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Financial News Details

Oracle Reports GAAP EPS of $0.50; Non-GAAP EPS of $0.64; Without the Effect of U.S. Dollar Strengthening Both Would Have Been 4 Cents Higher

March 15, 2016

Cloud SaaS and PaaS Revenues Up 57% in U.S. Dollars and Up 61% in Constant Currency

REDWOOD SHORES, CA -- (Marketwired) -- 03/15/16 -- Oracle Corporation (NYSE: ORCL) today announced fiscal 2016 Q3 results. The strengthening of the U.S. dollar compared to foreign currencies had a significant impact on results in the quarter. Total Revenues were $9.0 billion, down 3% in U.S. dollars and up 1% in constant currency. Cloud plus On-Premise Software Revenues were $7.1 billion, down 1% in U.S. dollars and up 3% in constant currency. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $583 million, up 57% in U.S. dollars and up 61% in constant currency. Cloud infrastructure as a service (IaaS) revenues were $152 million, down 2% in U.S. dollars and up 2% in constant currency. Total Cloud Revenues were $735 million, up 40% in U.S. dollars and up 44% in constant currency. Total On-Premise Software Revenues were $6.3 billion, down 4% in U.S. dollars and unchanged in constant currency. Total Hardware Revenues were $1.1 billion, down 13% in U.S. dollars and down 8% in constant currency. Total Services Revenues were $793 million, down 7% in U.S. dollars and down 2% in constant currency.

Operating Income was $3.0 billion and Operating Margin was 34%. Non-GAAP Operating Income was $3.8 billion and non-GAAP Operating Margin was 42%. Net Income was $2.1 billion while non-GAAP Net Income was $2.7 billion. Earnings Per Share was $0.50, while non-GAAP Earnings Per Share was $0.64. Without the impact of the U.S. dollar strengthening compared to foreign currencies, Oracle's reported GAAP and non-GAAP Earnings Per Share would have been 4 cents higher.

Short-term deferred revenues were $6.9 billion, up 7% in U.S. dollars and up 11% in constant currency compared with a year ago. Operating cash flow on a trailing twelve-month basis was $14.1 billion.

"Our Cloud SaaS and PaaS revenue growth rate accelerated to 61% in constant currency in Q3," said Oracle CEO, Safra Catz. "This dramatic revenue increase drove our non-GAAP SaaS and PaaS gross margins up to 51% in Q3 as compared with 43% in Q2. Our cloud business is now in a hyper-growth phase. Our gross margins are climbing toward our target of 80%. These two factors will ignite substantial EPS and cash flow growth over Oracle's next few quarters."

"Our SaaS and PaaS gross deferred revenue grew 96% in Q3 -- twice as fast as Workday and three times faster than Salesforce.com reported in their most recent quarters," said Oracle CEO, Mark Hurd. "Q3 SaaS and PaaS bookings were up 77% in constant currency. We added 942 new SaaS customers in the quarter, including several customers that switched from Workday HCM to Oracle Fusion HCM. We had more than 250 customers go live on Fusion SaaS HCM and Fusion ERP in Q3 alone. We now have over 11,000 SaaS customers with nearly 2,000 Fusion ERP customers -- ten times more ERP customers than Workday claims to have."

"In absolute dollar terms, Oracle is already selling more enterprise SaaS and PaaS new cloud revenue than any other company in the world -- including Salesforce.com," said Larry Ellison, Oracle Chairman and CTO. "We are growing much faster than Salesforce.com. We also have many more SaaS products than Salesforce.com. In some of our most important SaaS markets, such as ERP, HCM, Supply Chain and Manufacturing, Salesforce.com does not participate at all. By successfully competing in all of these markets, Oracle has the ability to sustain its high growth over a long period of time. That should make it easy for us to pass Salesforce.com and become the largest SaaS and PaaS cloud company in the world."

The Board of Directors also declared a quarterly cash dividend of $0.15 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on April 14, 2016, with a payment date of April 28, 2016.

Oracle also announced that its Board of Directors authorized the repurchase of up to an additional $10 billion of common stock under its existing share repurchase program in future quarters.

Q3 Fiscal 2016 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (816) 287-5563, Passcode: 425392. To access the live webcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle's Q3 results and Fiscal 2016 financial tables are available on the Oracle Investor Relations website.

A replay of the conference call will also be available by dialing (855) 859-2056 or (404) 537-3406, Pass Code: 67000932.

About Oracle

Oracle offers a comprehensive and fully integrated stack of cloud applications and platform services. For more information about Oracle (NYSE: ORCL), visit www.oracle.com or contact Investor Relations at investor_us@oracle.com or (650) 506-4073.

Trademarks

Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.

"Safe Harbor" Statement: Statements in this press release relating to Oracle's future plans, expectations, beliefs, intentions and prospects, including statements regarding our expectations of future growth in our gross margins, EPS and cash flow; the timing of such growth; the growth of our cloud business generally; and the competitive landscape for enterprise cloud are all "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, geopolitical and market conditions, including the continued slow economic recovery in Europe, parts of the U.S. and other parts of the world, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for contracts. (3) Our cloud computing strategy, including our Cloud SaaS, PaaS, IaaS and Database as a Service offerings, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses, cloud software subscriptions or hardware products or purchase or renew support contracts. (5) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (6) If the security measures for our software, hardware, services or Oracle Cloud offerings are compromised or subject to a successful cyber-attack, or if such offerings contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and financial exposure. (7) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. A detailed discussion of these factors and other risks that affect our business is contained in our U.S. Securities and Exchange Commission (SEC) filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle's Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of March 15, 2016. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION
Q3 FISCAL 2016 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Three Months Ended
February 29, 2016 % of Revenues February 28, 2015 % of Revenues % Increase (Decrease) in US $ % Increase (Decrease) in Constant Currency (1)
REVENUES
Cloud software as a service and platform as a service $ 583 6 % $ 372 4 % 57 % 61 %
Cloud infrastructure as a service 152 2 % 155 2 % (2 %) 2 %
Total cloud revenues 735 8 % 527 6 % 40 % 44 %
New software licenses 1,680 18 % 1,982 21 % (15 %) (11 %)
Software license updates and product support 4,669 52 % 4,661 50 % 0 % 5 %
Total on-premise software revenues 6,349 70 % 6,643 71 % (4 %) 0 %
Total cloud and on-premise software revenues 7,084 78 % 7,170 77 % (1 %) 3 %
Hardware products 604 7 % 712 8 % (15 %) (10 %)
Hardware support 531 6 % 587 6 % (10 %) (5 %)
Total hardware revenues 1,135 13 % 1,299 14 % (13 %) (8 %)
Total services revenues 793 9 % 858 9 % (7 %) (2 %)
Total revenues 9,012 100 % 9,327 100 % (3 %) 1 %
OPERATING EXPENSES
Sales and marketing 1,903 21 % 1,839 20 % 3 % 8 %
Cloud software as a service and platform as a service 292 3 % 203 2 % 44 % 48 %
Cloud infrastructure as a service 88 1 % 88 1 % (1 %) 2 %
Software license updates and product support 293 3 % 300 3 % (2 %) 2 %
Hardware products 338 4 % 367 4 % (8 %) (1 %)
Hardware support 171 2 % 218 2 % (21 %) (17 %)
Services 657 7 % 724 8 % (9 %) (4 %)
Research and development 1,419 16 % 1,370 15 % 4 % 5 %
General and administrative 290 3 % 252 3 % 15 % 20 %
Amortization of intangible assets 408 5 % 527 6 % (23 %) (23 %)
Acquisition related and other 11 0 % 8 0 % 38 % 42 %
Restructuring 115 1 % 48 0 % 141 % 157 %
Total operating expenses 5,985 66 % 5,944 64 % 1 % 4 %
OPERATING INCOME 3,027 34 % 3,383 36 % (11 %) (5 %)
Interest expense (360 ) (4 %) (273 ) (2 %) 32 % 32 %
Non-operating income, net 65 0 % 40 0 % 62 % 86 %
INCOME BEFORE PROVISION FOR INCOME TAXES 2,732 30 % 3,150 34 % (13 %) (7 %)
Provision for income taxes 590 6 % 655 7 % (10 %) (3 %)
NET INCOME $ 2,142 24 % $ 2,495 27 % (14 %) (8 %)
EARNINGS PER SHARE:
Basic $ 0.51 $ 0.57
Diluted $ 0.50 $ 0.56
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 4,182 4,389
Diluted 4,256 4,494
(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, 2015, 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 29, 2016 compared with the corresponding prior year period decreased our revenues by 4 percentage points, operating expenses by 3 percentage points and operating income by 6 percentage points.
ORACLE CORPORATION
Q3 FISCAL 2016 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 29,
2016 GAAP
Adj. February 29,
2016 Non-GAAP
February 28,
2015 GAAP
Adj. February 28,
2015 Non-GAAP
GAAP Non-GAAP GAAP Non-GAAP
TOTAL REVENUES $ 9,012 $ 2 $ 9,014 $ 9,327 $ 7 $ 9,334 (3 %) (3 %) 1 % 1 %
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES $ 7,084 $ 2 $ 7,086 $ 7,170 $ 6 $ 7,176 (1 %) (1 %) 3 % 3 %
Cloud software as a service and platform as a service 583 2 585 372 3 375 57 % 56 % 61 % 60 %
Cloud infrastructure as a service 152 - 152 155 - 155 (2 %) (2 %) 2 % 2 %
New software licenses 1,680 - 1,680 1,982 - 1,982 (15 %) (15 %) (11 %) (11 %)
Software license updates and product support 4,669 - 4,669 4,661 3 4,664 0 % 0 % 5 % 5 %
TOTAL HARDWARE REVENUES $ 1,135 $ - $ 1,135 $ 1,299 $ 1 $ 1,300 (13 %) (13 %) (8 %) (8 %)
Hardware products 604 - 604 712 - 712 (15 %) (15 %) (10 %) (10 %)
Hardware support 531 - 531 587 1 588 (10 %) (10 %) (5 %) (5 %)
TOTAL OPERATING EXPENSES $ 5,985 $ (794 ) $ 5,191 $ 5,944 $ (816 ) $ 5,128 1 % 1 % 4 % 5 %
Cloud software as a service and platform as a service 292 (4 ) 288 203 (3 ) 200 44 % 43 % 48 % 47 %
Stock-based compensation (3) 256 (256 ) - 230 (230 ) - 11 % * 11 % *
Amortization of intangible assets (4) 408 (408 ) - 527 (527 ) - (23 %) * (23 %) *
Acquisition related and other 11 (11 ) - 8 (8 ) - 38 % * 42 % *
Restructuring 115 (115 ) - 48 (48 ) - 141 % * 157 % *
CLOUD SOFTWARE AS A SERVICE AND PLATFORM AS A SERVICE MARGIN % 50 % 51 % 45 % 47 % 452 bp. 423 bp. 445 bp. 413 bp.
OPERATING INCOME $ 3,027 $ 796 $ 3,823 $ 3,383 $ 823 $ 4,206 (11 %) (9 %) (5 %) (4 %)
OPERATING MARGIN % 34 % 42 % 36 % 45 % (269) bp. (265) bp. (206) bp. (237) bp.
INCOME TAX EFFECTS (5) $ 590 $ 207 $ 797 $ 655 $ 247 $ 902 (10 %) (12 %) (3 %) (6 %)
NET INCOME $ 2,142 $ 589 $ 2,731 $ 2,495 $ 576 $ 3,071 (14 %) (11 %) (8 %) (6 %)
DILUTED EARNINGS PER SHARE $ 0.50 $ 0.64 $ 0.56 $ 0.68 (9 %) (6 %) (2 %) 0 %
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,256 - 4,256 4,494 - 4,494 (5 %) (5 %) (5 %) (5 %)
(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, 2015, 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 29, 2016 February 28, 2015
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
Sales and marketing $ 57 $ (57 ) $ - $ 45 $ (45 ) $ -
Cloud infrastructure as a service 1 (1 ) - 1 (1 ) -
Software license updates and product support 6 (6 ) - 6 (6 ) -
Hardware products 1 (1 ) - 1 (1 ) -
Hardware support 1 (1 ) - 2 (2 ) -
Services 7 (7 ) - 8 (8 ) -
Research and development 154 (154 ) - 138 (138 ) -
General and administrative 29 (29 ) - 29 (29 ) -
Subtotal 256 (256 ) - 230 (230 ) -
Cloud software as a service and platform as a service 4 (4 ) - 3 (3 ) -
Acquisition related and other - - - 1 (1 ) -
Total stock-based compensation $ 260 $ (260 ) $ - $ 234 $ (234 ) $ -
(4) Estimated future annual amortization expense related to intangible assets as of February 29, 2016 was as follows:
Remainder of Fiscal 2016 $ 353
Fiscal 2017 1,016
Fiscal 2018 867
Fiscal 2019 760
Fiscal 2020 615
Fiscal 2021 470
Thereafter 1,168
Total intangible assets, net $ 5,249
(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.6% and 20.8% in the third quarter of fiscal 2016 and 2015, respectively, and an effective non-GAAP tax rate of 22.6% and 22.7% in the third quarter of fiscal 2016 and 2015, respectively. The differences between our GAAP and non-GAAP tax rates in the third quarter of fiscal 2016 and 2015 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
* Not meaningful
ORACLE CORPORATION
Q3 FISCAL 2016 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Nine Months Ended
February 29, 2016 % of Revenues February 28, 2015 % of Revenues % Increase (Decrease) in US $ % Increase (Decrease) in Constant Currency (1)
REVENUES
Cloud software as a service and platform as a service $ 1,517 6 % $ 1,069 4 % 42 % 46 %
Cloud infrastructure as a service 477 2 % 448 2 % 7 % 12 %
Total cloud revenues 1,994 8 % 1,517 6 % 31 % 36 %
New software licenses 4,509 17 % 5,397 19 % (16 %) (11 %)
Software license updates and product support 14,048 53 % 14,161 51 % (1 %) 6 %
Total on-premise software revenues 18,557 70 % 19,558 70 % (5 %) 1 %
Total cloud and on-premise software revenues 20,551 78 % 21,075 76 % (2 %) 4 %
Hardware products 1,746 7 % 2,007 7 % (13 %) (6 %)
Hardware support 1,639 6 % 1,791 7 % (8 %) (2 %)
Total hardware revenues 3,385 13 % 3,798 14 % (11 %) (4 %)
Total services revenues 2,517 9 % 2,647 10 % (5 %) 2 %
Total revenues 26,453 100 % 27,520 100 % (4 %) 2 %
OPERATING EXPENSES
Sales and marketing 5,578 21 % 5,443 20 % 2 % 9 %
Cloud software as a service and platform as a service 847 3 % 517 2 % 64 % 70 %
Cloud infrastructure as a service 268 1 % 254 1 % 5 % 10 %
Software license updates and product support 877 3 % 867 3 % 1 % 8 %
Hardware products 967 4 % 1,034 4 % (6 %) 1 %
Hardware support 526 2 % 628 2 % (16 %) (11 %)
Services 2,058 8 % 2,179 8 % (6 %) 2 %
Research and development 4,253 16 % 4,088 15 % 4 % 6 %
General and administrative 832 3 % 799 3 % 4 % 9 %
Amortization of intangible assets 1,283 5 % 1,642 6 % (22 %) (22 %)
Acquisition related and other 35 0 % 12 0 % 201 % 226 %
Restructuring 293 1 % 168 0 % 74 % 100 %
Total operating expenses 17,817 67 % 17,631 64 % 1 % 6 %
OPERATING INCOME 8,636 33 % 9,889 36 % (13 %) (4 %)
Interest expense (1,105 ) (4 %) (817 ) (3 %) 35 % 35 %
Non-operating income, net 179 0 % 65 0 % 174 % 228 %
INCOME BEFORE PROVISION FOR INCOME TAXES 7,710 29 % 9,137 33 % (16 %) (6 %)
Provision for income taxes 1,623 6 % 1,956 7 % (17 %) (8 %)
NET INCOME $ 6,087 23 % $ 7,181 26 % (15 %) (6 %)
EARNINGS PER SHARE:
Basic $ 1.43 $ 1.63
Diluted $ 1.41 $ 1.59
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 4,246 4,419
Diluted 4,328 4,516
(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, 2015, 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 29, 2016 compared with the corresponding prior year period decreased our revenues by 6 percentage points, operating expenses by 5 percentage points and operating income by 9 percentage points.
ORACLE CORPORATION
Q3 FISCAL 2016 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 29,
2016 GAAP
Adj. February 29,
2016 Non-GAAP
February 28,
2015 GAAP
Adj. February 28,
2015 Non-GAAP
GAAP Non-GAAP GAAP Non-GAAP
TOTAL REVENUES $ 26,453 $ 8 $ 26,461 $ 27,520 $ 21 $ 27,541 (4 %) (4 %) 2 % 2 %
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES $ 20,551 $ 7 $ 20,558 $ 21,075 $ 18 $ 21,093 (2 %) (3 %) 4 % 4 %
Cloud software as a service and platform as a service 1,517 6 1,523 1,069 9 1,078 42 % 41 % 46 % 46 %
Cloud infrastructure as a service 477 - 477 448 - 448 7 % 7 % 12 % 12 %
New software licenses 4,509 - 4,509 5,397 - 5,397 (16 %) (16 %) (11 %) (11 %)
Software license updates and product support 14,048 1 14,049 14,161 9 14,170 (1 %) (1 %) 6 % 6 %
TOTAL HARDWARE REVENUES $ 3,385 $ 1 $ 3,386 $ 3,798 $ 3 $ 3,801 (11 %) (11 %) (4 %) (4 %)
Hardware products 1,746 - 1,746 2,007 - 2,007 (13 %) (13 %) (6 %) (6 %)
Hardware support 1,639 1 1,640 1,791 3 1,794 (8 %) (9 %) (2 %) (2 %)
TOTAL OPERATING EXPENSES $ 17,817 $ (2,376 ) $ 15,441 $ 17,631 $ (2,506 ) $ 15,125 1 % 2 % 6 % 8 %
Stock-based compensation (3) 765 (765 ) - 684 (684 ) - 12 % * 12 % *
Amortization of intangible assets (4) 1,283 (1,283 ) - 1,642 (1,642 ) - (22 %) * (22 %) *
Acquisition related and other 35 (35 ) - 12 (12 ) - 201 % * 226 % *
Restructuring 293 (293 ) - 168 (168 ) - 74 % * 100 % *
OPERATING INCOME $ 8,636 $ 2,384 $ 11,020 $ 9,889 $ 2,527 $ 12,416 (13 %) (11 %) (4 %) (4 %)
OPERATING MARGIN % 33 % 42 % 36 % 45 % (329) bp. (344) bp. (228) bp. (293) bp.
INCOME TAX EFFECTS (5) $ 1,623 $ 658 $ 2,281 $ 1,956 $ 715 $ 2,671 (17 %) (15 %) (8 %) (7 %)
NET INCOME $ 6,087 $ 1,726 $ 7,813 $ 7,181 $ 1,812 $ 8,993 (15 %) (13 %) (6 %) (6 %)
DILUTED EARNINGS PER SHARE $ 1.41 $ 1.81 $ 1.59 $ 1.99 (12 %) (9 %) (2 %) (2 %)
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,328 - 4,328 4,516 - 4,516 (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, 2015, 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 29, 2016 February 28, 2015
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
Sales and marketing $ 163 $ (163 ) $ - $ 131 $ (131 ) $ -
Cloud software as a service and platform as a service 13 (13 ) - 8 (8 ) -
Cloud infrastructure as a service 3 (3 ) - 3 (3 ) -
Software license updates and product support 18 (18 ) - 15 (15 ) -
Hardware products 4 (4 ) - 4 (4 ) -
Hardware support 4 (4 ) - 4 (4 ) -
Services 22 (22 ) - 23 (23 ) -
Research and development 452 (452 ) - 380 (380 ) -
General and administrative 86 (86 ) - 116 (116 ) -
Subtotal 765 (765 ) - 684 (684 ) -
Acquisition related and other 3 (3 ) - 5 (5 ) -
Total stock-based compensation $ 768 $ (768 ) $ - $ 689 $ (689 ) $ -
(4) Estimated future annual amortization expense related to intangible assets as of February 29, 2016 was as follows:
Remainder of Fiscal 2016 $ 353
Fiscal 2017 1,016
Fiscal 2018 867
Fiscal 2019 760
Fiscal 2020 615
Fiscal 2021 470
Thereafter 1,168
Total intangible assets, net $ 5,249
(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.0% and 21.4% in the first nine months of fiscal 2016 and 2015, respectively, and an effective non-GAAP tax rate of 22.6% and 22.9% in the first nine months of fiscal 2016 and 2015, respectively. The differences between our GAAP and non-GAAP tax rates in the first nine months of fiscal 2016 and 2015 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
* Not meaningful
ORACLE CORPORATION
Q3 FISCAL 2016 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
February 29, May 31,
2016 2015
ASSETS
Current Assets:
Cash and cash equivalents $ 15,583 $ 21,716
Marketable securities 35,184 32,652
Trade receivables, net 3,844 5,618
Inventories 212 314
Prepaid expenses and other current assets 2,246 2,220
Total Current Assets 57,069 62,520
Non-Current Assets:
Property, plant and equipment, net 4,011 3,686
Intangible assets, net 5,249 6,406
Goodwill, net 34,284 34,087
Deferred tax assets 1,382 1,458
Other assets 2,899 2,746
Total Non-Current Assets 47,825 48,383
TOTAL ASSETS $ 104,894 $ 110,903
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable, current $ - $ 1,999
Accounts payable 410 806
Accrued compensation and related benefits 1,536 1,839
Deferred revenues 6,912 7,245
Other current liabilities 2,967 3,317
Total Current Liabilities 11,825 15,206
Non-Current Liabilities:
Notes payable, non-current 40,106 39,959
Income taxes payable 4,418 4,386
Other non-current liabilities 2,209 2,254
Total Non-Current Liabilities 46,733 46,599
Equity 46,336 49,098
TOTAL LIABILITIES AND EQUITY $ 104,894 $ 110,903
ORACLE CORPORATION
Q3 FISCAL 2016 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Nine Months Ended
February 29,
2016
February 28,
2015
Cash Flows From Operating Activities:
Net income $ 6,087 $ 7,181
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 643 502
Amortization of intangible assets 1,283 1,642
Deferred income taxes (143 ) (486 )
Stock-based compensation 768 689
Tax benefits on the exercise of stock options and vesting of restricted stock-based awards 188 284
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards (61 ) (167 )
Other, net 116 126
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net 1,746 1,867
Decrease (increase) in inventories 87 (78 )
Decrease in prepaid expenses and other assets 95 362
Decrease in accounts payable and other liabilities (890 ) (1,204 )
Decrease in income taxes payable (112 ) (369 )
Increase (decrease) in deferred revenues 24 (296 )
Net cash provided by operating activities 9,831 10,053
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments (21,549 ) (23,339 )
Proceeds from maturities and sales of marketable securities and other investments 18,845 15,042
Acquisitions, net of cash acquired (313 ) (6,232 )
Capital expenditures (1,009 ) (794 )
Net cash used for investing activities (4,026 ) (15,323 )
Cash Flows From Financing Activities:
Payments for repurchases of common stock (8,467 ) (6,079 )
Proceeds from issuances of common stock 802 1,456
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards (82 ) (11 )
Payments of dividends to stockholders (1,918 ) (1,600 )
Proceeds from borrowings, net of issuance costs - 9,945
Repayments of borrowings (2,000 ) (1,500 )
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards 61 167
Distributions to noncontrolling interests (85 ) (196 )
Net cash (used for) provided by financing activities (11,689 ) 2,182
Effect of exchange rate changes on cash and cash equivalents (249 ) (980 )
Net decrease in cash and cash equivalents (6,133 ) (4,068 )
Cash and cash equivalents at beginning of period 21,716 17,769
Cash and cash equivalents at end of period $ 15,583 $ 13,701
ORACLE CORPORATION
Q3 FISCAL 2016 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($ in millions)
Fiscal 2015 Fiscal 2016
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
GAAP Operating Cash Flow $ 15,357 $ 15,273 $ 14,509 $ 14,336 $ 13,464 $ 12,903 $ 14,114
Capital Expenditures (628 ) (727 ) (948 ) (1,391 ) (1,636 ) (1,606 ) (1,606 )
Free Cash Flow $ 14,729 $ 14,546 $ 13,561 $ 12,945 $ 11,828 $ 11,297 $ 12,508
% Growth over prior year 4 % 0 % (6 )% (10 )% (20 )% (22 )% (8 )%
GAAP Net Income $ 10,948 $ 10,896 $ 10,827 $ 9,938 $ 9,501 $ 9,198 $ 8,844
Free Cash Flow as a % of Net Income 135 % 133 % 125 % 130 % 124 % 123 % 141 %
(1) 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
Q3 FISCAL 2016 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
($ in millions)
Fiscal 2015 Fiscal 2016
Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
REVENUES
Cloud software as a service and platform as a service $ 337 $ 361 $ 372 $ 416 $ 1,485 $ 451 $ 484 $ 583 $ 1,517
Cloud infrastructure as a service 138 155 155 160 608 160 165 152 477
Total cloud revenues 475 516 527 576 2,093 611 649 735 1,994
New software licenses 1,370 2,045 1,982 3,138 8,535 1,151 1,677 1,680 4,509
Software license updates and product support 4,731 4,768 4,661 4,686 18,847 4,696 4,683 4,669 14,048
Total on-premise software revenues 6,101 6,813 6,643 7,824 27,382 5,847 6,360 6,349 18,557
Total cloud and on-premise software revenues 6,576 7,329 7,170 8,400 29,475 6,458 7,009 7,084 20,551
Hardware products 578 717 712 818 2,825 570 573 604 1,746
Hardware support 587 617 587 589 2,380 558 550 531 1,639
Total hardware revenues 1,165 1,334 1,299 1,407 5,205 1,128 1,123 1,135 3,385
Total services revenues 855 935 858 899 3,546 862 861 793 2,517
Total revenues $ 8,596 $ 9,598 $ 9,327 $ 10,706 $ 38,226 $ 8,448 $ 8,993 $ 9,012 $ 26,453
AS REPORTED REVENUE GROWTH RATES
Cloud software as a service and platform as a service 32 % 39 % 30 % 29 % 32 % 34 % 34 % 57 % 42 %
Cloud infrastructure as a service 26 % 60 % 28 % 25 % 33 % 16 % 7 % (2 %) 7 %
Total cloud revenues 31 % 45 % 29 % 28 % 33 % 29 % 26 % 40 % 31 %
New software licenses (2 %) (4 %) (7 %) (17 %) (9 %) (16 %) (18 %) (15 %) (16 %)
Software license updates and product support 7 % 6 % 2 % 0 % 4 % (1 %) (2 %) 0 % (1 %)
Total on-premise software revenues 5 % 3 % (1 %) (8 %) (1 %) (4 %) (7 %) (4 %) (5 %)
Total cloud and on-premise software revenues 6 % 5 % 1 % (6 %) 1 % (2 %) (4 %) (1 %) (2 %)
Hardware products (14 %) 0 % (2 %) (6 %) (5 %) (1 %) (20 %) (15 %) (13 %)
Hardware support (1 %) 1 % (2 %) (1 %) (1 %) (5 %) (11 %) (10 %) (8 %)
Total hardware revenues (8 %) 1 % (2 %) (4 %) (3 %) (3 %) (16 %) (13 %) (11 %)
Total services revenues (7 %) (3 %) (3 %) (4 %) (4 %) 1 % (8 %) (7 %) (5 %)
Total revenues 3 % 3 % 0 % (5 %) 0 % (2 %) (6 %) (3 %) (4 %)
CONSTANT CURRENCY GROWTH RATES (2)
Cloud software as a service and platform as a service 32 % 41 % 34 % 35 % 35 % 38 % 39 % 61 % 46 %
Cloud infrastructure as a service 25 % 62 % 32 % 31 % 36 % 23 % 11 % 2 % 12 %
Total cloud revenues 30 % 47 % 33 % 34 % 36 % 34 % 31 % 44 % 36 %
New software licenses (2 %) 0 % 0 % (10 %) (4 %) (9 %) (12 %) (11 %) (11 %)
Software license updates and product support 6 % 9 % 8 % 8 % 8 % 8 % 5 % 5 % 6 %
Total on-premise software revenues 4 % 6 % 6 % 0 % 4 % 4 % 0 % 0 % 1 %
Total cloud and on-premise software revenues 6 % 8 % 7 % 2 % 5 % 6 % 2 % 3 % 4 %
Hardware products (14 %) 4 % 6 % 3 % 0 % 9 % (14 %) (10 %) (6 %)
Hardware support (2 %) 5 % 4 % 7 % 4 % 4 % (5 %) (5 %) (2 %)
Total hardware revenues (8 %) 4 % 5 % 5 % 2 % 6 % (10 %) (8 %) (4 %)
Total services revenues (8 %) 1 % 3 % 5 % 0 % 10 % 0 % (2 %) 2 %
Total revenues 2 % 7 % 6 % 3 % 4 % 7 % 0 % 1 % 2 %
GEOGRAPHIC REVENUES
REVENUES
Americas $ 4,620 $ 5,221 $ 5,134 $ 6,133 $ 21,107 $ 4,716 $ 4,960 $ 4,942 $ 14,620
Europe, Middle East & Africa 2,589 2,911 2,813 3,067 11,380 2,456 2,645 2,661 7,761
Asia Pacific 1,387 1,466 1,380 1,506 5,739 1,276 1,388 1,409 4,072
Total revenues $ 8,596 $ 9,598 $ 9,327 $ 10,706 $ 38,226 $ 8,448 $ 8,993 $ 9,012 $ 26,453
HEADCOUNT
GEOGRAPHIC AREA
Americas 54,073 57,243 58,117 58,415 59,901 59,999 60,437
Europe, Middle East & Africa 23,349 26,997 26,989 26,988 27,030 27,541 27,275
Asia Pacific 45,496 46,312 46,456 46,962 48,139 48,620 48,694
Total company 122,918 130,552 131,562 132,365 135,070 136,160 136,406
(1) The sum of the quarterly information presented may vary from the year-to-date information presented due to rounding.
(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, 2015 and 2014 for the fiscal 2016 and fiscal 2015 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
ORACLE CORPORATION
Q3 FISCAL 2016 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)
($ in millions)
Fiscal 2015 Fiscal 2016
Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
AMERICAS
Total cloud and on-premise software revenues $ 3,614 $ 4,044 $ 4,021 $ 4,926 $ 16,604 $ 3,684 $ 3,927 $ 3,964 $ 11,576
Total hardware revenues $ 583 $ 716 $ 686 $ 751 $ 2,737 $ 589 $ 595 $ 571 $ 1,755
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues 5 % 6 % 5 % 6 % 6 % 2 % (3 %) (1 %) (1 %)
Total hardware revenues (9 %) 3 % 5 % 1 % 0 % 1 % (17 %) (17 %) (12 %)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues 6 % 8 % 7 % 9 % 7 % 6 % 0 % 1 % 2 %
Total hardware revenues (8 %) 5 % 7 % 4 % 2 % 6 % (14 %) (13 %) (8 %)
EUROPE / MIDDLE EAST / AFRICA
Total cloud and on-premise software revenues $ 1,992 $ 2,234 $ 2,169 $ 2,369 $ 8,764 $ 1,873 $ 2,066 $ 2,069 $ 6,008
Total hardware revenues $ 338 $ 380 $ 379 $ 423 $ 1,519 $ 330 $ 316 $ 349 $ 995
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues 10 % 4 % (3 %) (22 %) (5 %) (6 %) (8 %) (5 %) (6 %)
Total hardware revenues (6 %) 2 % (6 %) (4 %) (3 %) (2 %) (17 %) (8 %) (9 %)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues 7 % 9 % 9 % (8 %) 3 % 7 % 3 % 2 % 4 %
Total hardware revenues (7 %) 8 % 8 % 15 % 6 % 14 % (6 %) (1 %) 2 %
ASIA PACIFIC
Total cloud and on-premise software revenues $ 970 $ 1,051 $ 980 $ 1,105 $ 4,107 $ 901 $ 1,016 $ 1,051 $ 2,967
Total hardware revenues $ 244 $ 238 $ 234 $ 233 $ 949 $ 209 $ 212 $ 215 $ 635
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues 3 % 2 % (3 %) (10 %) (3 %) (7 %) (3 %) 7 % (1 %)
Total hardware revenues (8 %) (7 %) (12 %) (16 %) (11 %) (14 %) (11 %) (8 %) (11 %)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues 2 % 7 % 4 % (1 %) 3 % 7 % 6 % 13 % 9 %
Total hardware revenues (8 %) (3 %) (6 %) (8 %) (6 %) (3 %) (3 %) (3 %) (3 %)
TOTAL COMPANY
Total cloud and on-premise software revenues $ 6,576 $ 7,329 $ 7,170 $ 8,400 $ 29,475 $ 6,458 $ 7,009 $ 7,084 $ 20,551
Total hardware revenues $ 1,165 $ 1,334 $ 1,299 $ 1,407 $ 5,205 $ 1,128 $ 1,123 $ 1,135 $ 3,385