ORACLE  CORPORATION

Q4 FISCAL 2018 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

Three Months Ended May 31,

% Increase

% Increase

(Decrease)

% of 

% of 

(Decrease)

in Constant

2018

Revenues

2017

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$ 6,770

60%

$ 6,258

58%

8%

6%

Cloud license and on-premise license

2,483

22%

2,626

24%

(5%)

(6%)

Hardware

1,115

10%

1,114

10%

0%

(2%)

Services

883

8%

894

8%

(1%)

(3%)

      Total revenues

11,251

100%

10,892

100%

3%

2%

OPERATING EXPENSES

Cloud services and license support 

962

8%

835

8%

15%

14%

Hardware

462

4%

440

4%

5%

3%

Services

755

7%

728

7%

4%

2%

Sales and marketing

2,324

20%

2,313

21%

0%

(1%)

Research and development 

1,544

14%

1,609

15%

(4%)

(4%)

General and administrative

308

3%

317

3%

(3%)

(5%)

Amortization of intangible assets

415

4%

441

4%

(6%)

(6%)

Acquisition related and other

20

0%

18

0%

9%

8%

Restructuring

81

1%

118

1%

(32%)

(34%)

      Total operating expenses 

6,871

63%

1%

0%

OPERATING INCOME 

4,380

39%

4,073

37%

8%

5%

Interest expense

(547)

(5%)

(481)

(4%)

14%

14%

Non-operating income, net 

308

3%

168

2%

83%

87%

INCOME BEFORE PROVISION FOR INCOME TAXES

4,141

37%

3,760

35%

10%

8%

Provision for income taxes

7%

529

5%

39%

39%

NET INCOME

$ 3,408

30%

$ 3,231

30%

5%

2%

EARNINGS PER SHARE:

Basic

$    0.84

$    0.78

Diluted

$    0.82

$    0.76

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

4,046

4,132

Diluted

4,149

4,248

(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 May 31, 2018 compared with the corresponding prior year period increased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 3 percentage points.

ORACLE  CORPORATION

 Q4 FISCAL 2018 FINANCIAL RESULTS

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

($ in millions, except per share data)

Three Months Ended May 31,

2018

2018

2017

2017

GAAP

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$ 11,251

$       9

$   11,260

$ 10,892

$     50

$   10,942

3%

3%

2%

1%

Cloud services and license support

6,770

9

6,779

6,258

50

6,308

8%

7%

6%

5%

TOTAL OPERATING EXPENSES

$    6,871

$ (909)

$     5,962

$    6,819

$ (893)

$     5,926

1%

1%

0%

(1%)

Sales and marketing (3)

2,324

(84)

2,240

2,313

(62)

2,251

0%

0%

(1%)

(2%)

Stock-based compensation (4)

309

(309)

-

254

(254)

-

22%

*

22%

*

Amortization of intangible assets (5)

415

(415)

-

441

(441)

-

(6%)

*

(6%)

*

Acquisition related and other

20

(20)

-

18

(18)

-

9%

*

8%

*

Restructuring

81

(81)

-

118

(118)

-

(32%)

*

(34%)

*

OPERATING INCOME

$    4,380

$   918

$     5,298

$    4,073

$   943

$     5,016

8%

6%

5%

4%

OPERATING MARGIN %

39%

47%

37%

46%

154 bp.

121 bp.

128 bp.

108 bp.

INCOME TAX EFFECTS (6)

$       733

$   239

$        972

$       529

$   412

$        941

39%

3%

39%

1%

NET INCOME

$    3,408

$   679

$     4,087

$    3,231

$   531

$     3,762

5%

9%

2%

7%

DILUTED EARNINGS PER SHARE 

$      0.82

$       0.99

$      0.76

$       0.89

8%

11%

5%

9%

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 

4,149

-

4,149

4,248

-

4,248

(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

May 31,

2018

2017

     Stock-based compensation (4)

$        (88)

$    (78)

     Acquired deferred sales commissions amortization

4

16

         Total non-GAAP sales and marketing adjustments

$        (84)

$    (62)

(4)

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

Three Months Ended

Three Months Ended

May 31, 2018

May 31, 2017

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

     Cloud services and license support

$         21

$    (21)

$           -

$         14

$    (14)

$           -

     Hardware

3

(3)

-

3

(3)

-

     Services

11

(11)

-

14

(14)

-

     Research and development

228

(228)

-

197

(197)

-

     General and administrative

46

(46)

-

26

(26)

-

           Subtotal

(309)

-

254

(254)

-

     Sales and marketing

88

(88)

-

78

(78)

-

     Acquisition related and other

-

-

-

2

(2)

-

           Total stock-based compensation

$       397

$ (397)

$           -

$       334

$ (334)

$           -

(5)

Estimated future annual amortization expense related to intangible assets as of May 31, 2018 was as follows:

     Fiscal 2019

$    1,605

     Fiscal 2020

1,400

     Fiscal 2021

1,174

     Fiscal 2022

966

     Fiscal 2023

613

     Thereafter

912

           Total intangible assets, net

$    6,670

(6)

Income tax effects were calculated reflecting an effective GAAP tax rate of 17.7% and 14.1% in the fourth quarter of fiscal 2018 and 2017, respectively, and an effective non-GAAP tax rate of 19.2% and 20.0% in the fourth quarter of fiscal 2018 and 2017, respectively. The difference between 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 the U.S. 2017 Tax Cuts and Jobs Act (refer to Appendix A for additional information), 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 rates in the fourth quarter of fiscal 2017 was primarily due to the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets.

ORACLE  CORPORATION

FISCAL 2018 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

Year Ended May 31,

% Increase

% Increase

(Decrease)

% of 

% of 

(Decrease)

in Constant

2018

Revenues

2017

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$ 26,254

66%

$ 23,800

63%

10%

8%

Cloud license and on-premise license

6,190

16%

6,418

17%

(4%)

(5%)

Hardware 

3,993

10%

4,152

11%

(4%)

(6%)

Services

3,394

8%

3,358

9%

1%

(1%)

      Total revenues

39,831

100%

37,728

100%

6%

3%

OPERATING EXPENSES

Cloud services and license support 

3,612

10%

3,015

9%

20%

18%

Hardware

1,581

4%

1,653

4%

(4%)

(7%)

Services

2,888

7%

2,801

7%

3%

1%

Sales and marketing

8,431

21%

8,197

22%

3%

1%

Research and development 

6,091

15%

6,159

16%

(1%)

(2%)

General and administrative

1,289

3%

1,176

3%

10%

8%

Amortization of intangible assets

1,620

4%

1,451

4%

12%

12%

Acquisition related and other

52

0%

103

0%

(50%)

(50%)

Restructuring

588

2%

463

1%

27%

22%

      Total operating expenses 

26,152

66%

25,018

66%

5%

3%

OPERATING INCOME 

13,679

34%

12,710

34%

8%

5%

Interest expense

(2,025)

(5%)

(1,798)

(5%)

13%

13%

Non-operating income, net 

1,237

3%

605

2%

105%

106%

INCOME BEFORE PROVISION FOR INCOME TAXES

12,891

32%

11,517

31%

12%

9%

Provision for income taxes (2)

9,066

22%

2,182

6%

315%

315%

NET INCOME 

$    3,825

10%

25%

(59%)

(62%)

EARNINGS PER SHARE:

Basic

$      0.93

$      2.27

Diluted

$      0.90

$      2.21

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

4,121

4,115

Diluted

4,238

4,217

(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 year ended May 31, 2018 compared with the corresponding prior year period increased our revenues by 3 percentage points, operating expenses by 2 percentage points and operating income by 3 percentage points.

(2)

Provision for income taxes for the year ended May 31, 2018 includes the impact of the U.S. 2017 Tax Cuts and Jobs Act, which was signed into law during our fiscal 2018.

ORACLE  CORPORATION

FISCAL 2018 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)

% Increase (Decrease)

in US $

% Increase (Decrease) in

Constant Currency (2) 

2018

2018

2017

2017

GAAP

GAAP

Non-GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$ 39,831

$        47

$   39,878

$ 37,728

$      171

$   37,899

6%

5%

3%

3%

Cloud services and license support

26,254

47

26,301

23,800

171

23,971

10%

10%

8%

7%

TOTAL OPERATING EXPENSES

$ 26,152

$  (3,844)

$   22,308

$ 25,018

$  (3,286)

$   21,732

5%

3%

3%

1%

Sales and marketing (3)

8,431

(339)

8,092

8,197

(260)

7,937

3%

2%

1%

0%

Stock-based compensation (4)

1,245

(1,245)

-

1,009

(1,009)

-

23%

*

23%

*

Amortization of intangible assets (5)

1,620

(1,620)

-

1,451

(1,451)

-

12%

*

12%

*

Acquisition related and other

52

(52)

-

103

(103)

-

(50%)

*

(50%)

*

Restructuring

588

(588)

-

463

(463)

-

27%

*

22%

*

OPERATING INCOME

$ 13,679

$   3,891

$   17,570

$ 12,710

$   3,457

$   16,167

8%

9%

5%

6%

OPERATING MARGIN %

34%

44%

34%

43%

65 bp.

140 bp.

38 bp.

126 bp.

INCOME TAX EFFECTS (6)

$    9,066

$  (5,528)

$     3,538

$    2,182

$   1,233

$     3,415

315%

4%

315%

1%

NET INCOME 

$    3,825

$   9,419

$   13,244

$    9,335

$   2,224

$   11,559

(59%)

15%

(62%)

12%

DILUTED EARNINGS PER SHARE

$      0.90

$       3.12