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Financial News Details

Q3 FY17 GAAP EPS UP 6% TO $0.53 and NON-GAAP EPS UP 7% TO $0.69

March 15, 2017

Q3 FY17 SaaS and PaaS Cloud Revenues Up 73% on a GAAP Basis and Up 85% on a Non-GAAP Basis

REDWOOD SHORES, Calif., March 15, 2017 /PRNewswire/ -- Oracle Corporation (NYSE: ORCL) today announced fiscal 2017 Q3 results. Total Revenues were $9.2 billion, up 2% in U.S. dollars and up 3% in constant currency. Non-GAAP Total Revenues were $9.3 billion, up 3% in U.S. dollars and up 4% in constant currency. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $1.0 billion, up 73% in U.S. dollars and up 74% in constant currency. Non-GAAP SaaS and PaaS revenues were $1.1 billion, up 85% in U.S. dollars and up 86% in constant currency. Total Cloud Revenues, including infrastructure as a service (IaaS), were $1.2 billion, up 62% in U.S. dollars and up 63% in constant currency. Total Cloud and On-Premise Software Revenues were $7.4 billion, up 4% in U.S. dollars and up 5% in constant currency.

Operating Income was $3.0 billion and Operating Margin was 32%. Non-GAAP Operating Income was $3.9 billion, up 3% in U.S. dollars and up 4% in constant currency, and non-GAAP Operating Margin was 43%. Net Income was $2.2 billion while non-GAAP Net Income was $2.9 billion, up 6% in U.S. dollars and up 7% in constant currency. Earnings Per Share was $0.53, while non-GAAP Earnings Per Share was $0.69, up 7% in U.S. dollars. Without the impact of the U.S. dollar strengthening compared to foreign currencies, Oracle's reported GAAP Earnings Per Share would have been 1 cent higher.

Short-term deferred revenues were $7.4 billion, up 7% in U.S. dollars and constant currency compared with a year ago. Operating cash flow on a trailing twelve-month basis was $13.5 billion.

"The hyper-growth we continue to experience in the cloud has rapidly driven both our SaaS and PaaS businesses to scale," said Oracle CEO, Safra Catz. "On an annualized non-GAAP basis, our total cloud business has reached the $5 billion mark, and our SaaS and PaaS businesses grew at the astonishing rate of 85% in Q3. That growth and the resulting scale enabled our SaaS and PaaS businesses to increase non-GAAP gross margins to 65%.  Our new, large, fast growing, high-margin cloud businesses are driving Oracle's total revenue and earnings up and improving nearly every important non-GAAP business metric you care to inspect; total revenue is up, margins are up, operating income is up, net income is up, EPS is up. Take a look. Q3 was a very strong quarter."

"Over the last year, we sold more new SaaS and PaaS than Salesforce.com, and we're growing more than 3 times faster," said Oracle CEO, Mark Hurd. "If these trends continue, where we are selling more SaaS and PaaS in absolute dollars AND growing dramatically faster, it's just a matter of when we catch and pass Salesforce.com in total cloud revenue."

"Both our SaaS and PaaS businesses are doing great, but I'm even more excited about our second generation IaaS business," said Oracle Chairman and CTO, Larry Ellison. "Our new Gen2 IaaS is both faster and lower cost than Amazon Web Services. And now our biggest customers can run their largest and most demanding Oracle database workloads in the Oracle Cloud – something that is absolutely impossible to do in the Amazon Cloud."

Oracle also announced that its Board of Directors declared a quarterly cash dividend of $0.19 per share of outstanding common stock, reflecting a 27% increase over the current quarterly dividend of $0.15. Larry Ellison, Oracle's Chairman of the Board, Chief Technology Officer and largest stockholder, did not participate in the deliberation or the vote on this matter. This increased dividend will be paid to stockholders of record as of the close of business on April 12, 2017, with a payment date of April 26, 2017.

Q3 Fiscal 2017 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, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle's Q3 results and Fiscal 2017 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, Passcode: 83283985.

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/investor 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 growth in SaaS, PaaS and total cloud revenue and expected future sales compared to competitors 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) 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 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, 2017. Oracle undertakes no duty to update any statement in light of new information or future events.


ORACLE  CORPORATION


Q3 FISCAL 2017 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




2017

Revenues

2016

Revenues

in US $

Currency (1)


REVENUES









Cloud software as a service and platform as a service

$           1,011

11%

$              583

6%

73%

74%



Cloud infrastructure as a service

178

2%

152

2%

17%

19%



Total cloud revenues

1,189

13%

735

8%

62%

63%



New software licenses 

1,414

15%

1,680

18%

(16%)

(15%)



Software license updates and product support

4,762

52%

4,669

52%

2%

3%



Total on-premise software revenues

6,176

67%

6,349

70%

(3%)

(2%)



   Total cloud and on-premise software revenues

7,365

80%

7,084

78%

4%

5%



Hardware products

520

6%

604

7%

(14%)

(13%)



Hardware support

508

5%

531

6%

(4%)

(3%)



   Total hardware revenues

1,028

11%

1,135

13%

(9%)

(9%)



   Total services revenues

812

9%

793

9%

2%

3%



      Total revenues

9,205

100%

9,012

100%

2%

3%


OPERATING EXPENSES









Sales and marketing

2,004

22%

1,903

21%

5%

6%



Cloud software as a service and platform as a service

380

4%

292

3%

30%

32%



Cloud infrastructure as a service

125

1%

88

1%

43%

44%



Software license updates and product support

270

3%

293

3%

(8%)

(8%)



Hardware products

290

3%

338

4%

(14%)

(14%)



Hardware support

147

2%

171

2%

(14%)

(14%)



Services

680

7%

657

7%

4%

4%



Research and development 

1,521

17%

1,419

16%

7%

8%



General and administrative

241

3%

290

3%

(17%)

(15%)



Amortization of intangible assets

397

4%

408

5%

(3%)

(3%)



Acquisition related and other

30

0%

11

0%

187%

174%



Restructuring

161

2%

115

1%

39%

42%



      Total operating expenses 

6,246

68%

5,985

66%

4%

5%


OPERATING INCOME 

2,959

32%

3,027

34%

(2%)

(1%)



Interest expense

(450)

(5%)

(360)

(4%)

25%

25%



Non-operating income, net 

189

2%

65

0%

190%

187%


INCOME BEFORE PROVISION FOR INCOME TAXES

2,698

29%

2,732

30%

(1%)

0%



Provision for income taxes

459

5%

590

6%

(22%)

(22%)


NET INCOME

$           2,239

24%

$           2,142

24%

5%

6%











EARNINGS PER SHARE:









Basic

$             0.55


$             0.51






Diluted

$             0.53


$             0.50





WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:









Basic

4,107


4,182






Diluted

4,204


4,256


















































(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, 2016, 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, 2017 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


Q3 FISCAL 2017 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,
2017




February 28,
2017



February 29,
2016




February 29,
2016


GAAP

Non-GAAP

GAAP

Non-GAAP





GAAP


Adj.


Non-GAAP



GAAP


Adj.


Non-GAAP
























TOTAL REVENUES


$          9,205


$           69


$          9,274



$          9,012


$      2


$          9,014


2%

3%

3%

4%























TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES


$          7,365


$           69


$          7,434



$          7,084


$      2


$          7,086


4%

5%

5%

6%



Cloud software as a service and platform as a service 


1,011


69


1,080



583


2


585


73%

85%

74%

86%



Cloud infrastructure as a service


178


-


178



152


-


152


17%

17%

19%

19%



New software licenses


1,414


-


1,414



1,680


-


1,680


(16%)

(16%)

(15%)

(15%)



Software license updates and product support 


4,762


-


4,762



4,669


-


4,669


2%

2%

3%

3%























TOTAL OPERATING EXPENSES


$          6,246


$        (916)


$          5,330



$          5,985


$(794)


$          5,191


4%

3%

5%

3%



Sales and marketing (3)


2,004


(75)


1,929



1,903


(57)


1,846


5%

4%

6%

5%



Cloud software as a service and platform as a service (4)


380


(6)


374



292


(4)


288


30%

30%

32%

31%



Stock-based compensation (4)


247


(247)


-



199


(199)


-


24%

*

24%

*



Amortization of intangible assets (5)


397


(397)


-



408


(408)


-


(3%)

*

(3%)

*



Acquisition related and other


30


(30)


-



11


(11)


-


187%

*

174%

*



Restructuring


161


(161)


-



115


(115)


-


39%

*

42%

*


CLOUD SOFTWARE AS A SERVICE AND PLATFORM AS A SERVICE MARGIN %


62%




65%



50%




51%


1,245 bp.

1,450 bp.

1,231 bp.

1,434 bp.


OPERATING INCOME


$          2,959


$         985


$          3,944



$          3,027


$  796


$          3,823


(2%)

3%

(1%)

4%


OPERATING MARGIN %


32%




43%



34%




42%


(144) bp.

12 bp.

(131) bp.

19 bp.


INCOME TAX EFFECTS (6)


$             459


$         336


$             795



$             590


$  207


$             797


(22%)

0%

(22%)

1%


NET INCOME 


$          2,239


$         649


$          2,888



$          2,142


$  589


$          2,731


5%

6%

6%

7%


DILUTED EARNINGS PER SHARE


$            0.53




$            0.69



$            0.50




$            0.64


6%

7%

7%

8%


DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING


4,204


-


4,204



4,256


-


4,256


(1%)

(1%)

(1%)

(1%)












































(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, 2016, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.






















(3)

Non-GAAP adjustments to sales and marketing expenses were as follows:

























Three Months Ended



















February 28,


February 29,



















2017


2016

















          Stock-based compensation (4)


$               (96)


$           (57)

















     Acquired deferred sales commissions amortization


21


-

















           Total non-GAAP sales and marketing adjustments


$               (75)


$           (57)





































(4)

Stock-based compensation was included in the following GAAP operating expense categories:

























Three Months Ended



Three Months Ended










February 28, 2017



February 29, 2016










GAAP


Adj.


Non-GAAP



GAAP


Adj.


Non-GAAP








     Cloud infrastructure as a service  


$                  1


$             (1)


$                 -



$                  1


$     (1)


$                 -








     Software license updates and product support


6


(6)


-



6


(6)


-








     Hardware products


2


(2)


-



1


(1)


-








     Hardware support


1


(1)


-



1


(1)


-








     Services


14


(14)


-



7


(7)


-








     Research and development


191


(191)


-



154


(154)


-








     General and administrative


32


(32)


-



29


(29)


-








           Subtotal


247


(247)


-



199


(199)


-








     Sales and marketing


96


(96)


-



57


(57)


-








     Cloud software as a service and platform as a service    


6


(6)


-



4


(4)


-








     Acquisition related and other


22


(22)


-



-


-


-








           Total stock-based compensation


$               371


$         (371)


$                 -



$               260


$  (260)


$                 -

















































(5)

Estimated future annual amortization expense related to intangible assets as of February 28, 2017 was as follows:


Remainder of fiscal 2017


$               402



















Fiscal 2018


1,362



















Fiscal 2019


1,248



















Fiscal 2020


1,058



















Fiscal 2021


883



















Fiscal 2022


779



















Thereafter


2,056



















Total intangible assets, net


$            7,788







































(6)

Income tax effects were calculated reflecting an effective GAAP tax rate of 17.0% and 21.6% in the third quarter of fiscal 2017 and 2016, respectively, and an effective non-GAAP tax rate of 21.6% and 22.6% in the third quarter of fiscal 2017 and 2016, respectively. The difference between our GAAP and non-GAAP tax rate in the third quarter of fiscal 2017 was primarily due to the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets. The difference between our GAAP and non-GAAP tax rate in the third quarter of fiscal 2016 was 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 2017 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




2017

Revenues

2016

Revenues

in US $

Currency (1)


REVENUES









Cloud software as a service and platform as a service

$           2,686

10%

$           1,517

6%

77%

79%



Cloud infrastructure as a service

525

2%

477

2%

10%

13%



Total cloud revenues

3,211

12%

1,994

8%

61%

63%



New software licenses 

3,792

14%

4,509

17%

(16%)

(15%)



Software license updates and product support

14,331

54%

14,048

53%

2%

3%



Total on-premise software revenues

18,123

68%

18,557

70%

(2%)

(2%)



   Total cloud and on-premise software revenues

21,334

80%

20,551

78%

4%

5%



Hardware products

1,478

5%

1,746

7%

(15%)

(14%)



Hardware support

1,559

6%

1,639

6%

(5%)

(4%)



   Total hardware revenues

3,037

11%

3,385

13%

(10%)

(9%)



   Total services revenues

2,464

9%

2,517

9%

(2%)

(1%)



      Total revenues

26,835

100%

26,453

100%

1%

2%


OPERATING EXPENSES









Sales and marketing

5,883

22%

5,578

21%

5%

6%



Cloud software as a service and platform as a service

1,060

4%

847

3%

25%

27%



Cloud infrastructure as a service

333

1%

268

1%

24%

26%



Software license updates and product support

786

3%

877

3%

(10%)

(9%)



Hardware products

775

3%

967

4%

(20%)

(19%)



Hardware support

439

2%

526

2%

(17%)

(16%)



Services

2,073

8%

2,058

8%

1%

2%



Research and development 

4,551

17%

4,253

16%

7%

8%



General and administrative

859

3%

832

3%

3%

5%



Amortization of intangible assets

1,010

4%

1,283

5%

(21%)

(21%)



Acquisition related and other

84

0%

35

0%

141%

144%



Restructuring

346

1%

293

1%

18%

21%



      Total operating expenses 

18,199

68%

17,817

67%

2%

3%


OPERATING INCOME 

8,636

32%

8,636

33%

0%

1%



Interest expense

(1,317)

(5%)

(1,105)

(4%)

19%

19%



Non-operating income, net 

437

2%

179

0%

144%

141%


INCOME BEFORE PROVISION FOR INCOME TAXES

7,756

29%

7,710

29%

1%

1%



Provision for income taxes

1,653

6%

1,623

6%

2%

2%


NET INCOME

$           6,103

23%

$           6,087

23%

0%

1%











EARNINGS PER SHARE:









Basic

$             1.49


$             1.43






Diluted

$             1.45


$             1.41





WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:









Basic

4,110


4,246






Diluted

4,207


4,328


















































(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, 2016, 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, 2017 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


 Q3 FISCAL 2017 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,
2017




February 28,
2017



February 29,
2016




February 29,
2016


GAAP

Non-GAAP

GAAP

Non-GAAP





GAAP


Adj.


Non-GAAP



GAAP


Adj.


Non-GAAP
























TOTAL REVENUES


$        26,835


$         122


$        26,957



$        26,453


$         8


$        26,461


1%

2%

2%

3%























TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES


$        21,334


$         121


$        21,455



$        20,551


$         7


$        20,558


4%

4%

5%

5%



Cloud software as a service and platform as a service


2,686


120


2,806



1,517


6


1,523


77%

84%

79%

86%



Cloud infrastructure as a service


525


-


525



477


-


477


10%

10%

13%

13%



New software licenses


3,792


-


3,792



4,509


-


4,509


(16%)

(16%)

(15%)

(15%)



Software license updates and product support


14,331


1


14,332



14,048


1


14,049


2%

2%

3%

3%























TOTAL HARDWARE REVENUES 


$          3,037


$             1


$          3,038



$          3,385


$         1


$          3,386


(10%)

(10%)

(9%)

(9%)



Hardware products 


1,478


-


1,478



1,746


-


1,746


(15%)

(15%)

(14%)

(14%)



Hardware support 


1,559


1


1,560



1,639


1


1,640


(5%)

(5%)

(4%)

(4%)























TOTAL OPERATING EXPENSES


$        18,199


$    (2,395)


$        15,804



$        17,817


$(2,376)


$        15,441


2%

2%

3%

3%



Sales and marketing (3)


5,883


(199)


5,684



5,578


(163)


5,415


5%

5%

6%

6%



Stock-based compensation (4)


756


(756)


-



602


(602)


-


26%

*

26%

*



Amortization of intangible assets (5)


1,010


(1,010)


-



1,283


(1,283)


-


(21%)

*

(21%)

*



Acquisition related and other


84


(84)


-



35


(35)


-


141%

*

144%

*



Restructuring


346


(346)


-



293


(293)


-


18%

*

21%

*


OPERATING INCOME


$          8,636


$      2,517


$        11,153



$          8,636


$  2,384


$        11,020


0%

1%

1%

2%


OPERATING MARGIN %


32%




41%



33%




42%


(46) bp.

(27) bp.

(49) bp.

(34) bp.


INCOME TAX EFFECTS (6)


$          1,653


$         823


$          2,476



$          1,623


$     658


$          2,281


2%

9%

2%

9%


NET INCOME 


$          6,103


$      1,694


$          7,797



$          6,087


$  1,726


$          7,813


0%

0%

1%

1%


DILUTED EARNINGS PER SHARE


$            1.45




$            1.85



$            1.41




$            1.81


3%

3%

4%

3%


DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING


4,207


-


4,207



4,328


-


4,328


(3%)

(3%)

(3%)

(3%)












































(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, 2016, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.






















(3)

Non-GAAP adjustments to sales and marketing expenses were as follows:

























Nine Months Ended



















February 28,


February 29,



















2017


2016

















          Stock-based compensation (4)


$             (228)


$         (163)

















     Acquired deferred sales commissions amortization


29


-

















           Total non-GAAP sales and marketing adjustments


$             (199)


$         (163)





































(4)

Stock-based compensation was included in the following GAAP operating expense categories:

























Nine Months Ended



Nine Months Ended










February 28, 2017



February 29, 2016










GAAP


Adj.


Non-GAAP



GAAP


Adj.


Non-GAAP








     Cloud software as a service and platform as a service


$                17


$           (17)


$                 -



$                13


$       (13)


$                 -








     Cloud infrastructure as a service


3


(3)


-



3


(3)


-








     Software license updates and product support


18


(18)


-



18


(18)


-








     Hardware products


6


(6)


-



4


(4)


-








     Hardware support


3


(3)


-



4


(4)


-








     Services


31


(31)


-



22


(22)


-








     Research and development


574


(574)


-



452


(452)


-








     General and administrative    


104


(104)


-



86


(86)


-








           Subtotal


756


(756)


-



602


(602)


-








     Sales and marketing


228


(228)


-



163


(163)


-








     Acquisition related and other


33


(33)


-



3


(3)


-








           Total stock-based compensation


$            1,017


$      (1,017)


$                 -



$               768


$     (768)


$                 -




























(5)

Estimated future annual amortization expense related to intangible assets as of February 28, 2017 was as follows:


Remainder of fiscal 2017


$               402



















Fiscal 2018


1,362



















Fiscal 2019


1,248



















Fiscal 2020


1,058



















Fiscal 2021


883



















Fiscal 2022


779



















Thereafter


2,056



















Total intangible assets, net


$            7,788







































(6)

Income tax effects were calculated reflecting an effective GAAP tax rate of 21.3% and 21.0% in the first nine months of fiscal 2017 and 2016, respectively, and an effective non-GAAP tax rate of 24.1% and 22.6% in the first nine months of fiscal 2017 and 2016, respectively. The difference between our GAAP and non-GAAP tax rate in the first nine months of fiscal 2017 was primarily due to the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets.  The difference between our GAAP and non-GAAP tax rate in the first nine months of fiscal 2016 was 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 2017 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)











February 28,

May 31,




2017

2016

ASSETS





   Current Assets:






Cash and cash equivalents

$          19,748


$          20,152



Marketable securities

39,604


35,973



Trade receivables, net

3,721


5,385



Inventories

391


212



Prepaid expenses and other current assets

2,547


2,591




Total Current Assets

66,011


64,313


   Non-Current Assets:






   Property, plant and equipment, net

5,070


4,000



   Intangible assets, net

7,788


4,943



   Goodwill, net

42,504


34,590



   Deferred tax assets

918


1,291



   Other assets

3,091


3,043




Total Non-Current Assets

59,371


47,867


TOTAL ASSETS

$        125,382


$        112,180


LIABILITIES AND EQUITY





   Current Liabilities:






Notes payable and other borrowings, current 

$            3,498


$            3,750



Accounts payable

481


504



Accrued compensation and related benefits

1,516


1,966



Deferred revenues

7,388


7,655



Other current liabilities

2,907


3,333




Total Current Liabilities

15,790


17,208


   Non-Current Liabilities:






Notes payable and other borrowings, non-current

50,469


40,105



Income taxes payable

5,162


4,908



Other non-current liabilities

2,938


2,169




Total Non-Current Liabilities

58,569


47,182


   Equity

51,023


47,790


TOTAL LIABILITIES AND EQUITY

$        125,382


$        112,180









 


ORACLE  CORPORATION 







Q3 FISCAL 2017 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)









Nine Months Ended



February 28,
2017

February 29,
2016

Cash Flows From Operating Activities:





   Net income

$         6,103


$          6,087


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





Depreciation

722


643


Amortization of intangible assets

1,010


1,283


Deferred income taxes

111


(143)


Stock-based compensation

1,017


768


Tax benefits on the vesting of restricted stock-based awards and exercise of stock options

378


188


Other, net

96


116


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





Decrease in trade receivables, net

1,673


1,746


(Increase) decrease in inventories

(178)


87


Decrease in prepaid expenses and other assets

308


95


Decrease in accounts payable and other liabilities

(862)


(890)


Decrease in income taxes payable

(388)


(112)


(Decrease) increase in deferred revenues

(330)


24


                    Net cash provided by operating activities

9,660


9,892


Cash Flows From Investing Activities:





   Purchases of marketable securities and other investments

(15,571)


(21,549)


   Proceeds from maturities and sales of marketable securities and other investments

11,825


18,845


   Acquisitions, net of cash acquired

(10,406)


(313)


   Capital expenditures

(1,496)


(1,009)


                    Net cash used for investing activities

(15,648)


(4,026)


Cash Flows From Financing Activities:





   Payments for repurchases of common stock

(3,067)


(8,467)


   Proceeds from issuances of common stock

1,309


802


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

(237)


(82)


   Payments of dividends to stockholders

(1,844)


(1,918)


   Proceeds from borrowings, net of issuance costs

13,932



   Repayments of borrowings

(4,094)


(2,000)


   Distributions to noncontrolling interests

(200)


(85)


                    Net cash provided by (used for) financing activities

5,799


(11,750)


Effect of exchange rate changes on cash and cash equivalents

(215)


(249)


Net decrease in cash and cash equivalents

(404)


(6,133)


Cash and cash equivalents at beginning of period

20,152


21,716


Cash and cash equivalents at end of period

$       19,748


$        15,583








 


ORACLE  CORPORATION 


 Q3 FISCAL 2017 FINANCIAL RESULTS 

 FREE CASH FLOW - TRAILING 4-QUARTERS (1) 

 ($ in millions) 














 Fiscal 2016 

 Fiscal 2017 




 Q1 

 Q2 

 Q3 

 Q4 

 Q1 

 Q2 

 Q3 

 Q4 












GAAP Operating Cash Flow

$13,682

$13,113

$14,252

$13,685

$13,679

$14,249

$13,453














Capital Expenditures

(1,636)

(1,606)

(1,606)

(1,189)

(1,042)

(1,604)

(1,676)














Free Cash Flow

$12,046

$11,507

$12,646

$12,496

$12,637

$12,645

$11,777














% Growth over prior year

(20%)

(22%)

(8%)

(5%)

5%

10%

(7%)

























GAAP Net Income

$  9,501

$  9,198

$  8,844

$  8,901

$  8,986

$  8,820

$  8,917














Free Cash Flow as a % of Net Income

127%

125%

143%

140%

141%

143%

132%

























(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 2017 FINANCIAL RESULTS 

 SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1) 

 ($ in millions) 


















 Fiscal 2016 





 Fiscal 2017 




 Q1 

 Q2 

 Q3 

 Q4 

 TOTAL 

 Q1 

 Q2 

 Q3 

 Q4 

 TOTAL 



REVENUES













 Cloud software as a service and platform as a service 

$     451

$     484

$      583

$     690

$  2,207

$     798

$     878

$  1,011


$   2,686



 Cloud infrastructure as a service 

160

165

152

169

646

171

175

178


525




Total cloud revenues

611

649

735

859

2,853

969

1,053

1,189


3,211



 New software licenses 

1,151

1,677

1,680

2,766

7,276

1,030

1,347

1,414


3,792



 Software license updates and product support 

4,696

4,683

4,669

4,814

18,861

4,792

4,777

4,762


14,331




Total on-premise software revenues

5,847

6,360

6,349

7,580

26,137

5,822

6,124

6,176


18,123




 Total cloud and on-premise software revenues 

6,458

7,009

7,084

8,439

28,990

6,791

7,177

7,365


21,334

















 Hardware products 

570

573

604

725

2,471

462

497

520


1,478



 Hardware support 

558

550

531

558

2,197

534

517

508


1,559




 Total hardware revenues 

1,128

1,123

1,135

1,283

4,668

996

1,014

1,028


3,037


















 Total services revenues 

862

861

793

872

3,389

808

844

812


2,464


















 Total revenues 

$  8,448

$  8,993

$   9,012

$10,594

$37,047

$  8,595

$  9,035

$  9,205


$26,835

















AS REPORTED REVENUE GROWTH RATES 













 Cloud software as a service and platform as a service 

34%

34%

57%

66%

49%

77%

81%

73%


77%



 Cloud infrastructure as a service 

16%

7%

(2%)

5%

6%

7%

6%

17%


10%




Total cloud revenues

29%

26%

40%

49%

36%

59%

62%

62%


61%



 New software licenses 

(16%)

(18%)

(15%)

(12%)

(15%)

(11%)

(20%)

(16%)


(16%)



 Software license updates and product support 

(1%)

(2%)

0%

3%

0%

2%

2%

2%


2%




Total on-premise software revenues

(4%)

(7%)

(4%)

(3%)

(5%)

0%

(4%)

(3%)


(2%)




 Total cloud and on-premise software revenues 

(2%)

(4%)

(1%)

0%

(2%)

5%

2%

4%


4%

















 Hardware products 

(1%)

(20%)

(15%)

(11%)

(13%)

(19%)

(13%)

(14%)


(15%)



 Hardware support 

(5%)

(11%)

(10%)

(5%)

(8%)

(4%)

(6%)

(4%)


(5%)




 Total hardware revenues 

(3%)

(16%)

(13%)

(9%)

(10%)

(12%)

(10%)

(9%)


(10%)


















 Total services revenues 

1%

(8%)

(7%)

(3%)

(4%)

(6%)

(2%)

2%


(2%)


















 Total revenues 

(2%)

(6%)

(3%)

(1%)

(3%)

2%

0%

2%


1%

















CONSTANT CURRENCY GROWTH RATES (2)













 Cloud software as a service and platform as a service 

38%

39%

61%

68%

52%

79%

83%

74%


79%



 Cloud infrastructure as a service 

23%

11%

2%

8%

11%

10%

9%

19%


13%




Total cloud revenues

34%

31%

44%

51%

40%

61%

64%

63%


63%



 New software licenses 

(9%)

(12%)

(11%)

(10%)

(11%)

(10%)

(19%)

(15%)


(15%)



 Software license updates and product support 

8%

5%

5%

4%

5%

3%

3%

3%


3%




Total on-premise software revenues

4%

0%

0%

(2%)

0%

1%

(3%)

(2%)


(2%)




 Total cloud and on-premise software revenues 

6%

2%

3%

2%

3%

6%

3%

5%


5%

















 Hardware products 

9%

(14%)

(10%)

(10%)

(7%)

(18%)

(12%)

(13%)


(14%)



 Hardware support 

4%

(5%)

(5%)

(4%)

(3%)

(3%)

(5%)

(3%)


(4%)




 Total hardware revenues 

6%

(10%)

(8%)

(7%)

(5%)

(11%)

(9%)

(9%)


(9%)


















 Total services revenues 

10%

0%

(2%)

(1%)

2%

(5%)

0%

3%


(1%)


















 Total revenues 

7%

0%

1%

0%

2%

3%

1%

3%


2%






























GEOGRAPHIC REVENUES


























 REVENUES 













 Americas 

$  4,716

$  4,960

$   4,942

$  5,847

$20,466

$  4,817

$  4,935

$  5,219


$14,971



 Europe, Middle East & Africa 

2,456

2,645

2,661

3,120

10,881

2,413

2,558

2,558


7,529



 Asia Pacific 

1,276

1,388

1,409

1,627

5,700

1,365

1,542

1,428


4,335




 Total revenues 

$  8,448

$  8,993

$   9,012

$10,594

$37,047

$  8,595

$  9,035

$  9,205


$26,835






























HEADCOUNT


























 GEOGRAPHIC AREA 













 Americas 

59,901

59,999

60,437

60,329


61,221

63,251

62,613





 Europe, Middle East & Africa 

27,030

27,541

27,275

27,061


26,895

27,922

27,809





 Asia Pacific 

48,139

48,620

48,694

48,872


49,234

50,509

50,481






 Total company 

135,070

136,160

136,406

136,262


137,350

141,682

140,903

































(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, 2016 and 2015 for the fiscal 2017 and fiscal 2016 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
















 


ORACLE  CORPORATION


 Q3 FISCAL 2017 FINANCIAL RESULTS 

 SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1) 

 ($ in millions) 




















 Fiscal 2016 





 Fiscal 2017 







 Q1 

 Q2 

 Q3 

 Q4 

 TOTAL 

 Q1 

 Q2 

 Q3 

 Q4 

 TOTAL 

















AMERICAS













 Total cloud and on-premise software revenues 

$     3,684

$     3,927

$     3,964

$     4,771

$    16,346

$      3,876

$     4,000

$     4,280


$      12,156



 Total hardware revenues 

$        589

$        595

$        571

$        650

$     2,404

$         526

$        510

$        511


$        1,547

















AS REPORTED GROWTH RATES 













 Total cloud and on-premise software revenues 

2%

(3%)

(1%)

(3%)

(2%)

5%

2%

8%


5%



 Total hardware revenues 

1%

(17%)

(17%)

(14%)

(12%)

(11%)

(14%)

(11%)


(12%)

















CONSTANT CURRENCY GROWTH RATES (2) 













 Total cloud and on-premise software revenues 

6%

0%

1%

(2%)

1%

6%

2%

7%


5%



 Total hardware revenues 

6%

(14%)

(13%)

(11%)

(9%)

(10%)

(14%)

(11%)


(12%)































EUROPE / MIDDLE EAST / AFRICA













 Total cloud and on-premise software revenues 

$     1,873

$     2,066

$     2,069

$     2,462

$     8,471

$      1,903

$     2,008

$     2,019


$        5,931



 Total hardware revenues 

$        330

$        316

$        349

$        382

$     1,377

$         275

$        294

$        300


$           868

















AS REPORTED GROWTH RATES 













 Total cloud and on-premise software revenues 

(6%)

(8%)

(5%)

4%

(3%)

2%

(3%)

(2%)


(1%)



 Total hardware revenues 

(2%)

(17%)

(8%)

(10%)

(9%)

(17%)

(7%)

(14%)


(13%)

















CONSTANT CURRENCY GROWTH RATES (2)













 Total cloud and on-premise software revenues 

7%

3%

2%

5%

4%

7%

2%

2%


3%



 Total hardware revenues 

14%

(6%)

(1%)

(8%)

(1%)

(13%)

(2%)

(10%)


(8%)































ASIA PACIFIC













 Total cloud and on-premise software revenues 

$        901

$     1,016

$     1,051

$     1,206

$     4,173

$      1,012

$     1,169

$     1,066


$        3,247



 Total hardware revenues 

$        209

$        212

$        215

$        251

$        887

$         195

$        210

$        217


$           622

















AS REPORTED GROWTH RATES 













 Total cloud and on-premise software revenues 

(7%)

(3%)

7%

9%

2%

12%

15%

2%


9%



 Total hardware revenues 

(14%)

(11%)

(8%)

8%

(7%)

(7%)

(1%)

1%


(2%)

















CONSTANT CURRENCY GROWTH RATES (2)













 Total cloud and on-premise software revenues 

7%

6%

13%

11%

9%

8%

11%

0%


6%



 Total hardware revenues 

(3%)

(3%)

(3%)

9%

0%

(9%)

(3%)

0%


(4%)































TOTAL COMPANY













 Total cloud and on-premise software revenues 

$     6,458

$     7,009

$     7,084

$     8,439

$    28,990

$      6,791

$     7,177

$     7,365


$      21,334



 Total hardware revenues 

$     1,128

$     1,123

$     1,135

$     1,283

$     4,668

$         996

$     1,014

$     1,028


$        3,037

















AS REPORTED GROWTH RATES 













 Total cloud and on-premise software revenues 

(2%)

(4%)

(1%)

0%

(2%)

5%

2%

4%


4%



 Total hardware revenues 

(3%)

(16%)

(13%)

(9%)

(10%)

(12%)

(10%)

(9%)


(10%)

















CONSTANT CURRENCY GROWTH RATES (2)













 Total cloud and on-premise software revenues 

6%

2%

3%

2%

3%

6%

3%

5%


5%



 Total hardware revenues 

6%

(10%)

(8%)

(7%)

(5%)

(11%)

(9%)

(9%)


(9%)































(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, 2016 and 2015 for the fiscal 2017 and fiscal 2016 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
















 

APPENDIX A

ORACLE CORPORATION
Q3 FISCAL 2017 FINANCIAL RESULTS
EXPLANATION OF NON-GAAP MEASURES

To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, which exclude certain business combination accounting entries and expenses related to acquisitions, as well as other significant expenses including stock-based compensation, that we believe are helpful in understanding our past financial performance and our future results. Our non-GAAP financial 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. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

Cloud software as a service and platform as a service, software license updates and product support and hardware support deferred revenues: Business combination accounting rules require us to account for the fair values of cloud software as a service and platform as a service contracts, software license updates and product support contracts and hardware support contracts assumed in connection with our acquisitions. Because these contracts are generally one year in duration, our GAAP revenues generally for the one year period subsequent to our acquisition of a business do not reflect the full amount of revenues on these assumed cloud and support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment to our cloud software as a service and platform as a service revenues, software license updates and product support revenues and hardware support revenues is intended to include, and thus reflect, the full amount of such revenues. We believe the adjustment to these revenues is useful to investors as a measure of the ongoing performance of our business. We have historically experienced high renewal rates on our software license updates and product support contracts and our objective is to increase the renewal rates on acquired and new cloud software as a service and platform as a service and hardware support contracts; however, we cannot be certain that our customers will renew our cloud software as a service and platform as a service contracts, software license updates and product support contracts or our hardware support contracts.

Deferred sales commissions amortization: Certain acquired companies capitalized sales commissions associated with subscription agreements and amortized these amounts over the related contractual terms.  Business combination accounting rules generally require us to eliminate these capitalized sales commissions balances as of the acquisition date and our post-combination GAAP sales and marketing expenses generally do not reflect the amortization of these deferred sales commissions balances. The non-GAAP adjustment to increase our sales and marketing expenses is intended to include, and thus reflect, the full amount of amortization related to such balances as though the acquired companies operated independently in the periods presented. We believe this adjustment to sales and marketing expenses is useful to investors as a measure of the ongoing performance of our business. This non-GAAP adjustment commenced in the second fiscal quarter of fiscal 2017 as a result of our acquisition of NetSuite.  Such adjustment was not material in prior periods.

Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.

Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP operating expenses and net income measures. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.

Acquisition related and other expenses; and restructuring expenses: We have excluded the effect of acquisition related and other expenses and the effect of restructuring expenses from our non-GAAP operating expenses and net income measures. We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related and other expenses consist of personnel related costs for transitional employees, other acquired employee related costs, stock-based compensation expenses (in addition to the stock-based compensation expenses described above), integration related professional services, certain business combination adjustments including adjustments after the measurement period has ended and certain other operating items, net. Substantially all of the stock-based compensation expenses included in acquisition related and other expenses resulted from unvested options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the original terms of those options. Restructuring expenses consist of employee severance and other exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses. Although acquisition related expenses and restructuring expenses generally diminish over time with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/q3-fy17-gaap-eps-up-6-to-053-and-non-gaap-eps-up-7-to-069-300424316.html

SOURCE Oracle Corporation

Ken Bond, Oracle Investor Relations, 1.650.607.0349, ken.bond@oracle.com: Deborah Hellinger, Oracle Corporate Communications, 1.212.508.7935, deborah.hellinger@oracle.com

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