Oracle Announces Fiscal 2023 Third Quarter Financial Results

ORACLE  CORPORATION

Q3 FISCAL 2023 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

% Increase

% Increase

(Decrease)

% of 

% of 

(Decrease)

in Constant

2023

Revenues

2022

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$              8,923

72 %

$              7,637

73 %

17 %

20 %

Cloud license and on-premise license

1,288

10 %

1,289

12 %

0 %

4 %

Hardware

811

7 %

798

8 %

2 %

4 %

Services

1,376

11 %

789

7 %

74 %

80 %

      Total revenues

12,398

100 %

10,513

100 %

18 %

21 %

OPERATING EXPENSES

Cloud services and license support 

1,980

16 %

1,305

13 %

52 %

54 %

Hardware

244

2 %

244

2 %

0 %

2 %

Services

1,215

10 %

669

7 %

81 %

87 %

Sales and marketing

2,150

18 %

2,004

19 %

7 %

10 %

Research and development 

2,146

17 %

1,816

17 %

18 %

20 %

General and administrative

402

3 %

335

3 %

20 %

22 %

Amortization of intangible assets

886

7 %

279

3 %

217 %

217 %

Acquisition related and other

37

0 %

20

0 %

90 %

95 %

Restructuring

78

1 %

19

0 %

311 %

337 %

      Total operating expenses 

9,138

74 %

6,691

64 %

37 %

39 %

OPERATING INCOME

3,260

26 %

3,822

36 %

(15 %)

(11 %)

Interest expense

(908)

(7 %)

(667)

(6 %)

36 %

36 %

Non-operating expenses, net

(3 %)

(57 %)

(57 %)

INCOME BEFORE INCOME TAXES

2,218

18 %

2,840

27 %

(22 %)

(17 %)

Provision for income taxes

322

3 %

521

5 %

(38 %)

(35 %)

NET INCOME

$              1,896

15 %

$              2,319

22 %

(18 %)

(13 %)

EARNINGS PER SHARE:

Basic

$                0.70

$                0.87

Diluted

$                0.68

$                0.84

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

2,698

2,670

Diluted

2,776

2,754

(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 February 28, 2023 compared with the corresponding prior year period decreased our total revenues by 3 percentage points, total

operating expenses by 2 percentage points and operating income by 4 percentage points.

ORACLE  CORPORATION

Q3 FISCAL 2023 FINANCIAL RESULTS

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

($ in millions, except per share data)

Three Months Ended February 28,

% Increase (Decrease)
in US $

% Increase (Decrease) in
Constant Currency (2) 

2023

2023

2022

2022

GAAP

Non-GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$     12,398

$              -

$     12,398

$     10,513

$              -

$     10,513

18 %

18 %

21 %

21 %

TOTAL OPERATING EXPENSES

$       9,138

$     (1,925)

$       7,213

$       6,691

$        (992)

$       5,699

37 %

27 %

39 %

29 %

     Stock-based compensation (3)

924

(924)

-

674

(674)

-

37 %

*

37 %

*

     Amortization of intangible assets (4)

886

(886)

-

279

(279)

-

217 %

*

217 %

*

     Acquisition related and other

37

(37)

-

20

(20)

-

90 %

*

95 %

*

     Restructuring

78

(78)

-

19

(19)

-

311 %

*

337 %

*

OPERATING INCOME

$       3,260

$       1,925

$       5,185

$       3,822

$          992

$       4,814

(15 %)

8 %

(11 %)

11 %

OPERATING MARGIN %

26 %

42 %

36 %

46 %

(1,006) bp.

(397) bp.

(955) bp.

(371) bp.

INCOME TAX EFFECTS (5)

$          322

$          439

$          761

$          521

$          209

$          730

(38 %)

4 %

(35 %)

9 %

NET INCOME

$       1,896

$       1,486

$       3,382

$       2,319

$          783

$       3,102

(18 %)

9 %

(13 %)

13 %

DILUTED EARNINGS PER SHARE

$         0.68

$         1.22

$         0.84

$         1.13

(19 %)

8 %

(14 %)

13 %

DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING

2,776

-

2,776

2,754

-

2,754

1 %

1 %

1 %

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

February 28,
 2023

February 28,
 2022

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

     Cloud services and license support

$          114

$        (114)

$             -

$            55

$          (55)

$             -

     Hardware

5

(5)

-

4

(4)

-

     Services

39

(39)

-

17

(17)

-

     Sales and marketing

158

(158)

-

113

(113)

-

     Research and development

517

(517)

-

421

(421)

-

     General and administrative

91

(91)

-

64

(64)

-

           Total stock-based compensation

$          924

$        (924)

$             -

$          674

$        (674)

$             -

(4)

Estimated future annual amortization expense related to intangible assets as of February 28, 2023 was as follows:

     Remainder of fiscal 2023

$          869

     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

$    10,707

(5)

Income tax effects were calculated reflecting an effective GAAP tax rate of 14.5% and 18.4% in the third quarter of fiscal 2023 and 2022, respectively, and an effective non-GAAP tax rate of 18.4% and 19.0% in the third quarter of fiscal 2023 and 2022, respectively. The difference in our GAAP and non-GAAP tax rates in each of the third quarter of fiscal 2023 and 2022 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.

ORACLE  CORPORATION

Q3 FISCAL 2023 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

% Increase

% Increase

(Decrease)

% of 

% of 

(Decrease)

in Constant

2023

Revenues

2022

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$           25,938

72 %

$           22,562

74 %

15 %

20 %

Cloud license and on-premise license

3,627

10 %

3,339

11 %

9 %

14 %

Hardware 

2,424

7 %

2,328

7 %

4 %

8 %

Services

4,129

11 %

2,371

8 %

74 %

82 %

      Total revenues

36,118

100 %

30,600

100 %

18 %

23 %

OPERATING EXPENSES

Cloud services and license support 

5,606

16 %

3,778

12 %

48 %

53 %

Hardware

780

2 %

718

2 %

9 %

13 %

Services

3,448

10 %

1,984

7 %

74 %

82 %

Sales and marketing

6,544

18 %

5,811

19 %

13 %

17 %

Research and development 

6,397

18 %

5,254

17 %

22 %

24 %

General and administrative

1,179

3 %

953

3 %

24 %

27 %

Amortization of intangible assets

2,712

7 %

882

3 %

207 %

208 %

Acquisition related and other (2)

140

0 %

4,707

16 %

(97 %)

(97 %)

Restructuring

359

1 %

89

0 %

303 %

340 %

      Total operating expenses 

27,165

75 %

24,176

79 %

12 %

15 %

OPERATING INCOME 

8,953

25 %

6,424

21 %

39 %

54 %

Interest expense

(2,550)

(7 %)

(2,051)

(7 %)

24 %

24 %

Non-operating expenses, net

(386)

(2 %)

(348)

(1 %)

11 %

10 %

INCOME BEFORE INCOME TAXES

6,017

16 %

4,025

13 %

49 %

75 %

Provision for income taxes

833

2 %

497

1 %

68 %

96 %

NET INCOME 

$              5,184

14 %

$              3,528

12 %

47 %

72 %

EARNINGS PER SHARE:

Basic

$                1.93

$                1.30

Diluted

$                1.88

$                1.26

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

2,692

2,711

Diluted

2,757

2,800

(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 nine months ended February 28, 2023 compared with the corresponding prior year period decreased our total revenues by 5 percentage points, total operating expenses by 3 percentage points and operating income by 15 percentage points.

(2)

Acquisition related and other for the nine months ended February 28, 2022 included the impact of litigation related charges totaling $4.7 billion.

ORACLE  CORPORATION

Q3 FISCAL 2023 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)

Nine Months Ended February 28,

% Increase (Decrease)
in US $

% Increase (Decrease) in
Constant Currency (2) 

2023

2023

2022

2022

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$    36,118

$             -

$    36,118

$    30,600

$             -

$    30,600

18 %

18 %

23 %

23 %

TOTAL OPERATING EXPENSES

$    27,165

$     (5,794)

$    21,371

$    24,176

$     (7,578)

$    16,598

12 %

29 %

15 %

33 %

     Stock-based compensation (3)

2,583

(2,583)

-

1,900

(1,900)

-

36 %

*

36 %

*

     Amortization of intangible assets (4)

2,712

(2,712)

-

882

(882)

-

207 %

*

208 %

*

     Acquisition related and other

140

(140)

-

4,707

(4,707)

-

(97 %)

*

(97 %)

*

     Restructuring

359

(359)

-

89

(89)

-

303 %

*

340 %

*

OPERATING INCOME

$       8,953

$       5,794

$    14,747

$       6,424

$       7,578

$    14,002

39 %

5 %

54 %

11 %

OPERATING MARGIN %

25 %

41 %

21 %

46 %

380 bp.

(493) bp.

504 bp.

(446) bp.

INCOME TAX EFFECTS (5)

$          833

$       1,457

$       2,290

$          497

$       1,680

$       2,177

68 %

5 %

96 %

12 %

NET INCOME 

$       5,184

$       4,337

$       9,521

$       3,528

$       5,898

$       9,426

47 %

1 %

72 %

8 %

DILUTED EARNINGS PER SHARE

$         1.88

$         3.45

$         1.26

$         3.37

49 %

3 %

74 %

9 %

DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING

2,757

-

2,757

2,800

-

2,800

(2 %)

(2 %)

(2 %)

(2 %)

(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:

Nine Months Ended

Nine Months Ended

February 28,
 2023

February 28,
 2022

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

     Cloud services and license support

$          319

$        (319)

$             -

$          145

$        (145)

$             -

     Hardware

13

(13)

-

11

(11)

-

     Services

99

(99)

-

49

(49)

-

     Sales and marketing

433

(433)

-

328

(328)

-

     Research and development

1,448

(1,448)

-

1,188

(1,188)

-

     General and administrative

271

(271)

-

179

(179)

-

           Total stock-based compensation

$       2,583

$     (2,583)

$             -

$       1,900

$     (1,900)

$             -

(4)

Estimated future annual amortization expense related to intangible assets as of February 28, 2023 was as follows:

     Remainder of fiscal 2023

$          869

     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

$    10,707

(5)

Income tax effects were calculated reflecting an effective GAAP tax rate of 13.8% and 12.3% in the first nine months of fiscal 2023 and 2022, respectively, and an effective non-GAAP tax rate of 19.4% and 18.8% in the first nine months of fiscal 2023 and 2022, respectively. The difference in our GAAP and non-GAAP tax rates in the first nine months 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 nine months 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

Q3 FISCAL 2023 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

February 28,

2023

2022

ASSETS

Current Assets:

Cash and cash equivalents

$                 8,219

$               21,383

Marketable securities

550

519

Trade receivables, net

6,213

5,953

Prepaid expenses and other current assets

3,714

3,778

Total Current Assets

18,696

31,633

Non-Current Assets:

   Property, plant and equipment, net

16,345

9,716

   Intangible assets, net

10,707

1,440

   Goodwill, net

61,499

43,811

   Deferred tax assets

12,153

12,782

   Other non-current assets

12,220

9,915

Total Non-Current Assets

112,924

77,664

TOTAL ASSETS

$             131,620

$             109,297

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Notes payable and other borrowings, current 

$                 5,415

$                 3,749

Accounts payable

1,610

1,317

Accrued compensation and related benefits

1,736

1,944

Deferred revenues

8,598

8,357

Other current liabilities

5,521

4,144

Total Current Liabilities

22,880

19,511

Non-Current Liabilities:

Notes payable and other borrowings, non-current

86,396

72,110

Income taxes payable

11,335

12,210

Deferred tax liabilities

6,814

6,031

Other non-current liabilities

6,107

5,203

Total Non-Current Liabilities

110,652

95,554

Stockholders' Deficit

(1,912)

$             131,620

$             109,297

     ORACLE  CORPORATION 

Q3 FISCAL 2023 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

2023

2022

Cash Flows From Operating Activities:

Net income 

$         5,184

$         3,528

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

Depreciation

1,810

1,409

Amortization of intangible assets

2,712

882

Deferred income taxes

(1,253)

(983)

Stock-based compensation

2,583

1,900

Other, net

487

82

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

Decrease in trade receivables, net

460

652

Decrease in prepaid expenses and other assets

515

71

Decrease in accounts payable and other liabilities

(783)

(683)

Decrease in income taxes payable

(453)

(661)

Increase (decrease) in deferred revenues

256

(643)

Net cash provided by operating activities

11,518

5,554

Cash Flows From Investing Activities:

Purchases of marketable securities and other investments

(921)

(10,134)

Proceeds from sales and maturities of marketable securities and other investments

552

25,735

Acquisitions, net of cash acquired

(27,721)

(132)

Capital expenditures

(6,782)

(3,088)

Net cash (used for) provided by investing activities

(34,872)

12,381

Cash Flows From Financing Activities:

Payments for repurchases of common stock

(1,150)

(15,654)

Proceeds from issuances of common stock

759

357

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

(1,040)

(1,011)

Payments of dividends to stockholders

(2,586)

(2,603)

Proceeds from issuances of commercial paper, net of repayments

1,874

-

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

33,494

-

Repayments of senior notes and other borrowings

(21,050)

(5,750)

Other, net

49

(439)

Net cash provided by (used for) financing activities

10,350

(25,100)

Effect of exchange rate changes on cash and cash equivalents

(160)

(251)

Net decrease in cash and cash equivalents

(13,164)