EX-99.1 2 dex991.htm PRESS RELEASE DATED SEPTEMBER 16, 2009 Press Release dated September 16, 2009

Exhibit 99.1

LOGO

For Immediate Release

 

Contact:

   

Ken Bond

   

Karen Tillman

  

Oracle Investor Relations

   

Oracle Corporate Communications

  

1.650.607.0349

   

1.650.607.0326

   ken.bond@oracle.com    karen.tillman@oracle.com

ORACLE REPORTS Q1 GAAP EPS OF 22 CENTS UP 8%, NON-GAAP EPS OF 30 CENTS UP 3%

Operating Margins Up Over 500 Basis Points

REDWOOD SHORES, Calif., September 16, 2009 — Oracle Corporation (NASDAQ: ORCL) today announced fiscal 2010 Q1 GAAP earnings per share were $0.22 up 8% compared to last year. First quarter GAAP total revenues were down 5% to $5.1 billion, while quarterly GAAP net income was up 4% to $1.1 billion. GAAP new software license revenues were down 17% to $1.0 billion. GAAP software license updates and product support revenues were up 6% to $3.1 billion. GAAP operating income was up 14% to $1.7 billion and GAAP operating margin was up 590 basis points to 34%. GAAP operating cash flow on a trailing twelve-month basis was $8.8 billion, up 10%.

First quarter non-GAAP earnings per share were up 3% to $0.30. Non-GAAP total revenues were down 7% to $5.1 billion, while non-GAAP net income was flat at $1.5 billion, compared to the same quarter last year. Non-GAAP operating income was up 7% to $2.3 billion and non-GAAP operating margin was up 570 basis points to 46%.

Oracle’s results were impacted by the reduced value of foreign currencies when compared to US dollars, reducing Q1 GAAP earnings by $0.02 per share. Without this impact, Oracle’s Q1 GAAP and non-GAAP earnings per share would have been $0.24 and $0.32, respectively. GAAP and non-GAAP new software license revenues would have been down 14%, and our software license updates and product support revenues would have been up 11% on a GAAP basis and up 8% on a non-GAAP basis. GAAP and non-GAAP operating income would have been up 21% and 11%, respectively.

In addition, Oracle’s Board of Directors declared a cash dividend of $0.05 per share of outstanding common stock to be paid to stockholders of record as of the close of business on October 14, 2009, with a payment date of November 4, 2009. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of Oracle’s Board of Directors.

“Yesterday, Sun and Oracle announced Exadata Version 2, which is twice as fast as Exadata Version 1 for data warehousing, and the first and only database machine that runs online transaction processing – OLTP – applications,” said Oracle CEO Larry Ellison. “This new combination of Sun hardware and Oracle software is now the world’s fastest computer system for both OLTP and data warehousing.”

“By substantially improving operating margins we were able to increase Q1 earnings per share even though revenues decreased slightly,” said Safra Catz, Oracle’s President. “We grew non-GAAP operating margins by 570 basis points to 46 percent in our seasonally smallest quarter. Our operating model continues to drive earnings for our stockholders.”

“Software license updates and product support revenues grew 11%, to $3.1 billion, for the quarter when adjusted for the change in the US dollar since last year,” said Oracle Executive Vice President and CFO, Jeff Epstein. “This growth, coupled with our disciplined expense management, was key to our ability to generate a record $8.5 billion in free cash flow over the last twelve months.”

“We grew faster than SAP in every region around the world, including Europe, where our applications business grew 3 percent in constant currency versus negative 39 percent for SAP’s most recent quarter,” said Oracle President Charles Phillips. “Our applications team also executed especially well in North America, where our applications business grew 8 percent in constant currency versus negative 50 percent for SAP.”

Q1 Earnings Conference Call and Webcast

Oracle will hold a conference call and web broadcast today to discuss these results at 2:00 p.m. (PDT) / 5:00 p.m. (EDT). You may listen to the call by dialing (866) 423-8620 or (719) 387-4093, Passcode: 745867. To access the live web broadcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor.

About Oracle

Oracle is the world’s largest enterprise software company. For more information about Oracle, please visit our web site at oracle.com or call Investor Relations at (650) 506-4073.

# # #

Trademarks

Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.

“Safe Harbor” Statement: Statements in this press release relating to Oracle’s or its Board of Directors’ future plans, intentions and prospects are “forward-looking statements” and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, political and market conditions, including the recent global economic and financial crisis, could adversely affect our business, operating results or financial condition, including our revenue growth and profitability, through reductions in customer IT budgets and expenditures and through the general tightening of access to credit. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for software license updates and product support. (3) We cannot assure market acceptance of new products or services or new versions of existing or acquired products or services. (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. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading “Risk Factors.” Copies of these filings are available online from the SEC or by contacting Oracle Corporation’s Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle’s Investor Relations website at http://www.oracle.com/investor. All information set forth in this release is current as of September 16, 2009. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION

Q1 FISCAL 2010 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

    Three Months Ended August 31,    

% Increase

     % Increase
(Decrease)		  
     2009     % of
Revenues		     2008     % of
Revenues 		    

(Decrease)

in US $

    

in Constant

Currency (1)

  

 

REVENUES

            

New software licenses

   $   1,028      20%      $   1,237      23%       (17% )    (14% ) 

Software license updates and product support

     3,117      62%        2,935      55%       6%      11%   
           

Software Revenues

     4,145      82%        4,172      78%       (1% )    4%   
           

Services

     909      18%        1,159      22%       (22% )    (18% ) 
           

Total Revenues

     5,054      100%        5,331      100%       (5% )    (1% ) 
           

 

OPERATING EXPENSES

            

Sales and marketing

     960      19%        1,112      21%       (14% )    (10% ) 

Software license updates and product support

     226      4%        282      5%       (20% )    (16% ) 

Cost of services

     782      16%        1,026      19%       (24% )    (19% ) 

Research and development

     660      13%        708      13%       (7% )    (5% ) 

General and administrative

     201      4%        206      4%       (3% )    1%   

Amortization of intangible assets

     431      9%        413      8%       4%      4%   

Acquisition related and other

     6      0%        49      1%       (88% )    (87% ) 

Restructuring

     48      1%        14      0%       255%      284%   
           

Total Operating Expenses

     3,314      66%        3,810      71%       (13% )    (9% ) 
           
           

OPERATING INCOME

     1,740      34%        1,521      29%       14%      21%   

Interest expense

     (179 )    (3% )      (159 )    (3% )     12%      12%   

Non-operating income, net

     1      0%        82      1%       (98% )    (99% ) 
           

INCOME BEFORE PROVISION FOR INCOME TAXES

     1,562      31%        1,444      27%       8%      15%   
           

Provision for income taxes

     438      9%        367      7%       19%      27%   
           

NET INCOME

   $ 1,124      22%      $ 1,077      20%       4%      11%   
           

EARNINGS PER SHARE:

            

Basic

   $ 0.22        $ 0.21         

Diluted

   $ 0.22        $ 0.21         

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

            

Basic

     5,009          5,152         

Diluted

     5,063          5,235         

 

 

(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect on May 31, 2009, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. The United States dollar strengthened relative to most major international currencies in the three months ended August 31, 2009 compared with the corresponding prior year period, reducing revenues by 4 percentage points, operating expenses by 4 percentage points and operating income by 7 percentage points.

 

1

 

ORACLE CORPORATION

Q1 FISCAL 2010 FINANCIAL RESULTS

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

($ in millions, except per share data)

 

     Three Months Ended August 31,    % Increase
(Decrease) in US $		    % Increase (Decrease) in
Constant Currency (2)
      2009  
GAAP  		    Adj.    2009
Non-GAAP		    2008  
GAAP  		    Adj.    2008
Non-GAAP		    GAAP    Non-GAAP    GAAP        Non-GAAP    

 

TOTAL REVENUES (3) 

 

    $

 

   5,054   

 

    $

 

 9 

 

    $

 

 5,063   

 

    $

 

   5,331   

 

    $

 

 91 

 

    $

 

 5,422   

 

    (5%)

 

    (7%)

 

    (1%)

 

    (2%)  

 

TOTAL SOFTWARE REVENUES (3) 

    $ 4,145       $ 9     $ 4,154       $ 4,172       $ 91     $ 4,263       (1%)    (3%)    4%     2%   

New software licenses

      1,028         —       1,028         1,237         —       1,237       (17%)    (17%)    (14%)    (14%)  

Software license updates and product support (3)

      3,117         9       3,126         2,935         91       3,026       6%     3%     11%     8%   

 

TOTAL OPERATING EXPENSES

   $ 3,314       $   (569)    $ 2,745       $ 3,810       $   (562)    $ 3,248       (13%)    (15%)    (9%)    (12%)  

Stock-based compensation (4)

      84         (84)      —         86         (86)      —       (3%)    *        (3%)    *      

Amortization of intangible assets (5)

      431         (431)      —         413         (413)      —       4%     *        4%     *      

Acquisition related and other

      6         (6)      —         49         (49)      —       (88%)    *        (87%)    *      

Restructuring

      48         (48)      —         14         (14)      —       255%     *        284%     *      

OPERATING INCOME

   $ 1,740       $ 578     $ 2,318       $ 1,521       $ 653     $ 2,174       14%     7%     21%     11%   

OPERATING MARGIN %

     34%         46%      29%         40%    590 bp    568 bp    623 bp    558 bp  

INCOME TAX EFFECTS (6) 

    $ 438       $ 162     $ 600       $ 367       $ 186     $ 553       19%     8%     27%     13%   

NET INCOME

   $ 1,124       $ 416     $ 1,540       $ 1,077       $ 467     $ 1,544       4%     0%     11%     4%   

DILUTED EARNINGS PER SHARE

   $ 0.22          $ 0.30       $ 0.21          $ 0.29       8%     3%     15%     8%   

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

     5,063         —       5,063         5,235         —       5,235       (3%)    (3%)    (3%)    (3%)  

 

 

(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 rate in effect on May 31, 2009, 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 August 31, 2009, approximately $15 million in estimated revenues related to assumed support contracts will not be recognized for fiscal 2010 due to business combination accounting rules.

 

(4) Stock-based compensation is included in the following GAAP operating expense categories:

 

      Three Months Ended
August 31, 2009		    Three Months Ended
August 31, 2008
   GAAP    Adj.      Non-GAAP    GAAP    Adj.      Non-GAAP

Sales and marketing

    $ 16    $ (16 )     $ —    $ 19    $   (19 )     $ —

Software license updates and product support

      4      (4 )       —      3      (3 )       —

Cost of services

      3      (3 )       —      3      (3 )       —

Research and development

      32      (32 )       —      37      (37 )       —

General and administrative

      29      (29 )       —      24      (24 )       —
                                             

Subtotal

      84      (84 )       —      86      (86 )       —
                                             

Acquisition related and other

      —      —         —      5      (5 )       —
                                             

Total stock-based compensation

    $ 84    $     (84 )     $ —    $ 91    $ (91 )     $ —
                                             

 

(5) Estimated future annual amortization expense related to intangible assets as of August 31, 2009 is as follows:

 

Remainder of Fiscal 2010

    $ 1,204

Fiscal 2011

      1,388

Fiscal 2012

      1,239

Fiscal 2013

      1,090

Fiscal 2014

      890

Fiscal 2015

      703

Thereafter

      372
      

Total

    $     6,886
      

 

(6) Income tax effects were calculated reflecting an effective GAAP tax rate of 28.0% and 25.4% in the first quarter of fiscal 2010 and 2009, respectively, and an effective non-GAAP tax rate of 28.0% and 26.4% in the first quarter of fiscal 2010 and 2009, respectively. Our non-GAAP tax rate in the first quarter of fiscal 2009 excludes the effect of an adjustment to our non-current deferred tax liability associated with acquired intangible assets.

 

*

Not meaningful

 

2

 

ORACLE CORPORATION

Q1 FISCAL 2010 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

 

      August 31,
2009		    May 31,
2009

 

ASSETS

 

      

Current Assets:

      

Cash and cash equivalents

    $ 16,098     $ 8,995 

Marketable securities

      4,467       3,629 

Trade receivables, net

      2,584       4,430 

Deferred tax assets

      710       661 

Prepaid expenses and other current assets

      586       866 
      

Total Current Assets

      24,445       18,581 

 

Non-Current Assets:

      

Property, net

      1,924       1,922 

Intangible assets, net

      6,886       7,269 

Goodwill

      18,867       18,842 

Other assets

      876       802 
      

Total Non-Current Assets

      28,553       28,835 
      

 

TOTAL ASSETS

    $ 52,998     $ 47,416 
      

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Current Liabilities:

      

Notes payable, current and other current borrowings

    $ 1,001     $ 1,001 

Accounts payable

      260       271 

Accrued compensation and related benefits

      1,033       1,409 

Deferred revenues

      5,283       4,592 

Other current liabilities

      1,583       1,876 
      

Total Current Liabilities

      9,160       9,149 

 

Non-Current Liabilities:

      

Notes payable and other non-current borrowings

      13,723       9,237 

Income taxes payable

      2,485       2,423 

Deferred tax liabilities

      465       480 

Other non-current liabilities

      678       682 
      

Total Non-Current Liabilities

      17,351       12,822 

 

Stockholders’ Equity

      26,487       25,445 
      

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

    $     52,998     $     47,416 
      
 

 

3

 

ORACLE CORPORATION

Q1 FISCAL 2010 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

 

    Three Months Ended August 31,
    2009    2008
 

Cash Flows From Operating Activities:

     

Net income

   $ 1,124      $ 1,077  

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

     

Depreciation

     61        64  

Amortization of intangible assets

     431        413  

Deferred income taxes

     (75)       (53) 

Stock-based compensation

     84        91  

Tax benefits on the exercise of stock options

     51        101  

Excess tax benefits on the exercise of stock options

     (30)       (65) 

Other, net

     40        19  

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

     

Decrease in trade receivables, net

     1,870        1,812  

Decrease in prepaid expenses and other assets

     251        397  

Decrease in accounts payable and other liabilities

     (642)       (906) 

Decrease in income taxes payable

     (9)       (361) 

Increase in deferred revenues

     582        651  
     

Net cash provided by operating activities

     3,738        3,240  
     

Cash Flows From Investing Activities:

     

Purchases of marketable securities and other investments

     (2,760)       (3,188) 

Proceeds from maturities and sales of marketable securities and other investments

     1,947        1,420  

Acquisitions, net of cash acquired

     (79)       (395) 

Capital expenditures

     (55)       (323) 
     

Net cash used for investing activities

     (947)       (2,486) 
     

Cash Flows From Financing Activities:

     

Payments for repurchases of common stock

     (244)       (500) 

Proceeds from issuances of common stock

     247        280  

Payment of dividends to stockholders

     (251)       —  

Proceeds from borrowings, net of issuance costs

     4,461        —  

Repayments of borrowings

     —        (4) 

Excess tax benefits on the exercise of stock options

     30        65  

Distributions to noncontrolling interests

     (34)       (30) 
     

Net cash provided by (used for) financing activities

     4,209        (189) 
     

Effect of exchange rate changes on cash and cash equivalents

     103        (274) 
     

Net increase in cash and cash equivalents

     7,103        291  
     

Cash and cash equivalents at beginning of period

     8,995        8,262  
     

Cash and cash equivalents at end of period

   $ 16,098      $ 8,553  
     

 

 

4

 

ORACLE CORPORATION

Q1 FISCAL 2010 FINANCIAL RESULTS

FREE CASH FLOW — TRAILING 4-QUARTERS (1)

($ in millions)

 

     Fiscal 2009     Fiscal 2010
     Q1     Q2     Q3     Q4     Q1             Q2                    Q3                    Q4        
 

 

GAAP Operating Cash Flow

   

 

$

 

        7,941

 

  

  

 

$

 

        8,089

 

  

  

 

$

 

        8,542

 

  

  

 

$

 

        8,255

 

  

  

 

$

 

        8,753

 

  

        

Capital Expenditures (2)

      (479 )      (486 )      (539 )      (529 )      (261 )         
      

 

Free Cash Flow

   

 

$

 

7,462

 

  

  

 

$

 

7,603

 

  

  

 

$

 

8,003

 

  

  

 

$

 

7,726

 

  

  

 

$

 

8,492

 

  

        
      

 

% Growth over prior year

 

   

 

 

 

 

20

 

 

% 

 

  

 

 

 

 

15

 

 

% 

 

  

 

 

 

 

14

 

 

% 

 

  

 

 

 

 

8

 

 

% 

 

  

 

 

 

 

14

 

 

% 

 

        
 

 

GAAP Net Income

   

 

$

 

5,758

 

  

  

 

$

 

5,750

 

  

  

 

$

 

5,739

 

  

  

 

$

 

5,593

 

  

  

 

$

 

5,640

 

  

        

 

Free Cash Flow as a % of Net Income

   

 

 

 

130

 

% 

  

 

 

 

132

 

% 

  

 

 

 

139

 

% 

  

 

 

 

138

 

% 

  

 

 

 

151

 

% 

        

 

 

(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.

 

 

5

 

ORACLE CORPORATION

Q1 FISCAL 2010 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)

($ in millions)

 

     Fiscal 2009     Fiscal 2010
     Q1     Q2     Q3     Q4     TOTAL     Q1       Q2        Q3        Q4      TOTAL      
 

REVENUES

                          

New software licenses

    $ 1,237      $ 1,626      $ 1,516      $ 2,744      $ 7,123      $ 1,028               $ 1,028     

Software license updates and product support

      2,935        2,850        2,917        3,052        11,754        3,117                 3,117     
      

Software Revenues

      4,172        4,476        4,433        5,796        18,877        4,145                 4,145     

Consulting

      865        842        758        782        3,247        663                 663     

On Demand

      195        189        191        204        779        180                 180     

Education

      99        100        71        79        349        66                 66     
      

Services Revenues

      1,159        1,131        1,020        1,065        4,375        909                 909     
      

Total Revenues

    $ 5,331      $ 5,607      $ 5,453      $ 6,861      $ 23,252      $ 5,054               $ 5,054     
      

 

AS REPORTED REVENUE GROWTH RATES

                         

New software licenses

      14 %      (3 %)      (6 %)      (13 %)      (5 %)      (17 %)               (17 %)   

Software license updates and product support

      23 %      14 %      11 %      8 %      14 %      6 %               6 %   

Software Revenues

      20 %      8 %      5 %      (3 %)      6 %      (1 %)               (1 %)   

 

Consulting

      8 %      (4 %)      (10 %)      (18 %)      (7 %)      (23 %)               (23 %)   

On Demand

      23 %      13 %      10 %      5 %      12 %      (8 %)               (8 %)   

Education

      (2 %)      (9 %)      (23 %)      (30 %)      (16 %)      (34 %)               (34 %)   

Services Revenues

      9 %      (2 %)      (8 %)      (16 %)      (5 %)      (22 %)               (22 %)   

 

Total Revenues

      18 %      6 %      2 %      (5 %)      4 %      (5 %)               (5 %)   

CONSTANT CURRENCY GROWTH RATES (2)

                          

New software licenses

      10 %      5 %      3 %      (4 %)      1 %      (14 %)               (14 %)   

Software license updates and product support

      18 %      20 %      20 %      18 %      19 %      11 %               11 %   

Software Revenues

      16 %      14 %      14 %      6 %      12 %      4 %               4 %   

Consulting

      5 %      4 %      0 %      (10 %)      (1 %)      (19 %)               (19 %)   

On Demand

      19 %      19 %      19 %      15 %      18 %      (3 %)               (3 %)   

Education

      (6 %)      (3 %)      (16 %)      (23 %)      (12 %)      (30 %)               (30 %)   

Services Revenues

      6 %      5 %      2 %      (7 %)      1 %      (18 %)               (18 %)   

Total Revenues

      14 %      12 %      11 %      4 %      10 %      (1 %)               (1 %)   
 

 

GEOGRAPHIC REVENUES

 

                          

REVENUES

                          

Americas

    $ 2,687      $ 2,904      $ 2,846      $ 3,463      $ 11,900      $ 2,671               $ 2,671     

Europe, Middle East & Africa

      1,830        1,881        1,824        2,413        7,948        1,642                 1,642     

Asia Pacific

      814        822        783        985        3,404        741                 741     
      

Total Revenues

    $ 5,331      $ 5,607      $ 5,453      $ 6,861      $ 23,252      $ 5,054               $ 5,054     
      
 

 

HEADCOUNT

 

                          

GEOGRAPHIC AREA

                          

Americas

      32,993        33,526        32,919        32,347          32,034                 32,034     

Europe, Middle East & Africa

      17,096        17,184        17,348        17,129          16,839                 16,839     

Asia Pacific

      35,099        35,947        36,321        36,086          35,766                 35,766     
      

Total Company

      85,188        86,657        86,588        85,562          84,639                 84,639     
      

 

 

(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, 2009 and 2008 for the fiscal 2010 and fiscal 2009 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

6

ORACLE CORPORATION

Q1 FISCAL 2010 FINANCIAL RESULTS

SUPPLEMENTAL TOTAL SOFTWARE PRODUCT REVENUE ANALYSIS (1)

($ in millions)

 

    Fiscal 2009     Fiscal 2010
    Q1     Q2     Q3     Q4     TOTAL     Q1       Q2       Q3       Q4     TOTAL      
 
                     

APPLICATIONS REVENUES

                      

New software licenses

   $ 331      $ 469      $ 396      $ 805      $ 2,000      $ 317            $ 317     

Software license updates and product support

     1,043        1,015        1,003        1,044        4,105        1,052              1,052     
     

Software Revenues

   $   1,374      $   1,484      $   1,399      $   1,849      $ 6,105      $   1,369            $ 1,369     
     

AS REPORTED GROWTH RATES

                      

New software licenses

     (12 %)      (15 %)      (12 %)      (19 %)      (16 %)      (4 %)            (4 %)   

Software license updates and product support

     18 %      9 %      3 %      0 %      7 %      1 %            1 %   

Software Revenues

     9 %      0 %      (2 %)      (9 %)      (2 %)      0 %            0 %   

CONSTANT CURRENCY GROWTH RATES (2)

                      

New software licenses

     (14 %)      (9 %)      (4 %)      (11 %)      (10 %)      0 %            0 %   

Software license updates and product support

     13 %      15 %      11 %      9 %      12 %      6 %            6 %   

Software Revenues

     5 %      6 %      7 %      (1 %)      4 %      4 %            4 %   
                                                                         

 

DATABASE & MIDDLEWARE REVENUES

 

                      

New software licenses

   $ 906      $ 1,157      $ 1,120      $ 1,939      $ 5,123      $ 711            $ 711     

Software license updates and product support

     1,892        1,835        1,914        2,008        7,649        2,065              2,065     
     

Software Revenues

   $ 2,798      $ 2,992      $ 3,034      $ 3,947      $ 12,772      $ 2,776            $ 2,776     
     

 

AS REPORTED GROWTH RATES

                      

New software licenses

     27 %      4 %      (4 %)      (10 %)      0 %      (22 %)            (22 %)   

Software license updates and product support

     26 %      17 %      16 %      12 %      18 %      9 %            9 %   

Software Revenues

     27 %      12 %      8 %      0 %      10 %      (1 %)            (1 %)   

 

CONSTANT CURRENCY GROWTH RATES (2)

                      

New software licenses

     23 %      12 %      6 %      (1 %)      7 %      (19 %)            (19 %)   

Software license updates and product support

     22 %      24 %      25 %      23 %      23 %      14 %            14 %   

Software Revenues

     22 %      19 %      17 %      10 %      16 %      4 %            4 %   

 

 

(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, 2009 and 2008 for the fiscal 2010 and fiscal 2009 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

7

ORACLE CORPORATION

Q1 FISCAL 2010 FINANCIAL RESULTS

SUPPLEMENTAL GEOGRAPHIC NEW SOFTWARE LICENSE REVENUE ANALYSIS (1)

($ in millions)

 

     Fiscal 2009     Fiscal 2010
     Q1     Q2     Q3     Q4     TOTAL     Q1       Q2        Q3        Q4      TOTAL      
 

AMERICAS

                          

Database & Middleware

    $ 354      $ 471      $ 449      $ 840      $ 2,114      $ 310               $ 310     

Applications

      182        280        224        416        1,102        185                 185     
      

New Software License Revenues

    $ 536      $ 751      $ 673      $ 1,256      $ 3,216      $ 495               $ 495     
      

AS REPORTED GROWTH RATES

                          

Database & Middleware

      18 %      5 %      (7 %)      (9 %)      (2 %)      (12 %)               (12 %)   

Applications

      (9 %)      (9 %)      (11 %)      (25 %)      (16 %)      2 %               2 %   

New Software License Revenues

      7 %      0 %      (9 %)      (15 %)      (7 %)      (7 %)               (7 %)   

CONSTANT CURRENCY GROWTH RATES (2)

                          

Database & Middleware

      17 %      10 %      (1 %)      (6 %)      2 %      (11 %)               (11 %)   

Applications

      (10 %)      (6 %)      (8 %)      (22 %)      (14 %)      6 %               6 %   

New Software License Revenues

      6 %      3 %      (4 %)      (12 %)      (4 %)      (5 %)               (5 %)   
 

EUROPE / MIDDLE EAST / AFRICA

                          

Database & Middleware

    $ 326      $ 431      $ 446      $ 759      $ 1,962      $ 224               $ 224     

Applications

      94        126        125        282        627        90                 90     
      

New Software License Revenues

    $ 420      $ 557      $ 571      $ 1,041      $ 2,589      $ 314               $ 314     
      

AS REPORTED GROWTH RATES

                          

Database & Middleware

      28 %      2 %      0 %      (14 %)      (2 %)      (31 %)               (31 %)   

Applications

      (23 %)      (28 %)      (12 %)      (11 %)      (17 %)      (5 %)               (5 %)   

New Software License Revenues

      11 %      (7 %)      (3 %)      (13 %)      (6 %)      (25 %)               (25 %)   

CONSTANT CURRENCY GROWTH RATES (2)

                          

Database & Middleware

      20 %      16 %      15 %      1 %      10 %      (26 %)               (26 %)   

Applications

      (26 %)      (16 %)      2 %      5 %      (6 %)      3 %               3 %   

New Software License Revenues

      5 %      7 %      12 %      2 %      6 %      (20 %)               (20 %)   
 

ASIA PACIFIC

                          

Database & Middleware

    $ 226      $ 255      $ 225      $ 340      $ 1,047      $ 177               $ 177     

Applications

      55        63        47        107        271        42                 42     
      

New Software License Revenues

    $ 281      $ 318      $ 272      $ 447      $ 1,318      $ 219               $ 219     
      

AS REPORTED GROWTH RATES

                          

Database & Middleware

      45 %      4 %      (3 %)      (1 %)      7 %      (22 %)               (22 %)   

Applications

      1 %      (13 %)      (18 %)      (11 %)      (11 %)      (24 %)               (24 %)   

New Software License Revenues

      34 %      0 %      (6 %)      (3 %)      3 %      (22 %)               (22 %)   

CONSTANT CURRENCY GROWTH RATES (2)

                          

Database & Middleware

      38 %      8 %      1 %      5 %      11 %      (22 %)               (22 %)   

Applications

      (1 %)      (2 %)      (2 %)      (4 %)      (3 %)      (23 %)               (23 %)   

New Software License Revenues

      28 %      5 %      1 %      3 %      7 %      (22 %)               (22 %)   
 

TOTAL COMPANY

                          

Database & Middleware

    $ 906      $ 1,157      $ 1,120      $ 1,939      $ 5,123      $ 711               $ 711     

Applications

      331        469        396        805        2,000        317                 317     
      

New Software License Revenues

    $   1,237      $   1,626      $   1,516      $   2,744      $ 7,123      $   1,028               $ 1,028     
      

AS REPORTED GROWTH RATES

                          

Database & Middleware

      27 %      4 %      (4 %)      (10 %)      0 %      (22 %)               (22 %)   

Applications

      (12 %)      (15 %)      (12 %)      (19 %)      (16 %)      (4 %)               (4 %)   

New Software License Revenues

      14 %      (3 %)      (6 %)      (13 %)      (5 %)      (17 %)               (17 %)   

CONSTANT CURRENCY GROWTH RATES (2)

                          

Database & Middleware

      23 %      12 %      6 %      (1 %)      7 %      (19 %)               (19 %)   

Applications

      (14 %)      (9 %)      (4 %)      (11 %)      (10 %)      0 %               0 %   

New Software License Revenues

      10 %      5 %      3 %      (4 %)      1 %      (14 %)               (14 %)   

 

 

(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, 2009 and 2008 for the fiscal 2010 and fiscal 2009 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

8

APPENDIX A

ORACLE CORPORATION

Q1 FISCAL 2010 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:

 

•  

Support deferred revenue: Business combination accounting rules require us to account for the fair value of support contracts assumed in connection with our acquisitions. Because these are typically one-year contracts, our GAAP revenues for the one year period subsequent to our acquisition of a business do not reflect the full amount of software license updates and product support revenues on assumed support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment is intended to reflect the full amount of such revenues. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we have historically experienced high renewal rates on support contracts, although we cannot be certain that customers will renew these contracts.

 

•  

Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP operating expenses and net income 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 revenues earned during the periods presented and will contribute to future period revenues as well. Amortization of intangible assets will recur in future periods.

 

•  

Acquisition related and other expenses, and restructuring expenses: 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 after the measurement period or purchase price allocation period has ended 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 are not recurring with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions.

 

9