ORACLE CORP - FORM 8-K - EX-99.1

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8-K - 8-K - ORACLE CORP	d740679d8k.htm

Exhibit 99.1

LOGO

For Immediate Release


Contact:	Ken Bond	Deborah Hellinger
	Oracle Investor Relations	Oracle Corporate Communications
	1.650.607.0349	1.212.508.7935
	ken.bond@oracle.com	deborah.hellinger@oracle.com

ORACLE BECOMES THE SECOND LARGEST CLOUD SAAS COMPANY IN THE WORLD

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

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

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

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

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

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

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

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

Q4 Fiscal 2014 Earnings Conference Call and Webcast

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

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

About Oracle

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

# # #

Trademarks

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

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

ORACLE CORPORATION

Q4 FISCAL 2014 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)


	Three Months Ended May 31,												% Increase			% Increase (Decrease)
	2014			% of Revenues			2013			% of Revenues			(Decrease) in US $			in Constant Currency (1)
REVENUES
New software licenses	$	3,769			33%		$	3,769			35%			0%			(1%	)
Cloud software-as-a-service and platform-as-a-service		322			3%			257			2%			25%			25%
Cloud infrastructure-as-a-service		128			1%			113			1%			13%			13%
Software license updates and product support		4,695			42%			4,402			40%			7%			6%

Software and Cloud Revenues		8,914			79%			8,541			78%			4%			4%

Hardware systems products		870			8%			849			8%			2%			3%
Hardware systems support		596			5%			582			5%			2%			2%

Hardware Systems Revenues		1,466			13%			1,431			13%			2%			3%

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

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


OPERATING EXPENSES
Sales and marketing		2,241			20%			2,125			19%			6%			5%
Cloud software-as-a-service and platform-as-a-service		137			1%			101			1%			36%			35%
Cloud infrastructure-as-a-service		84			1%			76			1%			10%			11%
Software license updates and product support		303			3%			316			3%			(4%	)		(4%	)
Hardware systems products		443			4%			413			4%			7%			8%
Hardware systems support		205			2%			220			2%			(7%	)		(6%	)
Services		759			7%			785			7%			(3%	)		(3%	)
Research and development		1,349			12%			1,264			12%			7%			7%
General and administrative		265			2%			274			2%			(3%	)		(3%	)
Amortization of intangible assets		568			5%			596			5%			(5%	)		(5%	)
Acquisition related and other (2)		20			0%			(257	)		(2%	)		108%			108%
Restructuring		37			0%			34			0%			8%			4%

Total Operating Expenses		6,411			57%			5,947			54%			8%			8%


OPERATING INCOME		4,909			43%			5,000			46%			(2%	)		(3%	)
Interest expense		(239	)		(2%	)		(210	)		(2%	)		14%			14%
Non-operating (expense) income, net		(81	)		0%			35			0%			328%			324%

INCOME BEFORE PROVISION FOR INCOME TAXES		4,589			41%			4,825			44%			(5%	)		(6%	)

Provision for income taxes		943			9%			1,018			9%			(7%	)		(8%	)

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

EARNINGS PER SHARE:
Basic	$	0.81					$	0.81
Diluted	$	0.80					$	0.80
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		4,475						4,684
Diluted		4,569						4,756

(1)

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

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

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)

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

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

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


	Three Months Ended May 31, 2014							Three Months Ended May 31, 2013
	GAAP		Adj.			Non-GAAP		GAAP		Adj.			Non-GAAP
Sales and marketing	$	46	$	(46	)	$	—	$	33	$	(33	)	$	—
Cloud software-as-a-service and platform-as-a-service		3		(3	)		—		2		(2	)		—
Cloud infrastructure-as-a-service		1		(1	)		—		2		(2	)		—
Software license updates and product support		6		(6	)		—		5		(5	)		—
Hardware systems products		1		(1	)		—		1		(1	)		—
Hardware systems support		1		(1	)		—		1		(1	)		—
Services		12		(12	)		—		6		(6	)		—
Research and development		101		(101	)		—		93		(93	)		—
General and administrative		45		(45	)		—		43		(43	)		—

Subtotal		216		(216	)		—		186		(186	)		—

Acquisition related and other		7		(7	)		—		4		(4	)		—

Total stock-based compensation	$	223	$	(223	)	$	—	$	190	$	(190	)	$	—

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


Fiscal 2015	$	1,934
Fiscal 2016		1,337
Fiscal 2017		741
Fiscal 2018		607
Fiscal 2019		508
Thereafter		980

Total intangible assets subject to amortization		6,107
In-process research and development		30

Total intangible assets, net	$	6,137

(7)

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

*	Not meaningful

ORACLE CORPORATION

FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)


	Year Ended May 31,												% Increase			% Increase (Decrease)
	2014			% of Revenues			2013			% of Revenues			(Decrease) in US $			in Constant Currency (1)
REVENUES
New software licenses	$	9,416			25%		$	9,411			25%			0%			1%
Cloud software-as-a-service and platform-as-a-service		1,121			3%			910			3%			23%			24%
Cloud infrastructure-as-a-service		456			1%			457			1%			0%			1%
Software license updates and product support		18,206			47%			17,142			46%			6%			7%

Software and Cloud Revenues		29,199			76%			27,920			75%			5%			5%

Hardware systems products		2,976			8%			3,033			8%			(2%	)		(1%	)
Hardware systems support		2,396			6%			2,313			6%			4%			5%

Hardware Systems Revenues		5,372			14%			5,346			14%			0%			2%

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

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


OPERATING EXPENSES
Sales and marketing		7,567			20%			7,062			19%			7%			8%
Cloud software-as-a-service and platform-as-a-service		455			1%			327			1%			39%			40%
Cloud infrastructure-as-a-service		308			1%			304			1%			1%			3%
Software license updates and product support		1,162			3%			1,175			3%			(1%	)		1%
Hardware systems products		1,521			4%			1,501			4%			1%			3%
Hardware systems support		836			2%			890			2%			(6%	)		(5%	)
Services		2,954			8%			3,182			9%			(7%	)		(6%	)
Research and development		5,151			13%			4,850			13%			6%			7%
General and administrative		1,038			3%			1,072			3%			(3%	)		(2%	)
Amortization of intangible assets		2,300			6%			2,385			7%			(4%	)		(4%	)
Acquisition related and other (2)		41			0%			(604	)		(2%	)		107%			107%
Restructuring		183			0%			352			1%			(48%	)		(49%	)

Total Operating Expenses		23,516			61%			22,496			61%			5%			6%


OPERATING INCOME		14,759			39%			14,684			39%			1%			1%
Interest expense		(914	)		(3%	)		(797	)		(2%	)		15%			15%
Non-operating (expense) income, net		(141	)		0%			11			0%			1,343%			1,749%

INCOME BEFORE PROVISION FOR INCOME TAXES		13,704			36%			13,898			37%			(1%	)		0%

Provision for income taxes		2,749			7%			2,973			8%			(7%	)		(6%	)

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

EARNINGS PER SHARE:
Basic	$	2.42					$	2.29
Diluted	$	2.38					$	2.26
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		4,528						4,769
Diluted		4,604						4,844

(1)

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

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

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)

(2)

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

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

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


	Year Ended May 31, 2014							Year Ended May 31, 2013
	GAAP		Adj.			Non-GAAP		GAAP		Adj.			Non-GAAP
Sales and marketing	$	165	$	(165	)	$	—	$	137	$	(137	)	$	—
Cloud software-as-a-service and platform-as-a-service		8		(8	)		—		10		(10	)		—
Cloud infrastructure-as-a-service		4		(4	)		—		8		(8	)		—
Software license updates and product support		22		(22	)		—		20		(20	)		—
Hardware systems products		5		(5	)		—		3		(3	)		—
Hardware systems support		6		(6	)		—		5		(5	)		—
Services		29		(29	)		—		23		(23	)		—
Research and development		385		(385	)		—		352		(352	)		—
General and administrative		171		(171	)		—		164		(164	)		—

Subtotal		795		(795	)		—		722		(722	)		—

Acquisition related and other		10		(10	)		—		33		(33	)		—

Total stock-based compensation	$	805	$	(805	)	$	—	$	755	$	(755	)	$	—

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


Fiscal 2015	$	1,934
Fiscal 2016		1,337
Fiscal 2017		741
Fiscal 2018		607
Fiscal 2019		508
Thereafter		980

Total intangible assets subject to amortization		6,107
In-process research and development		30

Total intangible assets, net	$	6,137

(7)

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

*	Not meaningful

ORACLE CORPORATION

FISCAL 2014 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)


	May 31, 2014		May 31, 2013
ASSETS

Current Assets:
Cash and cash equivalents	$	17,769	$	14,613
Marketable securities		21,050		17,603
Trade receivables, net		6,087		6,049
Inventories		189		240
Deferred tax assets		914		974
Prepaid expenses and other current assets		2,129		2,213

Total Current Assets		48,138		41,692
Non-Current Assets:
Property, plant and equipment, net		3,061		3,053
Intangible assets, net		6,137		6,640
Goodwill		29,652		27,343
Deferred tax assets		837		766
Other assets		2,519		2,318


Total Non-Current Assets		42,206		40,120

TOTAL ASSETS	$	90,344	$	81,812

LIABILITIES AND EQUITY
Current Liabilities:
Notes payable, current and other current borrowings	$	1,508	$	—
Accounts payable		471		419
Accrued compensation and related benefits		1,940		1,851
Income taxes payable		416		911
Deferred revenues		7,269		7,118
Other current liabilities		2,785		2,573

Total Current Liabilities		14,389		12,872
Non-Current Liabilities:
Notes payable and other non-current borrowings		22,667		18,494
Income taxes payable		4,184		3,899
Other non-current liabilities		1,657		1,402

Total Non-Current Liabilities		28,508		23,795

Equity		47,447		45,145

TOTAL LIABILITIES AND EQUITY	$	90,344	$	81,812

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.

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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.

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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.

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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.

ORACLE CORP - FORM 8-K - EX-99.1 - June 19, 2014

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ORACLE CORP Reports