Oracle Announces Fiscal 2023 First Quarter Financial Results

ORACLE  CORPORATION

Q1 FISCAL 2023 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)

% Increase

% Increase

(Decrease)

% of 

% of 

(Decrease)

in Constant

2022

Revenues

2021

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$              8,417

73 %

$              7,371

76 %

14 %

20 %

Cloud license and on-premise license

904

8 %

813

8 %

11 %

19 %

Hardware

763

7 %

763

8 %

0 %

5 %

Services

1,361

12 %

781

8 %

74 %

84 %

      Total revenues

11,445

100 %

9,728

100 %

18 %

23 %

OPERATING EXPENSES

Cloud services and license support 

1,735

15 %

1,214

13 %

43 %

48 %

Hardware

249

2 %

245

2 %

2 %

6 %

Services

1,053

9 %

644

7 %

63 %

72 %

Sales and marketing

2,177

19 %

1,854

19 %

17 %

23 %

Research and development 

2,093

19 %

1,684

18 %

24 %

27 %

General and administrative

411

4 %

298

3 %

38 %

42 %

Amortization of intangible assets

919

8 %

303

3 %

203 %

204 %

Acquisition related and other

41

0 %

21

0 %

106 %

110 %

Restructuring

144

1 %

38

0 %

276 %

310 %

      Total operating expenses 

8,822

77 %

6,301

65 %

40 %

45 %

OPERATING INCOME

2,623

23 %

3,427

35 %

(23 %)

(17 %)

Interest expense

(787)

(7 %)

(705)

(7 %)

12 %

12 %

Non-operating expenses, net

(180)

(1 %)

(41)

(1 %)

340 %

346 %

INCOME BEFORE INCOME TAXES

1,656

15 %

2,681

27 %

(38 %)

(30 %)

Provision for income taxes

108

1 %

224

2 %

(52 %)

(46 %)

NET INCOME

$              1,548

14 %

$              2,457

25 %

(37 %)

(29 %)

EARNINGS PER SHARE:

Basic

$                0.58

$                0.89

Diluted

$                0.56

$                0.86

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

2,685

2,769

Diluted

2,747

2,861

(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 August 31, 2022 compared with the corresponding prior year period decreased our total revenues
and total operating expenses, each by 5 percentage points, and operating income by 6 percentage points.

ORACLE  CORPORATION

Q1 FISCAL 2023 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) 

2022

2022

2021

2021

Non-GAAP

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$    11,445

$             -

$    11,445

$       9,728

$             -

$       9,728

18 %

18 %

23 %

23 %

TOTAL OPERATING EXPENSES

$       8,822

$     (1,854)

$       6,968

$       6,301

$        (907)

$       5,394

40 %

29 %

45 %

34 %

     Stock-based compensation (3)

750

(750)

-

545

(545)

-

38 %

*

38 %

*

     Amortization of intangible assets (4)

919

(919)

-

303

(303)

-

203 %

*

204 %

*

     Acquisition related and other

41

(41)

-

21

(21)

-

106 %

*

110 %

*

     Restructuring

144

(144)

-

38

(38)

-

276 %

*

310 %

*

OPERATING INCOME

$       2,623

$       1,854

$       4,477

$       3,427

$          907

$       4,334

(23 %)

3 %

(17 %)

10 %

OPERATING MARGIN %

23 %

39 %

35 %

45 %

(1,231) bp.

(544) bp.

(1,123) bp.

(484) bp.

INCOME TAX EFFECTS (5)

$          108

$          574

$          682

$          224

$          420

$          644

(52 %)

6 %

(46 %)

14 %

NET INCOME

$       1,548

$       1,280

$       2,828

$       2,457

$          487

$       2,944

(37 %)

(4 %)

(29 %)

4 %

DILUTED EARNINGS PER SHARE

$         0.56

$         1.03

$         0.86

$         1.03

(34 %)

0 %

(26 %)

8 %

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

2,747

-

2,747

2,861

-

2,861

(4 %)

(4 %)

(4 %)

(4 %)

(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

August 31,
 2022

August 31,
 2021

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

     Cloud services and license support

$            91

$          (91)

$             -

$            40

$          (40)

$             -

     Hardware

4

(4)

-

3

(3)

-

     Services

25

(25)

-

14

(14)

-

     Sales and marketing

124

(124)

-

95

(95)

-

     Research and development

422

(422)

-

344

(344)

-

     General and administrative

84

(84)

-

49

(49)

-

           Total stock-based compensation

$          750

$        (750)

$             -

$          545

$        (545)

$             -

(4)

Estimated future annual amortization expense related to intangible assets as of August 31, 2022 was as follows:

     Remainder of fiscal 2023

$       2,753

     Fiscal 2024

3,086

     Fiscal 2025

2,105

     Fiscal 2026

1,615

     Fiscal 2027

664

     Fiscal 2028

635

     Thereafter

1,641

           Total intangible assets, net

$    12,499

(5)

Income tax effects were calculated reflecting an effective GAAP tax rate of 6.5% and 8.4% in the first quarter of fiscal 2023 and 2022, respectively, and an effective non-GAAP tax rate of 19.4% and 18.0% in
the first quarter of fiscal 2023 and 2022, respectively. The difference in our GAAP and non-GAAP tax rates in each of the first 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

Q1 FISCAL 2023 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

August 31,

2022

2022

ASSETS

Current Assets:

Cash and cash equivalents

$               10,448

$               21,383

Marketable securities

772

519

Trade receivables, net

5,937

5,953

Prepaid expenses and other current assets

3,847

3,778

Total Current Assets

21,004

31,633

Non-Current Assets:

   Property, plant and equipment, net

12,280

9,716

   Intangible assets, net

12,499

1,440

   Goodwill, net

61,629

43,811

   Deferred tax assets

12,065

12,782

   Other non-current assets

10,832

9,915

Total Non-Current Assets

109,305

77,664

TOTAL ASSETS

$             130,309

$             109,297

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Notes payable and other borrowings, current 

$               16,097

$                 3,749

Accounts payable

1,461

1,317

Accrued compensation and related benefits

1,958

1,944

Deferred revenues

10,473

8,357

Other current liabilities

4,830

4,144

Total Current Liabilities

34,819

19,511

Non-Current Liabilities:

Notes payable and other borrowings, non-current

75,480

72,110

Income taxes payable

12,128

12,210

Deferred tax liabilities

7,693

6,031

Other non-current liabilities

5,638

5,203

Total Non-Current Liabilities

100,939

95,554

Stockholders' Deficit

(5,449)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$             130,309

$             109,297

     ORACLE  CORPORATION 

Q1 FISCAL 2023 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

2022

2021

Cash Flows From Operating Activities:

Net income 

$         1,548

$         2,457

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

Depreciation

547

454

Amortization of intangible assets

919

303

Deferred income taxes

(344)

(15)

Stock-based compensation

750

545

Other, net

156

(27)

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

Decrease in trade receivables, net

761

852

Decrease in prepaid expenses and other assets

44

270

Decrease in accounts payable and other liabilities

(166)

(713)

Increase (decrease) in income taxes payable

145

(221)

Increase in deferred revenues

2,034

1,486

Net cash provided by operating activities

6,394

5,391

Cash Flows From Investing Activities:

Purchases of marketable securities and other investments

(57)

(7,671)

Proceeds from sales and maturities of marketable securities and other investments

138

8,002

Acquisitions, net of cash acquired

(27,798)

(50)

Capital expenditures

(1,719)

(1,062)

Net cash used for investing activities

(29,436)

(781)

Cash Flows From Financing Activities:

Payments for repurchases of common stock

(552)

(7,995)

Proceeds from issuances of common stock

515

148

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

(829)

(820)

Payments of dividends to stockholders

(860)

(887)

Proceeds from borrowings, net of issuance costs

20,046

-

Repayments of borrowings

(5,883)

(1,500)

Other, net

(127)

(414)

Net cash provided by (used for) financing activities

12,310

(11,468)

Effect of exchange rate changes on cash and cash equivalents

(203)

(181)

Net decrease in cash and cash equivalents

(10,935)

(7,039)

Cash and cash equivalents at beginning of period

21,383

30,098

Cash and cash equivalents at end of period

$       10,448

$       23,059

 ORACLE  CORPORATION 

 Q1 FISCAL 2023 FINANCIAL RESULTS 

 FREE CASH FLOW - TRAILING 4-QUARTERS (1) 

 ($ in millions) 

 Fiscal 2022 

 Fiscal 2023 

 Q2 

 Q3 

 Q4 

 Q1 

 Q2 

 Q3 

 Q4 

GAAP Operating Cash Flow

$             15,325

$             10,255

$             10,396

$               9,539

$             10,542

Capital Expenditures

(3,118)

(3,805)

(5,168)

Free Cash Flow

$             12,564

$               7,137

$               6,591

$               5,028

$               5,374

% Growth over prior year

9 %

(41 %)

(49 %)

(63 %)

(57 %)

GAAP Net Income

$             13,952

$             10,262

$               7,560

$               6,717

$               5,808

Free Cash Flow as a % of Net Income

90 %

70 %

87 %

75 %

93 %

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.

 ORACLE  CORPORATION 

 Q1 FISCAL 2023 FINANCIAL RESULTS 

 SUPPLEMENTAL ANALYSIS OF GAAP REVENUES (1) 

 ($ in millions) 

 Fiscal 2022 

 Fiscal 2023 

 Q1 

 Q2 

 Q3 

 Q4 

 TOTAL 

 Q1 

 Q2 

 Q3 

 Q4 

 TOTAL 

REVENUES BY OFFERINGS

 Cloud services 

$      2,461

$      2,667

$      2,791

$      2,890

$      10,809

$      3,579

$        3,579

 License support 

4,910

4,887

4,846

4,722

19,365

4,838

4,838

 Cloud services and license support 

7,371

7,554

7,637

7,612

30,174

8,417

8,417

 Cloud license and on-premise license 

813

1,237

1,289

2,539

5,878

904

904

 Hardware 

763

767

798

856

3,183

763

763

 Services  

781

802

789

833

3,205

1,361

1,361

               Total revenues 

$      9,728

$    10,360

$    10,513

$    11,840

$      42,440

$    11,445

$      11,445

AS REPORTED REVENUE GROWTH RATES 

Cloud services

19 %

22 %

24 %

19 %

21 %

45 %

45 %

License support

1 %

(1 %)

(3 %)

(5 %)

(2 %)

(1 %)

(1 %)

 Cloud services and license support 

6 %

6 %

5 %

3 %

5 %

14 %

14 %

 Cloud license and on-premise license 

(8 %)

13 %

1 %

18 %

9 %

11 %

11 %

 Hardware 

(6 %)

(9 %)

(3 %)

(3 %)

(5 %)

0 %

0 %

 Services  

8 %

7 %

7 %

3 %

6 %

74 %

74 %

     Total revenues 

4 %

6 %

4 %

5 %

5 %

18 %

18 %

CONSTANT CURRENCY REVENUE GROWTH RATES (2)

Cloud services

18 %

22 %

26 %

22 %

22 %

50 %

50 %

License support

(1 %)

(1 %)

0 %

(1 %)

(1 %)

4 %

4 %

 Cloud services and license support  

5 %

6 %

8 %

7 %

6 %

20 %

20 %

 Cloud license and on-premise license 

(9 %)

16 %

4 %

25 %

12 %

19 %

19 %

 Hardware  

(7 %)

(8 %)

1 %

2 %

(3 %)

5 %

5 %

 Services  

7 %

7 %

11 %

7 %

8 %

84 %

84 %

     Total revenues 

2 %

6 %

7 %

10 %

7 %

23 %

23 %

CLOUD SERVICES AND LICENSE SUPPORT REVENUES

BY ECOSYSTEM

 Applications cloud services and license support 

$      3,041

$      3,149

$      3,187

$      3,235

$      12,612

$      4,016

$        4,016

 Infrastructure cloud services and license support 

4,330

4,405

4,450

4,377

17,562

4,401

4,401

     Total cloud services and license support revenues 

$      7,371

$      7,554

$      7,637

$      7,612

$      30,174

$      8,417

$        8,417

AS REPORTED REVENUE GROWTH RATES 

 Applications cloud services and license support 

8 %

9 %

8 %

6 %

8 %

32 %

32 %

 Infrastructure cloud services and license support 

5 %

5 %

3 %

1 %

3 %

2 %

2 %

     Total cloud services and license support revenues 

6 %

6 %

5 %

3 %

5 %

14 %

14 %

CONSTANT CURRENCY REVENUE GROWTH RATES (2)

 Applications cloud services and license support 

7 %

8 %

10 %

9 %

8 %

37 %

37 %

 Infrastructure cloud services and license support 

3 %

5 %

7 %

5 %

5 %

7 %

7 %

      Total cloud services and license support revenues 

5 %

6 %

8 %

7 %

6 %

20 %

20 %

GEOGRAPHIC REVENUES

 Americas 

$      5,321

$      5,736

$      5,849

$      6,774

$      23,679

$      7,192

$        7,192

 Europe/Middle East/Africa 

2,784

2,953

3,014

3,260

12,011

2,691

2,691

 Asia Pacific 

1,623

1,671

1,650

1,806

6,750

1,562

1,562

      Total revenues 

$      9,728

$    10,360

$    10,513

$    11,840

$      42,440

$    11,445

$      11,445

The sum of the quarterly information presented may vary from the year-to-date information presented due to rounding.

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 and 2021 for the fiscal 2023 and fiscal 2022 constant currency growth rate
calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.