Q2 FY18 GAAP EPS UP 8% TO $0.52 and NON-GAAP EPS UP 14% TO $0.70
REDWOOD SHORES, Calif., Dec. 14, 2017 /PRNewswire/ -- Oracle Corporation (NYSE: ORCL) today announced fiscal 2018 Q2 results. Total Revenues were up 6% to $9.6 billion, compared to Q2 last year. Cloud plus On-Premise Software Revenues were up 9% to $7.8 billion. Cloud Software as a Service (SaaS) revenues were up 55% to $1.1 billion. Cloud Platform as a Service (PaaS) plus Infrastructure as a Service (IaaS) revenues were up 21% to $396 million. Total Cloud Revenues were up 44% to $1.5 billion.
GAAP Operating Income was up 1% to $3.1 billion and GAAP Operating Margin was 32%. Non-GAAP Operating Income was up 10% to $4.2 billion and non-GAAP Operating Margin was 44%. GAAP Net Income was up 10% to $2.2 billion, while non-GAAP Net Income was up 16% to $3.0 billion. GAAP Earnings Per Share was up 8% to $0.52, while non-GAAP Earnings Per Share was up 14% to $0.70.
Short-term deferred revenues were up 9% to $8.1 billion. Operating cash flow on a trailing twelve-month basis was up 2% to $14.6 billion.
"Overall cloud revenue growth of 44% drove our quarterly revenue and earnings higher," said Oracle CEO, Safra Catz. "With non-GAAP Cloud SaaS Applications growth of 49% leading the way, Oracle delivered 14% non-GAAP earnings per share growth and 6% overall revenue growth. Our success in the quarter was based on the increasing scale and the gathering momentum in our cloud business. I expect the business to continue to grow and strengthen over the coming quarters."
"Our Fusion ERP and Fusion HCM SaaS applications suite revenues grew 65% in the quarter," said Oracle CEO, Mark Hurd. "We are now the clear market leader in enterprise back-office SaaS applications with over 5,000 Fusion customers. And we expect to extend our lead by selling around $2 billion in new enterprise SaaS application cloud subscriptions over the coming four quarters. That's more new SaaS sales than any of our competitors."
"Oracle will soon deliver the world's first autonomous "self-driving" database," said Oracle CTO, Larry Ellison. "The new artificially intelligent Oracle database is fully automated and requires no human labor for administration. If a security vulnerability is detected, the database immediately patches itself while running. No other system can do anything like this. Best of all, we guarantee the price of running the Oracle Autonomous Database in the Oracle Cloud is less than half the cost of running a database in the Amazon Cloud."
The Board of Directors increased the authorization for share repurchases by $12 billion. 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 January 10, 2018, with a payment date of January 24, 2018.
Q2 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 Q2 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: 9396959.
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 business, extension of our market position and sales in enterprise SaaS applications, and delivery of our new autonomous database, 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 December 14, 2017. Oracle undertakes no duty to update any statement in light of new information or future events.
ORACLE CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Three Months Ended November 30, % Increase % Increase
(Decrease)
% of % of (Decrease) in Constant
2017 Revenues 2016 Revenues in US $ Currency (1)
---- -------- ---- -------- ------- -----------
REVENUES
Cloud software as a service $1,123 12% $725 8% 55% 53%
Cloud platform as a service and
infrastructure as a service 396 4% 328 4% 21% 19%
--- --- ---
Total cloud revenues 1,519 16% 1,053 12% 44% 43%
----- --- ----- ---
New software licenses 1,353 14% 1,347 15% 0% (2%)
Software license updates and
product support 4,953 51% 4,777 53% 4% 2%
---
Total on-premise software revenues 6,306 65% 6,124 68% 3% 1%
----- --- ----- ---
Total cloud and on-premise
software revenues 7,825 81% 7,177 80% 9% 7%
----- --- ----- ---
Hardware revenues 940 10% 1,014 11% (7%) (9%)
Services revenues 856 9% 844 9% 1% 0%
--- ---
Total revenues 9,621 100% 9,035 100% 6% 5%
----- --- ----- ---
OPERATING EXPENSES
Cloud software as a service 396 4% 316 3% 25% 23%
Cloud platform as a service and
infrastructure as a service 241 3% 156 2% 55% 53%
Software license updates and
product support 257 3% 242 3% 6% 5%
Hardware 351 4% 386 5% (9%) (11%)
Services 720 7% 697 8% 3% 1%
Sales and marketing 2,082 22% 1,960 21% 6% 4%
Research and development 1,475 15% 1,510 17% (2%) (3%)
General and administrative 321 3% 303 3% 6% 5%
Amortization of intangible assets 400 4% 302 3% 33% 33%
Acquisition related and other 17 0% 40 0% (58%) (59%)
Restructuring 292 3% 86 1% 241% 227%
--- ---
Total operating expenses 6,552 68% 5,998 66% 9% 8%
----- --- ----- ---
OPERATING INCOME 3,069 32% 3,037 34% 1% (1%)
----- --- ----- ---
Interest expense (475) (5%) (451) (5%) 5% 5%
Non-operating income, net 273 3% 99 1% 176% 178%
--- ---
INCOME BEFORE
PROVISION FOR
INCOME TAXES 2,867 30% 2,685 30% 7% 4%
----- -----
Provision for income taxes 634 7% 653 7% (3%) (3%)
--- --- --- ---
NET INCOME $2,233 23% $2,032 23% 10% 7%
====== === ====== ===
EARNINGS PER SHARE:
Basic $0.54 $0.50
Diluted $0.52 $0.48
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 4,160 4,104
Diluted 4,283 4,195
(1) We compare the percent change in the results from one period to another period using
constant currency disclosure. We present constant currency information to provide a
framework for assessing how our underlying businesses performed excluding the
effect of foreign currency rate fluctuations. To present this information, current
and comparative prior period results for entities reporting in currencies other
than United States dollars are converted into United States dollars at the exchange
rates in effect on May 31, 2017, which was the last day of our prior fiscal year,
rather than the actual exchange rates in effect during the respective periods.
Movements in international currencies relative to the United States dollar during
the three months ended November 30, 2017 compared with the corresponding prior year
period increased our revenues by 1 percentage point, operating expenses by 1
percentage point and operating income by 2 percentage points.
ORACLE CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Three Months Ended November 30, % Increase (Decrease) % Increase (Decrease) in
in US $ Constant Currency (2)
------- --------------------
2017 2017 2016 2016 GAAP Non-GAAP GAAP Non-GAAP
---- -------- ---- --------
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
---- ---- -------- ---- ---- --------
TOTAL REVENUES $9,621 $9 $9,630 $9,035 $35 $9,070 6% 6% 5% 4%
TOTAL CLOUD AND ON-
PREMISE SOFTWARE
REVENUES 7,825 9 7,834 7,177 35 7,212 9% 9% 7% 7%
TOTAL CLOUD REVENUES 1,519 9 1,528 1,053 34 1,087 44% 41% 43% 39%
Cloud software as a service 1,123 7 1,130 725 34 759 55% 49% 53% 47%
Cloud platform as a service and infrastructure
as a service 396 2 398 328 - 328 21% 22% 19% 20%
Software license updates and product support 4,953 - 4,953 4,777 1 4,778 4% 4% 2% 2%
TOTAL OPERATING EXPENSES $6,552 $(1,122) $5,430 $5,998 $(735) $5,263 9% 3% 8% 2%
Cloud software as a service (4) 396 (11) 385 316 (6) 310 25% 24% 23% 22%
Cloud platform as a service and infrastructure
as a service (4) 241 (2) 239 156 (1) 155 55% 54% 53% 52%
Sales and marketing (3) 2,082 (93) 1,989 1,960 (59) 1,901 6% 5% 4% 3%
Stock-based compensation (4) 307 (307) - 241 (241) - 27% * 27% *
Amortization of intangible assets (5) 400 (400) - 302 (302) - 33% * 33% *
Acquisition related and other 17 (17) - 40 (40) - (58%) * (59%) *
Restructuring 292 (292) - 86 (86) - 241% * 227% *
CLOUD SOFTWARE AS A
SERVICE MARGIN % 65% 66% 56% 59% 841 bp. 682 bp. 857 bp. 699 bp.
CLOUD PLATFORM AS A
SERVICE AND
INFRASTRUCTURE AS A
SERVICE MARGIN % 39% 40% 52% 53% (1,332) bp. (1,274) bp. (1,340) bp. (1,282) bp.
OPERATING INCOME $3,069 $1,131 $4,200 $3,037 $770 $3,807 1% 10% (1%) 8%
OPERATING MARGIN % 32% 44% 34% 42% (172) bp. 164 bp. (189) bp. 155 bp.
INCOME TAX EFFECTS (6) $634 $374 $1,008 $653 $228 $881 (3%) 14% (3%) 12%
NET INCOME $2,233 $757 $2,990 $2,032 $542 $2,574 10% 16% 7% 14%
DILUTED EARNINGS PER
SHARE $0.52 $0.70 $0.48 $0.61 8% 14% 4% 12%
DILUTED WEIGHTED AVERAGE
COMMON
SHARES
OUTSTANDING 4,283 - 4,283 4,195 - 4,195 2% 2% 2% 2%
(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
November 30,
------------
2017 2016
---- ----
Stock-based compensation (4) $(98) $(68)
Acquired deferred sales commissions amortization 5 9
Total non-GAAP sales and marketing adjustments $(93) $(59)
==== ====
(4) Stock-based compensation was included in the following GAAP operating expense categories:
Three Months Ended Three Months Ended
November 30, 2017 November 30, 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) - 9 (9) -
Research and development 237 (237) - 188 (188) -
General and administrative 46 (46) - 35 (35) -
--- --- --- --- ---
Subtotal 307 (307) - 241 (241) -
--- ---- --- --- ---- ---
Cloud software as a service 11 (11) - 6 (6) -
Cloud platform as a service and infrastructure
as a service 2 (2) - 1 (1) -
Sales and marketing 98 (98) - 68 (68) -
Acquisition related and other - - - 11 (11) -
--- --- --- --- --- ---
Total stock-based compensation $418 $(418) $ - $327 $(327) $ -
==== ===== ======================= ==== ===== =======================
(5) Estimated future annual amortization expense related to intangible assets as of November 30, 2017 was as follows:
Remainder of fiscal 2018 $781
Fiscal 2019 1,411
Fiscal 2020 1,210
Fiscal 2021 1,023
Fiscal 2022 918
Fiscal 2023 567
Thereafter 884
---
Total intangible assets, net $6,794
======
(6) Income tax effects were calculated reflecting an effective GAAP tax rate of 22.1% and 24.3% in the second quarter of fiscal 2018 and 2017, respectively, and an effective
non-GAAP tax rate of 25.2% and 25.5% in the second quarter of fiscal 2018 and 2017, respectively. The difference between our GAAP and non-GAAP tax rates in the second
quarters of fiscal 2018 and 2017 was primarily due to the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of
amortization of intangible assets.
* Not meaningful
ORACLE CORPORATION
Q2 FISCAL 2018 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Six Months Ended November 30, % Increase
-----------------------------
% Increase (Decrease)
% of % of (Decrease) in Constant
2017 Revenues 2016 Revenues in US $ Currency (1)
---- -------- ---- -------- ------- -----------
REVENUES
Cloud software as a service $2,189 12% $1,382 8% 58% 57%
Cloud platform as a service and
infrastructure as a service 797 4% 639 3% 25% 23%
--- --- ---
Total cloud revenues 2,986 16% 2,021 11% 48% 47%
----- --- ----- ---
New software licenses 2,319 12% 2,377 13% (2%) (4%)
Software license updates and
product support 9,904 53% 9,570 55% 3% 2%
---
Total on-premise software revenues 12,223 65% 11,947 68% 2% 1%
------ --- ------ ---
Total cloud and on-premise
software revenues 15,209 81% 13,968 79% 9% 7%
------ --- ------ ---
Hardware revenues 1,884 10% 2,010 12% (6%) (8%)
Services revenues 1,716 9% 1,652 9% 4% 2%
--- ---
Total revenues 18,809 100% 17,630 100% 7% 5%
------ --- ------ ---
OPERATING EXPENSES
Cloud software as a service 770 4% 600 3% 29% 27%
Cloud platform as a service and
infrastructure as a service 468 3% 288 2% 62% 60%
Software license updates and
product support 515 3% 516 3% 0% (1%)
Hardware 724 4% 776 5% (7%) (8%)
Services 1,422 8% 1,393 8% 2% 0%
Sales and marketing 4,074 22% 3,879 22% 5% 4%
Research and development 3,049 16% 3,030 17% 1% 0%
General and administrative 642 3% 618 4% 4% 3%
Amortization of intangible assets 811 4% 613 3% 32% 32%
Acquisition related and other 28 0% 54 0% (48%) (48%)
Restructuring 416 2% 185 1% 125% 118%
--- ---
Total operating expenses 12,919 69% 11,952 68% 8% 7%
------ --- ------ ---
OPERATING INCOME 5,890 31% 5,678 32% 4% 2%
----- --- ----- ---
Interest expense (944) (5%) (867) (5%) 9% 9%
Non-operating income, net 505 3% 247 2% 104% 105%
--- ---
INCOME BEFORE
PROVISION FOR
INCOME TAXES 5,451 29% 5,058 29% 8% 6%
----- -----
Provision for income taxes 1,009 5% 1,194 7% (15%) (16%)
----- --- ----- ---
NET INCOME $4,442 24% $3,864 22% 15% 13%
====== === ====== ===
EARNINGS PER SHARE:
Basic $1.07 $0.94
Diluted $1.04 $0.92
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 4,158 4,112
Diluted 4,283 4,208
(1) We compare the percent change in the results from one period to another period using
constant currency disclosure. We present constant currency information to provide a
framework for assessing how our underlying businesses performed excluding the
effect of foreign currency rate fluctuations. To present this information, current
and comparative prior period results for entities reporting in currencies other
than United States dollars are converted into United States dollars at the exchange
rates in effect on May 31, 2017, which was the last day of our prior fiscal year,
rather than the actual exchange rates in effect during the respective periods.
Movements in international currencies relative to the United States dollar during
the six months ended November 30, 2017 compared with the corresponding prior year
period increased our revenues by 2 percentage points, operating expenses by 1
percentage point and operating income by 2 percentage points.
ORACLE CORPORATION
Q2 FISCAL 2018 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Six Months Ended November 30, % Increase (Decrease) % Increase (Decrease) in
in US $ Constant Currency (2)
------- --------------------
2017 2017 2016 2016 GAAP Non-GAAP GAAP Non-GAAP
---- -------- ---- --------
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
---- ---- -------- ---- ---- --------
TOTAL REVENUES $18,809 $34 $18,843 $17,630 $53 $17,683 7% 7% 5% 5%
TOTAL CLOUD AND ON-
PREMISE SOFTWARE
REVENUES 15,209 34 15,243 13,968 53 14,021 9% 9% 7% 7%
TOTAL CLOUD REVENUES 2,986 34 3,020 2,021 52 2,073 48% 46% 47% 45%
Cloud software as a service 2,189 30 2,219 1,382 52 1,434 58% 55% 57% 54%
Cloud platform as a service and infrastructure
as a service 797 4 801 639 - 639 25% 25% 23% 24%
Software license updates and product support 9,904 - 9,904 9,570 1 9,571 3% 3% 2% 2%
TOTAL OPERATING EXPENSES $12,919 $(2,060) $10,859 $11,952 $(1,478) $10,474 8% 4% 7% 2%
Cloud software as a service (4) 770 (20) 750 600 (11) 589 29% 28% 27% 26%
Cloud platform as a service and infrastructure
as a service (4) 468 (4) 464 288 (2) 286 62% 62% 60% 60%
Sales and marketing (3) 4,074 (171) 3,903 3,879 (124) 3,755 5% 4% 4% 2%
Stock-based compensation (4) 610 (610) - 489 (489) - 25% * 25% *
Amortization of intangible assets (5) 811 (811) - 613 (613) - 32% * 32% *
Acquisition related and other 28 (28) - 54 (54) - (48%) * (48%) *
Restructuring 416 (416) - 185 (185) - 125% * 118% *
CLOUD SOFTWARE AS A
SERVICE MARGIN % 65% 66% 57% 59% 812 bp. 718 bp. 825 bp. 732 bp.
CLOUD PLATFORM AS A
SERVICE AND
INFRASTRUCTURE AS A
SERVICE MARGIN % 41% 42% 55% 55% (1,360) bp. (1,302) bp. (1,366) bp (1,307) bp.
OPERATING INCOME $5,890 $2,094 $7,984 $5,678 $1,531 $7,209 4% 11% 2% 9%
OPERATING MARGIN % 31% 42% 32% 41% (89) bp. 161 bp. (100) bp. 157 bp.
INCOME TAX EFFECTS (6) $1,009 $885 $1,894 $1,194 $486 $1,680 (15%) 13% (16%) 11%
NET INCOME $4,442 $1,209 $5,651 $3,864 $1,045 $4,909 15% 15% 13% 13%
DILUTED EARNINGS PER
SHARE $1.04 $1.32 $0.92 $1.17 13% 13% 11% 11%
DILUTED WEIGHTED AVERAGE
COMMON
SHARES
OUTSTANDING 4,283 - 4,283 4,208 - 4,208 2% 2% 2% 2%
(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:
Six Months Ended
November 30,
------------
2017 2016
---- ----
Stock-based compensation (4) $(187) $(133)
Acquired deferred sales commissions amortization 16 9
Total non-GAAP sales and marketing adjustments $(171) $(124)
===== =====
(4) Stock-based compensation was included in the following GAAP operating expense categories:
Six Months Ended Six Months Ended
November 30, 2017 November 30, 2016
----------------- -----------------
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
---- ---- -------- ---- ---- --------
Software license updates and product support $14 $(14) $ - $12 $(12) $ -
Hardware 6 (6) - 6 (6) -
Services 28 (28) - 17 (17) -
Research and development 472 (472) - 382 (382) -
General and administrative 90 (90) - 72 (72) -
--- --- --- --- --- ---
Subtotal 610 (610) - 489 (489) -
--- ---- --- --- ---- ---
Cloud software as a service 20 (20) - 11 (11) -
Cloud platform as a service and infrastructure
as a service 4 (4) - 2 (2) -
Sales and marketing 187 (187) - 133 (133) -
Acquisition related and other 1 (1) - 11 (11) -
Total stock-based compensation $822 $(822) $ - $646 $(646) $ -
==== ===== ======================= ==== ===== =======================
(5) Estimated future annual amortization expense related to intangible assets as of November 30, 2017 was as follows:
Remainder of fiscal 2018 $781
Fiscal 2019 1,411
Fiscal 2020 1,210
Fiscal 2021 1,023
Fiscal 2022 918
Fiscal 2023 567
Thereafter 884
---
Total intangible assets, net $6,794
======
(6) Income tax effects were calculated reflecting an effective GAAP tax rate of 18.5% and 23.6% in the first half of fiscal 2018 and 2017, respectively, and an effective non-GAAP
tax rate of 25.1% and 25.5% in the first half of fiscal 2018 and 2017, respectively. The difference between our GAAP and non-GAAP tax rate in fiscal 2018 was primarily due to
the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets. The difference between
our GAAP and non-GAAP tax rate in the first half of fiscal 2018 and 2017 was primarily due to the net tax effects on stock-based compensation expense and acquisition related
items, including the tax effects of amortization of intangible assets.
* Not meaningful
ORACLE CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
November 30, May 31,
2017 2017
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $21,310 $21,784
Marketable securities 50,270 44,294
Trade receivables, net 3,798 5,300
Inventories 436 300
Prepaid expenses and other current assets 2,731 2,837
----- -----
Total Current Assets 78,545 74,515
Non-Current Assets:
Property, plant and equipment, net 5,868 5,315
Intangible assets, net 6,794 7,679
Goodwill, net 42,964 43,045
Deferred tax assets 1,222 1,143
Other assets 3,369 3,294
----- -----
Total Non-Current Assets 60,217 60,476
------ ------
TOTAL ASSETS $138,762 $134,991
======== ========
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable and other borrowings, current $2,499 $9,797
Accounts payable 554 599
Accrued compensation and related benefits 1,500 1,966
Deferred revenues 8,076 8,233
Other current liabilities 2,865 3,583
----- -----
Total Current Liabilities 15,494 24,178
Non-Current Liabilities:
Notes payable and other borrowings, non-
current 58,170 48,112
Income taxes payable 6,082 5,681
Other non-current liabilities 2,716 2,774
----- -----
Total Non-Current Liabilities 66,968 56,567
Equity 56,300 54,246
------ ------
TOTAL LIABILITIES AND EQUITY $138,762 $134,991
======== ========
ORACLE CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Six Months Ended November 30,
-----------------------------
2017 2016
---- ----
Cash Flows From Operating Activities:
Net income $4,442 $3,864
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 573 463
Amortization of intangible assets 811 613
Deferred income taxes 95 103
Stock-based compensation 822 646
Other, net 81 85
Changes in operating assets and
liabilities, net of effects from
acquisitions:
Decrease in trade receivables, net 1,529 1,680
Increase in inventories (135) (116)
Decrease in prepaid expenses and other
assets 138 321
Decrease in accounts payable and other
liabilities (618) (499)
Increase in income taxes payable 22 9
Decrease in deferred revenues (344) (208)
Net cash provided by operating
activities 7,416 6,961
----- -----
Cash Flows From Investing Activities:
Purchases of marketable securities and
other investments (18,022) (10,090)
Proceeds from maturities and sales of
marketable securities and other
investments 11,566 6,080
Acquisitions, net of cash acquired - (9,854)
Capital expenditures (1,072) (1,056)
Net cash used for investing activities (7,528) (14,920)
------ -------
Cash Flows From Financing Activities:
Payments for repurchases of common stock (2,454) (2,569)
Proceeds from issuances of common stock 1,353 746
Shares repurchased for tax withholdings
upon vesting of restricted stock-based
awards (434) (188)
Payments of dividends to stockholders (1,579) (1,232)
Proceeds from borrowings, net of
issuance costs 9,945 13,932
Repayments of borrowings (7,300) (3,750)
Distributions to noncontrolling
interests (34) (200)
Net cash (used for) provided by
financing activities (503) 6,739
---- -----
Effect of exchange rate changes on cash
and cash equivalents 141 (340)
--- ----
Net decrease in cash and cash
equivalents (474) (1,560)
Cash and cash equivalents at beginning
of period 21,784 20,152
------ ------
Cash and cash equivalents at end of
period $21,310 $18,592
======= =======
ORACLE CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($ 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 $14,581
Capital
Expenditures (1,042) (1,604) (1,676) (2,021) (2,195) (2,037)
------ ------ ------ ------ ------ ------
Free Cash Flow $12,637 $12,645 $11,777 $12,105 $12,622 $12,544
======= ======= ======= ======= ======= =======
% Growth over
prior year 5% 10% (7%) (3%) 0% (1%)
GAAP Net Income $8,986 $8,820 $8,917 $9,335 $9,713 $9,914
Free Cash Flow
as a % of Net
Income 141% 143% 132% 130% 130% 127%
(1) To supplement our statements of cash flows presented on a GAAP basis, we use non-
GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flow
generated from operations. We believe free cash flow is also useful as one of the
bases for comparing our performance with our competitors. The presentation of non-
GAAP free cash flow is not meant to be considered in isolation or as an
alternative to net income as an indicator of our performance, or as an alternative
to cash flows from operating activities as a measure of liquidity.
ORACLE CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES (1)
($ 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 $1,123 $2,189
Cloud platform as a
service and
infrastructure as
a service 312 328 324 397 1,360 400 396 797
--- --- --- --- ----- --- --- ---
Total cloud revenues 969 1,053 1,189 1,361 4,571 1,467 1,519 2,986
--- ----- ----- ----- ----- ----- ----- -----
New software
licenses 1,030 1,347 1,414 2,626 6,418 966 1,353 2,319
Software license
updates and
product support 4,792 4,777 4,762 4,897 19,229 4,951 4,953 9,904
----- ----- ----- ----- ------ ----- ----- -----
Total on-premise software
revenues 5,822 6,124 6,176 7,523 25,647 5,917 6,306 12,223
----- ----- ----- ----- ------ ----- ----- ------
Total cloud and on-premise
software revenues 6,791 7,177 7,365 8,884 30,218 7,384 7,825 15,209
----- ----- ----- ----- ------ ----- ----- ------
Total hardware revenues 996 1,014 1,028 1,114 4,152 943 940 1,884
Total services revenues 808 844 812 894 3,358 860 856 1,716
Total revenues $8,595 $9,035 $9,205 $10,892 $37,728 $9,187 $9,621 $18,809
====== ====== ====== ======= ======= ====== ====== =======
AS REPORTED REVENUE
GROWTH RATES
Cloud software as a
service 50% 57% 64% 67% 61% 62% 55% 58%
Cloud platform as a
service and
infrastructure as
a service 80% 75% 55% 40% 60% 28% 21% 25%
Total cloud revenues 59% 62% 62% 58% 60% 51% 44% 48%
New software
licenses (11%) (20%) (16%) (5%) (12%) (6%) 0% (2%)
Software license
updates and
product support 2% 2% 2% 2% 2% 3% 4% 3%
Total on-premise software
revenues 0% (4%) (3%) (1%) (2%) 2% 3% 2%
Total cloud and on-premise
software revenues 5% 2% 4% 5% 4% 9% 9% 9%
Total hardware revenues (12%) (10%) (9%) (13%) (11%) (5%) (7%) (6%)
Total services revenues (6%) (2%) 2% 3% (1%) 6% 1% 4%
Total revenues 2% 0% 2% 3% 2% 7% 6% 7%
CONSTANT CURRENCY
GROWTH RATES (2)
Cloud software as a
service 52% 59% 65% 69% 62% 62% 53% 57%
Cloud platform as a
service and
infrastructure as
a service 84% 78% 57% 42% 62% 27% 19% 23%
Total cloud revenues 61% 64% 63% 60% 62% 51% 43% 47%
New software
licenses (10%) (19%) (15%) (4%) (11%) (7%) (2%) (4%)
Software license
updates and
product support 3% 3% 3% 3% 3% 2% 2% 2%
Total on-premise software
revenues 1% (3%) (2%) 0% (1%) 1% 1% 1%
Total cloud and on-premise
software revenues 6% 3% 5% 6% 5% 8% 7% 7%
Total hardware revenues (11%) (9%) (9%) (12%) (10%) (6%) (9%) (8%)
Total services revenues (5%) 0% 3% 4% 1% 5% 0% 2%
Total revenues 3% 1% 3% 4% 3% 6% 5% 5%
(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.
ORACLE CORPORATION
Q2 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 $4,414 $8,670
====== ====== ====== ====== ======= ====== ====== ======
Total
hardware
revenues $526 $510 $511 $542 $2,089 $485 $482 $968
==== ==== ==== ==== ====== ==== ==== ====
AS REPORTED
GROWTH RATES
Total cloud
and on-
premise
software
revenues 5% 2% 8% 6% 5% 10% 10% 10%
Total
hardware
revenues (11%) (14%) (11%) (17%) (13%) (8%) (5%) (7%)
CONSTANT
CURRENCY
GROWTH RATES
(2)
Total cloud
and on-
premise
software
revenues 6% 2% 7% 6% 5% 9% 10% 10%
Total
hardware
revenues (10%) (14%) (11%) (17%) (13%) (8%) (6%) (7%)
EUROPE /
MIDDLE EAST
/AFRICA
------------
Total cloud
and on-
premise
software
revenues $1,903 $2,008 $2,019 $2,489 $8,419 $2,019 $2,259 $4,278
====== ====== ====== ====== ====== ====== ====== ======
Total
hardware
revenues $275 $294 $300 $352 $1,221 $271 $272 $543
==== ==== ==== ==== ====== ==== ==== ====
AS REPORTED
GROWTH RATES
Total cloud
and on-
premise
software
revenues 2% (3%) (2%) 1% (1%) 6% 12% 9%
Total
hardware
revenues (17%) (7%) (14%) (8%) (11%) (1%) (8%) (5%)
CONSTANT
CURRENCY
GROWTH RATES
(2)
Total cloud
and on-
premise
software
revenues 7% 2% 2% 5% 4% 3% 7% 5%
Total
hardware
revenues (13%) (2%) (10%) (4%) (7%) (4%) (12%) (8%)
ASIA PACIFIC
------------
Total cloud
and on-
premise
software
revenues $1,012 $1,169 $1,066 $1,319 $4,568 $1,109 $1,152 $2,261
====== ====== ====== ====== ====== ====== ====== ======
Total
hardware
revenues $195 $210 $217 $220 $842 $187 $186 $373
==== ==== ==== ==== ==== ==== ==== ====
AS REPORTED
GROWTH RATES
Total cloud
and on-
premise
software
revenues 12% 15% 2% 9% 9% 10% (1%) 4%
Total
hardware
revenues (7%) (1%) 1% (12%) (5%) (4%) (11%) (8%)
CONSTANT
CURRENCY
GROWTH RATES
(2)
Total cloud
and on-
premise
software
revenues 8% 11% 0% 9% 7% 10% (2%) 4%
Total
hardware
revenues (9%) (3%) 0% (12%) (6%) (4%) (12%) (8%)
TOTAL COMPANY
-------------
Total cloud
and on-
premise
software
revenues $6,791 $7,177 $7,365 $8,884 $30,218 $7,384 $7,825 $15,209
====== ====== ====== ====== ======= ====== ====== =======
Total
hardware
revenues $996 $1,014 $1,028 $1,114 $4,152 $943 $940 $1,884
==== ====== ====== ====== ====== ==== ==== ======
AS REPORTED
GROWTH RATES
Total cloud
and on-
premise
software
revenues 5% 2% 4% 5% 4% 9% 9% 9%
Total
hardware
revenues (12%) (10%) (9%) (13%) (11%) (5%) (7%) (6%)
CONSTANT
CURRENCY
GROWTH RATES
(2)
Total cloud
and on-
premise
software
revenues 6% 3% 5% 6% 5% 8% 7% 7%
Total
hardware
revenues (11%) (9%) (9%) (12%) (10%) (6%) (9%) (8%)
(1) The sum of the quarterly information presented may vary from the year-to-date information presented due
to rounding.
(2) We compare the percent change in the results from one period to another period using constant currency
disclosure. We present constant currency information to provide a framework for assessing how our
underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present
this information, current and comparative prior period results for entities reporting in currencies other
than United States dollars are converted into United States dollars at the exchange rates in effect on May
31, 2017 and 2016 for the fiscal 2018 and fiscal 2017 constant currency growth rate calculations
presented, respectively, rather than the actual exchange rates in effect during the respective periods.
ORACLE CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
SUPPLEMENTAL TOTAL CLOUD AND ON-PREMISE SOFTWARE GAAP REVENUES ANALYSIS (1)
($ 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 $1,123 $2,189
On-premise
software revenues 1,584 1,610 1,632 1,898 6,724 1,579 1,554 3,134
----- ----- ----- ----- ----- ----- ----- -----
Total cloud and on-
premise software
revenues $2,241 $2,335 $2,497 $2,862 $9,935 $2,646 $2,677 $5,323
====== ====== ====== ====== ====== ====== ====== ======
AS REPORTED GROWTH
RATES
Cloud software as a
service 50% 57% 64% 67% 61% 62% 55% 58%
On-premise
software revenues (5%) (11%) (8%) (10%) (8%) 0% (3%) (2%)
Total cloud and on-
premise software
revenues 6% 3% 9% 7% 6% 18% 15% 16%
CONSTANT CURRENCY
GROWTH RATES (2)
Cloud software as a
service 52% 59% 65% 69% 62% 62% 53% 57%
On-premise
software revenues (4%) (9%) (7%) (9%) (7%) (1%) (5%) (3%)
Total cloud and on-
premise software
revenues 8% 5% 9% 8% 8% 17% 13% 15%
PLATFORM AND
INFRASTRUCTURE
REVENUES
---------------
Cloud platform as a
service and
infrastructure as
a service $312 $328 $324 $397 $1,360 $400 $396 $797
On-premise
software revenues 4,238 4,514 4,544 5,625 18,923 4,338 4,752 9,089
----- ----- ----- ----- ------ ----- ----- -----
Total cloud and on-
premise software
revenues $4,550 $4,842 $4,868 $6,022 $20,283 $4,738 $5,148 $9,886
====== ====== ====== ====== ======= ====== ====== ======
AS REPORTED GROWTH
RATES
Cloud platform as a
service and
infrastructure as
a service 80% 75% 55% 40% 60% 28% 21% 25%
On-premise
software revenues 1% (1%) (1%) 3% 1% 2% 5% 4%
Total cloud and on-
premise software
revenues 5% 2% 2% 5% 3% 4% 6% 5%
CONSTANT CURRENCY
GROWTH RATES (2)
Cloud platform as a
service and
infrastructure as
a service 84% 78% 57% 42% 62% 27% 19% 23%
On-premise
software revenues 2% (1%) 0% 4% 1% 1% 3% 2%
Total cloud and on-
premise software
revenues 5% 2% 2% 6% 4% 3% 4% 4%
(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.
APPENDIX A
ORACLE CORPORATION
Q2 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 adjustments to these revenues are 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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SOURCE Oracle Corporation
