Oracle Announces Fiscal 2021 Third Quarter Financial Results

ORACLE  CORPORATION

Q3 FISCAL 2021 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

Three Months Ended

% Increase

% Increase

(Decrease)

February 28,

% of

February 29,

% of

(Decrease)

in Constant

2021

Revenues

2020

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support

$                  7,252

72%

$                  6,930

71%

5%

2%

Cloud license and on-premise license

1,276

13%

1,231

12%

4%

0%

Hardware

820

8%

857

9%

(6%)

Services

737

7%

778

8%

(5%)

(8%)

      Total revenues

10,085

100%

9,796

100%

3%

0%

OPERATING EXPENSES

Cloud services and license support

1,064

11%

991

10%

7%

6%

Hardware

230

2%

271

3%

(15%)

(16%)

Services

621

6%

702

7%

(12%)

(14%)

Sales and marketing

1,915

19%

2,049

21%

(7%)

(8%)

Research and development

1,621

16%

1,500

15%

8%

8%

General and administrative

330

3%

288

3%

15%

14%

Amortization of intangible assets

347

4%

400

4%

(13%)

(14%)

Acquisition related and other

13

0%

7

0%

92%

91%

Restructuring

66

1%

60

1%

10%

1%

      Total operating expenses

6,207

62%

6,268

64%

(1%)

(2%)

OPERATING INCOME

3,878

38%

3,528

36%

10%

5%

Interest expense

(585)

(6%)

(456)

(5%)

28%

28%

Non-operating (expenses) income, net

(17)

0%

4

0%

*

*

INCOME BEFORE BENEFIT FROM (PROVISION FOR) INCOME TAXES

3,276

32%

3,076

31%

7%

2%

Benefit from (provision for) income taxes

1,745

18%

(505)

(5%)

*

*

NET INCOME

$                  5,021

50%

$                  2,571

26%

95%

87%

EARNINGS PER SHARE:

Basic

$                     1.72

$                    0.81

Diluted

$                     1.68

$                    0.79

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

2,913

3,190

Diluted

2,994

3,271

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 February 28, 2021 compared with the corresponding prior year period increased our revenues by 3 percentage points, operating expenses by 1 percentage point and operating income by 5 percentage points.

ORACLE  CORPORATION

Q3 FISCAL 2021 FINANCIAL RESULTS

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

($ in millions, except per share data)

Three Months Ended

% Increase (Decrease)
in US $

% Increase (Decrease) in
Constant Currency (2)

February 28,

February 28,

February 29,

February 29,

2021

2021

2020

2020

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$     10,085

$               1

$     10,086

$       9,796

$               1

$       9,797

3%

3%

0%

0%

     Cloud services and license support

7,252

1

7,253

6,930

1

6,931

5%

5%

2%

2%

TOTAL OPERATING EXPENSES

$       6,207

$        (905)

$       5,302

$       6,268

$        (828)

$       5,440

(1%)

(3%)

(2%)

(4%)

     Stock-based compensation (3)

479

(479)

-

361

(361)

-

33%

*

33%

*

     Amortization of intangible assets (4)

347

(347)

-

400

(400)

-

(13%)

*

(14%)

*

     Acquisition related and other

13

(13)

-

7

(7)

-

92%

*

91%

*

     Restructuring

66

(66)

-

60

(60)

-

10%

*

1%

*

OPERATING INCOME

$       3,878

$          906

$       4,784

$       3,528

$          829

$       4,357

10%

10%

5%

6%

OPERATING MARGIN %

38%

47%

36%

44%

244 bp.

297 bp.

179 bp.

247 bp.

INCOME TAX EFFECTS (5)

$       1,745

$     (2,442)

$        (697)

$        (505)

$        (240)

$        (745)

*

(6%)

*

(10%)

NET INCOME

$       5,021

$     (1,536)

$       3,485

$       2,571

$          589

$       3,160

95%

10%

87%

6%

DILUTED EARNINGS PER SHARE

$         1.68

$         1.16

$         0.79

$         0.97

113%

20%

104%

16%

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

2,994

-

2,994

3,271

-

3,271

(8%)

(8%)

(8%)

(8%)

ORACLE  CORPORATION

Q3  FISCAL 2021 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data) 

Nine Months Ended

% Increase

% Increase

(Decrease)

February 28,

% of

February 29,

% of

(Decrease)

in Constant

2021

Revenues

2020

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support

$                21,311

73%

$                20,546

72%

4%

3%

Cloud license and on-premise license

3,254

11%

3,169

11%

3%

1%

Hardware

2,478

8%

2,542

9%

(3%)

(3%)

Services

2,209

8%

2,372

8%

(7%)

(8%)

      Total revenues

29,252

100%

28,629

100%

2%

1%

OPERATING EXPENSES

Cloud services and license support

3,139

11%

2,994

11%

5%

4%

Hardware

719

2%

828

3%

(13%)

(13%)

Services

1,875

6%

2,147

8%

(13%)

(14%)

Sales and marketing

5,605

19%

6,135

21%

(9%)

(9%)

Research and development

4,812

17%

4,588

16%

5%

5%

General and administrative

949

3%

903

3%

5%

5%

Amortization of intangible assets

1,037

4%

1,221

4%

(15%)

(15%)

Acquisition related and other

107

1%

44

0%

144%

145%

Restructuring

337

1%

181

1%

87%

82%

      Total operating expenses

18,580

64%

19,041

67%

(2%)

(3%)

OPERATING INCOME

10,672

36%

9,588

33%

11%

9%

Interest expense

(1,799)

(6%)

(1,416)

(5%)

27%

27%

Non-operating (expenses) income, net

(30)

0%

195

1%

*

*

INCOME BEFORE BENEFIT FROM (PROVISION FOR) INCOME TAXES

8,843

30%

8,367

29%

6%

3%

Benefit from (provision for) income taxes

871

3%

(1,348)

(4%)

*

*

NET INCOME

$                  9,714

33%

$                  7,019

25%

38%

34%

EARNINGS PER SHARE:

Basic

$                    3.26

$                    2.16

Diluted

$                    3.19

$                    2.10

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

2,977

3,251

Diluted

3,049

3,337

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 nine months ended February 28, 2021 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

Q3  FISCAL 2021 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)

Nine Months Ended

% Increase (Decrease)
in US $

% Increase (Decrease) in
Constant Currency (2)

February 28,

February 28,

February 29,

February 29,

2021

2021

2020

2020

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$     29,252

$               2

$     29,254

$     28,629

$               3

$     28,632

2%

2%

1%

1%

             Cloud services and license support revenues

21,311

2

21,313

20,546

3

20,549

4%

4%

3%

3%

TOTAL OPERATING EXPENSES

$     18,580

$     (2,876)

$     15,704

$     19,041

$     (2,650)

$     16,391

(2%)

(4%)

(3%)

(5%)

                    Stock-based compensation (3)

1,395

(1,395)

-

1,204

(1,204)

-

16%

*

16%

*

                    Amortization of intangible assets (4)

1,037

(1,037)

-

1,221

(1,221)

-

(15%)

*

(15%)

*

                    Acquisition related and other

107

(107)

-

44

(44)

-

144%

*

145%

*

                    Restructuring

337

(337)

-

181

(181)

-

87%

*

82%

*

OPERATING INCOME

$     10,672

$       2,878

$     13,550

$       9,588

$       2,653

$     12,241

11%

11%

9%

9%

OPERATING MARGIN %

36%

46%

33%

43%

299 bp.

357 bp.

257 bp.

322 bp.

INCOME TAX EFFECTS (5)

$          871

$     (2,990)

$     (2,119)

$     (1,348)

$        (769)

$     (2,117)

*

0%

*

(2%)

NET INCOME

$       9,714

$        (112)

$       9,602

$       7,019

$       1,884

$       8,903

38%

8%

34%

6%

DILUTED EARNINGS PER SHARE

$         3.19

$         3.15

$         2.10

$         2.67

51%

18%

48%

16%

DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING

3,049

-

3,049

3,337

-

3,337

(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:

Nine Months Ended

Nine Months Ended

February 28, 2021

February 29, 2020

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

     Cloud services and license support

$             99

$           (99)

$              -

$             83

$           (83)

$              -

     Hardware

8

(8)

-

8

(8)

-

     Services

41

(41)

-

42

(42)

-

     Sales and marketing

233

(233)

-

192

(192)

-

     Research and development

897

(897)

-

781

(781)

-

     General and administrative

117

(117)

-

98

(98)

-

           Total stock-based compensation

$       1,395

$     (1,395)

$              -

$       1,204

$     (1,204)

$              -

Estimated future annual amortization expense related to intangible assets as of February 28, 2021 was as follows:

     Remainder of fiscal 2021

$          328

     Fiscal 2022

1,120

     Fiscal 2023

696

     Fiscal 2024

450

     Fiscal 2025

126

     Fiscal 2026

24

     Thereafter

10

           Total intangible assets, net

$       2,754

(5)

Income tax effects were calculated reflecting an effective GAAP tax rate of (9.8%) and 16.1% in the first nine months of fiscal 2021 and 2020, respectively, and an effective non-GAAP tax rate of 18.1% and 19.2% in the first nine months of fiscal 2021 and 2020, respectively. The difference in our GAAP and non-GAAP tax rates for the first nine months of fiscal 2021 was primarily due to a net tax benefit of $2.3 billion related to the partial realignment of our legal entity structure (refer to Appendix A for additional information), the net tax effects on stock-based compensation expense, and the net tax effects related to acquisition related items, including the net tax effects on amortization of intangible assets. The difference in our GAAP and non-GAAP tax rates in the first nine months of fiscal 2020 was primarily due to the net tax effects on stock-based compensation expense and the net tax effects on acquisition related items, including the tax effects on amortization of intangible assets.

*

Not meaningful

ORACLE  CORPORATION

Q3 FISCAL 2021 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

February 28,

May 31,

2020

ASSETS

Current Assets:

Cash and cash equivalents

$               22,321

$               37,239

Marketable securities

13,543

5,818

Trade receivables, net

4,637

5,551

Prepaid expenses and other current assets

3,243

3,532

Total Current Assets

43,744

52,140

Non-Current Assets:

   Property, plant and equipment, net

6,816

6,244

   Intangible assets, net

2,754

3,738

   Goodwill, net

43,954

43,769

   Deferred tax assets

13,725

3,252

   Other non-current assets

7,116

6,295

Total Non-Current Assets

74,365

63,298

TOTAL ASSETS

$             115,438

LIABILITIES AND EQUITY

Current Liabilities:

Notes payable, current

$                 5,758

$                 2,371

Accounts payable

812

637

Accrued compensation and related benefits

1,684

1,453

Deferred revenues

8,088

8,002

Other current liabilities

3,908

4,737

Total Current Liabilities

20,250

17,200

Non-Current Liabilities:

Notes payable and other borrowings, non-current

63,541

69,226

Income taxes payable

12,316

12,463

Deferred tax liabilities

7,892

41

Other non-current liabilities

4,473

3,791

Total Non-Current Liabilities

88,222

85,521

Equity

9,637

12,717

TOTAL LIABILITIES AND EQUITY

$             118,109

$             115,438

     ORACLE  CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

Nine Months Ended

February 28,

Cash Flows From Operating Activities:

Net income

$              9,714

$               7,019

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

Depreciation

1,127

1,025

Amortization of intangible assets

1,037

1,221

Deferred income taxes

(2,475)

(398)

Stock-based compensation

1,395

1,204

Other, net

227

167

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

Decrease in trade receivables, net

1,089

946

Decrease in prepaid expenses and other assets

609

718

Decrease in accounts payable and other liabilities

(247)

(1,035)

Decrease in income taxes payable

(1,181)

(789)

Decrease in deferred revenues

(250)

(553)

Net cash provided by operating activities

11,045

9,525

Cash Flows From Investing Activities:

Purchases of marketable securities and other investments

(26,775)

(399)

Proceeds from maturities of marketable securities and other investments

18,182

3,165

Proceeds from sales of marketable securities

853

12,575

Acquisitions, net of cash acquired