Oracle Announces Fiscal 2023 Second Quarter Financial Results

ORACLE  CORPORATION

Q2 FISCAL 2023 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data) 

Three Months Ended
November 30,

% Increase

% Increase

(Decrease)

% of 

% of 

(Decrease)

in Constant

2022

Revenues

2021

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$           8,598

70 %

$          7,554

73 %

14 %

20 %

Cloud license and on-premise license

1,435

12 %

1,237

12 %

16 %

23 %

Hardware

850

7 %

767

7 %

11 %

16 %

Services

1,392

11 %

802

8 %

74 %

83 %

      Total revenues

12,275

100 %

10,360

100 %

18 %

25 %

OPERATING EXPENSES

Cloud services and license support 

1,891

15 %

1,259

12 %

50 %

55 %

Hardware

286

2 %

229

2 %

25 %

31 %

Services

1,181

10 %

671

7 %

76 %

85 %

Sales and marketing

2,216

18 %

1,954

19 %

13 %

18 %

Research and development 

2,158

18 %

1,754

17 %

23 %

26 %

General and administrative

366

3 %

319

3 %

15 %

19 %

Amortization of intangible assets

907

7 %

299

3 %

203 %

204 %

Acquisition related and other (2)

62

1 %

4,667

45 %

(99 %)

(99 %)

Restructuring

137

1 %

32

0 %

330 %

376 %

      Total operating expenses 

9,204

75 %

11,184

108 %

(18 %)

(15 %)

OPERATING INCOME (LOSS)

3,071

25 %

(824)

(8 %)

*

*

Interest expense

(856)

(7 %)

(679)

(6 %)

26 %

26 %

Non-operating (expenses) income, net

(71)

(1 %)

7

0 %

*

*

INCOME (LOSS) BEFORE INCOME TAXES

2,144

17 %

(14 %)

*

*

(Provision for) benefit from income taxes

(403)

(3 %)

249

2 %

*

*

NET INCOME (LOSS)

$            1,741

14 %

$          (1,247)

(12 %)

*

*

EARNINGS (LOSS) PER SHARE:

Basic

$              0.65

$            (0.46)

Diluted

$              0.63

$            (0.46)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

2,695

2,694

Diluted

2,746

2,694

(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, 2022, which was the last day of our
prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative
to the United States dollar during the three months ended November 30, 2022 compared with the corresponding prior year period decreased
our total revenues by 7 percentage points and total operating expenses by 3 percentage points.

(2)

Acquisition related and other for the three months ended November 30, 2021 included the impact of litigation related charges totaling
$4.7 billion.

*

ORACLE  CORPORATION

Q2 FISCAL 2023 FINANCIAL RESULTS

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

($ in millions, except per share data)

Three Months Ended
November 30,

% Increase (Decrease)
in US $

% Increase (Decrease)
in Constant Currency (2) 

2022

2022

2021

2021

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$   12,275

$            -

$   12,275

$  10,360

$            -

$   10,360

18 %

18 %

25 %

25 %

TOTAL OPERATING EXPENSES

$     9,204

$   (2,015)

$     7,189

$  11,184

$   (5,679)

$     5,505

(18 %)

31 %

(15 %)

36 %

     Stock-based compensation (3)

909

(909)

-

681

(681)

-

33 %

*

33 %

*

     Amortization of intangible assets (4)

907

(907)

-

299

(299)

-

203 %

*

204 %

*

     Acquisition related and other

62

(62)

-

4,667

(4,667)

-

(99 %)

*

(99 %)

*

     Restructuring

137

(137)

-

32

(32)

-

330 %

*

376 %

*

OPERATING INCOME (LOSS)

$     3,071

$     2,015

$     5,086

$      (824)

$     5,679

$     4,855

*

5 %

*

12 %

OPERATING MARGIN %

25 %

41 %

(8 %)

47 %

*

(543) bp.

*

(485) bp.

INCOME TAX EFFECTS (5)

$       (403)

$       (444)

$       (847)

$       249

$    (1,052)

$       (803)

*

5 %

*

14 %

NET INCOME (LOSS)

$     1,741

$     1,571

$     3,312

$   (1,247)

$     4,627

$     3,380

*

(2 %)

*

6 %

DILUTED EARNINGS (LOSS) PER SHARE (6)

$       0.63

$       1.21

$     (0.46)

$       1.21

*

(1 %)

*

7 %

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (6)

2,746

-

2,746

2,694

91

2,785

2 %

(1 %)

2 %

(1 %)

(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, 2022, which was the last
day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. 

(3)

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

Three Months Ended

Three Months Ended

November 30,
 2022

November 30,
 2021

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

     Cloud services and license support

$        113

$      (113)

$           -

$          50

$         (50)

$           -

     Hardware

5

(5)

-

4

(4)

-

     Services

35

(35)

-

18

(18)

-

     Sales and marketing

151

(151)

-

120

(120)

-

     Research and development

510

(510)

-

423

(423)

-

     General and administrative

95

(95)

-

66

(66)

-

           Total stock-based compensation

$        909

$      (909)

$           -

$        681

$      (681)

$           -

(4)

Estimated future annual amortization expense related to intangible assets as of November 30, 2022 was as follows:

     Remainder of fiscal 2023

$     1,755

     Fiscal 2024

2,995

     Fiscal 2025

2,283

     Fiscal 2026

1,620

     Fiscal 2027

664

     Fiscal 2028

635

     Thereafter

1,641

           Total intangible assets, net

$  11,593

(5)

Income tax effects were calculated reflecting an effective GAAP tax rate of 18.8% and (16.6%) in the second quarter of fiscal 2023 and 2022, respectively, and an effective non-GAAP tax
rate of 20.4% and 19.2% in the second quarter of fiscal 2023 and 2022, respectively. The difference in our GAAP and non-GAAP tax rates in the second quarter of fiscal 2023 was primarily
due to the net tax effects related to stock-based compensation expense and acquisition related and other items, including the tax effects on amortization of intangible assets,
partially offset by the net deferred tax effects related to an income tax benefit that was previously recorded due to the partial realignment of our legal entity structure. The difference
in our GAAP and non-GAAP tax rates in the second quarter of fiscal 2022 was primarily due to the net tax effects related to stock-based compensation expense and acquisition related
and other items, including the net tax effects for litigation related charges (refer to Appendix A for additional information), and the net tax effects on amortization of intangible assets,
partially offset by the net deferred tax effects related to an income tax benefit that was previously recorded due to the partial realignment of our legal entity structure.

(6)

In the second quarter of fiscal 2022, GAAP diluted loss per share was calculated excluding the dilutive effects of 91 million shares related to employee stock plans as the effect would
be anti-dilutive.

*

ORACLE  CORPORATION

Q2 FISCAL 2023 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)

Six Months Ended
November 30,

% Increase

% Increase

(Decrease)

% of 

% of 

(Decrease)

in Constant

2022

Revenues

2021

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$         17,015

72 %

$         14,925

74 %

14 %

20 %

Cloud license and on-premise license

2,339

10 %

2,049

10 %

14 %

21 %

Hardware 

1,613

7 %

1,530

8 %

5 %

11 %

Services

2,753

11 %

1,583

8 %

74 %

83 %

      Total revenues

23,720

100 %

20,087

100 %

18 %

24 %

OPERATING EXPENSES

Cloud services and license support 

3,626

15 %

2,472

12 %

47 %

52 %

Hardware

536

2 %

474

2 %

13 %

18 %

Services

2,233

9 %

1,315

7 %

70 %

79 %

Sales and marketing

4,393

19 %

3,808

19 %

15 %

20 %

Research and development 

4,251

18 %

3,438

17 %

24 %

26 %

General and administrative

777

3 %

618

3 %

26 %

30 %

Amortization of intangible assets

1,826

8 %

603

3 %

203 %

204 %

Acquisition related and other (2)

103

1 %

4,687

24 %

(98 %)

(98 %)

Restructuring

281

1 %

70

0 %

301 %

340 %

      Total operating expenses 

18,026

76 %

17,485

87 %

3 %

6 %

OPERATING INCOME 

5,694

24 %

2,602

13 %

119 %

159 %

Interest expense

(1,643)

(7 %)

(1,384)

(7 %)

19 %

19 %

Non-operating expenses, net

(251)

(1 %)

(34)

0 %

638 %

658 %

INCOME BEFORE INCOME TAXES

3,800

16 %

1,184

6 %

221 %

359 %

(Provision for) benefit from income taxes

(511)

(2 %)

25

0 %

*

*

NET INCOME 

$            3,289

14 %

$            1,209

6 %

172 %

289 %

EARNINGS PER SHARE:

Basic

$              1.22

$              0.44

Diluted

$              1.20

$              0.43

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

2,690

2,731

Diluted

2,747

2,823

(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, 2022, which was the last day of our prior fiscal year, rather
than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar
during the six months ended November 30, 2022 compared with the corresponding prior year period decreased our total revenues by 6
percentage points, total operating expenses by 3 percentage points and operating income by 40 percentage points.

(2)

Acquisition related and other for the six months ended November 30, 2021 included the impact of litigation related charges totaling $4.7 billion.

*

Not meaningful

ORACLE  CORPORATION

Q2 FISCAL 2023 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)

Six Months Ended
November 30,

% Increase (Decrease)
in US $

% Increase (Decrease)
in Constant Currency (2) 

2022

2022

2021

2021

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$  23,720

$             -

$   23,720

$  20,087

$            -

$  20,087

18 %

18 %

24 %

24 %

TOTAL OPERATING EXPENSES

$  18,026

$    (3,869)

$   14,157

$  17,485

$   (6,586)

$  10,899

3 %

30 %

6 %

35 %

     Stock-based compensation (3)

1,659

(1,659)

-

1,226

(1,226)

-

35 %

*

35 %

*

     Amortization of intangible assets (4)

1,826

(1,826)

-

603

(603)

-

203 %

*

204 %

*

     Acquisition related and other

103

(103)

-

4,687

(4,687)

-

(98 %)

*

(98 %)

*

     Restructuring

281

(281)

-

70

(70)

-

301 %

*

340 %

*

OPERATING INCOME

$     5,694

$     3,869

$     9,563

$     2,602

$    6,586

$    9,188

119 %

4 %

159 %

11 %

OPERATING MARGIN %

24 %

40 %

13 %

46 %

1,105 bp.

(543) bp.

1,279 bp.

(484) bp.

INCOME TAX EFFECTS (5)

$       (511)

$    (1,018)

$    (1,529)

$          25

$   (1,473)

$   (1,448)

*

6 %

*

14 %

NET INCOME 

$     3,289

$     2,851

$     6,140

$     1,209

$    5,113

$    6,322

172 %

(3 %)

289 %

5 %

DILUTED EARNINGS PER SHARE

$       1.20

$       2.24

$       0.43

$      2.24

179 %

0 %

300 %

8 %

DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING

2,747

-

2,747

2,823

-

2,823

(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 rates in effect on May 31, 2022,
which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

(3)

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

Six Months Ended

Six Months Ended

November 30,
 2022

November 30,
 2021

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

     Cloud services and license support

$        204

$      (204)

$           -

$          90

$         (90)

$           -

     Hardware

9

(9)

-

7

(7)

-

     Services

60

(60)

-

32

(32)

-

     Sales and marketing

275

(275)

-

215

(215)

-

     Research and development

932

(932)

-

767

(767)

-

     General and administrative

179

(179)

-

115

(115)

-

           Total stock-based compensation

$     1,659

$   (1,659)

$           -

$     1,226

$   (1,226)

$           -

(4)

Estimated future annual amortization expense related to intangible assets as of November 30, 2022 was as follows:

     Remainder of fiscal 2023

$     1,755

     Fiscal 2024

2,995

     Fiscal 2025

2,283

     Fiscal 2026

1,620

     Fiscal 2027

664

     Fiscal 2028

635

     Thereafter

1,641

           Total intangible assets, net

$  11,593

(5)

Income tax effects were calculated reflecting an effective GAAP tax rate of 13.4% and (2.1%) in the first half of fiscal 2023 and 2022, respectively, and an effective non-GAAP tax rate of
19.9% and 18.6% in the first half of fiscal 2023 and 2022, respectively. The difference in our GAAP and non-GAAP tax rates in the first half of fiscal 2023 was primarily due to the net tax
effects related to stock-based compensation expense and acquisition related and other items, including the tax effects on amortization of intangible assets, partially offset by
the net deferred tax effects related to an income tax benefit that was previously recorded due to the partial realignment of our legal entity structure. The difference in our GAAP
and non-GAAP tax rates in the first half of fiscal 2022 was primarily due to the net tax effects related to stock-based compensation expense and acquisition related and other items,
including the net tax effects for litigation related charges (refer to Appendix A for additional information), and the net tax effects on amortization of intangible assets,
partially offset by the net deferred tax effects related to an income tax benefit that was previously recorded due to the partial realignment of our legal entity structure.

*

Not meaningful

ORACLE  CORPORATION

Q2 FISCAL 2023 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

November 30,

2022

2022

ASSETS

Current Assets:

Cash and cash equivalents

$                 6,813

$               21,383

Marketable securities

537

519

Trade receivables, net

6,197

5,953

Prepaid expenses and other current assets

4,014

3,778

Total Current Assets

17,561

31,633

Non-Current Assets:

   Property, plant and equipment, net

14,351

9,716

   Intangible assets, net

11,593

1,440

   Goodwill, net

61,513

43,811

   Deferred tax assets

12,091

12,782

   Other non-current assets

11,360

9,915

Total Non-Current Assets

110,908

77,664

TOTAL ASSETS

$             128,469

$             109,297

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Notes payable and other borrowings, current 

$                 9,746

$                 3,749

Accounts payable

1,647

1,317

Accrued compensation and related benefits

1,780

1,944

Deferred revenues

8,705

8,357

Other current liabilities

5,228

4,144

Total Current Liabilities

27,106

19,511

Non-Current Liabilities:

Notes payable and other borrowings, non-current

81,173

72,110

Income taxes payable

11,128

12,210

Deferred tax liabilities

7,165

6,031

Other non-current liabilities

5,673

5,203

Total Non-Current Liabilities

105,139

95,554

Stockholders' Deficit

(3,776)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$            128,469

$            109,297

     ORACLE  CORPORATION 

Q2 FISCAL 2023 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

2022

2021

Cash Flows From Operating Activities:

Net income 

$        3,289

$        1,209

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

Depreciation

1,138

913

Amortization of intangible assets

1,826

603

Deferred income taxes

(852)

(820)

Stock-based compensation

1,659

1,226

Other, net

289

(176)

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

Decrease in trade receivables, net

516

789

Decrease in prepaid expenses and other assets

121

263

Decrease in accounts payable and other liabilities

(785)

(918)

Decrease in income taxes payable

(327)

(849)

Increase (decrease) in deferred revenues

369

(531)

Net cash provided by operating activities

7,243

1,709

Cash Flows From Investing Activities:

Purchases of marketable securities and other investments

(603)

(9,631)

Proceeds from sales and maturities of marketable securities and other investments

462

21,617

Acquisitions, net of cash acquired

(27,799)

(50)

Capital expenditures

(4,154)

(1,987)

Net cash (used for) provided by investing activities

(32,094)

9,949

Cash Flows From Financing Activities:

Payments for repurchases of common stock

(1,000)

(15,001)

Proceeds from issuances of common stock

661

305

Shares repurchased for tax withholdings upon vesting of restricted stock-based awards

(895)

(890)

Payments of dividends to stockholders

(1,723)

(1,748)

Proceeds from issuances of commercial paper, net of repayments

1,880

-

Proceeds from issuances of senior notes and other borrowings, net of issuance costs

28,280

-

Repayments of senior notes and other borrowings

(16,692)

(5,750)

Other, net

(56)

(437)

Net cash provided by (used for) financing activities

10,455

(23,521)

Effect of exchange rate changes on cash and cash equivalents

(174)

(297)

Net decrease in cash and cash equivalents

(14,570)

(12,160)

Cash and cash equivalents at beginning of period

21,383

30,098

Cash and cash equivalents at end of period

$        6,813

$      17,938

 ORACLE  CORPORATION 

 Q2 FISCAL 2023 FINANCIAL RESULTS 

 FREE CASH FLOW - TRAILING 4-QUARTERS (1) 

 ($ in millions) 

 Fiscal 2022 

 Fiscal 2023 

 Q2 

 Q3