ORACLE CORP (Form: 8-K, Received: 06/19/2019 16:24:47)

ORACLE CORPORATION

Dated: June 19, 2019

/S/ W ILLIAM C OREY W EST

William Corey West

Executive Vice President, Corporate Controller and

Chief Accounting Officer

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): June 19, 2019

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

2.25% senior notes due January 2021

3.125% senior notes due July 2025

ORCL

New York Stock Exchange

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

Item 2.02 Results of Operations and Financial Condition

Item 8.01 Other Events

Item 9.01 Financial Statements and Exhibits

SIGNATURE

EXHIBIT 99.1

Sect ion 2—Financial Information

Item 2.02 Results of Operations and Financial Condition

On June 19, 2019, Oracle Corporation (“Oracle”) issued a press release announcing financial results for its fiscal fourth quarter ended May 31, 2019. 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 $0.24 per share of outstanding common stock payable on July 31, 2019, to stockholders of record as of the close of business on July 17, 2019.

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 June 19, 2019

SIGNA TURE

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.

Exhibit 99.1

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

Q4 FY19 GAAP EPS UP 36% TO $1.07 and NON-GAAP EPS UP 23% TO $1.16

FY19 Fusion ERP and HCM Cloud Revenue Up 32%, NetSuite ERP Cloud Revenue Up 32%

REDWOOD SHORES, Calif., June 19, 2019 -- Oracle Corporation (NYSE: ORCL) today announced fiscal 2019 Q4 results and fiscal 2019 full year results. Total Quarterly Revenues were $11.1 billion, up 1% in USD and up 4% in constant currency compared to Q4 last year. Cloud Services and License Support revenues were $6.8 billion, while Cloud License and On-Premise License revenues were $2.5 billion. Total Cloud Services and License Support plus Cloud License and On-Premise License revenues were $9.3 billion, up 3% in USD and 6% in constant currency.

Q4 GAAP Operating Income was up 2% to $4.3 billion and GAAP operating margin was 38%. Non-GAAP Operating Income was up 4% to $5.3 billion and non-GAAP operating margin was 47%. GAAP Net Income was up 14% to $3.7 billion and non-GAAP Net Income was up 3% to $4.1 billion. GAAP Earnings Per Share was $1.07, while non-GAAP Earnings Per Share was $1.16.

Short-term deferred revenues were $8.4 billion. Operating cash flow for fiscal 2019 was $14.6 billion.

For fiscal 2019, Total Revenues were $39.5 billion, slightly higher in USD and up 3% in constant currency. Cloud Services and License Support revenues were $26.7 billion, while Cloud License and On-Premise License revenues were $5.9 billion. Total Cloud Services and License Support plus Cloud License and On-Premise revenues were $32.6 billion, up 2% in USD and 4% in constant currency.

Fiscal 2019 GAAP Operating Income was $13.5 billion, and GAAP operating margin was 34%. Non-GAAP Operating Income was $17.4 billion, and non-GAAP operating margin was 44%. GAAP Net Income was $11.1 billion, while non-GAAP Net Income was $13.1 billion. GAAP Earnings Per Share increased 251% to $2.97, while non-GAAP Earnings Per Share was up 16% to $3.52.

“In Q4, our non-GAAP operating income grew 7% in constant currency—which drove EPS well above the high end of my guidance,” said Oracle CEO, Safra Catz. “Our high-margin Fusion and NetSuite cloud applications businesses are growing rapidly, while we downsize our low-margin legacy hardware business. The net result of this shift away from commodity hardware to cloud applications was a Q4 non-GAAP operating margin of 47%, the highest we’ve seen in five years.”

“Our Fusion ERP and HCM cloud applications suite revenues grew 32% in FY19,” said Oracle CEO, Mark Hurd. “Our NetSuite ERP cloud applications revenues also grew 32% this year. These strong results extend Oracle’s already commanding lead in worldwide Cloud ERP. Our cloud applications businesses are growing faster than our competitors. That said, let me call your attention to the following approved statement from industry analyst IDC.”

Per IDC’s latest annual market share results, Oracle gained the most market share globally out of all Enterprise Applications SaaS vendors three years running -- in CY16, CY17 and CY18.

“We added over five thousand new Autonomous Database trials in Q4,” said Oracle Chairman and CTO, Larry Ellison. “Our new Gen2 Cloud Infrastructure offers those customers a compelling array of advance technology features including our self-driving database that automatically encrypts all your data, backs itself up, tunes itself, upgrades itself, and patches itself when a security threat is detected. It does all of this autonomously—while running—without the need for any human intervention, and without the need for any downtime. No other cloud infrastructure provides anything close to these autonomous features.”

The Board of Directors also declared a quarterly cash dividend of $0.24 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on July 17, 2019, with a payment date of July 31, 2019.

Q4 Fiscal 2019 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 Q4 results and fiscal 2019 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: 9955119.

About Oracle

The Oracle Cloud offers a complete suite of integrated applications for Sales, Service, Marketing, Human Resources, Finance, Supply Chain and Manufacturing, plus Highly-Automated and Secure Generation 2 Infrastructure featuring the Oracle Autonomous Database. For more information about Oracle (NYSE:ORCL), visit us at www.oracle.com or contact Investor Relations at investor_us@oracle.com or (650) 506-4073.

# # #

Trademarks

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

"Safe Harbor" Statement : Statements in this press release relating to Oracle's future plans, expectations, beliefs, intentions and prospects, including statements regarding the growth of our high-margin cloud applications businesses, are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Our cloud strategy, including our Oracle Software as a Service and Infrastructure as a Service offerings, may not be successful. (2) If we are unable to develop new or sufficiently differentiated products and services, integrate acquired products and services, or enhance and improve our existing products and support services in a timely manner, or price our products and services to meet market demand, customers may not purchase or subscribe to our software, hardware or cloud offerings or renew software support, hardware support or cloud subscriptions contracts. (3) Enterprise customers rely on our cloud, license and hardware offerings and related services to run their businesses and significant coding, manufacturing or configuration errors in our cloud, license and hardware offerings and related services could expose us to product liability, performance and warranty claims, as well as cause significant harm to our brand and reputation, which could impact our future sales. (4) If the security measures for our products and services are compromised and as a result, our customers' data or our IT systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable, our brand and reputation could be damaged and we may experience legal claims and reduced sales. (5) Our business practices with respect to data could give rise to operational interruption, liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection. (6) Economic, political 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) Our international sales and operations subject us to additional risks that can adversely affect our operating results. (8) We have a selective and active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle’s Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of June 19, 2019. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION

Q4 FISCAL 2019 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

	Three Months Ended May 31,								% Increase	% Increase (Decrease)
	2019			% of Revenues	2018			% of Revenues	(Decrease) in US $	in Constant Currency (1)
REVENUES
Cloud services and license support	$	6,799		61%	$	6,768		62%	0%	3%
Cloud license and on-premise license		2,520		23%		2,247		20%	12%	15%
Hardware		994		9%		1,116		10%	(11%)	(8%)
Services		823		7%		883		8%	(7%)	(4%)
Total revenues		11,136		100%		11,014		100%	1%	4%
OPERATING EXPENSES
Cloud services and license support		975		9%		961		9%	1%	3%
Hardware		362		3%		461		4%	(21%)	(19%)
Services		726		7%		752		7%	(3%)	0%
Sales and marketing		2,318		21%		2,315		21%	0%	3%
Research and development		1,562		14%		1,542		14%	1%	3%
General and administrative		329		3%		306		3%	8%	11%
Amortization of intangible assets		424		4%		415		4%	2%	2%
Acquisition related and other		15		0%		20		0%	(23%)	(21%)
Restructuring		168		1%		81		0%	108%	118%
Total operating expenses		6,879		62%		6,853		62%	0%	3%
OPERATING INCOME		4,257		38%		4,161		38%	2%	6%
Interest expense		(525	)	(4%)		(548	)	(5%)	(4%)	(4%)
Non-operating income, net		134		1%		294		3%	(54%)	(54%)
INCOME BEFORE PROVISION FOR INCOME TAXES		3,866		35%		3,907		36%	(1%)	3%
Provision for income taxes		126		1%		631		6%	(80%)	(79%)
NET INCOME	$	3,740		34%	$	3,276		30%	14%	19%
EARNINGS PER SHARE:
Basic	$	1.10			$	0.81
Diluted	$	1.07			$	0.79
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		3,389				4,046
Diluted		3,495				4,149

(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, 2018, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended May 31, 2019 compared with the corresponding prior year period decreased our revenues by 3 percentage points, operating expenses by 3 percentage points and operating income by 4 percentage points.

ORACLE CORPORATION

Q4 FISCAL 2019 FINANCIAL RESULTS

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

($ in millions, except per share data)

	Three Months Ended May 31,														% Increase (Decrease) in US $		% Increase (Decrease) in Constant Currency (2)
	2019 GAAP		Adj.			2019 Non-GAAP		2018 GAAP		Adj.			2018 Non-GAAP		GAAP	Non-GAAP	GAAP	Non-GAAP
TOTAL REVENUES	$	11,136	$	3		$	11,139	$	11,014	$	9		$	11,023	1%	1%	4%	4%
Cloud services and license support		6,799		3			6,802		6,768		9			6,777	0%	0%	3%	3%
TOTAL OPERATING EXPENSES	$	6,879	$	(1,001	)	$	5,878	$	6,853	$	(909	)	$	5,944	0%	(1%)	3%	1%
Sales and marketing (3)		2,318		(82	)		2,236		2,315		(84	)		2,231	0%	0%	3%	3%
Stock-based compensation (4)		312		(312	)		—		309		(309	)		—	1%	*	1%	*
Amortization of intangible assets (5)		424		(424	)		—		415		(415	)		—	2%	*	2%	*
Acquisition related and other		15		(15	)		—		20		(20	)		—	(23%)	*	(21%)	*
Restructuring		168		(168	)		—		81		(81	)		—	108%	*	118%	*
OPERATING INCOME	$	4,257	$	1,004		$	5,261	$	4,161	$	918		$	5,079	2%	4%	6%	7%
OPERATING MARGIN %	38%					47%		38%					46%		45 bp.	115 bp.	79 bp.	132 bp.
INCOME TAX EFFECTS (6)	$	126	$	673		$	799	$	631	$	249		$	880	(80%)	(9%)	(79%)	(6%)
NET INCOME	$	3,740	$	331		$	4,071	$	3,276	$	669		$	3,945	14%	3%	19%	7%
DILUTED EARNINGS PER SHARE	$	1.07				$	1.16	$	0.79				$	0.95	36%	23%	41%	27%
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		3,495		—			3,495		4,149		—			4,149	(16%)	(16%)	(16%)	(16%)

(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)

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

	Three Months Ended May 31,
	2019			2018
Stock-based compensation (4)	$	(82	)	$	(88	)
Acquired deferred sales commissions amortization		—			4
Total non-GAAP sales and marketing adjustments	$	(82	)	$	(84	)

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

	Three Months Ended May 31, 2019							Three Months Ended May 31, 2018
	GAAP		Adj.			Non-GAAP		GAAP		Adj.			Non-GAAP
Cloud services and license support	$	25	$	(25	)	$	—	$	21	$	(21	)	$	—
Hardware		3		(3	)		—		3		(3	)		—
Services		12		(12	)		—		11		(11	)		—
Research and development		231		(231	)		—		228		(228	)		—
General and administrative		41		(41	)		—		46		(46	)		—
Subtotal		312		(312	)		—		309		(309	)		—
Sales and marketing		82		(82	)		—		88		(88	)		—
Total stock-based compensation	$	394	$	(394	)	$	—	$	397	$	(397	)	$	—

(5)	Estimated future annual amortization expense related to intangible assets as of May 31, 2019 was as follows:

Fiscal 2020	$	1,583
Fiscal 2021		1,339
Fiscal 2022		1,090
Fiscal 2023		668
Fiscal 2024		440
Thereafter		159
Total intangible assets, net	$	5,279

(6)

Income tax effects were calculated reflecting an effective GAAP tax rate of 3.3% and 16.1% in the fourth quarter of fiscal 2019 and 2018, respectively, and an effective non-GAAP tax rate of 16.4% and 18.2% in the fourth quarter of fiscal 2019 and 2018, respectively. The difference in our GAAP and non-GAAP tax rates in the fourth quarter of fiscal 2019 was primarily due to a tax benefit arising from the increase of a deferred tax asset associated with a partial realignment of our legal structure; the net tax effects on stock-based compensation expense; and acquisition related items, including the tax effects of amortization of intangible assets. The difference in our GAAP and non-GAAP tax rates in the fourth quarter of fiscal 2018 was primarily due to adjustments in our estimates for the one-time effects of the U.S. Tax Cuts and Jobs Act (refer to Appendix A for additional information), the net tax effects on stock-based compensation expense, and acquisition related items, including the tax effects of amortization of intangible assets.

Not meaningful

ORACLE CORPORATION

FISCAL 2019 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

	Year Ended May 31,								% Increase	% Increase (Decrease)
	2019			% of Revenues	2018			% of Revenues	(Decrease) in US $	in Constant Currency (1)
REVENUES
Cloud services and license support	$	26,707		68%	$	26,222		66%	2%	4%
Cloud license and on-premise license		5,855		15%		5,772		15%	1%	4%
Hardware		3,704		9%		3,994		10%	(7%)	(5%)
Services		3,240		8%		3,395		9%	(5%)	(2%)
Total revenues		39,506		100%		39,383		100%	0%	3%
OPERATING EXPENSES
Cloud services and license support		3,782		10%		3,606		9%	5%	7%
Hardware		1,360		4%		1,576		4%	(14%)	(11%)
Services		2,853		7%		2,878		7%	(1%)	2%
Sales and marketing		8,509		22%		8,433		22%	1%	3%
Research and development		6,026		15%		6,084		15%	(1%)	0%
General and administrative		1,265		3%		1,282		3%	(1%)	1%
Amortization of intangible assets		1,689		4%		1,620		4%	4%	4%
Acquisition related and other		44		0%		52		0%	(15%)	(13%)
Restructuring		443		1%		588		2%	(25%)	(22%)
Total operating expenses		25,971		66%		26,119		66%	(1%)	2%
OPERATING INCOME		13,535		34%		13,264		34%	2%	5%
Interest expense		(2,082	)	(5%)		(2,025	)	(5%)	3%	3%
Non-operating income, net		815		2%		1,185		3%	(31%)	(31%)
INCOME BEFORE PROVISION FOR INCOME TAXES		12,268		31%		12,424		32%	(1%)	2%
Provision for income taxes (2)		1,185		3%		8,837		23%	(87%)	(86%)
NET INCOME	$	11,083		28%	$	3,587		9%	209%	230%
EARNINGS PER SHARE:
Basic	$	3.05			$	0.87
Diluted	$	2.97			$	0.85
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		3,634				4,121
Diluted		3,732				4,238

(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, 2018, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the year ended May 31, 2019 compared with the corresponding prior year period decreased our revenues by 3 percentage points, operating expenses by 3 percentage points and operating income by 3 percentage points.

(2)

Provision for income taxes for the periods presented included the impacts of the U.S. 2017 Tax Cuts and Jobs Act, which was signed into law during our third quarter of fiscal 2018, and for which additional discussion is included in Appendix A.

ORACLE CORPORATION

FISCAL 2019 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)

	Year Ended May 31,														% Increase (Decrease) in US $		% Increase (Decrease) in Constant Currency (2)
	2019 GAAP		Adj.			2019 Non-GAAP		2018 GAAP		Adj.			2018 Non-GAAP		GAAP	Non-GAAP	GAAP	Non-GAAP
TOTAL REVENUES	$	39,506	$	20		$	39,526	$	39,383	$	47		$	39,430	0%	0%	3%	3%
Cloud services and license support		26,707		20			26,727		26,222		47			26,269	2%	2%	4%	4%
TOTAL OPERATING EXPENSES	$	25,971	$	(3,829	)	$	22,142	$	26,119	$	(3,844	)	$	22,275	(1%)	(1%)	2%	2%
Sales and marketing (3)		8,509		(360	)		8,149		8,433		(339	)		8,094	1%	1%	3%	3%
Stock-based compensation (4)		1,293		(1,293	)		—		1,245		(1,245	)		—	4%	*	4%	*
Amortization of intangible assets (5)		1,689		(1,689	)		—		1,620		(1,620	)		—	4%	*	4%	*
Acquisition related and other		44		(44	)		—		52		(52	)		—	(15%)	*	(13%)	*
Restructuring		443		(443	)		—		588		(588	)		—	(25%)	*	(22%)	*
OPERATING INCOME	$	13,535	$	3,849		$	17,384	$	13,264	$	3,891		$	17,155	2%	1%	5%	4%
OPERATING MARGIN %	34%					44%		34%					44%		58 bp.	47 bp.	82 bp.	53 bp.
INCOME TAX EFFECTS (6)	$	1,185	$	1,795		$	2,980	$	8,837	$	(5,439	)	$	3,398	(87%)	(12%)	(86%)	(10%)
NET INCOME	$	11,083	$	2,054		$	13,137	$	3,587	$	9,330		$	12,917	209%	2%	230%	5%
DILUTED EARNINGS PER SHARE	$	2.97				$	3.52	$	0.85				$	3.05	251%	16%	274%	19%
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		3,732		—			3,732		4,238		—			4,238	(12%)	(12%)	(12%)	(12%)

(1)

(2)

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

	Year Ended May 31,
	2019			2018
Stock-based compensation (4)	$	(360	)	$	(361	)
Acquired deferred sales commissions amortization		—			22
Total non-GAAP sales and marketing adjustments	$	(360	)	$	(339	)

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

	Year Ended May 31, 2019							Year Ended May 31, 2018
	GAAP		Adj.			Non-GAAP		GAAP		Adj.			Non-GAAP
Cloud services and license support	$	99	$	(99	)	$	—	$	82	$	(82	)	$	—
Hardware		10		(10	)		—		10		(10	)		—
Services		49		(49	)		—		52		(52	)		—
Research and development		963		(963	)		—		921		(921	)		—
General and administrative		172		(172	)		—		180		(180	)		—
Subtotal		1,293		(1,293	)		—		1,245		(1,245	)		—
Sales and marketing		360		(360	)		—		361		(361	)		—
Acquisition related and other		—		—			—		1		(1	)		—
Total stock-based compensation	$	1,653	$	(1,653	)	$	—	$	1,607	$	(1,607	)	$	—

(5)	Estimated future annual amortization expense related to intangible assets as of May 31, 2019 was as follows:

Fiscal 2020	$	1,583
Fiscal 2021		1,339
Fiscal 2022		1,090
Fiscal 2023		668
Fiscal 2024		440
Thereafter		159
Total intangible assets, net	$	5,279

(6)

Income tax effects were calculated reflecting an effective GAAP tax rate of 9.7% and 71.1% in fiscal 2019 and 2018, respectively, and an effective non-GAAP tax rate of 18.5% and 20.8% in fiscal 2019 and 2018, respectively. The difference in our GAAP and non-GAAP tax rates in fiscal 2019 was primarily due to the impacts of the U.S. Tax Cuts and Jobs Act of 2017 (refer to Appendix A for additional information); a tax benefit arising from the increase of a deferred tax asset associated with a partial realignment of our legal structure; the net tax effects on stock-based compensation expense; and acquisition related items, including the tax effects of amortization of intangible assets. The difference in our GAAP and non-GAAP tax rates in fiscal 2018 was primarily due to adjustments in our estimates for the one-time effects of the U.S. Tax Cuts and Jobs Act.

Not meaningful

ORACLE CORPORATION

FISCAL 2019 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

	May 31, 2019		May 31, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	20,514	$	21,620
Marketable securities		17,313		45,641
Trade receivables, net		5,134		5,136
Prepaid expenses and other current assets		3,425		3,762
Total Current Assets		46,386		76,159
Non-Current Assets:
Property, plant and equipment, net		6,252		5,897
Intangible assets, net		5,279		6,670
Goodwill, net		43,779		43,755
Deferred tax assets		2,696		1,395
Other non-current assets		4,317		3,975
Total Non-Current Assets		62,323		61,692
TOTAL ASSETS	$	108,709	$	137,851
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and other borrowings, current	$	4,494	$	4,491
Accounts payable		580		529
Accrued compensation and related benefits		1,628		1,806
Deferred revenues		8,374		8,341
Other current liabilities		3,554		3,957
Total Current Liabilities		18,630		19,124
Non-Current Liabilities:
Notes payable and other borrowings, non-current		51,673		56,128
Income taxes payable		13,295		13,429
Other non-current liabilities		2,748		2,297
Total Non-Current Liabilities		67,716		71,854
Equity		22,363		46,873
TOTAL LIABILITIES AND EQUITY	$	108,709	$	137,851

ORACLE CORPORATION

FISCAL 2019 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

	Year Ended May 31,
	2019			2018
Cash Flows From Operating Activities:
Net income	$	11,083		$	3,587
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,230			1,165
Amortization of intangible assets		1,689			1,620
Deferred income taxes		(1,191	)		(847	)
Stock-based compensation		1,653			1,607
Other, net		157			(27	)
Changes in operating assets and liabilities, net of effects from acquisitions:
(Increase) decrease in trade receivables, net		(82	)		413
Decrease (increase) in prepaid expenses and other assets		261			(258	)
Decrease in accounts payable and other liabilities		(102	)		(260	)
(Decrease) increase in income taxes payable		(453	)		8,150
Increase in deferred revenues		306			236
Net cash provided by operating activities		14,551			15,386
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments		(1,400	)		(25,282	)
Proceeds from maturities of marketable securities and other investments		12,681			20,372
Proceeds from sales of marketable securities		17,299			2,745
Acquisitions, net of cash acquired		(363	)		(1,724	)
Capital expenditures		(1,660	)		(1,736	)
Net cash provided by (used for) investing activities		26,557			(5,625	)
Cash Flows From Financing Activities:
Payments for repurchases of common stock		(36,140	)		(11,347	)
Proceeds from issuances of common stock		2,155			2,402
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards		(503	)		(506	)
Payments of dividends to stockholders		(2,932	)		(3,140	)
Proceeds from borrowings, net of issuance cost	-				12,443
Repayments of borrowings		(4,500	)		(9,800	)
Other, net		(136	)		(34	)
Net cash used for financing activities		(42,056	)		(9,982	)
Effect of exchange rate changes on cash and cash equivalents		(158	)		57
Net decrease in cash and cash equivalents		(1,106	)		(164	)
Cash and cash equivalents at beginning of period		21,620			21,784
Cash and cash equivalents at end of period	$	20,514		$	21,620

ORACLE CORPORATION

FISCAL 2019 FINANCIAL RESULTS

FREE CASH FLOW - TRAILING 4-QUARTERS (1)

($ in millions)

	Fiscal 2018												Fiscal 2019
	Q1			Q2			Q3			Q4			Q1			Q2			Q3			Q4

GAAP Operating Cash Flow	$	14,817		$	14,581		$	15,192		$	15,386		$	15,542		$	15,238		$	14,789		$	14,551

Capital Expenditures		(2,195	)		(2,037	)		(1,883	)		(1,736	)		(1,646	)		(1,468	)		(1,625	)		(1,660	)

Free Cash Flow	$	12,622		$	12,544		$	13,309		$	13,650		$	13,896		$	13,770		$	13,164		$	12,891

% Growth over prior year	0%			(1%)			13%			13%			10%			10%			(1%)			(6%)

GAAP Net Income	$	9,745		$	9,932		$	3,643		$	3,587		$	3,708		$	3,827		$	10,619		$	11,083

Free Cash Flow as a % of Net Income	130%			126%			365%			381%			375%			360%			124%			116%

(1)

To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flow generated from operations. We believe free cash flow is also useful as one of the bases for comparing our performance with our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity.

ORACLE CORPORATION

FISCAL 2019 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES (1)

($ in millions)

	Fiscal 2018										Fiscal 2019
	Q1		Q2		Q3		Q4		TOTAL		Q1		Q2		Q3		Q4		TOTAL
REVENUES BY OFFERINGS
Cloud services and license support	$	6,407	$	6,461	$	6,587	$	6,768	$	26,222	$	6,609	$	6,637	$	6,662	$	6,799	$	26,707
Cloud license and on-premise license		894		1,331		1,299		2,247		5,772		867		1,217		1,251		2,520		5,855
Hardware		943		941		994		1,116		3,994		904		891		915		994		3,704
Services		860		856		796		883		3,395		813		817		786		823		3,240
Total revenues	$	9,104	$	9,589	$	9,676	$	11,014	$	39,383	$	9,193	$	9,562	$	9,614	$	11,136	$	39,506
AS REPORTED REVENUE GROWTH RATES
Cloud services and license support	11%		11%		11%		8%		10%		3%		3%		1%		0%		2%
Cloud license and on-premise license	(13%)		(1%)		(9%)		(18%)		(12%)		(3%)		(9%)		(4%)		12%		1%
Hardware	(5%)		(7%)		(3%)		0%		(4%)		(4%)		(5%)		(8%)		(11%)		(7%)
Services	6%		1%		(2%)		(1%)		1%		(5%)		(5%)		(1%)		(7%)		(5%)
Total revenues	6%		6%		5%		0%		4%		1%		0%		(1%)		1%		0%
CONSTANT CURRENCY GROWTH RATES (2)
Cloud services and license support	10%		9%		7%		6%		8%		4%		5%		4%		3%		4%
Cloud license and on-premise license	(14%)		(3%)		(13%)		(18%)		(13%)		0%		(6%)		0%		15%		4%
Hardware	(6%)		(9%)		(7%)		(2%)		(6%)		(3%)		(3%)		(4%)		(8%)		(5%)
Services	6%		0%		(6%)		(3%)		(1%)		(4%)		(2%)		3%		(4%)		(2%)
Total revenues	5%		5%		1%		(1%)		2%		2%		2%		3%		4%		3%
CLOUD AND LICENSE REVENUES BY ECOSYSTEM (3)
Applications revenues	$	2,616	$	2,668	$	2,717	$	3,022	$	11,023	$	2,761	$	2,808	$	2,841	$	3,081	$	11,491
Infrastructure revenues		4,685		5,124		5,169		5,993		20,971		4,715		5,046		5,072		6,238		21,071
Total cloud and license revenues	$	7,301	$	7,792	$	7,886	$	9,015	$	31,994	$	7,476	$	7,854	$	7,913	$	9,319	$	32,562
AS REPORTED REVENUE GROWTH RATES
Applications revenues	17%		15%		9%		5%		11%		6%		5%		5%		2%		4%
Infrastructure revenues	3%		6%		6%		(2%)		3%		1%		(2%)		(2%)		4%		0%
Total cloud and license revenues	7%		9%		7%		1%		6%		2%		1%		0%		3%		2%
CONSTANT CURRENCY GROWTH RATES (2)
Applications revenues	17%		13%		7%		4%		10%		7%		7%		7%		4%		6%
Infrastructure revenues	1%		4%		1%		(3%)		1%		2%		1%		2%		7%		3%
Total cloud and license revenues	7%		7%		3%		(1%)		4%		4%		3%		3%		6%		4%
GEOGRAPHIC REVENUES
Americas	$	5,098	$	5,281	$	5,253	$	6,016	$	21,648	$	5,161	$	5,243	$	5,266	$	6,184	$	21,856
Europe/Middle East/Africa		2,535		2,796		2,881		3,197		11,409		2,576		2,782		2,781		3,132		11,270
Asia Pacific		1,471		1,512		1,542		1,801		6,326		1,456		1,537		1,567		1,820		6,380
Total revenues	$	9,104	$	9,589	$	9,676	$	11,014	$	39,383	$	9,193	$	9,562	$	9,614	$	11,136	$	39,506

(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, 2018 and 2017 for the fiscal 2019 and fiscal 2018 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

(3)

Applications ecosystem revenues represent the sum of applications related cloud services and license support revenues; and applications related license revenues. Infrastructure ecosystem revenues represent the sum of infrastructure related cloud services and license support revenues; and infrastructure related license revenues.

APPENDIX A

ORACLE CORPORATION

Q4 FISCAL 2019 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 related to each of the below items except for the impact of the U.S. Tax Cuts and Jobs Act of 2017:

• Cloud services and license support revenues: Business combination accounting rules require us to account for the fair values of cloud services and license support contracts assumed in connection with our acquisitions. The non-GAAP adjustments to our cloud services and license support revenues are intended to include, and thus reflect, the full amount of such revenues. We believe the adjustments to these revenues are useful to investors as a measure of the ongoing performance of our business as we generally expect to experience high renewal rates for these contracts at their stated values during the post combination periods.

• 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.

• 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 primarily consist of personnel related costs and stock-based compensation expenses for transitional and certain other employees, integration related professional services, certain business combination adjustments including adjustments after the measurement period has ended and certain other operating items, net. 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 and other 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.

• Impact of the U.S. Tax Cuts and Jobs Act of 2017: The U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law on December 22, 2017. For fiscal 2019, we recorded a net benefit of $389 million related to adjustments in our estimates of the one-time effects of the Tax Act, including the one-time transition tax on certain foreign subsidiary earnings and the remeasurement of net deferred income tax balances affected by the Tax Act. We recorded a provisional net charge of $6.9 billion during fiscal 2018 related to our preliminary assessment of the one-time effects of the Tax Act, including the one-time transition tax on certain foreign subsidiary earnings and the remeasurement of net deferred income tax balances affected by the Tax Act. We have excluded the impacts of these items from our non-GAAP income taxes and net income measures for fiscal 2019 and 2018. We believe making these adjustments provides insight to our operating performance and comparability to past operating results.