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Financial News Details

Q4 FY16 SaaS and PaaS Revenues Were Up 66%, and Up 68% in Constant Currency

June 16, 2016

Q1 FY17 SaaS and PaaS Revenues Expected to Be Up 75% to 80%

REDWOOD SHORES, CA -- (Marketwired) -- 06/16/16 -- Oracle Corporation (NYSE: ORCL) today announced fiscal 2016 Q4 results. Total Q4 Revenues were $10.6 billion, down 1% in U.S. dollars and flat in constant currency. Cloud plus On-Premise Software Revenues were $8.4 billion, flat in U.S. dollars and up 2% in constant currency. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $690 million, up 66% in U.S. dollars and up 68% in constant currency. Total Cloud revenues, including infrastructure as a service (IaaS), were $859 million, up 49% in U.S. dollars and up 51% in constant currency. Operating Income was $4.0 billion, and Operating Margin was 37%. Non-GAAP Operating Income was $4.8 billion, and the non-GAAP Operating Margin was 45%. Net Income was $2.8 billion while non-GAAP Net Income was $3.4 billion. Earnings Per Share was $0.66, while non-GAAP Earnings Per Share was $0.81. Without the impact of the U.S. dollar strengthening compared to foreign currencies, Oracle's reported GAAP Earnings Per Share would have been 2 cents higher and non-GAAP Earnings Per Share would have been 1 cent higher.

Short-term deferred revenues were $7.7 billion, up 6% in U.S. dollars and up 7% in constant currency compared with a year ago. Operating cash flow on a trailing twelve-month basis was $13.6 billion.

For fiscal 2016, Total Revenues were $37.0 billion, down 3% in U.S. dollars and up 2% in constant currency. Cloud plus On-Premise Software Revenues were $29.0 billion, down 2% in U.S. dollars and up 3% in constant currency. Cloud SaaS and PaaS revenues were $2.2 billion, up 49% in U.S. dollars and up 52% in constant currency. Total Cloud revenues, including IaaS, were $2.9 billion, up 36% in U.S. dollars and up 40% in constant currency. Operating Income was $12.6 billion, and Operating Margin was 34%. Non-GAAP Operating Income was $15.8 billion and non-GAAP Operating Margin was 43%. Net Income was $8.9 billion while non-GAAP Net Income was $11.2 billion. Earnings Per Share was $2.07, while Non-GAAP Earnings Per Share was $2.61. 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 17 cents higher.

"Fourth quarter SaaS and PaaS revenue growth accelerated to 68% in constant currency, significantly higher than my guidance," said Oracle CEO, Safra Catz. "SaaS and PaaS gross margins continued to improve throughout the year, exiting FY16 at 56%. Bookings in Q4 were also very strong enabling us to raise our guidance for Q1 SaaS and PaaS revenue growth, which we now expect to be between 75% and 80%."

"We added more than 1,600 new SaaS customers and more than 2,000 new PaaS customers in Q4," said Oracle CEO, Mark Hurd. "In Fusion ERP alone, we added more than 800 new cloud customers. Today, Oracle has nearly 2,600 Fusion ERP customers in the Oracle Public Cloud -- that's ten-times more cloud ERP customers than Workday."

"We expect that the SaaS and PaaS hyper-growth we experienced in FY16 will continue on for the next few years," said Oracle Executive Chairman and CTO, Larry Ellison. "That gives us a fighting chance to be the first cloud company to reach $10 billion in SaaS and PaaS revenue. We're also very excited about the availability of version 2 of Oracle's Infrastructure as a Service (IaaS) -- which will enable us to speed up the growth of our IaaS business, which customers want to buy in conjunction with our SaaS and PaaS."

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 July 6, 2016, with a payment date of July 27, 2016.

Q4 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 Q4 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: 28515799.

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 future guidance, and expectations of future SaaS, PaaS and IaaS growth, are "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) Our cloud computing strategy, including our Oracle Cloud SaaS, PaaS, IaaS and data as a service offerings, may not be successful. (2) 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 systems products or purchase or renew support contracts. (3) If the security measures for our software, hardware, services or Oracle Cloud offerings are compromised or if such offerings contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and financial exposure. (4) 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 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) Economic, geopolitical and market conditions, including the continued slow economic recovery in 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. (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 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 June 16, 2016. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION
Q4 FISCAL 2016 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($in millions, except per share data)
Three Months Ended May 31,
2016 % of Revenues 2015 % of Revenues % Increase (Decrease) in US $ % Increase (Decrease) in Constant Currency (1)
REVENUES
Cloud software as a service and platform as a service $ 690 6 % $ 416 4 % 66 % 68 %
Cloud infrastructure as a service 169 2 % 160 1 % 5 % 8 %
Total cloud revenues 859 8 % 576 5 % 49 % 51 %
New software licenses 2,766 26 % 3,138 29 % (12 %) (10 %)
Software license updates and product support 4,814 46 % 4,686 44 % 3 % 4 %
Total on-premise software revenues 7,580 72 % 7,824 73 % (3 %) (2 %)
Total cloud and on-premise software revenues 8,439 80 % 8,400 78 % 0 % 2 %
Hardware products 725 7 % 818 8 % (11 %) (10 %)
Hardware support 558 5 % 589 6 % (5 %) (4 %)
Total hardware revenues 1,283 12 % 1,407 14 % (9 %) (7 %)
Total services revenues 872 8 % 899 8 % (3 %) (1 %)
Total revenues 10,594 100 % 10,706 100 % (1 %) 0 %
OPERATING EXPENSES
Sales and marketing 2,306 22 % 2,212 21 % 4 % 6 %
Cloud software as a service and platform as a service 304 3 % 256 2 % 19 % 20 %
Cloud infrastructure as a service 99 1 % 90 1 % 9 % 11 %
Software license updates and product support 268 2 % 331 3 % (19 %) (18 %)
Hardware products 405 4 % 438 4 % (8 %) (6 %)
Hardware support 168 2 % 188 2 % (11 %) (10 %)
Services 692 7 % 750 7 % (8 %) (6 %)
Research and development 1,534 14 % 1,435 13 % 7 % 8 %
General and administrative 323 3 % 278 3 % 16 % 18 %
Amortization of intangible assets 355 3 % 507 5 % (30 %) (30 %)
Acquisition related and other 7 0 % 200 2 % (97 %) (96 %)
Restructuring 165 2 % 39 0 % 320 % 314 %
Total operating expenses 6,626 63 % 6,724 63 % (1 %) 0 %
OPERATING INCOME 3,968 37 % 3,982 37 % 0 % 1 %
Interest expense (362 ) (3 %) (325 ) (3 %) 11 % 11 %
Non-operating income, net 126 1 % 40 1 % 211 % 211 %
INCOME BEFORE PROVISION FOR INCOME TAXES 3,732 35 % 3,697 35 % 1 % 3 %
Provision for income taxes 918 8 % 939 9 % (2 %) 0 %
NET INCOME $ 2,814 27 % $ 2,758 26 % 2 % 4 %
EARNINGS PER SHARE:
Basic $ 0.68 $ 0.63
Diluted $ 0.66 $ 0.62
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 4,147 4,359
Diluted 4,238 4,463
(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 May 31, 2016 compared with the corresponding prior year period decreased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 1 percentage point.
ORACLE CORPORATION
Q4 FISCAL 2016 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Three Months Ended May 31, % Increase (Decrease)
in US $
% Increase (Decrease) in Constant Currency (2)
2016 GAAP Adj. 2016 Non-GAAP 2015 GAAP Adj. 2015 Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
TOTAL REVENUES $ 10,594 $ 2 $ 10,596 $ 10,706 $ 6 $ 10,712 (1 %) (1 %) 0 % 0 %
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES $ 8,439 $ 2 $ 8,441 $ 8,400 $ 5 $ 8,405 0 % 0 % 2 % 2 %
Cloud software as a service and platform as a service 690 1 691 416 3 419 66 % 65 % 68 % 67 %
Cloud infrastructure as a service 169 - 169 160 - 160 5 % 5 % 8 % 8 %
New software licenses 2,766 - 2,766 3,138 - 3,138 (12 %) (12 %) (10 %) (10 %)
Software license updates and product support 4,814 1 4,815 4,686 2 4,688 3 % 3 % 4 % 4 %
TOTAL HARDWARE REVENUES $ 1,283 $ - $ 1,283 $ 1,407 $ 1 $ 1,408 (9 %) (9 %) (7 %) (7 %)
Hardware products 725 - 725 818 - 818 (11 %) (11 %) (10 %) (10 %)
Hardware support 558 - 558 589 1 590 (5 %) (5 %) (4 %) (4 %)
TOTAL OPERATING EXPENSES $ 6,626 $ (796 ) $ 5,830 $ 6,724 $ (990 ) $ 5,734 (1 %) 2 % 0 % 3 %
Cloud software as a service and platform as a service (3) 304 (4 ) 300 256 (3 ) 253 19 % 18 % 20 % 20 %
Stock-based compensation (3) 265 (265 ) - 241 (241 ) - 10 % * 10 % *
Amortization of intangible assets (4) 355 (355 ) - 507 (507 ) - (30 %) * (30 %) *
Acquisition related and other 7 (7 ) - 200 (200 ) - (97 %) * (96 %) *
Restructuring 165 (165 ) - 39 (39 ) - 320 % * 314 % *
CLOUD SOFTWARE AS A SERVICE AND PLATFORM AS A SERVICE MARGIN % 56 % 57 % 38 % 40 % 1,748 bp. 1,707 bp. 1,749 bp. 1,707 bp.
OPERATING INCOME $ 3,968 $ 798 $ 4,766 $ 3,982 $ 996 $ 4,978 0 % (4 %) 1 % (3 %)
OPERATING MARGIN % 37 % 45 % 37 % 46 % 26 bp. (149) bp. 36 bp. (153) bp.
INCOME TAX EFFECTS (5) $ 918 $ 188 $ 1,106 $ 939 $ 258 $ 1,197 (2 %) (8 %) 0 % (6 %)
NET INCOME $ 2,814 $ 610 $ 3,424 $ 2,758 $ 738 $ 3,496 2 % (2 %) 4 % (1 %)
DILUTED EARNINGS PER SHARE $ 0.66 $ 0.81 $ 0.62 $ 0.78 7 % 3 % 9 % 5 %
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,238 - 4,238 4,463 - 4,463 (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
May 31, 2016 May 31, 2015
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
Sales and marketing $ 57 $ (57 ) $ - $ 49 $ (49 ) $ -
Cloud infrastructure as a service 1 (1 ) - 1 (1 ) -
Software license updates and product support 6 (6 ) - 6 (6 ) -
Hardware products 2 (2 ) - 2 (2 ) -
Hardware support 1 (1 ) - 2 (2 ) -
Services 7 (7 ) - 8 (8 ) -
Research and development 157 (157 ) - 142 (142 ) -
General and administrative 34 (34 ) - 31 (31 ) -
Subtotal 265 (265 ) - 241 (241 ) -
Cloud software as a service and platform as a service 4 (4 ) - 3 (3 ) -
Acquisition related and other - - - - - -
Total stock-based compensation $ 269 $ (269 ) $ - $ 244 $ (244 ) $ -
(4) Estimated future annual amortization expense related to intangible assets as of May 31, 2016 was as follows:
Fiscal 2017 $ 1,026
Fiscal 2018 878
Fiscal 2019 770
Fiscal 2020 621
Fiscal 2021 476
Thereafter 1,172
Total intangible assets, net $ 4,943
(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 24.6% and 25.4% in the fourth quarter of fiscal 2016 and 2015, respectively, and an effective non-GAAP tax rate of 24.4% and 25.5% in the fourth quarter of fiscal 2016 and 2015, respectively. The differences between our GAAP and non-GAAP tax rates in the fourth 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
FISCAL 2016 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Year Ended May 31,
2016 % of Revenues 2015 % of Revenues % Increase (Decrease) in US $ % Increase (Decrease) in Constant Currency (1)
REVENUES
Cloud software as a service and platform as a service $ 2,207 6 % $ 1,485 4 % 49 % 52 %
Cloud infrastructure as a service 646 2 % 608 2 % 6 % 11 %
Total cloud revenues 2,853 8 % 2,093 6 % 36 % 40 %
New software licenses 7,276 19 % 8,535 22 % (15 %) (11 %)
Software license updates and product support 18,861 51 % 18,847 49 % 0 % 5 %
Total on-premise software revenues 26,137 70 % 27,382 71 % (5 %) 0 %
Total cloud and on-premise software revenues 28,990 78 % 29,475 77 % (2 %) 3 %
Hardware products 2,471 7 % 2,825 8 % (13 %) (7 %)
Hardware support 2,197 6 % 2,380 6 % (8 %) (3 %)
Total hardware revenues 4,668 13 % 5,205 14 % (10 %) (5 %)
Total services revenues 3,389 9 % 3,546 9 % (4 %) 2 %
Total revenues 37,047 100 % 38,226 100 % (3 %) 2 %
OPERATING EXPENSES
Sales and marketing 7,884 21 % 7,655 20 % 3 % 8 %
Cloud software as a service and platform as a service 1,152 3 % 773 2 % 49 % 53 %
Cloud infrastructure as a service 366 1 % 344 1 % 6 % 10 %
Software license updates and product support 1,146 3 % 1,199 3 % (4 %) 1 %
Hardware products 1,371 4 % 1,471 4 % (7 %) (1 %)
Hardware support 693 2 % 816 2 % (15 %) (10 %)
Services 2,751 8 % 2,929 8 % (6 %) 0 %
Research and development 5,787 16 % 5,524 14 % 5 % 7 %
General and administrative 1,155 3 % 1,077 3 % 7 % 11 %
Amortization of intangible assets 1,638 4 % 2,149 5 % (24 %) (24 %)
Acquisition related and other 42 0 % 211 1 % (80 %) (80 %)
Restructuring 458 1 % 207 1 % 121 % 145 %
Total operating expenses 24,443 66 % 24,355 64 % 0 % 4 %
OPERATING INCOME 12,604 34 % 13,871 36 % (9 %) (2 %)
Interest expense (1,467 ) (4 %) (1,143 ) (3 %) 28 % 28 %
Non-operating income, net 305 1 % 106 0 % 188 % 221 %
INCOME BEFORE PROVISION FOR INCOME TAXES 11,442 31 % 12,834 33 % (11 %) (4 %)
Provision for income taxes 2,541 7 % 2,896 7 % (12 %) (5 %)
NET INCOME $ 8,901 24 % $ 9,938 26 % (10 %) (3 %)
EARNINGS PER SHARE:
Basic $ 2.11 $ 2.26
Diluted $ 2.07 $ 2.21
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 4,221 4,404
Diluted 4,305 4,503
(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 year ended May 31, 2016 compared with the corresponding prior year period decreased our revenues by 5 percentage points, operating expenses by 4 percentage points and operating income by 7 percentage points.
ORACLE CORPORATION
FISCAL 2016 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Year Ended May 31, % Increase (Decrease)
in US $
% Increase (Decrease) in Constant Currency (2)
2016 GAAP Adj. 2016 Non-GAAP 2015 GAAP Adj. 2015 Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
TOTAL REVENUES $ 37,047 $ 10 $ 37,057 $ 38,226 $ 27 $ 38,253 (3 %) (3 %) 2 % 2 %
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES $ 28,990 $ 9 $ 28,999 $ 29,475 $ 23 $ 29,498 (2 %) (2 %) 3 % 3 %
Cloud software as a service and platform as a service 2,207 7 2,214 1,485 12 1,497 49 % 48 % 52 % 52 %
Cloud infrastructure as a service 646 - 646 608 - 608 6 % 6 % 11 % 11 %
New software licenses 7,276 - 7,276 8,535 - 8,535 (15 %) (15 %) (11 %) (11 %)
Software license updates and product support 18,861 2 18,863 18,847 11 18,858 0 % 0 % 5 % 5 %
TOTAL HARDWARE REVENUES $ 4,668 $ 1 $ 4,669 $ 5,205 $ 4 $ 5,209 (10 %) (10 %) (5 %) (5 %)
Hardware products 2,471 - 2,471 2,825 - 2,825 (13 %) (13 %) (7 %) (7 %)
Hardware support 2,197 1 2,198 2,380 4 2,384 (8 %) (8 %) (3 %) (3 %)
TOTAL OPERATING EXPENSES $ 24,443 $ (3,172 ) $ 21,271 $ 24,355 $ (3,495 ) $ 20,860 0 % 2 % 4 % 7 %
Stock-based compensation (3) 1,034 (1,034 ) - 928 (928 ) - 11 % * 11 % *
Amortization of intangible assets (4) 1,638 (1,638 ) - 2,149 (2,149 ) - (24 %) * (24 %) *
Acquisition related and other 42 (42 ) - 211 (211 ) - (80 %) * (80 %) *
Restructuring 458 (458 ) - 207 (207 ) - 121 % * 145 % *
OPERATING INCOME $ 12,604 $ 3,182 $ 15,786 $ 13,871 $ 3,522 $ 17,393 (9 %) (9 %) (2 %) (4 %)
OPERATING MARGIN % 34 % 43 % 36 % 45 % (226) bp. (287) bp. (153) bp. (254) bp.
INCOME TAX EFFECTS (5) $ 2,541 $ 846 $ 3,387 $ 2,896 $ 971 $ 3,867 (12 %) (12 %) (5 %) (7 %)
NET INCOME $ 8,901 $ 2,336 $ 11,237 $ 9,938 $ 2,551 $ 12,489 (10 %) (10 %) (3 %) (4 %)
DILUTED EARNINGS PER SHARE $ 2.07 $ 2.61 $ 2.21 $ 2.77 (6 %) (6 %) 1 % 0 %
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,305 - 4,305 4,503 - 4,503 (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:
Year Ended Year Ended
May 31, 2016 May 31, 2015
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
Sales and marketing $ 220 $ (220 ) $ - $ 180 $ (180 ) $ -
Cloud software as a service and platform as a service 17 (17 ) - 10 (10 ) -
Cloud infrastructure as a service 4 (4 ) - 5 (5 ) -
Software license updates and product support 23 (23 ) - 21 (21 ) -
Hardware products 7 (7 ) - 6 (6 ) -
Hardware support 5 (5 ) - 6 (6 ) -
Services 29 (29 ) - 30 (30 ) -
Research and development 609 (609 ) - 522 (522 ) -
General and administrative 120 (120 ) - 148 (148 ) -
Subtotal 1,034 (1,034 ) - 928 (928 ) -
Acquisition related and other 3 (3 ) - 5 (5 ) -
Total stock-based compensation $ 1,037 $ (1,037 ) $ - $ 933 $ (933 ) $ -
(4) Estimated future annual amortization expense related to intangible assets as of May 31, 2016 was as follows:
Fiscal 2017 $ 1,026
Fiscal 2018 878
Fiscal 2019 770
Fiscal 2020 621
Fiscal 2021 476
Thereafter 1,172
Total intangible assets, net $ 4,943
(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 22.2% and 22.6% in fiscal 2016 and 2015, respectively, and an effective non-GAAP tax rate of 23.2% and 23.6% in fiscal 2016 and 2015, respectively. The differences between our GAAP and non-GAAP tax rates in 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
FISCAL 2016 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
May 31, May 31,
2016 2015
ASSETS
Current Assets:
Cash and cash equivalents $ 20,152 $ 21,716
Marketable securities 35,973 32,652
Trade receivables, net 5,385 5,618
Inventories 212 314
Prepaid expenses and other current assets 2,591 2,220
Total Current Assets 64,313 62,520
Non-Current Assets:
Property, plant and equipment, net 4,000 3,686
Intangible assets, net 4,943 6,406
Goodwill, net 34,590 34,087
Deferred tax assets 1,291 1,458
Other assets 3,043 2,746
Total Non-Current Assets 47,867 48,383
TOTAL ASSETS $ 112,180 $ 110,903
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable, current $ 3,750 $ 1,999
Accounts payable 504 806
Accrued compensation and related benefits 1,966 1,839
Deferred revenues 7,655 7,245
Other current liabilities 3,333 3,317
Total Current Liabilities 17,208 15,206
Non-Current Liabilities:
Notes payable, non-current 40,105 39,959
Income taxes payable 4,908 4,386
Other non-current liabilities 2,169 2,254
Total Non-Current Liabilities 47,182 46,599
Equity 47,790 49,098
TOTAL LIABILITIES AND EQUITY $ 112,180 $ 110,903
ORACLE CORPORATION
FISCAL 2016 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Year Ended May 31,
2016 2015
Cash Flows From Operating Activities:
Net income $ 8,901 $ 9,938
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 871 712
Amortization of intangible assets 1,638 2,149
Deferred income taxes (105 ) (548 )
Stock-based compensation 1,037 933
Tax benefits on the exercise of stock options and vesting of restricted stock-based awards 311 396
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards (124 ) (244 )
Other, net 143 327
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net 226 264
Decrease (increase) in inventories 88 (96 )
Increase in prepaid expenses and other assets (90 ) (387 )
(Decrease) increase in accounts payable and other liabilities (13 ) 247
Increase (decrease) in income taxes payable 2 (10 )
Increase in deferred revenues 676 655
Net cash provided by operating activities 13,561 14,336
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments (24,562 ) (31,421 )
Proceeds from maturities and sales of marketable securities and other investments 21,247 20,004
Acquisitions, net of cash acquired (650 ) (6,239 )
Capital expenditures (1,189 ) (1,391 )
Net cash used for investing activities (5,154 ) (19,047 )
Cash Flows From Financing Activities:
Payments for repurchases of common stock (10,440 ) (8,087 )
Proceeds from issuances of common stock 1,425 1,816
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards (89 ) (14 )
Payments of dividends to stockholders (2,541 ) (2,255 )
Proceeds from borrowings, net of issuance costs 3,750 19,842
Repayments of borrowings (2,000 ) (1,500 )
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards 124 244
Distributions to noncontrolling interests (85 ) (196 )
Net cash (used for) provided by financing activities (9,856 ) 9,850
Effect of exchange rate changes on cash and cash equivalents (115 ) (1,192 )
Net (decrease) increase in cash and cash equivalents (1,564 ) 3,947
Cash and cash equivalents at beginning of period 21,716 17,769
Cash and cash equivalents at end of period $ 20,152 $ 21,716
ORACLE CORPORATION
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 $ 13,561
Capital Expenditures (628 ) (727 ) (948 ) (1,391 ) (1,636 ) (1,606 ) (1,606 ) (1,189 )
Free Cash Flow $ 14,729 $ 14,546 $ 13,561 $ 12,945 $ 11,828 $ 11,297 $ 12,508 $ 12,372
% Growth over prior year 4 % 0 % (6 )% (10 )% (20 )% (22 )% (8 )% (4 )%
GAAP Net Income $ 10,948 $ 10,896 $ 10,827 $ 9,938 $ 9,501 $ 9,198 $ 8,844 $ 8,901
Free Cash Flow as a % of Net Income 135 % 133 % 125 % 130 % 124 % 123 % 141 % 139 %
(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
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 $ 690 $ 2,207
Cloud infrastructure as a service 138 155 155 160 608 160 165 152 169 646
Total cloud revenues 475 516 527 576 2,093 611 649 735 859 2,853
New software licenses 1,370 2,045 1,982 3,138 8,535 1,151 1,677 1,680 2,766 7,276
Software license updates and product support 4,731 4,768 4,661 4,686 18,847 4,696 4,683 4,669 4,814 18,861
Total on-premise software revenues 6,101 6,813 6,643 7,824 27,382 5,847 6,360 6,349 7,580 26,137
Total cloud and on-premise software revenues 6,576 7,329 7,170 8,400 29,475 6,458 7,009 7,084 8,439 28,990
Hardware products 578 717 712 818 2,825 570 573 604 725 2,471
Hardware support 587 617 587 589 2,380 558 550 531 558 2,197
Total hardware revenues 1,165 1,334 1,299 1,407 5,205 1,128 1,123 1,135 1,283 4,668
Total services revenues 855 935 858 899 3,546 862 861 793 872 3,389
Total revenues $ 8,596 $ 9,598 $ 9,327 $ 10,706 $ 38,226 $ 8,448 $ 8,993 $ 9,012 $ 10,594 $ 37,047
AS REPORTED REVENUE GROWTH RATES
Cloud software as a service and platform as a service 32 % 39 % 30 % 29 % 32 % 34 % 34 % 57 % 66 % 49 %
Cloud infrastructure as a service 26 % 60 % 28 % 25 % 33 % 16 % 7 % (2 %) 5 % 6 %
Total cloud revenues 31 % 45 % 29 % 28 % 33 % 29 % 26 % 40 % 49 % 36 %
New software licenses (2 %) (4 %) (7 %) (17 %) (9 %) (16 %) (18 %) (15 %) (12 %) (15 %)
Software license updates and product support 7 % 6 % 2 % 0 % 4 % (1 %) (2 %) 0 % 3 % 0 %
Total on-premise software revenues 5 % 3 % (1 %) (8 %) (1 %) (4 %) (7 %) (4 %) (3 %) (5 %)
Total cloud and on-premise software revenues 6 % 5 % 1 % (6 %) 1 % (2 %) (4 %) (1 %) 0 % (2 %)
Hardware products (14 %) 0 % (2 %) (6 %) (5 %) (1 %) (20 %) (15 %) (11 %) (13 %)
Hardware support (1 %) 1 % (2 %) (1 %) (1 %) (5 %) (11 %) (10 %) (5 %) (8 %)
Total hardware revenues (8 %) 1 % (2 %) (4 %) (3 %) (3 %) (16 %) (13 %) (9 %) (10 %)
Total services revenues (7 %) (3 %) (3 %) (4 %) (4 %) 1 % (8 %) (7 %) (3 %) (4 %)
Total revenues 3 % 3 % 0 % (5 %) 0 % (2 %) (6 %) (3 %) (1 %) (3 %)
CONSTANT CURRENCY GROWTH RATES (2)
Cloud software as a service and platform as a service 32 % 41 % 34 % 35 % 35 % 38 % 39 % 61 % 68 % 52 %
Cloud infrastructure as a service 25 % 62 % 32 % 31 % 36 % 23 % 11 % 2 % 8 % 11 %
Total cloud revenues 30 % 47 % 33 % 34 % 36 % 34 % 31 % 44 % 51 % 40 %
New software licenses (2 %) 0 % 0 % (10 %) (4 %) (9 %) (12 %) (11 %) (10 %) (11 %)
Software license updates and product support 6 % 9 % 8 % 8 % 8 % 8 % 5 % 5 % 4 % 5 %
Total on-premise software revenues 4 % 6 % 6 % 0 % 4 % 4 % 0 % 0 % (2 %) 0 %
Total cloud and on-premise software revenues 6 % 8 % 7 % 2 % 5 % 6 % 2 % 3 % 2 % 3 %
Hardware products (14 %) 4 % 6 % 3 % 0 % 9 % (14 %) (10 %) (10 %) (7 %)
Hardware support (2 %) 5 % 4 % 7 % 4 % 4 % (5 %) (5 %) (4 %) (3 %)
Total hardware revenues (8 %) 4 % 5 % 5 % 2 % 6 % (10 %) (8 %) (7 %) (5 %)
Total services revenues (8 %) 1 % 3 % 5 % 0 % 10 % 0 % (2 %) (1 %) 2 %
Total revenues 2 % 7 % 6 % 3 % 4 % 7 % 0 % 1 % 0 % 2 %
GEOGRAPHIC REVENUES
REVENUES
Americas $ 4,620 $ 5,221 $ 5,134 $ 6,133 $ 21,107 $ 4,716 $ 4,960 $ 4,942 $ 5,847 $ 20,466
Europe, Middle East & Africa 2,589 2,911 2,813 3,067 11,380 2,456 2,645 2,661 3,120 10,881
Asia Pacific 1,387 1,466 1,380 1,506 5,739 1,276 1,388 1,409 1,627 5,700
Total revenues $ 8,596 $ 9,598 $ 9,327 $ 10,706 $ 38,226 $ 8,448 $ 8,993 $ 9,012 $ 10,594 $ 37,047
HEADCOUNT
GEOGRAPHIC AREA
Americas 54,073 57,243 58,117 58,415 59,901 59,999 60,437 60,329
Europe, Middle East & Africa 23,349 26,997 26,989 26,988 27,030 27,541 27,275 27,061
Asia Pacific 45,496 46,312 46,456 46,962 48,139 48,620 48,694 48,872
Total company 122,918 130,552 131,562 132,365 135,070 136,160 136,406 136,262
(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
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 $ 4,771 $ 16,346
Total hardware revenues $ 583 $ 716 $ 686 $ 751 $ 2,737 $ 589 $ 595 $ 571 $ 650 $ 2,404
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues 5 % 6 % 5 % 6 % 6 % 2 % (3 %) (1 %) (3 %) (2 %)
Total hardware revenues (9 %) 3 % 5 % 1 % 0 % 1 % (17 %) (17 %) (14 %) (12 %)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues 6 % 8 % 7 % 9 % 7 % 6 % 0 % 1 % (2 %) 1 %
Total hardware revenues (8 %) 5 % 7 % 4 % 2 % 6 % (14 %) (13 %) (11 %) (9 %)
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 $ 2,462 $ 8,471
Total hardware revenues $ 338 $ 380 $ 379 $ 423 $ 1,519 $ 330 $ 316 $ 349 $ 382 $ 1,377
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues 10 % 4 % (3 %) (22 %) (5 %) (6 %) (8 %) (5 %) 4 % (3 %)
Total hardware revenues (6 %) 2 % (6 %) (4 %) (3 %) (2 %) (17 %) (8 %) (10 %) (9 %)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues 7 % 9 % 9 % (8 %) 3 % 7 % 3 % 2 % 5 % 4 %
Total hardware revenues (7 %) 8 % 8 % 15 % 6 % 14 % (6 %) (1 %) (8 %) (1 %)
ASIA PACIFIC
Total cloud and on-premise software revenues $ 970 $ 1,051 $ 980 $ 1,105 $ 4,107 $ 901 $ 1,016 $ 1,051 $ 1,206 $ 4,173
Total hardware revenues $ 244 $ 238 $ 234 $ 233 $ 949 $ 209 $ 212 $ 215 $ 251 $ 887
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues 3 % 2 % (3 %) (10 %) (3 %) (7 %) (3 %) 7 % 9 % 2 %
Total hardware revenues (8 %) (7 %) (12 %) (16 %) (11 %) (14 %) (11 %) (8 %) 8 % (7 %)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues 2 % 7 % 4 % (1 %)