding our Cloud business becoming bigger over time and products like Exadata and SPARC SuperCluster driving profitability and growth in our hardware business, are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, political and market conditions, including the current European debt crisis, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for software license updates and product support. (3) Our hardware systems business may not be successful, and we may fail to achieve our financial forecasts with respect to this business. (4) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. (5) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses and risks relating to compliance with international and U.S. laws that apply to our international operations. (6) Intense competitive forces demand rapid technological advances and frequent new product introductions and could require us to reduce prices or cause us to lose customers. (7) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses, cloud software subscriptions, or hardware systems products, or purchase or renew support contracts. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle's Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of December 18, 2012. Oracle undertakes no duty to update any statement in light of new information or future events.

                           
ORACLE CORPORATION  
                           
Q2 FISCAL 2013 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
($ in millions, except per share data)  
                           
    Three Months Ended November 30,          
    2012   % of Revenues   2011   % of Revenues   % Increase (Decrease)in US $   % Increase (Decrease) in Constant Currency (1)  
REVENUES                              
  New software licenses and cloud software subscriptions   $ 2,389   26 % $ 2,048   23 % 17 % 18 %
  Software license updates and product support     4,260   47 %   3,986   46 % 7 % 8 %
    Software Revenues     6,649   73 %   6,034   69 % 10 % 11 %
  Hardware systems products     734   8 %   953   11 % (23 %) (23 %)
  Hardware systems support     587   7 %   625   7 % (6 %) (5 %)
    Hardware Systems Revenues     1,321   15 %   1,578   18 % (16 %) (16 %)
    Services Revenues     1,124   12 %   1,180   13 % (5 %) (3 %)
                                     
      Total Revenues     9,094   100 %   8,792   100 % 3 % 5 %
                                     
OPERATING EXPENSES                              
  Sales and marketing     1,773   20 %   1,697   19 % 4 % 6 %
  Software license updates and product support     270   3 %   298   3 % (9 %) (8 %)
  Hardware systems products     367   4 %   471   5 % (22 %) (22 %)
  Hardware systems support     227   3 %   258   3 % (12 %) (11 %)
  Services     930   10 %   929   11 % 0 % 2 %
  Research and development     1,199   13 %   1,102   13 % 9 % 10 %
  General and administrative     263   3 %   277   3 % (5 %) (3 %)
  Amortization of intangible assets     584   6 %   592   7 % (1 %) (1 %)
  Acquisition related and other (2)     (121 ) (1 %)   5   0 % (2,432 %) (1,991 %)
  Restructuring     131   1 %   52   1 % 151 % 152 %
                                     
      Total Operating Expenses     5,623   62 %   5,681   65 % (1 %) 0 %
                                     
OPERATING INCOME     3,471   38 %   3,111   35 % 12 % 13 %
  Interest expense     (195 ) (2 %)   (192 ) (2 %) 2 % 2 %
  Non-operating income, net     4   0 %   41   1 % (91 %) (90 %)
                               
INCOME BEFORE PROVISION FOR INCOME TAXES     3,280   36 %   2,960   34 % 11 % 13 %
  Provision for income taxes     699   8 %   768   9 % (9 %) (8 %)
                                 
NET INCOME   $ 2,581   28 % $ 2,192   25 % 18 % 20 %
                               
EARNINGS PER SHARE:                              
  Basic   $ 0.54       $ 0.43              
  Diluted   $ 0.53       $ 0.43              
                                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                              
  Basic     4,792         5,041              
  Diluted     4,868         5,123              
                               
(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended November 30, 2012 compared with the corresponding prior year period decreased our revenues by 2 percentage points, operating expenses by 1 percentage point and operating income by 1 percentage point.
   
(2) Acquisition related and other expenses for the three months ended November 30, 2012 included a net benefit of $145 million due to an acquisition related item.
   
   
   
 
ORACLE CORPORATION
 
Q2 FISCAL 2013 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
 
    Three Months Ended November 30,     % Increase (Decrease) in US $     % Increase (Decrease) in Constant Currency (2)  
    2012 GAAP     Adj.     2012 Non-GAAP     2011 GAAP     Adj.     2011 Non-GAAP     GAAP     Non-GAAP     GAAP     Non-GAAP  
                                                                         
TOTAL REVENUES (3) (4) (5)   $ 9,094     $ 19     $ 9,113     $ 8,792     $ 19     $ 8,811     3 %   3 %   5 %   5 %
                                                                         
TOTAL SOFTWARE REVENUES (3) (4)   $ 6,649     $ 16     $ 6,665     $ 6,034     $ 10     $ 6,044     10 %   10 %   11 %   12 %
  New software licenses and cloud software subscriptions (3)     2,389       12       2,401       2,048       -       2,048     17 %   17 %   18 %   18 %
  Software license updates and product support (4)     4,260       4       4,264       3,986       10       3,996     7 %   7 %   8 %   8 %
                                                                         
TOTAL HARDWARE SYSTEMS REVENUES (5)   $ 1,321     $ 3     $ 1,324     $ 1,578     $ 9     $ 1,587     (16 %)   (17 %)   (16 %)   (16 %)
  Hardware systems products     734       -       734       953       -       953     (23 %)   (23 %)   (23 %)   (23 %)
  Hardware systems support (5)     587       3       590       625       9       634     (6 %)   (7 %)   (5 %)   (6 %)
                                                                         
TOTAL OPERATING EXPENSES   $ 5,623     $ (782 )   $ 4,841     $ 5,681     $ (799 )   $ 4,882     (1 %)   (1 %)   0 %   0 %
  Stock-based compensation (6)     188       (188 )     -       150       (150 )     -     26 %   *     26 %   *  
  Amortization of intangible assets (7)     584       (584 )     -       592       (592 )     -     (1 %)   *     (1 %)   *  
  Acquisition related and other     (121 )     121       -       5       (5 )     -     (2,432 %)   *     (1,991 %)   *  
  Restructuring     131       (131 )     -       52       (52 )     -     151 %   *     152 %   *  
                                                                           
OPERATING INCOME   $ 3,471     $ 801     $ 4,272     $ 3,111     $ 818     $ 3,929     12 %   9 %   13 %   10 %
                                                                         
OPERATING MARGIN%     38 %             47 %     35 %             45 %   278 bp.     229 bp.     287 bp.     224 bp.  
                                                                         
INCOME TAX EFFECTS (8)   $ 699     $ 260     $ 959     $ 768     $ 226     $ 994     (9 %)   (3 %)   (8 %)   (2 %)
                                                                         
NET INCOME   $ 2,581     $ 541     $ 3,122     $ 2,192     $ 592     $ 2,784     18 %   12 %   20 %   13 %
                                                                         
DILUTED EARNINGS PER SHARE   $ 0.53             $ 0.64     $ 0.43             $ 0.54     24 %   18 %   26 %   19 %
                                                                         
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,868       -       4,868       5,123       -       5,123     (5 %)   (5 %)   (5 %)   (5 %)
   
(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.
   
(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
   
(3) As of November 30, 2012, approximately $5 million in estimated revenues related to assumed cloud software subscriptions contracts will not be recognized for the remainder of fiscal 2013 due to business combination accounting rules.
   
(4) As of November 30, 2012, approximately $5 million and $2 million in estimated revenues related to assumed software support contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.
   
(5) As of November 30, 2012, approximately $5 million and $2 million in estimated revenues related to hardware systems support contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.
   
(6) Stock-based compensation was included in the following GAAP operating expense categories:
   
                                           
                               
      Three Months Ended   Three Months Ended
      November 30, 2012   November 30, 2011
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing   $ 43   $ (43 )   $ -   $ 29   $ (29 )   $ -
  Software license updates and product support     5     (5 )     -     5     (5 )     -
  Hardware systems products     1     (1 )     -     -     -       -
  Hardware systems support     1     (1 )     -     2     (2 )     -
  Services     8     (8 )     -     6     (6 )     -
  Research and development     89     (89 )     -     68     (68 )     -
  General and administrative     41     (41 )     -     40     (40 )     -
    Subtotal     188     (188 )     -     150     (150 )     -
  Acquisition related and other     4     (4 )     -     2     (2 )     -
    Total stock-based compensation   $ 192   $ (192 )   $ -   $ 152   $ (152 )   $ -
                                           
                                           
(7) Estimated future annual amortization expense related to intangible assets as of November 30, 2012 was as follows:
  Remainder of Fiscal 2013   $ 1,140                                  
  Fiscal 2014     1,972                                  
  Fiscal 2015     1,522                                  
  Fiscal 2016     967                                  
  Fiscal 2017     408                                  
  Fiscal 2018     284                                  
  Thereafter     569                                  
    Total intangible assets subject to amortization     6,862                                  
  In-process research and development     11                                  
    Total intangible assets, net   $ 6,873                                  
                                           
(8) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.3% and 25.9% in the second quarter of fiscal 2013 and 2012, respectively, and an effective non-GAAP tax rate of 23.5% and 26.3% in the second quarter of fiscal 2013 and 2012, respectively. The difference between our GAAP and non-GAAP tax rates in the second quarter of fiscal 2013 was primarily due to the net tax effects of acquisition related items, including the tax effect of amortization of intangible assets. The difference between our GAAP and non-GAAP tax rates in the second quarter of fiscal 2012 was primarily due to differences in jurisdictional tax rates and the related tax benefits attributable to our restructuring expenses.
                                           
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ORACLE CORPORATION  
                           
Q2 FISCAL 2013 YEAR TO DATE FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
($ in millions, except per share data)  
                           
    Six Months Ended November 30,          
    2012   % of Revenues   2011   % of Revenues   % Increase (Decrease) in US $   % Increase (Decrease) in Constant Currency (1)  
REVENUES                              
  New software licenses and cloud software subscriptions   $ 3,963   23 % $ 3,546