ORACLE  CORPORATION

 Q1 FISCAL 2019 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

Three Months Ended August 31,

% Increase

% Increase

(Decrease)

% of 

% of 

(Decrease)

in Constant

2018

Revenues

Revenues

in US $

Currency (1)

REVENUES

Cloud services and license support 

$           6,609

72%

$           6,407

71%

3%

4%

Cloud license and on-premise license

867

9%

894

10%

(3%)

0%

Hardware

904

10%

943

10%

(4%)

(3%)

Services

813

9%

860

9%

(5%)

(4%)

      Total revenues

9,193

100%

9,104

100%

1%

2%

OPERATING EXPENSES

Cloud services and license support 

913

10%

857

9%

7%

8%

Hardware

326

4%

372

4%

(12%)

(11%)

Services

714

8%

699

8%

2%

4%

Sales and marketing

2,039

22%

1,989

22%

3%

4%

Research and development 

1,564

17%

1,572

17%

(1%)

0%

General and administrative

321

3%

319

4%

1%

2%

Amortization of intangible assets

434

5%

411

5%

6%

6%

Acquisition related and other

14

0%

12

0%

21%

23%

Restructuring

90

1%

124

1%

(28%)

(27%)

      Total operating expenses 

6,415

70%

6,355

70%

1%

2%

OPERATING INCOME 

2,778

30%

2,749

30%

1%

3%

Interest expense

(529)

(5%)

(469)

(5%)

13%

13%

Non-operating income, net 

291

3%

220

3%

33%

34%

INCOME BEFORE PROVISION FOR INCOME TAXES

2,540

28%

2,500

28%

2%

4%

Provision for income taxes

275

3%

356

4%

(23%)

(23%)

NET INCOME

$           2,265

25%

$           2,144

24%

6%

8%

EARNINGS PER SHARE:

Basic

$              0.58

$              0.52

Diluted

$              0.57

$              0.50

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

3,904

4,156

Diluted

3,999

4,284

(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 August 31, 2018 compared with the corresponding prior year period decreased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 2 percentage points.

ORACLE  CORPORATION

 Q1 FISCAL 2019 FINANCIAL RESULTS

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

($ in millions, except per share data)

Three Months Ended August 31,

2018

2018

2017

2017

GAAP

Non-GAAP

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

TOTAL REVENUES

$     9,193

$            8

$     9,201

$     9,104

$          25

$     9,129

1%

1%

2%

2%

Cloud services and license support

6,609

8

6,617

6,407

25

6,432

3%

3%

4%

4%

TOTAL OPERATING EXPENSES

$     6,415

$      (974)

$     5,441

$     6,355

$      (938)

$     5,417

1%

0%

2%

2%

Sales and marketing (3)

2,039

(94)

1,945

1,989

(78)

1,911

3%

2%

4%

3%

Stock-based compensation (4)

342

(342)

-

313

(313)

-

9%

*

9%

*

Amortization of intangible assets (5)

434

(434)

-

411

(411)

-

6%

*

6%

*

Acquisition related and other

14

(14)

-

12

(12)

-

21%

*

23%

*

Restructuring

90

(90)

-

124

(124)

-

(28%)

*

(27%)

*

OPERATING INCOME

$     2,778

$        982

$     3,760

$     2,749

$        963

$     3,712

1%

1%

3%

3%

OPERATING MARGIN %

30%

41%

30%

41%

2 bp.

20 bp.

13 bp.

19 bp.

INCOME TAX EFFECTS (6)

$        275

$        398

$        673

$        356

$        510

$        866

(23%)

(22%)

(23%)

(21%)

NET INCOME

$     2,265

$        584

$     2,849

$     2,144

$        453

$     2,597

6%

10%

8%

12%

DILUTED EARNINGS PER SHARE 

$       0.57

$       0.71

$       0.50

$       0.61

13%

18%

16%

19%

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 

3,999

-

3,999

4,284

-

4,284

(7%)

(7%)

(7%)

(7%)

(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, 2018, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

(3)

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

Three Months Ended

August 31,

2018

2017

Stock-based compensation (4)

$         (94)

$         (89)

Acquired deferred sales commissions amortization

-

11

           Total non-GAAP sales and marketing adjustments

$         (94)

$         (78)

(4)

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

Three Months Ended

Three Months Ended

August 31, 2018

August 31, 2017

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

Cloud services and license support

$          24

$         (24)

$           -

$          18

$         (18)

$           -

Hardware

3

(3)

-

3

(3)

-

Services

13

(13)

-

14

(14)

-

Research and development

257

(257)

-

234

(234)

-

General and administrative

45

(45)

-

44

(44)

-

           Subtotal

(342)

-

313

(313)

-

Sales and marketing

94

(94)

-

89

(89)

-

Acquisition related and other

-

-

-

1

(1)

-

           Total stock-based compensation

$        436

$      (436)

$           -

$        403

$      (403)

$           -

(5)

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

     Remainder of fiscal 2019

$     1,190

     Fiscal 2020

1,419

     Fiscal 2021

1,198

     Fiscal 2022

982

     Fiscal 2023

629

     Fiscal 2024

388

     Thereafter

489

           Total intangible assets, net

$     6,295

(6)

Income tax effects were calculated reflecting an effective GAAP tax rate of 10.8% and 14.2% in the first quarter of fiscal 2019 and 2018, respectively, and an effective non-GAAP tax rate of 19.1% and 25.0% in the first quarter of fiscal 2019 and 2018, respectively. The difference between our GAAP and non-GAAP tax rates in the first quarter of fiscal 2019 was primarily due to adjustments in our estimates for the one-time effects of the U.S. Tax Cuts and Jobs Act of 2017 (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.  The difference between our GAAP and non-GAAP tax rates in the first quarter of 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.

ORACLE  CORPORATION

Q1 FISCAL 2019 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

August 31,

ASSETS

Current Assets:

Cash and cash equivalents

$               18,455

$               21,620

Marketable securities

41,639

45,641

Trade receivables, net

3,729

5,136

Prepaid expenses and other current assets

3,186

3,762

Total Current Assets

67,009

76,159

Non-Current Assets:

   Property, plant and equipment, net

5,918

5,897

   Intangible assets, net

6,295

6,670

   Goodwill, net

43,702

43,755

   Deferred tax assets

1,433

1,395

   Other non-current assets

4,001

3,975

Total Non-Current Assets

61,349

TOTAL ASSETS

$            137,851

LIABILITIES AND EQUITY

Current Liabilities:

Notes payable and other borrowings, current 

$                 3,743

$                 4,491

Accounts payable

527

529

Accrued compensation and related benefits

1,421

1,806

Deferred revenues

10,349

8,341

Other current liabilities

3,522

3,957

Total Current Liabilities

19,562

19,124

Non-Current Liabilities:

Notes payable and other borrowings, non-current

54,386

56,128

Income taxes payable

13,513

13,429

Other non-current liabilities

2,333

2,297

Total Non-Current Liabilities

70,232

71,854

Equity

38,564

46,873

TOTAL LIABILITIES AND EQUITY

$            128,358

$            137,851

     ORACLE  CORPORATION 

Q1 FISCAL 2019 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

Three Months Ended August 31,

Cash Flows From Operating Activities:

Net income 

$              2,265

$               2,144

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

Depreciation

286

285

Amortization of intangible assets

434

411

Deferred income taxes

(112)

141

Stock-based compensation

436

403

Other, net

52

48

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

Decrease in trade receivables, net

1,390

1,804

Decrease in prepaid expenses and other assets

309

246

Decrease in accounts payable and other liabilities

(561)

(770)

Increase in income taxes payable

10

32

Increase in deferred revenues

2,213

1,822

Net cash provided by operating activities

6,722