Oracle Announces Fiscal 2021 Second Quarter Financial Results

ORACLE  CORPORATION

Q2 FISCAL 2021 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

2020

Revenues

2019

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$              7,112

72%

$              6,811

71%

4%

4%

Cloud license and on-premise license

1,092

11%

1,126

12%

(3%)

(5%)

Hardware

844

9%

871

9%

(3%)

(3%)

Services

752

8%

806

8%

(7%)

(8%)

      Total revenues

9,800

100%

9,614

100%

2%

1%

OPERATING EXPENSES

Cloud services and license support 

1,064

11%

1,022

11%

4%

4%

Hardware

244

2%

285

3%

(15%)

(15%)

Services

631

6%

741

8%

(15%)

(16%)

Sales and marketing

1,836

19%

2,068

22%

(11%)

(12%)

Research and development 

1,601

16%

1,531

16%

5%

5%

General and administrative

324

3%

323

3%

0%

0%

Amortization of intangible assets

345

4%

407

4%

(15%)

(16%)

Acquisition related and other

76

1%

12

0%

514%

503%

Restructuring

96

1%

42

0%

130%

124%

      Total operating expenses 

6,217

63%

6,431

67%

(3%)

(4%)

OPERATING INCOME 

3,583

37%

3,183

33%

13%

11%

Interest expense

(600)

(7%)

(465)

(5%)

29%

29%

Non-operating (expenses) income, net

(11)

0%

92

1%

*

*

INCOME BEFORE PROVISION FOR INCOME TAXES

2,972

30%

2,810

29%

6%

3%

Provision for income taxes

530

5%

499

5%

6%

4%

NET INCOME 

$              2,442

25%

$              2,311

24%

6%

3%

EARNINGS PER SHARE:

Basic

$                0.82

$                0.71

Diluted

$                0.80

$                0.69

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

2,977

3,245

Diluted

3,046

3,331

(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, 2020, 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, 2020 compared with the corresponding prior year period increased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 2 percentage points.

*

Not meaningful

ORACLE  CORPORATION

Q2 FISCAL 2021 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) 

2020

2020

2019

2019

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$       9,800

$              -

$       9,800

$       9,614

$               1

$       9,615

2%

2%

1%

1%

     Cloud services and license support

7,112

-

7,112

6,811

1

6,812

4%

4%

4%

4%

TOTAL OPERATING EXPENSES

$       6,217

$       5,212

$       6,431

$        (858)

$       5,573

(3%)

(6%)

(4%)

(7%)

     Stock-based compensation (3)

488

(488)

-

397

(397)

-

23%

*

23%

*

     Amortization of intangible assets (4)

345

(345)

-

407

(407)

-

(15%)

*

(16%)

*

     Acquisition related and other

76

(76)

-

12

(12)

-

514%

*

503%

*

     Restructuring

96

(96)

-

42

(42)

-

130%

*

124%

*

OPERATING INCOME

$       3,583

$       1,005

$       4,588

$       3,183

$          859

$       4,042

13%

14%

11%

12%

OPERATING MARGIN %

47%

33%

42%

346 bp.

478 bp.

314 bp.

452 bp.

INCOME TAX EFFECTS (5)

$          530

$          212

$          742

$          499

$          189

$          688

6%

8%

4%

6%

NET INCOME 

$       2,442

$          793

$       3,235

$       2,311

$          670

$       2,981

6%

9%

3%

7%

DILUTED EARNINGS PER SHARE

$         0.80

$         1.06

$         0.69

$         0.90

16%

19%

13%

17%

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 

3,046

-

3,046

3,331

-

3,331

(9%)

(9%)

(9%)

(9%)

(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, 2020, 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, 2020

November 30, 2019

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

     Cloud services and license support

$             36

$           (36)

$              -

$             30

$           (30)

$              -

     Hardware

3

(3)

-

3

(3)

-

     Services

14

(14)

-

14

(14)

-

     Sales and marketing

80

(80)

-

37

(37)

-

     Research and development

314

(314)

-

272

(272)

-

     General and administrative

41

(41)

-

41

(41)

-

           Total stock-based compensation

$          488

$        (488)

$              -

$          397

$        (397)

$              -

(4)

Estimated future annual amortization expense related to intangible assets as of November 30, 2020 was as follows:

     Remainder of fiscal 2021

$          668

     Fiscal 2022

1,106

     Fiscal 2023

682

     Fiscal 2024

445

     Fiscal 2025

126

     Fiscal 2026

24

     Thereafter

10

           Total intangible assets, net

(5)

Income tax effects were calculated reflecting an effective GAAP tax rate of 17.8% and 17.7% in the second quarter of fiscal 2021 and 2020, respectively, and an effective non-GAAP tax rate of 18.7% and 18.8% in the second quarter of fiscal 2021 and 2020, respectively. The differences in our GAAP and non-GAAP tax rates in the periods presented were primarily due to the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets.

ORACLE  CORPORATION

Q2  FISCAL 2021 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

2020

Revenues

2019

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$            14,059

73%

$            13,616

73%

3%

3%

Cloud license and on-premise license

1,978

10%

1,937

10%

2%

1%

Hardware 

1,658

9%

1,686

9%

(2%)

(2%)

Services

1,472

8%

1,593

8%

(8%)

(8%)

      Total revenues

19,167

100%

18,832

100%

2%

1%

OPERATING EXPENSES

Cloud services and license support 

2,075

11%

2,003

11%

4%

4%

Hardware

490

3%

557

3%

(12%)

(12%)

Services

1,254

7%

1,445

8%

(13%)

(14%)

Sales and marketing

3,690

19%

4,086

22%

(10%)

(10%)

Research and development 

3,190

17%

3,088

16%

3%

4%

General and administrative

619

3%

615

3%

1%

1%

Amortization of intangible assets

690

4%

821

4%

(16%)

(16%)

Acquisition related and other

95

0%

37

0%

154%

155%

Restructuring

270

1%

120

1%

125%

123%

      Total operating expenses 

12,373

65%

12,772

68%

(3%)

(3%)

OPERATING INCOME 

6,794

35%

6,060

32%

12%

11%

Interest expense

(1,214)

(6%)

(959)

(5%)

27%

27%

Non-operating (expenses) income, net

(13)

0%

191

1%

*

*

INCOME BEFORE PROVISION FOR INCOME TAXES

5,567

29%

5,292

28%

5%

4%

Provision for income taxes 

874

5%

844

4%

4%

2%

NET INCOME 

$              4,693

24%

$              4,448

24%

6%

4%

EARNINGS PER SHARE:

Basic

$                1.56

$                1.36

Diluted

$                1.53

$                1.32

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

3,009

3,281

Diluted

3,076

3,370

(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, 2020, 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, 2020 compared with the corresponding prior year period increased our revenues by 1 percentage point and operating income by 1 percentage point. 

*

Not meaningful

ORACLE  CORPORATION

Q2  FISCAL 2021 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) 

2020

2020

2019

2019

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$     19,167

$               1

$     19,168

$     18,832

$               3

$     18,835

2%

2%

1%

1%

          Cloud services and license support

14,059

1

14,060

13,616

3

13,619

3%

3%

3%

3%

TOTAL OPERATING EXPENSES

$     12,373

$     (1,971)

$     10,402

$     12,772

$     (1,821)

$     10,951

(3%)

(5%)

(3%)

(5%)

          Stock-based compensation (3)

916

(916)

-

843

(843)

-

9%

*

9%

*

          Amortization of intangible assets (4)

690

(690)

-

821

(821)

-

(16%)

*

(16%)

*

          Acquisition related and other

95

(95)

-

37

(37)

-

154%

*

155%

*

          Restructuring

270

(270)

-

120

(120)

-

125%

*

123%

*

OPERATING INCOME

$       6,794

$       1,972

$       8,766

$       6,060

$       1,824

$       7,884

12%

11%

11%

10%

OPERATING MARGIN %

35%

46%

32%

42%

327 bp.

388 bp.

299 bp.

361 bp.

INCOME TAX EFFECTS (5)

$          874

$          548

$       1,422

$          844

$          528

$       1,372

4%

4%

2%

2%

NET INCOME 

$       4,693

$       1,424

$       6,117

$       4,448

$       1,296

$       5,744

6%

7%

4%

5%

DILUTED EARNINGS PER SHARE

$         1.53

$         1.99

$         1.32

$         1.70

16%

17%

14%

15%

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

3,076

-

3,076

3,370

-

3,370

(9%)

(9%)

(9%)

(9%)

(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, 2020, 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, 2020

November 30, 2019

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

     Cloud services and license support

$             66

$           (66)

$              -

$             61

$           (61)

$              -

     Hardware

6

(6)

-

6

(6)

-

     Services

26

(26)

-

28

(28)

-

     Sales and marketing

151

(151)

-

125

(125)

-

     Research and development

590

(590)

-

543

(543)

-

     General and administrative

77

(77)

-

80

(80)

-

           Total stock-based compensation

$          916

$        (916)

$              -

$          843

$        (843)

$              -

(4)

Estimated future annual amortization expense related to intangible assets as of November 30, 2020 was as follows:

     Remainder of fiscal 2021

$          668

     Fiscal 2022

1,106

     Fiscal 2023

682

     Fiscal 2024

445

     Fiscal 2025

126

     Fiscal 2026

24

     Thereafter

10

           Total intangible assets, net

$       3,061

(5)

Income tax effects were calculated reflecting an effective GAAP tax rate of 15.7% and 16.0% in the first half of fiscal 2021 and 2020, respectively, and an effective non-GAAP tax rate of 18.9% and 19.3% in the first half of fiscal 2021 and 2020, respectively. The differences in our GAAP and non-GAAP tax rates in the periods presented were primarily due to the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets.

*

Not meaningful

ORACLE  CORPORATION

Q2 FISCAL 2021 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

November 30,

2020

ASSETS

Current Assets:

Cash and cash equivalents

$               28,001

$               37,239

Marketable securities

10,592

5,818

Trade receivables, net

4,423

5,551

Prepaid expenses and other current assets

3,235

3,532

Total Current Assets

46,251

52,140

Non-Current Assets:

   Property, plant and equipment, net

6,627

6,244

   Intangible assets, net

3,061

3,738

   Goodwill, net

43,877

43,769

   Deferred tax assets

3,401

3,252

   Other non-current assets

6,797

6,295

Total Non-Current Assets

63,763

TOTAL ASSETS

$             115,438

LIABILITIES AND EQUITY

Current Liabilities:

Notes payable, current 

$                 7,251

$                 2,371

Accounts payable

724

637

Accrued compensation and related benefits

1,420

1,453

Deferred revenues

8,062

8,002

Other current liabilities

3,890

4,737

Total Current Liabilities

21,347

17,200

Non-Current Liabilities:

Notes payable and other borrowings, non-current

63,531

69,226

Income taxes payable

12,214

12,463

Other non-current liabilities

4,306

3,832

Total Non-Current Liabilities

80,051

85,521

Equity

8,616

12,717

TOTAL LIABILITIES AND EQUITY

$             110,014

$             115,438

     ORACLE  CORPORATION 

Q2 FISCAL 2021 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

Six Months Ended November 30,

Cash Flows From Operating Activities:

Net income 

$              4,693

$               4,448

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

Depreciation

742

677

Amortization of intangible assets

690

821

Deferred income taxes

(43)

(263)

Stock-based compensation

916

843

Other, net

184

117

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

Decrease in trade receivables, net

1,263

1,079

Decrease in prepaid expenses and other assets

545

638

Decrease in accounts payable and other liabilities

(248)

(916)

Decrease in income taxes payable

(1,243)

(613)

Decrease in deferred revenues

(158)

(318)

Net cash provided by operating activities

7,341

6,513

Cash Flows From Investing Activities:

Purchases of marketable securities and other investments

(15,578)

(314)

Proceeds from maturities of marketable securities and other investments

10,776

2,204

Proceeds from sales of marketable securities 

3

12,575

Acquisitions, net of cash acquired

-

(111)

Capital expenditures

(1,004)

(735)

Net cash (used for) provided by investing activities

(5,803)

13,619

Cash Flows From Financing Activities:

Payments for repurchases of common stock

(8,962)

(9,996)

Proceeds from issuances of common stock

772

617

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

(520)

(559)

Payments of dividends to stockholders

(1,447)

(1,562)

Repayments of borrowings

(1,000)

(4,500)

Other, net

110

(96)

Net cash used for financing activities

(11,047)

(16,096)

Effect of exchange rate changes on cash and cash equivalents

(10)

Net (decrease) increase in cash and cash equivalents

(9,238)

4,026

Cash and cash equivalents at beginning of period

37,239

20,514

Cash and cash equivalents at end of period

 ORACLE  CORPORATION 

 Q2 FISCAL 2021 FINANCIAL RESULTS 

 FREE CASH FLOW - TRAILING 4-QUARTERS (1) 

 ($ in millions) 

 Fiscal 2020 

 Fiscal 2021 

 Q2 

 Q3 

 Q4 

 Q1 

 Q2 

 Q3 

 Q4 

GAAP Operating Cash Flow

$             13,829

$             13,796

$             13,947

$             13,139

$             13,092

$             13,967

Capital Expenditures

(1,591)

(1,544)

(1,614)

(1,833)

Free Cash Flow

$             12,205

$             12,403

$             11,575

$             11,478

$             12,134

% Growth over prior year

(6%)

(6%)

(1%)

GAAP Net Income

$             10,955

$             10,933

$             10,759

$             10,135

$             10,249

$             10,380

Free Cash Flow as a % of Net Income

111%

112%

115%

114%

112%

117%

 ORACLE  CORPORATION 

 Q2 FISCAL 2021 FINANCIAL RESULTS 

 SUPPLEMENTAL ANALYSIS OF GAAP REVENUES (1) 

 ($ in millions) 

 Fiscal 2020 

 Fiscal 2021 

 Q2 

 Q3 

 Q4 

 TOTAL 

 Q1 

 Q2 

 Q3 

 Q4 

 TOTAL 

REVENUES BY OFFERINGS

 Cloud services and license support 

$       6,805

$       6,811

$       6,930

$       6,845

$    27,392

$       6,947

$       7,112

$    14,059

 Cloud license and on-premise license 

812

1,126

1,231

1,959

5,127

886

1,092

1,978

 Hardware 

815

871

857

901

3,443

814

844

1,658

 Services  

786

806

778

735

3,106

720

752

1,472

         Total revenues 

$       9,218

$       9,614

$       9,796

$    10,440

$    39,068

$       9,367

$       9,800

$    19,167

AS REPORTED REVENUE GROWTH RATES 

 Cloud services and license support 

3%

3%

4%

1%

3%

2%

4%

3%

 Cloud license and on-premise license 

(6%)

(7%)

(2%)

(22%)

(12%)

9%

(3%)

2%

 Hardware  

(10%)

(2%)

(6%)

(9%)

(7%)

0%

(3%)

(2%)

 Services  

(3%)

(1%)

(1%)

(11%)

(4%)

(8%)

(7%)

(8%)

         Total revenues 

0%

1%

2%

(6%)

(1%)

2%

2%

2%

CONSTANT CURRENCY REVENUE GROWTH RATES (2)

 Cloud services and license support  

4%

4%

5%

3%

4%

2%

4%

3%

 Cloud license and on-premise license 

(6%)

(7%)

0%

(21%)

(11%)

8%

(5%)

1%

 Hardware  

(9%)

(1%)

(5%)

(7%)

(6%)

0%

(3%)

(2%)

 Services  

(2%)

0%

0%

(8%)

(3%)

(8%)

(8%)

(8%)

         Total revenues 

2%

1%

3%

(4%)

0%

2%