Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 14, 2017

Oracle Corporation

(Exact name of registrant as specified in its charter)

 

Delaware   001-35992   54-2185193
(State or other jurisdiction of incorporation)  

(Commission

File Number)

 

(IRS Employer

Identification No.)

500 Oracle Parkway, Redwood City, California 94065

(Address of principal executive offices) (Zip Code)

(650) 506-7000

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 

Table of Contents

TABLE OF CONTENTS

 

Item 2.02 Results of Operations and Financial Condition
Item 8.01 Other Events
Item 9.01 Financial Statements and Exhibits
EXHIBIT LIST
SIGNATURE
EXHIBIT 99.1

Table of Contents

Section 2—Financial Information

Item 2.02 Results of Operations and Financial Condition

On September 14, 2017, Oracle Corporation (“Oracle”) issued a press release announcing financial results for its fiscal first quarter ended August 31, 2017. A copy of this press release is furnished as Exhibit 99.1 to this report.

Section 8—Other Events

Item 8.01 Other Events

Oracle announced that its Board of Directors has declared a cash dividend of $0.19 per share of outstanding common stock payable on October 25, 2017, to stockholders of record as of the close of business on October 11, 2017.

Section 9—Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

 

Exhibit No.

  

Description of Exhibit

99.1    Press Release dated September 14, 2017

Table of Contents

EXHIBIT LIST

 

Exhibit No.

  

Description of Exhibit

99.1    Press Release dated September 14, 2017

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    ORACLE CORPORATION
Dated: September 14, 2017     By:   /S/ W ILLIAM C OREY W EST
     

William Corey West

Executive Vice President, Corporate Controller and

Chief Accounting Officer

Exhibit 99.1

 

LOGO

For Immediate Release

 

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

Q1 FY18 GAAP EPS UP 19% TO $0.52 and NON-GAAP EPS UP 12% TO $0.62

Q1 FY18 Cloud Revenues Up 51% to $1.5 Billion and Total Revenues Up 7% to $9.2 Billion

REDWOOD SHORES, Calif., September 14, 2017 — Oracle Corporation (NYSE: ORCL) today announced fiscal 2018 Q1 results. Total Revenues were up 7% from the prior year to $9.2 billion. Cloud plus On-Premise Software Revenues were up 9% to $7.4 billion. Cloud Software as a Service (SaaS) revenues were up 62% to $1.1 billion. Cloud Platform as a Service (PaaS) plus Infrastructure as a Service (IaaS) revenues were up 28% to $400 million. Total Cloud Revenues were up 51% to $1.5 billion.

GAAP Operating Income was up 7% to $2.8 billion and Operating Margin was 31%. Non-GAAP Operating Income was up 11% to $3.8 billion and non-GAAP Operating Margin was 41%. GAAP Net Income was up 21% to $2.2 billion, while non-GAAP Net Income was up 14% to $2.7 billion. GAAP Earnings Per Share was up 19% to $0.52, while non-GAAP Earnings Per Share was up 12% to $0.62.

Short-term deferred revenues were up 9% compared with a year ago to $10.3 billion. Operating cash flow on a trailing twelve-month basis was up 8% to $14.8 billion.

“The sustained hyper-growth in our multi-billion dollar cloud business continues to drive Oracle’s overall revenue and earnings higher and higher,” said Oracle CEO, Safra Catz. “In Q1, total revenues were up 7%, GAAP EPS was up 19%, and non-GAAP EPS was up 12%. Oracle is off to a very, very strong start in FY18.”

“With SaaS revenue up 62%, our cloud applications business continues to grow more than twice as fast as Salesforce.com,” said Oracle CEO, Mark Hurd. “ERP is our largest and most important cloud applications business. We now have about 5,000 Fusion ERP customers plus 12,000 NetSuite ERP customers in the Oracle Cloud. That’s 30 times more ERP customers than Workday.”

“In a couple of weeks, we will announce the world’s first fully autonomous database cloud service,” said Oracle Chairman and CTO, Larry Ellison. “Based on machine learning, the latest version of Oracle is a totally automated “self-driving” system that does not require human beings to manage or tune the database. Using AI to eliminate most sources of human error enables Oracle to offer database SLA’s that guarantee 99.995% reliability while charging much less than AWS.”

The Board of Directors also declared a quarterly cash dividend of $0.19 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on October 11, 2017, with a payment date of October 25, 2017.

Q1 Fiscal 2018 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 Q1 results and Fiscal 2018 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: 82330974.

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 the growth of our cloud applications business compared to competitors and the announcement regarding our new autonomous database cloud service, 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 products and services are compromised or if our products and services contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and reduced sales. (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 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 September 14, 2017. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION

Q1 FISCAL 2018 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

   

 

Three Months Ended August 31,

    % Increase
(Decrease)
in US $ 		         

% Increase

(Decrease)
in Constant
Currency (1)

 
           2017            % of
Revenues 		           2016            % of
Revenues 		       
   

REVENUES

             

Cloud software as a service

  $ 1,067       12%     $ 657       8%       62%         62%  

Cloud platform as a service and infrastructure as a service

    400       4%       312       3%       28%         27%  
 

 

 

       

Total cloud revenues

    1,467       16%       969       11%       51%         51%  
 

 

 

       

New software licenses

    966       11%       1,030       12%       (6% )        (7% ) 

Software license updates and product support

    4,951       54%       4,792       56%       3%         2%  
 

 

 

       

Total on-premise software revenues

    5,917       65%       5,822       68%       2%         1%  
 

 

 

       

Total cloud and on-premise software revenues

    7,384       81%       6,791       79%       9%         8%  
 

 

 

       

Hardware revenues

    943       10%       996       12%       (5% )        (6% ) 

Services revenues

    860       9%       808       9%       6%         5%  
 

 

 

       

Total revenues

    9,187       100%       8,595       100%       7%         6%  
 

 

 

       

OPERATING EXPENSES

             

Cloud software as a service

    374       4%       283       3%       33%         32%  

Cloud platform as a service and infrastructure as a service

    227       2%       132       2%       70%         69%  

Software license updates and product support

    257       3%       275       3%       (6% )        (7% ) 

Hardware

    373       4%       391       5%       (4% )        (5% ) 

Services

    702       8%       695       8%       1%         0%  

Sales and marketing

    1,992       22%       1,919       22%       4%         3%  

Research and development

    1,574       17%       1,520       17%       4%         3%  

General and administrative

    320       3%       315       4%       2%         1%  

Amortization of intangible assets

    411       5%       311       4%       32%         32%  

Acquisition related and other

    12       0%       14       0%       (17% )        (17% ) 

Restructuring

    124       1%       99       1%       25%         22%  
 

 

 

       

Total operating expenses

    6,366       69%       5,954       69%       7%         6%  
 

 

 

       

 

OPERATING INCOME

    2,821       31%       2,641       31%       7%         6%  
 

 

 

       

Interest expense

    (469 )      (5% )      (416 )      (5% )      13%         13%  

Non-operating income, net

    233       2%       148       2%       57%         57%  
 

 

 

       

INCOME BEFORE PROVISION FOR INCOME TAXES

    2,585       28%       2,373       28%       9%         8%  
 

 

 

       

Provision for income taxes

    375       4%       541       7%       (31% )        (31% ) 
 

 

 

       

NET INCOME

  $ 2,210       24%     $ 1,832       21%       21%         19%  
 

 

 

       

EARNINGS PER SHARE:

             

Basic

  $ 0.53       $ 0.44          

Diluted

  $ 0.52       $ 0.43          

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

             

Basic

    4,156         4,119          

Diluted

    4,284         4,221          
                                                         

 

(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, 2017, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended August 31, 2017 compared with the corresponding prior year period increased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 1 percentage point.

 

1

ORACLE CORPORATION

Q1 FISCAL 2018 FINANCIAL RESULTS

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

($ in millions, except per share data)

 

    Three Months Ended August 31,     % Increase (Decrease)
in US $ 		    % Increase (Decrease) in
Constant Currency (2) 		 
     2017
GAAP 		    Adj.     2017
Non-GAAP 		    2016
GAAP 		    Adj.     2016
Non-GAAP 		    GAAP     Non-GAAP     GAAP     Non-GAAP  

TOTAL REVENUES

  $        9,187     $ 25     $        9,212     $ 8,595     $ 18     $   8,613       7%        7%        6%        6%   

TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES

    7,384       25       7,409       6,791       18       6,809       9%        9%        8%        8%   

TOTAL CLOUD REVENUES

    1,467       25       1,492       969       17       986       51%        51%        51%        51%   

Cloud software as a service

    1,067       22       1,089       657       17       674       62%        62%        62%        61%   

Cloud platform as a service and infrastructure as a service

    400             3       403       312       —       312       28%        29%        27%        28%   

Software license updates and product support

    4,951       —       4,951       4,792             1       4,793       3%        3%        2%        2%   

TOTAL OPERATING EXPENSES

  $ 6,366     $ (938 )    $ 5,428     $ 5,954     $ (743 )    $ 5,211       7%        4%        6%        3%   

Cloud software as a service (4)

    374       (9 )      365       283       (5 )      278       33%        32%        32%        31%   

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

    227       (2 )      225       132       (1 )      131       70%        70%        69%        69%   

Sales and marketing (3)

    1,992       (78 )      1,914       1,919       (63 )      1,856       4%        3%        3%        2%   

Stock-based compensation (4)

    302       (302 )      —       250       (250 )      —       21%        *        21%        *   

Amortization of intangible assets (5)

    411       (411 )      —       311       (311 )      —       32%        *        32%        *   

Acquisition related and other

    12       (12 )      —       14       (14 )      —       (17%)       *        (17%)       *   

Restructuring

    124       (124 )      —       99       (99 )      —       25%        *        22%        *   

CLOUD SOFTWARE AS A SERVICE MARGIN %

    65%         67%       57%         59%       779 bp.        757 bp.        788 bp.        766 bp.   

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

    43%         44%       58%         58%       (1,401) bp.        (1,343) bp.        (1,407) bp.        (1,348) bp.   

OPERATING INCOME

  $ 2,821     $ 963     $ 3,784     $ 2,641     $ 761     $ 3,402       7%        11%        6%        10%   

OPERATING MARGIN %

    31%         41%       31%         39%       (2) bp.        158 bp.        (5)  bp.        161 bp.   

INCOME TAX EFFECTS (6)

  $ 375     $ 512     $ 887     $ 541     $ 258     $ 799       (31%)       11%        (31%)       10%   

NET INCOME

  $ 2,210     $ 451     $ 2,661     $ 1,832     $ 503     $ 2,335       21%        14%        19%        13%   

DILUTED EARNINGS PER SHARE

  $ 0.52       $ 0.62     $ 0.43       $ 0.55       19%        12%        18%        11%   

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

    4,284       —       4,284       4,221       —       4,221       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, 2017, 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
August 31, 		 
   2017      2016  

Stock-based compensation (4)

   $ (89 )     $ (63 ) 

Acquired deferred sales commissions amortization

        11             —  
  

 

 

    

 

 

 

Total non-GAAP sales and marketing adjustments

   $ (78 )     $ (63 ) 
  

 

 

    

 

 

 

 

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

 

      Three Months Ended
August 31, 2017 		     Three Months Ended
August 31, 2016 		 
   GAAP      Adj.      Non-GAAP      GAAP      Adj.      Non-GAAP  

Software license updates and product support

   $ 7      $ (7 )     $ —      $ 6      $ (6 )     $ —  

Hardware

     3        (3 )       —        3        (3 )       —  

Services

     14        (14 )       —        8        (8 )       —  

Research and development

     234        (234 )       —        195        (195 )       —  

General and administrative

     44        (44 )       —        38        (38 )       —  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

     302        (302 )       —        250        (250 )       —  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cloud software as a service

     9        (9 )       —        5        (5 )       —  

Cloud platform as a service and infrastructure as a service

     2        (2 )       —        1        (1 )       —  

Sales and marketing

     89        (89 )       —        63        (63 )       —  

Acquisition related and other

     1        (1 )       —        —        —        —  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation

   $   403      $   (403 )     $   —      $   319      $   (319 )     $   —  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(5) Estimated future annual amortization expense related to intangible assets as of August 31, 2017 was as follows:

 

Remainder of fiscal 2018

   $ 1,179  

Fiscal 2019

     1,408  

Fiscal 2020

     1,207  

Fiscal 2021

     1,021  

Fiscal 2022

     918  

Fiscal 2023

     567  

Thereafter

     886  
  

 

 

 

Total intangible assets, net

   $   7,186  
  

 

 

 

 

(6) Income tax effects were calculated reflecting an effective GAAP tax rate of 14.5% and 22.8% in the first quarter of fiscal 2018 and 2017, respectively, and an effective non-GAAP tax rate of 25.0% and 25.5% in the first quarter of fiscal 2018 and 2017, respectively. The difference between our GAAP and non-GAAP tax rates in the first quarters of fiscal 2018 and 2017 were 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.

 

* Not meaningful

 

2

ORACLE CORPORATION

Q1 FISCAL 2018 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

 

     

 

August 31,
2017

     May 31,
2017 		 

 

ASSETS

     

Current Assets:

     

Cash and cash equivalents

   $ 21,321      $ 21,784  

Marketable securities

     45,576        44,294  

Trade receivables, net

     3,591        5,300  

Inventories

     312        300  

Prepaid expenses and other current assets

     2,535        2,837  
  

 

 

 

 

Total Current Assets

     73,335        74,515  

 

Non-Current Assets:

     

Property, plant and equipment, net

     5,586        5,315  

Intangible assets, net

     7,186        7,679  

Goodwill, net

     43,020        43,045  

Deferred tax assets

     1,181        1,143  

Other assets

     3,289        3,294  
  

 

 

 

 

Total Non-Current Assets

     60,262        60,476  
  

 

 

 

 

TOTAL ASSETS

   $ 133,597      $ 134,991  
  

 

 

 

 

LIABILITIES AND EQUITY

     

 

Current Liabilities:

     

Notes payable and other borrowings, current

   $ 4,998      $ 9,797  

Accounts payable

     593        599  

Accrued compensation and related benefits

     1,517        1,966  

Deferred revenues

     10,269        8,233  

Other current liabilities

     2,849        3,583  
  

 

 

 

 

Total Current Liabilities

     20,226        24,178  

 

Non-Current Liabilities:

     

Notes payable and other borrowings, non-current

     48,293        48,112  

Income taxes payable

     5,891        5,681  

Other non-current liabilities

     2,821        2,774  
  

 

 

 

 

Total Non-Current Liabilities

     57,005        56,567  

 

Equity

     56,366        54,246  
  

 

 

 

 

TOTAL LIABILITIES AND EQUITY

   $   133,597      $   134,991  
  

 

 

 
                   

 

3

ORACLE CORPORATION

Q1 FISCAL 2018 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

 

     Three Months Ended August 31,  
              2017                      2016          

Cash Flows From Operating Activities:

     

Net income

   $ 2,210      $ 1,832  

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

     

Depreciation

     285        222  

Amortization of intangible assets

     411        311  

Deferred income taxes

     159        145  

Stock-based compensation

     403        319  

Other, net

     47        39  

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

     

Decrease in trade receivables, net

     1,752        1,993  

Increase in inventories

     (11 )       (75 ) 

Decrease in prepaid expenses and other assets

     555        435  

Decrease in accounts payable and other liabilities

     (1,062 )       (1,013 ) 

Increase (decrease) in income taxes payable

     32        (94 ) 

Increase in deferred revenues

     1,785        1,761  
  

 

 

 

 

Net cash provided by operating activities

     6,566        5,875  
  

 

 

 

 

Cash Flows From Investing Activities:

     

Purchases of marketable securities and other investments

     (7,671 )       (5,513 ) 

Proceeds from maturities and sales of marketable securities and other investments

     6,326        1,752  

Acquisitions, net of cash acquired

     —        (1,143 ) 

Capital expenditures

     (473 )       (299 ) 
  

 

 

 

 

Net cash used for investing activities

     (1,818 )       (5,203 ) 
  

 

 

 

 

Cash Flows From Financing Activities:

     

Payments for repurchases of common stock

     (502 )       (2,002 ) 

Proceeds from issuances of common stock

     1,014        487  

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

     (331 )       (170 ) 

Payments of dividends to stockholders

     (788 )       (618 ) 

Proceeds from borrowings, net of issuance costs

     —        13,932  

Repayments of borrowings

     (4,800 )       (3,750 ) 

Distributions to noncontrolling interests

     (34 )       (167 ) 
  

 

 

 

 

Net cash (used for) provided by financing activities

     (5,441 )       7,712  
  

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     230        78  
  

 

 

 

Net (decrease) increase in cash and cash equivalents

     (463 )       8,462  
  

 

 

 

Cash and cash equivalents at beginning of period

     21,784        20,152  
  

 

 

 

Cash and cash equivalents at end of period

   $   21,321      $   28,614  
  

 

 

 
                   

 

4

ORACLE CORPORATION

Q1 FISCAL 2018 FINANCIAL RESULTS

FREE CASH FLOW - TRAILING 4-QUARTERS (1)

($ in millions)

 

     Fiscal 2017      Fiscal 2018  
      Q1      Q2      Q3      Q4      Q1              Q2                      Q3                      Q4          

 

GAAP Operating Cash Flow

   $       13,679      $       14,249      $       13,453      $       14,126      $       14,817           

Capital Expenditures

     (1,042 )       (1,604 )       (1,676 )       (2,021 )       (2,195 )          
  

 

 

 

 

Free Cash Flow

   $ 12,637      $ 12,645      $ 11,777      $ 12,105      $ 12,622           
  

 

 

 

% Growth over prior year

     5%        10%        (7%)        (3%)        0%                             

 

GAAP Net Income

   $ 8,986      $ 8,820      $ 8,917      $ 9,335      $ 9,713           

Free Cash Flow as a % of Net Income

     141%        143%        132%        130%        130%           
                                                                         

 

(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.

 

5

ORACLE CORPORATION

Q1 FISCAL 2018 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES (1)

($ in millions)

 

     Fiscal 2017     Fiscal 2018  
  Q1     Q2     Q3     Q4     TOTAL         Q1             Q2             Q3             Q4         TOTAL  

 

REVENUES

                   

Cloud software as a service

  $ 657     $ 725     $ 865     $ 964     $ 3,211     $ 1,067           $ 1,067  

Cloud platform as a service and infrastrucure as a service

    312       328       324       397       1,360       400             400  
 

 

 

 

Total cloud revenues

    969       1,053       1,189       1,361       4,571       1,467             1,467  
 

 

 

 

 

New software licenses

    1,030       1,347       1,414       2,626       6,418       966             966  

Software license updates and product support

    4,792       4,777       4,762       4,897       19,229       4,951             4,951  
 

 

 

 

Total on-premise software revenues

    5,822       6,124       6,176       7,523       25,647       5,917             5,917  
 

 

 

 

Total cloud and on-premise software revenues

    6,791       7,177       7,365       8,884       30,218       7,384             7,384  
 

 

 

 

 

Total hardware revenues

    996       1,014       1,028       1,114       4,152       943             943  

 

Total services revenues

    808       844       812       894       3,358       860             860  
 

 

 

 

 

Total revenues

  $ 8,595     $ 9,035     $ 9,205     $ 10,892     $ 37,728     $ 9,187           $ 9,187  
 

 

 

 

 

AS REPORTED REVENUE GROWTH RATES

                   

Cloud software as a service

    50%       57%       64%       67%       61%       62%             62%  

Cloud platform as a service and infrastrucure as a service

    80%       75%       55%       40%       60%       28%             28%  

Total cloud revenues

    59%       62%       62%       58%       60%       51%             51%  

 

New software licenses

    (11% )      (20% )      (16% )      (5% )      (12% )      (6% )            (6% ) 

Software license updates and product support

    2%       2%       2%       2%       2%       3%             3%  

Total on-premise software revenues

    0%       (4% )      (3% )      (1% )      (2% )      2%             2%  

Total cloud and on-premise software revenues

    5%       2%       4%       5%       4%       9%             9%  

 

Total hardware revenues

    (12% )      (10% )      (9% )      (13% )      (11% )      (5% )            (5% ) 

 

Total services revenues

    (6% )      (2% )      2%       3%       (1% )      6%             6%  

 

Total revenues

    2%       0%       2%       3%       2%       7%             7%  

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

Cloud software as a service

    52%       59%       65%       69%       62%       62%             62%  

Cloud platform as a service and infrastrucure as a service

    84%       78%       57%       42%       62%       27%             27%  

Total cloud revenues

    61%       64%       63%       60%       62%       51%             51%  

 

New software licenses

    (10% )      (19% )      (15% )      (4% )      (11% )      (7% )            (7% ) 

Software license updates and product support

    3%       3%       3%       3%       3%       2%             2%  

Total on-premise software revenues

    1%       (3% )      (2% )      0%       (1% )      1%             1%  

Total cloud and on-premise software revenues

    6%       3%       5%       6%       5%       8%             8%  

 

Total hardware revenues

    (11% )      (9% )      (9% )      (12% )      (10% )      (6% )            (6% ) 

 

Total services revenues

    (5% )      0%       3%       4%       1%       5%             5%  

 

Total revenues

    3%       1%       3%       4%       3%       6%             6%  
                                                                                 

 

(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, 2017 and 2016 for the fiscal 2018 and fiscal 2017 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

6

ORACLE CORPORATION

Q1 FISCAL 2018 FINANCIAL RESULTS

SUPPLEMENTAL GEOGRAPHIC GAAP REVENUES ANALYSIS (1)

($ in millions)

 

    Fiscal 2017     Fiscal 2018  
     Q1     Q2     Q3     Q4     TOTAL         Q1             Q2             Q3             Q4         TOTAL  

 

AMERICAS

                   

Total cloud and on-premise software revenues

  $ 3,876     $ 4,000     $ 4,280     $ 5,076     $ 17,231     $ 4,256           $ 4,256  
 

 

 

 

Total hardware revenues

  $ 526     $ 510     $ 511     $ 542     $ 2,089     $ 485           $ 485  
 

 

 

 

AS REPORTED GROWTH RATES

                   

Total cloud and on-premise software revenues

    5%       2%       8%       6%       5%       10%             10%  

Total hardware revenues

    (11% )      (14% )      (11% )      (17% )      (13% )      (8% )            (8% ) 

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

Total cloud and on-premise software revenues

    6%       2%       7%       6%       5%       9%             9%  

Total hardware revenues

    (10% )      (14% )      (11% )      (17% )      (13% )      (8% )            (8% ) 
           

 

EUROPE / MIDDLE EAST / AFRICA

                   

Total cloud and on-premise software revenues

  $ 1,903     $ 2,008     $ 2,019     $ 2,489     $ 8,419     $ 2,019           $ 2,019  
 

 

 

 

Total hardware revenues

  $ 275     $ 294     $ 300     $ 352     $ 1,221     $ 271           $ 271  
 

 

 

 

AS REPORTED GROWTH RATES

                   

Total cloud and on-premise software revenues

    2%       (3% )      (2% )      1%       (1% )      6%             6%  

Total hardware revenues

    (17% )      (7% )      (14% )      (8% )      (11% )      (1% )            (1% ) 

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

Total cloud and on-premise software revenues

    7%       2%       2%       5%       4%       3%             3%  

Total hardware revenues

    (13% )      (2% )      (10% )      (4% )      (7% )      (4% )            (4% ) 
                                                                                 

 

ASIA PACIFIC

                   

Total cloud and on-premise software revenues

  $ 1,012     $ 1,169     $ 1,066     $ 1,319     $ 4,568     $ 1,109           $ 1,109  
 

 

 

 

Total hardware revenues

  $ 195     $ 210     $ 217     $ 220     $ 842     $ 187           $ 187  
 

 

 

 

AS REPORTED GROWTH RATES

                   

Total cloud and on-premise software revenues

    12%       15%       2%       9%       9%       10%             10%  

Total hardware revenues

    (7% )      (1% )      1%       (12% )      (5% )      (4% )            (4% ) 

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

Total cloud and on-premise software revenues

    8%       11%       0%       9%       7%       10%             10%  

Total hardware revenues

    (9% )      (3% )      0%       (12% )      (6% )      (4% )            (4% ) 
           

TOTAL COMPANY

                   

Total cloud and on-premise software revenues

  $ 6,791     $ 7,177     $ 7,365     $ 8,884     $ 30,218     $ 7,384           $ 7,384  
 

 

 

 

Total hardware revenues

  $ 996     $ 1,014     $ 1,028     $ 1,114     $ 4,152     $ 943           $ 943  
 

 

 

 

 

AS REPORTED GROWTH RATES

                   

Total cloud and on-premise software revenues

    5%       2%       4%       5%       4%       9%             9%  

Total hardware revenues

    (12% )      (10% )      (9% )      (13% )      (11% )      (5% )            (5% ) 

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

Total cloud and on-premise software revenues

    6%       3%       5%       6%       5%       8%             8%  

Total hardware revenues

    (11% )      (9% )      (9% )      (12% )      (10% )      (6% )            (6% ) 
                                                                                 

 

(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, 2017 and 2016 for the fiscal 2018 and fiscal 2017 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

7

ORACLE CORPORATION

Q1 FISCAL 2018 FINANCIAL RESULTS

SUPPLEMENTAL TOTAL CLOUD AND ON-PREMISE SOFTWARE GAAP REVENUES ANALYSIS (1)

($ in millions)

 

    Fiscal 2017     Fiscal 2018  
     Q1     Q2     Q3     Q4     TOTAL         Q1             Q2             Q3             Q4         TOTAL  

 

APPLICATIONS REVENUES

                   

Cloud software as a service

  $ 657     $ 725     $ 865     $ 964     $ 3,211     $ 1,067           $ 1,067  

On-premise software revenues

    1,584       1,610       1,632       1,898       6,724       1,579             1,579  
 

 

 

 

Total cloud and on-premise software revenues

  $ 2,241     $ 2,335     $ 2,497     $ 2,862     $ 9,935     $ 2,646           $ 2,646  
 

 

 

 

 

AS REPORTED GROWTH RATES

                   

Cloud software as a service

    50%       57%       64%       67%       61%       62%             62%  

On-premise software revenues

    (5% )      (11% )      (8% )      (10% )      (8% )      0%             0%  

Total cloud and on-premise software revenues

    6%       3%       9%       7%       6%       18%             18%  

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

Cloud software as a service

    52%       59%       65%       69%       62%       62%             62%  

On-premise software revenues

    (4% )      (9% )      (7% )      (9% )      (7% )      (1% )            (1% ) 

Total cloud and on-premise software revenues

    8%       5%       9%       8%       8%       17%             17%  
           

 

PLATFORM AND INFRASTRUCTURE REVENUES

                   

Cloud platform as a service and infrastructure as a service

  $ 312     $ 328     $ 324     $ 397     $ 1,360     $ 400           $ 400  

On-premise software revenues

    4,238       4,514       4,544       5,625       18,923       4,338             4,338  
 

 

 

 

Total cloud and on-premise software revenues

  $ 4,550     $ 4,842     $ 4,868     $ 6,022     $ 20,283     $ 4,738           $ 4,738  
 

 

 

 

 

AS REPORTED GROWTH RATES

                   

Cloud platform as a service and infrastructure as a service

    80%       75%       55%       40%       60%       28%             28%  

On-premise software revenues

    1%       (1% )      (1% )      3%       1%       2%             2%  

Total cloud and on-premise software revenues

    5%       2%       2%       5%       3%       4%             4%  

 

CONSTANT CURRENCY GROWTH RATES (2)

                   

Cloud platform as a service and infrastructure as a service

    84%       78%       57%       42%       62%       27%             27%  

On-premise software revenues

    2%       (1% )      0%       4%       1%       1%             1%  

Total cloud and on-premise software revenues

    5%       2%       2%       6%       4%       3%             3%  
                                                                                 
(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, 2017 and 2016 for the fiscal 2018 and fiscal 2017 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

8

APPENDIX A

ORACLE CORPORATION

Q1 FISCAL 2018 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, cloud platform as a service and infrastructure as a service, and software license updates and product support deferred revenues : Business combination accounting rules require us to account for the fair values of cloud-based service contracts and software license updates and product 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 revenues, cloud platform as a service and infrastructure as a service revenues, and software license updates and product 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-based service contracts; however, we cannot be certain that our customers will renew our cloud-based contracts or software license updates and product 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. The presentation of 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 stock awards assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the original terms of those stock awards. 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 and/or strategic initiatives, we generally will incur these expenses in connection with any future acquisitions and/or strategic initiatives.

 

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