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

New Software Licenses and Cloud Subscriptions Up 17%; Trailing Twelve Month Operating Cash Flow of $13.5 Billion

Marketwired

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.
                                           
* Not meaningful
   
   
   
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   21 % 12 % 14 %
  Software license updates and product support     8,400   49 %   8,008   46 % 5 % 8 %
    Software Revenues     12,363   72 %   11,554   67 % 7 % 10 %
  Hardware systems products     1,513   9 %   1,981   12 % (24 %) (22 %)
  Hardware systems support     1,161   6 %   1,271   7 % (9 %) (6 %)
    Hardware Systems Revenues     2,674   15 %   3,252   19 % (18 %) (15 %)
    Services Revenues     2,238   13 %   2,360   14 % (5 %) (2 %)
      Total Revenues     17,275   100 %   17,166   100 % 1 % 4 %
                               
OPERATING EXPENSES                              
  Sales and marketing     3,319   19 %   3,327   19 % 0 % 3 %
  Software license updates and product support     553   3 %   594   3 % (7 %) (4 %)
  Hardware systems products     751   4 %   943   6 % (20 %) (18 %)
  Hardware systems support     451   3 %   541   3 % (17 %) (14 %)
  Services     1,814   10 %   1,865   11 % (3 %) 1 %
  Research and development     2,400   14 %   2,152   13 % 11 % 13 %
  General and administrative     538   3 %   587   3 % (8 %) (6 %)
  Amortization of intangible assets     1,203   7 %   1,184   7 % 2 % 2 %
  Acquisition related and other (2)     (380 ) (2 %)   25   0 % (1,647 %) (1,696 %)
  Restructuring     276   2 %   154   1 % 80 % 91 %
      Total Operating Expenses     10,925   63 %   11,372   66 % (4 %) (1 %)
                               
OPERATING INCOME     6,350   37 %   5,794   34 % 10 % 14 %
  Interest expense     (382 ) (2 %)   (384 ) (2 %) 0 % 0 %
  Non-operating income, net     14   0 %   21   0 % (29 %) (2 %)
                               
INCOME BEFORE PROVISION FOR INCOME TAXES     5,982   35 %   5,431   32 % 10 % 15 %
  Provision for income taxes     1,367   8 %   1,399   9 % (2 %) 2 %
                               
NET INCOME   $ 4,615   27 % $ 4,032   23 % 14 % 19 %
                               
EARNINGS PER SHARE:                              
  Basic   $ 0.96       $ 0.80              
  Diluted   $ 0.94       $ 0.78              
                               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                              
  Basic     4,829         5,052              
  Diluted     4,904         5,137              
                               
   
(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 six months ended November 30, 2012 compared with the corresponding prior year period decreased our revenues by 3 percentage points, operating expenses by 3 percentage points and operating income by 4 percentage points.
   
(2) Acquisition related and other expenses for the six months ended November 30, 2012 included a benefit of $306 million related to certain litigation and a net benefit of $129 million due to an acquisition related item.
   
   
   
ORACLE CORPORATION
 
Q2 FISCAL 2013 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
 
    Six 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)   $ 17,275     $ 47     $ 17,322     $ 17,166     $ 43     $ 17,209     1 %   1 %   4 %   4 %
                                                                         
TOTAL SOFTWARE REVENUES (3) (4)   $ 12,363     $ 39     $ 12,402     $ 11,554     $ 24     $ 11,578     7 %   7 %   10 %   10 %
  New software licenses and cloud software subscriptions (3)     3,963       31       3,994       3,546       -       3,546     12 %   13 %   14 %   15 %
  Software license updates and product support (4)     8,400       8       8,408       8,008       24       8,032     5 %   5 %   8 %   8 %
                                                                         
TOTAL HARDWARE SYSTEMS REVENUES (5)   $ 2,674     $ 8     $ 2,682     $ 3,252     $ 19     $ 3,271     (18 %)   (18 %)   (15 %)   (16 %)
  Hardware systems products     1,513       -       1,513       1,981       -       1,981     (24 %)   (24 %)   (22 %)   (22 %)
  Hardware systems support (5)     1,161       8       1,169       1,271       19       1,290     (9 %)   (9 %)   (6 %)   (7 %)
                                                                         
TOTAL OPERATING EXPENSES   $ 10,925     $ (1,464 )   $ 9,461     $ 11,372     $ (1,658 )   $ 9,714     (4 %)   (3 %)   (1 %)   0 %
  Stock-based compensation (6)     365       (365 )     -       295       (295 )     -     23 %   *     23 %   *  
  Amortization of intangible assets (7)     1,203       (1,203 )     -       1,184       (1,184 )     -     2 %   *     2 %   *  
  Acquisition related and other     (380 )     380       -       25       (25 )     -     (1,647 %)   *     (1,696 %)   *  
  Restructuring     276       (276 )     -       154       (154 )     -     80 %   *     91 %   *  
                                                                           
OPERATING INCOME   $ 6,350     $ 1,511     $ 7,861     $ 5,794     $ 1,701     $ 7,495     10 %   5 %   14 %   8 %
                                                                         
OPERATING MARGIN %     37 %             45 %     34 %             44 %   301 bp.     183 bp.     331 bp.     187 bp.  
                                                                         
INCOME TAX EFFECTS (8)   $ 1,367     $ 390     $ 1,757     $ 1,399     $ 483     $ 1,882     (2 %)   (7 %)   2 %   (3 %)
                                                                         
NET INCOME   $ 4,615     $ 1,121     $ 5,736     $ 4,032     $ 1,218     $ 5,250     14 %   9 %   19 %   13 %
                                                                         
DILUTED EARNINGS PER SHARE   $ 0.94             $ 1.17     $ 0.78             $ 1.02     20 %   14 %   25 %   18 %
                                                                         
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,904       -       4,904       5,137       -       5,137     (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:
   
      Six Months Ended   Six Months Ended
      November 30, 2012   November 30, 2011
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
    Sales and marketing   $ 81   $ (81 )   $ -   $ 55   $ (55 )   $ -
    Software license updates and product support     10     (10 )     -     8     (8 )     -
    Hardware systems products     1     (1 )     -     1     (1 )     -
    Hardware systems support     2     (2 )     -     3     (3 )     -
    Services     17     (17 )     -     10     (10 )     -
    Research and development     172     (172 )     -     139     (139 )     -
    General and administrative     82     (82 )     -     79     (79 )     -
      Subtotal     365     (365 )     -     295     (295 )     -
    Acquisition related and other     21     (21 )     -     3     (3 )     -
      Total stock-based compensation   $ 386   $ (386 )   $ -   $ 298   $ (298 )   $ -
                                           
                                           
(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 22.9% and 25.8% in the first half of fiscal 2013 and 2012, respectively, and an effective non-GAAP tax rate of 23.5% and 26.4% in the first half of fiscal 2013 and 2012, respectively. The differences between our GAAP and non-GAAP tax rates in the first half of fiscal 2013 were primarily due to the net tax effects of acquisition related items, including the tax effect of amortization of intangible assets, partially offset by the disproportionate tax rate impact of certain discrete items for the period. The difference between our GAAP and non-GAAP tax rates in the first half of fiscal 2012 was primarily due to income tax effects related to our acquired tax exposures and the differences in jurisdictional tax rates and the related tax benefits attributable to our restructuring expenses.
   
* Not meaningful
   
   
   
ORACLE CORPORATION
         
Q2 FISCAL 2013 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
         
    November 30,   May 31,
    2012   2012
ASSETS            
               
  Current Assets:            
    Cash and cash equivalents   $ 15,912   $ 14,955
    Marketable securities     17,783     15,721
    Trade receivables, net     4,401     6,377
    Inventories     164     158
    Deferred tax assets     893     877
    Prepaid expenses and other current assets     1,976     1,935
      Total Current Assets     41,129     40,023
               
  Non-Current Assets:            
    Property, plant and equipment, net     3,093     3,021
    Intangible assets, net     6,873     7,899
    Goodwill     25,458     25,119
    Deferred tax assets     782     595
    Other assets     2,322     1,670
      Total Non-Current Assets     38,528     38,304
             
TOTAL ASSETS   $ 79,657   $ 78,327
             
LIABILITIES AND EQUITY            
             
  Current Liabilities:            
    Notes payable, current and other current borrowings   $ 1,250   $ 2,950
    Accounts payable     372     438
    Accrued compensation and related benefits     1,546     2,002
    Deferred revenues     6,504     7,035
    Other current liabilities     2,675     2,963
      Total Current Liabilities     12,347     15,388
                 
  Non-Current Liabilities:            
    Notes payable and other non-current borrowings     18,507     13,524
    Income taxes payable     3,906     3,759
    Other non-current liabilities     1,487     1,569
      Total Non-Current Liabilities     23,900     18,852
             
  Equity     43,410     44,087
             
TOTAL LIABILITIES AND EQUITY   $ 79,657   $ 78,327
             
             
             
ORACLE CORPORATION  
   
Q2 FISCAL 2013 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
($ in millions)  
   
    Six Months Ended November 30,  
    2012     2011  
Cash Flows From Operating Activities:                
  Net income   $ 4,615     $ 4,032  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation     261       226  
    Amortization of intangible assets     1,203       1,184  
    Deferred income taxes     (40 )     (137 )
    Stock-based compensation     386       298  
    Tax benefits on the exercise of stock options and vesting of restricted stock-based awards     179       94  
    Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     (95 )     (53 )
    Other, net     80       53  
    Changes in operating assets and liabilities, net of effects from acquisitions:                
      Decrease in trade receivables, net     2,038       2,128  
      Decrease in inventories     -       93  
      (Increase) decrease in prepaid expenses and other assets     (213 )     424  
      Decrease in accounts payable and other liabilities     (790 )     (1,306 )
      (Decrease) increase in income taxes payable     (559 )     184  
      Decrease in deferred revenues     (599 )     (544 )
        Net cash provided by operating activities     6,466       6,676  
                 
Cash Flows From Investing Activities:                
  Purchases of marketable securities and other investments     (17,314 )     (21,422 )
  Proceeds from maturities and sales of marketable securities and other investments     15,263       16,335  
  Acquisitions, net of cash acquired     (660 )     (571 )
  Capital expenditures     (351 )     (289 )
        Net cash used for investing activities     (3,062 )     (5,947 )
                 
Cash Flows From Financing Activities:                
  Payments for repurchases of common stock     (6,072 )     (1,798 )
  Proceeds from issuances of common stock     752       434  
  Payments of dividends to stockholders     (583 )     (607 )
  Proceeds from borrowings, net of issuance costs     4,974       -  
  Repayments of borrowings     (1,700 )     (1,150 )
  Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     95       53  
  Distributions to noncontrolling interests     (31 )     (163 )
        Net cash used for financing activities     (2,565 )     (3,231 )
                 
Effect of exchange rate changes on cash and cash equivalents     118       (375 )
                 
Net increase (decrease) in cash and cash equivalents     957       (2,877 )
                 
Cash and cash equivalents at beginning of period     14,955       16,163  
                 
Cash and cash equivalents at end of period   $ 15,912     $ 13,286  
                 
                 
                 
ORACLE CORPORATION
Q2 FISCAL 2013 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($ in millions)
                                 
    Fiscal 2012   Fiscal 2013
    Q1   Q2   Q3   Q4   Q1   Q2   Q3   Q4
                                             
GAAP Operating Cash Flow   $ 12,818   $ 13,129   $ 13,463   $ 13,743   $ 13,993   $ 13,533        
                                             
Capital Expenditures (2)     (492 )   (500 )   (509 )   (648 )   (627 )   (710 )      
                                             
Free Cash Flow   $ 12,326   $ 12,629   $ 12,954   $ 13,095   $ 13,366   $ 12,823        
                                             
% Growth over prior year     46 %   45 %   36 %   22 %   8 %   2 %      
                                             
                                             
GAAP Net Income   $ 9,035   $ 9,356   $ 9,738   $ 9,981   $ 10,175   $ 10,564        
                                             
Free Cash Flow as a % of Net Income     136 %   135 %   133 %   131 %   131 %   121 %      
                                             
(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 2013 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
($ in millions)
 
    Fiscal 2012     Fiscal 2013  
    Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3   Q4   TOTAL  
REVENUES                                                                        
  New software licenses and cloud software subscriptions   $ 1,498     $ 2,048     $ 2,374     $ 3,985     $ 9,906     $ 1,574     $ 2,389             $ 3,963  
  Software license updates and product support     4,022       3,986       4,051       4,152       16,210       4,140       4,260               8,400  
    Software Revenues     5,520       6,034       6,425       8,137       26,116       5,714       6,649               12,363  
                                                                           
  Hardware systems products     1,029       953       869       977       3,827       779       734               1,513  
  Hardware systems support     645       625       604       600       2,475       574       587               1,161  
    Hardware Systems Revenues     1,674       1,578       1,473       1,577       6,302       1,353       1,321               2,674  
                                                                           
    Services Revenues     1,180       1,180       1,141       1,202       4,703       1,114       1,124               2,238  
                                                                           
      Total Revenues   $ 8,374     $ 8,792     $ 9,039     $ 10,916     $ 37,121     $ 8,181     $ 9,094             $ 17,275  
                                                                         
AS REPORTED REVENUE GROWTH RATES                                                                        
  New software licenses and cloud software subscriptions     17%       2%       7%       7%       7%       5%       17%               12%  
  Software license updates and product support     17%       9%       8%       5%       10%       3%       7%               5%  
    Software Revenues     17%       7%       8%       6%       9%       4%       10%               7%  
                                                                           
  Hardware systems products     (5% )     (14% )     (16% )     (16% )     (13% )     (24% )     (23% )             (24% )
  Hardware systems support     4%       (2% )     (4% )     (11% )     (3% )     (11% )     (6% )             (9% )
    Hardware Systems Revenues     (1% )     (10% )     (11% )     (14% )     (9% )     (19% )     (16% )             (18% )
                                                                           
    Services Revenues     10%       0%       0%       (4% )     1%       (6% )     (5% )             (5% )
                                                                           
      Total Revenues     12%       2%       3%       1%       4%       (2% )     3%               1%  
                                                                         
CONSTANT CURRENCY GROWTH RATES (2)                                                                        
  New software licenses and cloud software subscriptions     11%       3%       8%       11%       8%       10%       18%               14%  
  Software license updates and product support     10%       9%       9%       8%       9%       8%       8%               8%  
    Software Revenues     11%       7%       9%       10%       9%       9%       11%               10%  
                                                                           
  Hardware systems products     (11% )     (14% )     (16% )     (13% )     (14% )     (21% )     (23% )             (22% )
  Hardware systems support     (3% )     (3% )     (3% )     (7% )     (4% )     (6% )     (5% )             (6% )
    Hardware Systems Revenues     (8% )     (10% )     (11% )     (11% )     (10% )     (15% )     (16% )             (15% )
                                                                           
    Services Revenues     5%       0%       1%       0%       1%       0%       (3% )             (2% )
                                                                           
      Total Revenues     5%       2%       4%       5%       4%       3%       5%               4%  
                                                                         
                                                                         
GEOGRAPHIC REVENUES                                                                        
                                                                         
  REVENUES                                                                        
    Americas   $ 4,226     $ 4,532     $ 4,707     $ 5,771     $ 19,236     $ 4,324     $ 4,787             $ 9,111  
    Europe, Middle East & Africa     2,704       2,756       2,787       3,314       11,561       2,383       2,701               5,084  
    Asia Pacific     1,444       1,504       1,545       1,831       6,324       1,474       1,606               3,080  
      Total Revenues   $ 8,374     $ 8,792     $ 9,039     $ 10,916     $ 37,121     $ 8,181     $ 9,094             $ 17,275  
                                                                         
                                                                         
HEADCOUNT                                                                        
                                                                         
  GEOGRAPHIC AREA                                                                        
    Americas     46,338       46,672       47,884       48,901               49,145       49,584                  
    Europe, Middle East & Africa     22,210       22,725       22,852       22,957               22,584       22,594                  
    Asia Pacific     40,840       41,901       42,908       43,308               44,170       45,051                  
      Total Company     109,388       111,298       113,644       115,166               115,899       117,229                  
                                                                         
   
(1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.
(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012 and 2011 for the fiscal 2013 and fiscal 2012 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
   
   
   
ORACLE CORPORATION
Q2 FISCAL 2013 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)
($ in millions)
 
    Fiscal 2012     Fiscal 2013  
    Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3   Q4   TOTAL  
                                                                         
AMERICAS                                                                        
                                                                         
  New software licenses and cloud software subscriptions   $ 727     $ 1,027     $ 1,228     $ 2,126     $ 5,107     $ 814     $ 1,253             $ 2,066  
  Hardware systems products   $ 475     $ 496     $ 410     $ 498     $ 1,880     $ 380     $ 370             $ 750  
                                                                         
AS REPORTED GROWTH RATES                                                                        
  New software licenses and cloud software subscriptions     10%       0%       11%       14%       10%       12%       22%               18%  
  Hardware systems products     (12% )     (17% )     (19% )     (17% )     (16% )     (20% )     (25% )             (23% )
                                                                         
CONSTANT CURRENCY GROWTH RATES (2)                                                                        
  New software licenses and cloud software subscriptions     9%       1%       11%       16%       11%       14%       22%               19%  
  Hardware systems products     (13% )     (17% )     (18% )     (16% )     (16% )     (19% )     (25% )             (22% )
                                                                         
                                                                         
EUROPE / MIDDLE EAST / AFRICA                                                                        
                                                                         
  New software licenses and cloud software subscriptions   $ 440     $ 584     $ 693     $ 1,166     $ 2,884     $ 403     $ 641             $ 1,044  
  Hardware systems products   $ 344     $ 272     $ 265     $ 260     $ 1,140     $ 214     $ 198             $ 413  
                                                                         
AS REPORTED GROWTH RATES                                                                        
  New software licenses and cloud software subscriptions     25%       2%       (1% )     (5% )     1%       (8% )     10%               2%  
  Hardware systems products     2%       (17% )     (20% )     (24% )     (15% )     (38% )     (27% )             (33% )
                                                                         
CONSTANT CURRENCY GROWTH RATES (2)                                                                        
  New software licenses and cloud software subscriptions     15%       3%       1%       2%       4%       1%       12%               8%  
  Hardware systems products     (11% )     (17% )     (18% )     (18% )     (16% )     (30% )     (25% )             (28% )
                                                                         
                                                                         
ASIA PACIFIC                                                                        
                                                                         
  New software licenses and cloud software subscriptions   $ 331     $ 437     $ 453     $ 693     $ 1,915     $ 357     $ 495             $ 853  
  Hardware systems products   $ 210     $ 185     $ 194     $ 219     $ 807     $ 185     $ 166             $ 350  
                                                                         
AS REPORTED GROWTH RATES                                                                        
  New software licenses and cloud software subscriptions     20%       11%       13%       8%       12%       8%       13%               11%  
  Hardware systems products     6%       2%       (3% )     1%       1%       (12% )     (10% )             (11% )
                                                                         
CONSTANT CURRENCY GROWTH RATES (2)                                                                        
  New software licenses and cloud software subscriptions     9%       8%       11%       13%       11%       12%       13%               13%  
  Hardware systems products     (5% )     (1% )     (6% )     1%       (3% )     (10% )     (12% )             (11% )
                                                                         
                                                                         
TOTAL COMPANY                                                                        
                                                                         
  New software licenses and cloud software subscriptions   $ 1,498     $ 2,048     $ 2,374     $ 3,985     $ 9,906     $ 1,574     $ 2,389             $ 3,963  
  Hardware systems products   $ 1,029     $ 953     $ 869     $ 977     $ 3,827     $ 779     $ 734             $ 1,513  
                                                                         
AS REPORTED GROWTH RATES                                                                        
  New software licenses and cloud software subscriptions     17%       2%       7%       7%       7%       5%       17%               12%  
  Hardware systems products     (5% )     (14% )     (16% )     (16% )     (13% )     (24% )     (23% )             (24% )
                                                                         
CONSTANT CURRENCY GROWTH RATES (2)                                                                        
  New software licenses and cloud software subscriptions     11%       3%       8%       11%       8%       10%       18%               14%  
  Hardware systems products     (11% )     (14% )     (16% )     (13% )     (14% )     (21% )     (23% )             (22% )
                                                                         
(1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.
   
(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2012 and 2011 for the fiscal 2013 and fiscal 2012 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
   
   
   
APPENDIX A
 
ORACLE CORPORATION
Q2 FISCAL 2013 FINANCIAL RESULTS
EXPLANATION OF NON-GAAP MEASURES

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

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

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

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

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

Ken Bond
Oracle Investor Relations
1.650.607.0349
Email Contact

Deborah Hellinger
Oracle Corporate Communications
1.212.508.7935
Email Contact
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