Oracle Becomes the Second Largest Cloud SaaS Company in the World

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

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

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

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

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

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

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

Q4 Fiscal 2014 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (913) 312-6699, Passcode: 822011. To access the live webcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle's Q4 results and Fiscal 2014 financial tables are available on the Oracle Investor Relations website.

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

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

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

"Safe Harbor" Statement: Statements in this press release relating to Oracle's future plans, expectations, beliefs, intentions and prospects, including statements regarding our cloud subscription run rate, the timing of the delivery of our 10,000th Engineered Systems unit, and our plans to increase our focus on the Cloud and become number one in SaaS and PaaS, are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, political and market conditions, including the continued slow economic recovery in the U.S. and other parts of the world, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for support contracts. (3) Our cloud computing strategy, including our Oracle Cloud Software-as-a-Service, Platform-as-a-Service and Infrastructure-as-a-Service offerings, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses, cloud software subscriptions or hardware systems products or purchase or renew support contracts. (5) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (6) If the security measures for our software, hardware, services or Oracle Cloud offerings are compromised or if such offerings contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and financial exposure. (7) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle's Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of June 19, 2014. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION

Q4 FISCAL 2014 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

Three Months Ended May 31,

2014

% of Revenues

2013

% of Revenues

% Increase (Decrease) in US $

% Increase (Decrease) in Constant Currency (1)

REVENUES

New software licenses

$

3,769

33%

$

3,769

35%

0%

(1%)

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

322

3%

257

2%

25%

25%

Cloud infrastructure-as-a-service

128

1%

113

1%

13%

13%

Software license updates and product support

4,695

42%

4,402

40%

7%

6%

Software and Cloud Revenues

8,914

79%

8,541

78%

4%

4%

Hardware systems products

870

8%

849

8%

2%

3%

Hardware systems support

596

5%

582

5%

2%

2%

Hardware Systems Revenues

1,466

13%

1,431

13%

2%

3%

Services Revenues

940

8%

975

9%

(4%)

(3%)

Total Revenues

11,320

100%

10,947

100%

3%

3%

OPERATING EXPENSES

Sales and marketing

2,241

20%

2,125

19%

6%

5%

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

137

1%

101

1%

36%

35%

Cloud infrastructure-as-a-service

84

1%

76

1%

10%

11%

Software license updates and product support

303

3%

316

3%

(4%)

(4%)

Hardware systems products

443

4%

413

4%

7%

8%

Hardware systems support

205

2%

220

2%

(7%)

(6%)

Services

759

7%

785

7%

(3%)

(3%)

Research and development

1,349

12%

1,264

12%

7%

7%

General and administrative

265

2%

274

2%

(3%)

(3%)

Amortization of intangible assets

568

5%

596

5%

(5%)

(5%)

Acquisition related and other (2)

20

0%

(257

)

(2%)

108%

108%

Restructuring

37

0%

34

0%

8%

4%

Total Operating Expenses

6,411

57%

5,947

54%

8%

8%

OPERATING INCOME

4,909

43%

5,000

46%

(2%)

(3%)

Interest expense

(239

)

(2%)

(210

)

(2%)

14%

14%

Non-operating (expense) income, net

(81

)

0%

35

0%

328%

324%

INCOME BEFORE PROVISION FOR INCOME TAXES

4,589

41%

4,825

44%

(5%)

(6%)

Provision for income taxes

943

9%

1,018

9%

(7%)

(8%)

NET INCOME

$

3,646

32%

$

3,807

35%

(4%)

(5%)

EARNINGS PER SHARE:

Basic

$

0.81

$

0.81

Diluted

$

0.80

$

0.80

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

4,475

4,684

Diluted

4,569

4,756

(1)

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

(2)

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

ORACLE CORPORATION

Q4 FISCAL 2014 FINANCIAL RESULTS

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

($ in millions, except per share data)

Three Months Ended May 31,

% Increase (Decrease)
in US $

% Increase (Decrease) in Constant Currency (2)

2014 GAAP

Adj.

2014 Non-GAAP

2013 GAAP

Adj.

2013 Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

TOTAL REVENUES (3) (4)

$

11,320

$

6

$

11,326

$

10,947

$

14

$

10,961

3%

3%

3%

3%

TOTAL SOFTWARE AND CLOUD REVENUES (3)

$

8,914

$

5

$

8,919

$

8,541

$

10

$

8,551

4%

4%

4%

4%

New software licenses

3,769

-

3,769

3,769

-

3,769

0%

0%

(1%)

(1%)

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

322

5

327

257

8

265

25%

23%

25%

23%

Cloud infrastructure-as-a-service

128

-

128

113

-

113

13%

13%

13%

13%

Software license updates and product support

4,695

-

4,695

4,402

2

4,404

7%

7%

6%

6%

TOTAL HARDWARE SYSTEMS REVENUES (4)

$

1,466

$

1

$

1,467

$

1,431

$

4

$

1,435

2%

2%

3%

2%

Hardware systems products

870

-

870

849

-

849

2%

2%

3%

3%

Hardware systems support (4)

596

1

597

582

4

586

2%

2%

2%

2%

TOTAL OPERATING EXPENSES

$

6,411

$

(841

)

$

5,570

$

5,947

$

(559

)

$

5,388

8%

3%

8%

3%

Stock-based compensation (5)

216

(216

)

-

186

(186

)

-

16%

*

16%

*

Amortization of intangible assets (6)

568

(568

)

-

596

(596

)

-

(5%)

*

(5%)

*

Acquisition related and other

20

(20

)

-

(257

)

257

-

108%

*

108%

*

Restructuring

37

(37

)

-

34

(34

)

-

8%

*

4%

*

OPERATING INCOME

$

4,909

$

847

$

5,756

$

5,000

$

573

$

5,573

(2%)

3%

(3%)

2%

OPERATING MARGIN %

43

%

51

%

46

%

51

%

(231) bp.

(2) bp.

(255) bp.

(24) bp.

INCOME TAX EFFECTS (7)

$

943

$

308

$

1,251

$

1,018

$

266

$

1,284

(7%)

(3%)

(8%)

(4%)

NET INCOME

$

3,646

$

539

$

4,185

$

3,807

$

307

$

4,114

(4%)

2%

(5%)

1%

DILUTED EARNINGS PER SHARE

$

0.80

$

0.92

$

0.80

$

0.87

0%

6%

(1%)

5%

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

4,569

-

4,569

4,756

-

4,756

(4%)

(4%)

(4%)

(4%)

(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

Three Months Ended

Three Months Ended

May 31, 2014

May 31, 2013

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

Sales and marketing

$

46

$

(46

)

$

-

$

33

$

(33

)

$

-

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

3

(3

)

-

2

(2

)

-

Cloud infrastructure-as-a-service

1

(1

)

-

2

(2

)

-

Software license updates and product support

6

(6

)

-

5

(5

)

-

Hardware systems products

1

(1

)

-

1

(1

)

-

Hardware systems support

1

(1

)

-

1

(1

)

-

Services

12

(12

)

-

6

(6

)

-

Research and development

101

(101

)

-

93

(93

)

-

General and administrative

45

(45

)

-

43

(43

)

-

Subtotal

216

(216

)

-

186

(186

)

-

Acquisition related and other

7

(7

)

-

4

(4

)

-

Total stock-based compensation

$

223

$

(223

)

$

-

$

190

$

(190

)

$

-

(6)

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

Fiscal 2015

$

1,934

Fiscal 2016

1,337

Fiscal 2017

741

Fiscal 2018

607

Fiscal 2019

508

Thereafter

980

Total intangible assets subject to amortization

6,107

In-process research and development

30

Total intangible assets, net

$

6,137

(7)

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

*

Not meaningful

ORACLE CORPORATION

FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

Year Ended May 31,

2014

% of Revenues

2013

% of Revenues

% Increase (Decrease) in US $

% Increase (Decrease) in Constant Currency (1)

REVENUES

New software licenses

$

9,416

25%

$

9,411

25%

0%

1%

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

1,121

3%

910

3%

23%

24%

Cloud infrastructure-as-a-service

456

1%

457

1%

0%

1%

Software license updates and product support

18,206

47%

17,142

46%

6%

7%

Software and Cloud Revenues

29,199

76%

27,920

75%

5%

5%

Hardware systems products

2,976

8%

3,033

8%

(2%)

(1%)

Hardware systems support

2,396

6%

2,313

6%

4%

5%

Hardware Systems Revenues

5,372

14%

5,346

14%

0%

2%

Services Revenues

3,704

10%

3,914

11%

(5%)

(4%)

Total Revenues

38,275

100%

37,180

100%

3%

4%

OPERATING EXPENSES

Sales and marketing

7,567

20%

7,062

19%

7%

8%

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

455

1%

327

1%

39%

40%

Cloud Infrastructure-as-a-service

308

1%

304

1%

1%

3%

Software license updates and product support

1,162

3%

1,175

3%

(1%)

1%

Hardware systems products

1,521

4%

1,501

4%

1%

3%

Hardware systems support

836

2%

890

2%

(6%)

(5%)

Services

2,954

8%

3,182

9%

(7%)

(6%)

Research and development

5,151

13%

4,850

13%

6%

7%

General and administrative

1,038

3%

1,072

3%

(3%)

(2%)

Amortization of intangible assets

2,300

6%

2,385

7%

(4%)

(4%)

Acquisition related and other (2)

41

0%

(604

)

(2%)

107%

107%

Restructuring

183

0%

352

1%

(48%)

(49%)

Total Operating Expenses

23,516

61%

22,496

61%

5%

6%

OPERATING INCOME

14,759

39%

14,684

39%

1%

1%

Interest expense

(914

)

(3%)

(797

)

(2%)

15%

15%

Non-operating (expense) income, net

(141

)

0%

11

0%

1,343%

1,749%

INCOME BEFORE PROVISION FOR INCOME TAXES

13,704

36%

13,898

37%

(1%)

0%

Provision for income taxes

2,749

7%

2,973

8%

(7%)

(6%)

NET INCOME

$

10,955

29%

$

10,925

29%

0%

1%

EARNINGS PER SHARE:

Basic

$

2.42

$

2.29

Diluted

$

2.38

$

2.26

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

4,528

4,769

Diluted

4,604

4,844

(1)

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

(2)

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

ORACLE CORPORATION

FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)

Year Ended May 31,

% Increase (Decrease)
in US $

% Increase (Decrease) in Constant Currency (2)

2014 GAAP

Adj.

2014 Non-GAAP

2013 GAAP

Adj.

2013 Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

TOTAL REVENUES (3) (4)

$

38,275

$

31

$

38,306

$

37,180

$

73

$

37,253

3%

3%

4%

4%

TOTAL SOFTWARE AND CLOUD REVENUES (3)

$

29,199

$

20

$

29,219

$

27,920

$

59

$

27,979

5%

4%

5%

5%

New software licenses

9,416

-

9,416

9,411

-

9,411

0%

0%

1%

1%

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

1,121

17

1,138

910

45

955

23%

19%

24%

20%

Cloud infrastructure-as-a-service

456

-

456

457

-

457

0%

0%

1%

1%

Software license updates and product support

18,206

3

18,209

17,142

14

17,156

6%

6%

7%

7%

TOTAL HARDWARE SYSTEMS REVENUES (4)

$

5,372

$

11

$

5,383

$

5,346

$

14

$

5,360

0%

0%

2%

2%

Hardware systems products

2,976

-

2,976

3,033

-

3,033

(2%)

(2%)

(1%)

(1%)

Hardware systems support (4)

2,396

11

2,407

2,313

14

2,327

4%

3%

5%

5%

TOTAL OPERATING EXPENSES

$

23,516

$

(3,319

)

$

20,197

$

22,496

$

(2,855

)

$

19,641

5%

3%

6%

4%

Stock-based compensation (5)

795

(795

)

-

722

(722

)

-

10%

*

10%

*

Amortization of intangible assets (6)

2,300

(2,300

)

-

2,385

(2,385

)

-

(4%)

*

(4%)

*

Acquisition related and other

41

(41

)

-

(604

)

604

-

107%

*

107%

*

Restructuring

183

(183

)

-

352

(352

)

-

(48%)

*

(49%)

*

OPERATING INCOME

$

14,759

$

3,350

$

18,109

$

14,684

$

2,928

$

17,612

1%

3%

1%

4%

OPERATING MARGIN %

39

%

47

%

39

%

47

%

(93) bp.

0 bp.

(94) bp.

(8) bp.

INCOME TAX EFFECTS (7)

$

2,749

$

1,091

$

3,840

$

2,973

$

896

$

3,869

(7%)

(1%)

(6%)

0%

NET INCOME

$

10,955

$

2,259

$

13,214

$

10,925

$

2,032

$

12,957

0%

2%

1%

3%

DILUTED EARNINGS PER SHARE

$

2.38

$

2.87

$

2.26

$

2.68

5%

7%

7%

8%

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

4,604

-

4,604

4,844

-

4,844

(5%)

(5%)

(5%)

(5%)

(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

Year Ended

Year Ended

May 31, 2014

May 31, 2013

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

Sales and marketing

$

165

$

(165

)

$

-

$

137

$

(137

)

$

-

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

8

(8

)

-

10

(10

)

-

Cloud infrastructure-as-a-service

4

(4

)

-

8

(8

)

-

Software license updates and product support

22

(22

)

-

20

(20

)

-

Hardware systems products

5

(5

)

-

3

(3

)

-

Hardware systems support

6

(6

)

-

5

(5

)

-

Services

29

(29

)

-

23

(23

)

-

Research and development

385

(385

)

-

352

(352

)

-

General and administrative

171

(171

)

-

164

(164

)

-

Subtotal

795

(795

)

-

722

(722

)

-

Acquisition related and other

10

(10

)

-

33

(33

)

-

Total stock-based compensation

$

805

$

(805

)

$

-

$

755

$

(755

)

$

-

(6)

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

Fiscal 2015

$

1,934

Fiscal 2016

1,337

Fiscal 2017

741

Fiscal 2018

607

Fiscal 2019

508

Thereafter

980

Total intangible assets subject to amortization

6,107

In-process research and development

30

Total intangible assets, net

$

6,137

(7)

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

*

Not meaningful

ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

May 31,

May 31,

2014

2013

ASSETS

Current Assets:

Cash and cash equivalents

$

17,769

$

14,613

Marketable securities

21,050

17,603

Trade receivables, net

6,087

6,049

Inventories

189

240

Deferred tax assets

914

974

Prepaid expenses and other current assets

2,129

2,213

Total Current Assets

48,138

41,692

Non-Current Assets:

Property, plant and equipment, net

3,061

3,053

Intangible assets, net

6,137

6,640

Goodwill

29,652

27,343

Deferred tax assets

837

766

Other assets

2,519

2,318

Total Non-Current Assets

42,206

40,120

TOTAL ASSETS

$

90,344

$

81,812

LIABILITIES AND EQUITY

Current Liabilities:

Notes payable, current and other current borrowings

$

1,508

$

-

Accounts payable

471

419

Accrued compensation and related benefits

1,940

1,851

Income taxes payable

416

911

Deferred revenues

7,269

7,118

Other current liabilities

2,785

2,573

Total Current Liabilities

14,389

12,872

Non-Current Liabilities:

Notes payable and other non-current borrowings

22,667

18,494

Income taxes payable

4,184

3,899

Other non-current liabilities

1,657

1,402

Total Non-Current Liabilities

28,508

23,795

Equity

47,447

45,145

TOTAL LIABILITIES AND EQUITY

$

90,344

$

81,812

ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

Year Ended May 31,

2014

2013

Cash Flows From Operating Activities:

Net income

$

10,955

$

10,925

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

Depreciation

608

546

Amortization of intangible assets

2,300

2,385

Deferred income taxes

(248

)

(117

)

Stock-based compensation

805

755

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

480

410

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

(250

)

(241

)

Other, net

311

155

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

Decrease in trade receivables, net

146

385

Decrease (increase) in inventories

57

(66

)

Increase in prepaid expenses and other assets

(143

)

(555

)

Increase (decrease) in accounts payable and other liabilities

48

(541

)

(Decrease) increase in income taxes payable

(320

)

35

Increase in deferred revenues

172

148

Net cash provided by operating activities

14,921

14,224

Cash Flows From Investing Activities:

Purchases of marketable securities and other investments

(32,316

)

(32,160

)

Proceeds from maturities and sales of marketable securities and other investments

28,845

30,159

Acquisitions, net of cash acquired

(3,488

)

(3,305

)

Capital expenditures

(580

)

(650

)

Net cash used for investing activities

(7,539

)

(5,956

)

Cash Flows From Financing Activities:

Payments for repurchases of common stock

(9,813

)

(11,021

)

Proceeds from issuances of common stock

2,135

1,527

Payments of dividends to stockholders

(2,178

)

(1,433

)

Proceeds from borrowings, net of issuance costs

5,566

4,974

Repayments of borrowings

-

(2,950

)

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

250

241

Distributions to noncontrolling interests

(28

)

(31

)

Other, net

-

193

Net cash used for financing activities

(4,068

)

(8,500

)

Effect of exchange rate changes on cash and cash equivalents

(158

)

(110

)

Net increase (decrease) in cash and cash equivalents

3,156

(342

)

Cash and cash equivalents at beginning of period

14,613

14,955

Cash and cash equivalents at end of period

$

17,769

$

14,613

ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

FREE CASH FLOW - TRAILING 4-QUARTERS (1)

($in millions)

Fiscal 2013

Fiscal 2014

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

GAAP Operating Cash Flow

$

13,993

$

13,533

$

13,717

$

14,224

$

14,845

$

15,196

$

15,029

$

14,921

Capital Expenditures (2)

(627

)

(710

)

(684

)

(650

)

(664

)

(578

)

(609

)

(580

)

Free Cash Flow

$

13,366

$

12,823

$

13,033

$

13,574

$

14,181

$

14,618

$

14,420

$

14,341

% Growth over prior year

8

%

2

%

1

%

4

%

6

%

14

%

11

%

6

%

GAAP Net Income

$

10,175

$

10,564

$

10,571

$

10,925

$

11,082

$

11,054

$

11,115

$

10,955

Free Cash Flow as a % of Net Income

131

%

121

%

123

%

124

%

128

%

132

%

130

%

131

%

(1)

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

(2)

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

ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)

($in millions)

Fiscal 2013

Fiscal 2014

Q1

Q2

Q3

Q4

TOTAL

Q1

Q2

Q3

Q4

TOTAL

REVENUES

New software licenses

$

1,371

$

2,171

$

2,101

$

3,769

$

9,411

$

1,399

$

2,121

$

2,128

$

3,769

$

9,416

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

203

218

231

257

910

254

259

287

322

1,121

Cloud infrastructure-as-a-service

119

114

110

113

457

109

97

121

128

456

Software license updates and product support

4,140

4,260

4,340

4,402

17,142

4,431

4,516

4,564

4,695

18,206

Software and Cloud Revenues

5,833

6,763

6,782

8,541

27,920

6,193

6,993

7,100

8,914

29,199

Hardware systems products

779

734

671

849

3,033

669

714

725

870

2,976

Hardware systems support

574

587

570

582

2,313

592

609

598

596

2,396

Hardware Systems Revenues

1,353

1,321

1,241

1,431

5,346

1,261

1,323

1,323

1,466

5,372

Services Revenues

995

1,010

935

975

3,914

918

959

884

940

3,704

Total Revenues

$

8,181

$

9,094

$

8,958

$

10,947

$

37,180

$

8,372

$

9,275

$

9,307

$

11,320

$

38,275

AS REPORTED REVENUE GROWTH RATES

New software licenses

(3

%)

11

%

(7

%)

(1

%)

0

%

2

%

(2

%)

1

%

0

%

0

%

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

138

%

145

%

111

%

50

%

100

%

25

%

19

%

24

%

25

%

23

%

Cloud infrastructure-as-a-service

13

%

5

%

(1

%)

(4

%)

3

%

(9

%)

(15

%)

10

%

13

%

0

%

Software license updates and product support

3

%

7

%

7

%

6

%

6

%

7

%

6

%

5

%

7

%

6

%

Software and Cloud Revenues

4

%

10

%

4

%

3

%

5

%

6

%

3

%

5

%

4

%

5

%

Hardware systems products

(24

%)

(23

%)

(23

%)

(13

%)

(21

%)

(14

%)

(3

%)

8

%

2

%

(2

%)

Hardware systems support

(11

%)

(6

%)

(6

%)

(3

%)

(7

%)

3

%

4

%

5

%

2

%

4

%

Hardware Systems Revenues

(19

%)

(16

%)

(16

%)

(9

%)

(15

%)

(7

%)

0

%

7

%

2

%

0

%

Services Revenues

(7

%)

(6

%)

(9

%)

(10

%)

(8

%)

(8

%)

(5

%)

(5

%)

(4

%)

(5

%)

Total Revenues

(2

%)

3

%

(1

%)

0

%

0

%

2

%

2

%

4

%

3

%

3

%

CONSTANT CURRENCY GROWTH RATES (2)

New software licenses

2

%

12

%

(6

%)

0

%

1

%

5

%

0

%

3

%

(1

%)

1

%

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

139

%

145

%

111

%

51

%

100

%

26

%

20

%

25

%

25

%

24

%

Cloud infrastructure-as-a-service

18

%

6

%

0

%

(2

%)

5

%

(7

%)

(14

%)

11

%

13

%

1

%

Software license updates and product support

8

%

8

%

8

%

8

%

8

%

8

%

7

%

7

%

6

%

7

%

Software and Cloud Revenues

9

%

11

%

5

%

5

%

7

%

8

%

5

%

6

%

4

%

5

%

Hardware systems products

(21

%)

(23

%)

(22

%)

(12

%)

(19

%)

(13

%)

(2

%)

10

%

3

%

(1

%)

Hardware systems support

(6

%)

(5

%)

(5

%)

(1

%)

(4

%)

5

%

5

%

7

%

2

%

5

%

Hardware Systems Revenues

(15

%)

(16

%)

(15

%)

(8

%)

(13

%)

(6

%)

1

%

9

%

3

%

2

%

Services Revenues

(2

%)

(4

%)

(8

%)

(9

%)

(6

%)

(6

%)

(3

%)

(3

%)

(3

%)

(4

%)

Total Revenues

3

%

5

%

0

%

2

%

2

%

4

%

3

%

6

%

3

%

4

%

GEOGRAPHIC REVENUES

REVENUES

Americas

$

4,324

$

4,787

$

4,698

$

5,911

$

19,719

$

4,517

$

4,995

$

4,953

$

5,857

$

20,323

Europe, Middle East & Africa

2,383

2,701

2,745

3,328

11,158

2,439

2,817

2,923

3,768

11,946

Asia Pacific

1,474

1,606

1,515

1,708

6,303

1,416

1,463

1,431

1,695

6,006

Total Revenues

$

8,181

$

9,094

$

8,958

$

10,947

$

37,180

$

8,372

$

9,275

$

9,307

$

11,320

$

38,275

HEADCOUNT

GEOGRAPHIC AREA

Americas

49,145

49,584

50,402

51,519

53,465

53,073

53,799

53,827

Europe, Middle East & Africa

22,584

22,594

22,592

22,860

23,349

23,178

23,350

23,339

Asia Pacific

44,170

45,051

45,663

45,855

45,513

45,617

45,561

45,108

Total Company

115,899

117,229

118,657

120,234

122,327

121,868

122,710

122,274

(1)

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

(2)

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

ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)

($ in millions)

Fiscal 2013

Fiscal 2014

Q1

Q2

Q3

Q4

TOTAL

Q1

Q2

Q3

Q4

TOTAL

AMERICAS

Software and cloud revenues

$

3,164

$

3,641

$

3,651

$

4,686

$

15,142

$

3,434

$

3,808

$

3,847

$

4,649

$

15,737

Hardware systems revenues

$

652

$

648

$

577

$

728

$

2,604

$

640

$

694

$

655

$

747

$

2,736

AS REPORTED GROWTH RATES

Software and cloud revenues

8

%

13

%

4

%

5

%

7

%

9

%

5

%

5

%

(1

%)

4

%

Hardware systems revenues

(16

%)

(17

%)

(17

%)

(7

%)

(14

%)

(2

%)

7

%

14

%

3

%

5

%

CONSTANT CURRENCY GROWTH RATES (2)

Software and cloud revenues

10

%

13

%

5

%

6

%

8

%

9

%

6

%

7

%

1

%

5

%

Hardware systems revenues

(15

%)

(17

%)

(17

%)

(7

%)

(14

%)

(1

%)

8

%

16

%

5

%

6

%

EUROPE / MIDDLE EAST / AFRICA

Software and cloud revenues

$

1,699

$

1,993

$

2,073

$

2,627

$

8,393

$

1,816

$

2,155

$

2,245

$

3,032

$

9,249

Hardware systems revenues

$

402

$

391

$

390

$

411

$

1,594

$

358

$

372

$

403

$

440

$

1,572

AS REPORTED GROWTH RATES

Software and cloud revenues

(4

%)

5

%

5

%

5

%

3

%

7

%

8

%

8

%

15

%

10

%

Hardware systems revenues

(31

%)

(22

%)

(18

%)

(10

%)

(21

%)

(11

%)

(5

%)

3

%

7

%

(1

%)

CONSTANT CURRENCY GROWTH RATES (2)

Software and cloud revenues

7

%

8

%

5

%

6

%

6

%

4

%

6

%

6

%

10

%

7

%

Hardware systems revenues

(22

%)

(19

%)

(18

%)

(9

%)

(17

%)

(13

%)

(6

%)

2

%

3

%

(3

%)

ASIA PACIFIC

Software and cloud revenues

$

970

$

1,129

$

1,058

$

1,228

$

4,385

$

943

$

1,030

$

1,008

$

1,233

$

4,213

Hardware systems revenues

$

299

$

282

$

274

$

292

$

1,148

$

263

$

257

$

265

$

279

$

1,064

AS REPORTED GROWTH RATES

Software and cloud revenues

6

%

10

%

1

%

(5

%)

2

%

(3

%)

(9

%)

(5

%)

0

%

(4

%)

Hardware systems revenues

(7

%)

(5

%)

(10

%)

(12

%)

(9

%)

(12

%)

(9

%)

(3

%)

(4

%)

(7

%)

CONSTANT CURRENCY GROWTH RATES (2)

Software and cloud revenues

10

%

10

%

5

%

0

%

6

%

8

%

0

%

3

%

3

%

3

%

Hardware systems revenues

(4

%)

(6

%)

(7

%)

(9

%)

(7

%)

(5

%)

(3

%)

3

%

(3

%)

(2

%)

TOTAL COMPANY

Software and cloud revenues

$

5,833

$

6,763

$

6,782

$

8,541

$

27,920

$

6,193

$

6,993

$

7,100

$

8,914

$

29,199

Hardware systems revenues

$

1,353

$

1,321

$

1,241

$

1,431

$

5,346

$

1,261

$

1,323

$

1,323

$

1,466

$

5,372

AS REPORTED GROWTH RATES

Software and cloud revenues

4

%

10

%

4

%

3

%

5

%

6

%

3

%

5

%

4

%

5

%

Hardware systems revenues

(19

%)

(16

%)

(16

%)

(9

%)

(15

%)

(7

%)

0

%

7

%

2

%

0

%

CONSTANT CURRENCY GROWTH RATES (2)

Software and cloud revenues

9

%

11

%

5

%

5

%

7

%

8

%

5

%

6

%

4

%

5

%

Hardware systems revenues

(15

%)

(16

%)

(15

%)

(8

%)

(13

%)

(6

%)

1

%

9

%

3

%

2

%

(1)

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

(2)

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

APPENDIX A

ORACLE CORPORATION

Q4 FISCAL 2014 FINANCIAL RESULTS

EXPLANATION OF NON-GAAP MEASURES

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

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

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

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

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