SOURCE: Oracle Corporation

Oracle Corporation

March 15, 2016 16:00 ET

Oracle Reports GAAP EPS of $0.50; Non-GAAP EPS of $0.64; Without the Effect of U.S. Dollar Strengthening Both Would Have Been 4 Cents Higher

Cloud SaaS and PaaS Revenues Up 57% in U.S. Dollars and Up 61% in Constant Currency

REDWOOD SHORES, CA--(Marketwired - Mar 15, 2016) - Oracle Corporation (NYSE: ORCL) today announced fiscal 2016 Q3 results. The strengthening of the U.S. dollar compared to foreign currencies had a significant impact on results in the quarter. Total Revenues were $9.0 billion, down 3% in U.S. dollars and up 1% in constant currency. Cloud plus On-Premise Software Revenues were $7.1 billion, down 1% in U.S. dollars and up 3% in constant currency. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $583 million, up 57% in U.S. dollars and up 61% in constant currency. Cloud infrastructure as a service (IaaS) revenues were $152 million, down 2% in U.S. dollars and up 2% in constant currency. Total Cloud Revenues were $735 million, up 40% in U.S. dollars and up 44% in constant currency. Total On-Premise Software Revenues were $6.3 billion, down 4% in U.S. dollars and unchanged in constant currency. Total Hardware Revenues were $1.1 billion, down 13% in U.S. dollars and down 8% in constant currency. Total Services Revenues were $793 million, down 7% in U.S. dollars and down 2% in constant currency.

Operating Income was $3.0 billion and Operating Margin was 34%. Non-GAAP Operating Income was $3.8 billion and non-GAAP Operating Margin was 42%. Net Income was $2.1 billion while non-GAAP Net Income was $2.7 billion. Earnings Per Share was $0.50, while non-GAAP Earnings Per Share was $0.64. Without the impact of the U.S. dollar strengthening compared to foreign currencies, Oracle's reported GAAP and non-GAAP Earnings Per Share would have been 4 cents higher.

Short-term deferred revenues were $6.9 billion, up 7% in U.S. dollars and up 11% in constant currency compared with a year ago. Operating cash flow on a trailing twelve-month basis was $14.1 billion.

"Our Cloud SaaS and PaaS revenue growth rate accelerated to 61% in constant currency in Q3," said Oracle CEO, Safra Catz. "This dramatic revenue increase drove our non-GAAP SaaS and PaaS gross margins up to 51% in Q3 as compared with 43% in Q2. Our cloud business is now in a hyper-growth phase. Our gross margins are climbing toward our target of 80%. These two factors will ignite substantial EPS and cash flow growth over Oracle's next few quarters."

"Our SaaS and PaaS gross deferred revenue grew 96% in Q3 -- twice as fast as Workday and three times faster than Salesforce.com reported in their most recent quarters," said Oracle CEO, Mark Hurd. "Q3 SaaS and PaaS bookings were up 77% in constant currency. We added 942 new SaaS customers in the quarter, including several customers that switched from Workday HCM to Oracle Fusion HCM. We had more than 250 customers go live on Fusion SaaS HCM and Fusion ERP in Q3 alone. We now have over 11,000 SaaS customers with nearly 2,000 Fusion ERP customers -- ten times more ERP customers than Workday claims to have."

"In absolute dollar terms, Oracle is already selling more enterprise SaaS and PaaS new cloud revenue than any other company in the world -- including Salesforce.com," said Larry Ellison, Oracle Chairman and CTO. "We are growing much faster than Salesforce.com. We also have many more SaaS products than Salesforce.com. In some of our most important SaaS markets, such as ERP, HCM, Supply Chain and Manufacturing, Salesforce.com does not participate at all. By successfully competing in all of these markets, Oracle has the ability to sustain its high growth over a long period of time. That should make it easy for us to pass Salesforce.com and become the largest SaaS and PaaS cloud company in the world."

The Board of Directors also declared a quarterly cash dividend of $0.15 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on April 14, 2016, with a payment date of April 28, 2016.

Oracle also announced that its Board of Directors authorized the repurchase of up to an additional $10 billion of common stock under its existing share repurchase program in future quarters.

Q3 Fiscal 2016 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 of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle's Q3 results and Fiscal 2016 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, Pass Code: 67000932.

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 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 our expectations of future growth in our gross margins, EPS and cash flow; the timing of such growth; the growth of our cloud business generally; and the competitive landscape for enterprise cloud 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) Economic, geopolitical and market conditions, including the continued slow economic recovery in Europe, parts of the U.S. and other parts of the world, 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. (2) 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 contracts. (3) Our cloud computing strategy, including our Cloud SaaS, PaaS, IaaS and Database as a Service offerings, may not be successful. (4) 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 products or purchase or renew 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) If the security measures for our software, hardware, services or Oracle Cloud offerings are compromised or subject to a successful cyber-attack, or if such offerings contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and financial exposure. (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 March 15, 2016. Oracle undertakes no duty to update any statement in light of new information or future events.

 
 
ORACLE CORPORATION
 
Q3 FISCAL 2016 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
 
  Three Months Ended          
  February 29, 2016   % of Revenues   February 28, 2015   % of Revenues   % Increase (Decrease) in US $   % Increase (Decrease) in Constant Currency (1)  
REVENUES                            
  Cloud software as a service and platform as a service $ 583   6 % $ 372   4 % 57 % 61 %
  Cloud infrastructure as a service   152   2 %   155   2 % (2 %) 2 %
    Total cloud revenues   735   8 %   527   6 % 40 % 44 %
  New software licenses   1,680   18 %   1,982   21 % (15 %) (11 %)
  Software license updates and product support   4,669   52 %   4,661   50 % 0 % 5 %
    Total on-premise software revenues   6,349   70 %   6,643   71 % (4 %) 0 %
      Total cloud and on-premise software revenues   7,084   78 %   7,170   77 % (1 %) 3 %
  Hardware products   604   7 %   712   8 % (15 %) (10 %)
  Hardware support   531   6 %   587   6 % (10 %) (5 %)
      Total hardware revenues   1,135   13 %   1,299   14 % (13 %) (8 %)
      Total services revenues   793   9 %   858   9 % (7 %) (2 %)
        Total revenues   9,012   100 %   9,327   100 % (3 %) 1 %
                                     
OPERATING EXPENSES                            
  Sales and marketing   1,903   21 %   1,839   20 % 3 % 8 %
  Cloud software as a service and platform as a service   292   3 %   203   2 % 44 % 48 %
  Cloud infrastructure as a service   88   1 %   88   1 % (1 %) 2 %
  Software license updates and product support   293   3 %   300   3 % (2 %) 2 %
  Hardware products   338   4 %   367   4 % (8 %) (1 %)
  Hardware support   171   2 %   218   2 % (21 %) (17 %)
  Services   657   7 %   724   8 % (9 %) (4 %)
  Research and development   1,419   16 %   1,370   15 % 4 % 5 %
  General and administrative   290   3 %   252   3 % 15 % 20 %
  Amortization of intangible assets   408   5 %   527   6 % (23 %) (23 %)
  Acquisition related and other   11   0 %   8   0 % 38 % 42 %
  Restructuring   115   1 %   48   0 % 141 % 157 %
                               
        Total operating expenses   5,985   66 %   5,944   64 % 1 % 4 %
                             
OPERATING INCOME   3,027   34 %   3,383   36 % (11 %) (5 %)
  Interest expense   (360 ) (4 %)   (273 ) (2 %) 32 % 32 %
  Non-operating income, net   65   0 %   40   0 % 62 % 86 %
                               
INCOME BEFORE PROVISION FOR INCOME TAXES   2,732   30 %   3,150   34 % (13 %) (7 %)
  Provision for income taxes   590   6 %   655   7 % (10 %) (3 %)
                               
NET INCOME $ 2,142   24 % $ 2,495   27 % (14 %) (8 %)
                             
EARNINGS PER SHARE:                            
  Basic $ 0.51       $ 0.57              
  Diluted $ 0.50       $ 0.56              
                               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                            
  Basic   4,182         4,389              
  Diluted   4,256         4,494              
                               
(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, 2015, 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 February 29, 2016 compared with the corresponding prior year period decreased our revenues by 4 percentage points, operating expenses by 3 percentage points and operating income by 6 percentage points.
   
   
   
ORACLE CORPORATION
 
Q3 FISCAL 2016 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
 
  Three Months Ended     % Increase (Decrease)
in US $
    % Increase (Decrease) in Constant Currency (2)  
  February 29,
 2016 GAAP
    Adj.     February 29,
 2016 Non-GAAP
    February 28,
 2015 GAAP
    Adj.     February 28,
 2015 Non-GAAP
    GAAP     Non-GAAP     GAAP     Non-GAAP  
                                                                       
TOTAL REVENUES $ 9,012     $ 2     $ 9,014     $ 9,327     $ 7     $ 9,334     (3 %)   (3 %)   1 %   1 %
                                                                       
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES $ 7,084     $ 2     $ 7,086     $ 7,170     $ 6     $ 7,176     (1 %)   (1 %)   3 %   3 %
  Cloud software as a service and platform as a service   583       2       585       372       3       375     57 %   56 %   61 %   60 %
  Cloud infrastructure as a service   152       -       152       155       -       155     (2 %)   (2 %)   2 %   2 %
  New software licenses   1,680       -       1,680       1,982       -       1,982     (15 %)   (15 %)   (11 %)   (11 %)
  Software license updates and product support   4,669       -       4,669       4,661       3       4,664     0 %   0 %   5 %   5 %
                                                                       
TOTAL HARDWARE REVENUES $ 1,135     $ -     $ 1,135     $ 1,299     $ 1     $ 1,300     (13 %)   (13 %)   (8 %)   (8 %)
  Hardware products   604       -       604       712       -       712     (15 %)   (15 %)   (10 %)   (10 %)
  Hardware support   531       -       531       587       1       588     (10 %)   (10 %)   (5 %)   (5 %)
                                                                       
TOTAL OPERATING EXPENSES $ 5,985     $ (794 )   $ 5,191     $ 5,944     $ (816 )   $ 5,128     1 %   1 %   4 %   5 %
  Cloud software as a service and platform as a service   292       (4 )     288       203       (3 )     200     44 %   43 %   48 %   47 %
  Stock-based compensation (3)   256       (256 )     -       230       (230 )     -     11 %   *     11 %   *  
  Amortization of intangible assets (4)   408       (408 )     -       527       (527 )     -     (23 %)   *     (23 %)   *  
  Acquisition related and other   11       (11 )     -       8       (8 )     -     38 %   *     42 %   *  
  Restructuring   115       (115 )     -       48       (48 )     -     141 %   *     157 %   *  
                                                                       
CLOUD SOFTWARE AS A SERVICE AND PLATFORM AS A SERVICE MARGIN %   50 %             51 %     45 %             47 %   452 bp.     423 bp.     445 bp.     413 bp.  
                                                                       
OPERATING INCOME $ 3,027     $ 796     $ 3,823     $ 3,383     $ 823     $ 4,206     (11 %)   (9 %)   (5 %)   (4 %)
                                                                       
OPERATING MARGIN %   34 %             42 %     36 %             45 %   (269) bp.     (265) bp.     (206) bp.     (237) bp.  
                                                                       
INCOME TAX EFFECTS (5) $ 590     $ 207     $ 797     $ 655     $ 247     $ 902     (10 %)   (12 %)   (3 %)   (6 %)
                                                                       
NET INCOME $ 2,142     $ 589     $ 2,731     $ 2,495     $ 576     $ 3,071     (14 %)   (11 %)   (8 %)   (6 %)
                                                                       
DILUTED EARNINGS PER SHARE $ 0.50             $ 0.64     $ 0.56             $ 0.68     (9 %)   (6 %)   (2 %)   0 %
                                                                       
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   4,256       -       4,256       4,494       -       4,494     (5 %)   (5 %)   (5 %)   (5 %)
                                                                       
(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, 2015, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
                               
(3) Stock-based compensation was included in the following GAAP operating expense categories:
                               
      Three Months Ended   Three Months Ended
      February 29, 2016   February 28, 2015
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing   $ 57   $ (57 )   $ -   $ 45   $ (45 )   $ -
  Cloud infrastructure as a service     1     (1 )     -     1     (1 )     -
  Software license updates and product support     6     (6 )     -     6     (6 )     -
  Hardware products     1     (1 )     -     1     (1 )     -
  Hardware support     1     (1 )     -     2     (2 )     -
  Services     7     (7 )     -     8     (8 )     -
  Research and development     154     (154 )     -     138     (138 )     -
  General and administrative     29     (29 )     -     29     (29 )     -
    Subtotal     256     (256 )     -     230     (230 )     -
  Cloud software as a service and platform as a service     4     (4 )     -     3     (3 )     -
  Acquisition related and other     -     -       -     1     (1 )     -
    Total stock-based compensation   $ 260   $ (260 )   $ -   $ 234   $ (234 )   $ -
                           
(4) Estimated future annual amortization expense related to intangible assets as of February 29, 2016 was as follows:
                           
  Remainder of Fiscal 2016   $ 353                    
  Fiscal 2017     1,016                    
  Fiscal 2018     867                    
  Fiscal 2019     760                    
  Fiscal 2020     615                    
  Fiscal 2021     470                    
  Thereafter     1,168                    
    Total intangible assets, net   $ 5,249                    
                             
(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.6% and 20.8% in the third quarter of fiscal 2016 and 2015, respectively, and an effective non-GAAP tax rate of 22.6% and 22.7% in the third quarter of fiscal 2016 and 2015, respectively. The differences between our GAAP and non-GAAP tax rates in the third quarter of fiscal 2016 and 2015 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
                             
* Not meaningful                          
                             
                             
                             
ORACLE CORPORATION
 
Q3 FISCAL 2016 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
 
  Nine Months Ended          
  February 29, 2016   % of Revenues   February 28, 2015   % of Revenues   % Increase (Decrease) in US $   % Increase (Decrease) in Constant Currency (1)  
REVENUES                            
  Cloud software as a service and platform as a service $ 1,517   6 % $ 1,069   4 % 42 % 46 %
  Cloud infrastructure as a service   477   2 %   448   2 % 7 % 12 %
    Total cloud revenues   1,994   8 %   1,517   6 % 31 % 36 %
  New software licenses   4,509   17 %   5,397   19 % (16 %) (11 %)
  Software license updates and product support   14,048   53 %   14,161   51 % (1 %) 6 %
    Total on-premise software revenues   18,557   70 %   19,558   70 % (5 %) 1 %
      Total cloud and on-premise software revenues   20,551   78 %   21,075   76 % (2 %) 4 %
  Hardware products   1,746   7 %   2,007   7 % (13 %) (6 %)
  Hardware support   1,639   6 %   1,791   7 % (8 %) (2 %)
      Total hardware revenues   3,385   13 %   3,798   14 % (11 %) (4 %)
      Total services revenues   2,517   9 %   2,647   10 % (5 %) 2 %
        Total revenues   26,453   100 %   27,520   100 % (4 %) 2 %
                             
OPERATING EXPENSES                            
  Sales and marketing   5,578   21 %   5,443   20 % 2 % 9 %
  Cloud software as a service and platform as a service   847   3 %   517   2 % 64 % 70 %
  Cloud infrastructure as a service   268   1 %   254   1 % 5 % 10 %
  Software license updates and product support   877   3 %   867   3 % 1 % 8 %
  Hardware products   967   4 %   1,034   4 % (6 %) 1 %
  Hardware support   526   2 %   628   2 % (16 %) (11 %)
  Services   2,058   8 %   2,179   8 % (6 %) 2 %
  Research and development   4,253   16 %   4,088   15 % 4 % 6 %
  General and administrative   832   3 %   799   3 % 4 % 9 %
  Amortization of intangible assets   1,283   5 %   1,642   6 % (22 %) (22 %)
  Acquisition related and other   35   0 %   12   0 % 201 % 226 %
  Restructuring   293   1 %   168   0 % 74 % 100 %
                               
        Total operating expenses   17,817   67 %   17,631   64 % 1 % 6 %
                             
OPERATING INCOME   8,636   33 %   9,889   36 % (13 %) (4 %)
  Interest expense   (1,105 ) (4 %)   (817 ) (3 %) 35 % 35 %
  Non-operating income, net   179   0 %   65   0 % 174 % 228 %
                             
INCOME BEFORE PROVISION FOR INCOME TAXES   7,710   29 %   9,137   33 % (16 %) (6 %)
  Provision for income taxes   1,623   6 %   1,956   7 % (17 %) (8 %)
                             
NET INCOME $ 6,087   23 % $ 7,181   26 % (15 %) (6 %)
                             
EARNINGS PER SHARE:                            
  Basic $ 1.43       $ 1.63              
  Diluted $ 1.41       $ 1.59              
                             
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                            
  Basic   4,246         4,419              
  Diluted   4,328         4,516              
                             
(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, 2015, 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 nine months ended February 29, 2016 compared with the corresponding prior year period decreased our revenues by 6 percentage points, operating expenses by 5 percentage points and operating income by 9 percentage points.
   
   
   
ORACLE CORPORATION
 
Q3 FISCAL 2016 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
 
    Nine Months Ended     % Increase (Decrease)
in US $
    % Increase (Decrease) in Constant Currency (2)  
    February 29,
 2016 GAAP
    Adj.     February 29,
 2016 Non-GAAP
    February 28,
 2015 GAAP
    Adj.     February 28,
 2015 Non-GAAP
    GAAP     Non-GAAP     GAAP     Non-GAAP  
                                                             
TOTAL REVENUES   $ 26,453     $ 8     $ 26,461     $ 27,520     $ 21     $ 27,541     (4 %)   (4 %)   2 %   2 %
                                                                         
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES   $ 20,551     $ 7     $ 20,558     $ 21,075     $ 18     $ 21,093     (2 %)   (3 %)   4 %   4 %
  Cloud software as a service and platform as a service     1,517       6       1,523       1,069       9       1,078     42 %   41 %   46 %   46 %
  Cloud infrastructure as a service     477       -       477       448       -       448     7 %   7 %   12 %   12 %
  New software licenses     4,509       -       4,509       5,397       -       5,397     (16 %)   (16 %)   (11 %)   (11 %)
  Software license updates and product support     14,048       1       14,049       14,161       9       14,170     (1 %)   (1 %)   6 %   6 %
                                                                         
TOTAL HARDWARE REVENUES   $ 3,385     $ 1     $ 3,386     $ 3,798     $ 3     $ 3,801     (11 %)   (11 %)   (4 %)   (4 %)
  Hardware products     1,746       -       1,746       2,007       -       2,007     (13 %)   (13 %)   (6 %)   (6 %)
  Hardware support     1,639       1       1,640       1,791       3       1,794     (8 %)   (9 %)   (2 %)   (2 %)
                                                                         
TOTAL OPERATING EXPENSES   $ 17,817     $ (2,376 )   $ 15,441     $ 17,631     $ (2,506 )   $ 15,125     1 %   2 %   6 %   8 %
  Stock-based compensation (3)     765       (765 )     -       684       (684 )     -     12 %   *     12 %   *  
  Amortization of intangible assets (4)     1,283       (1,283 )     -       1,642       (1,642 )     -     (22 %)   *     (22 %)   *  
  Acquisition related and other     35       (35 )     -       12       (12 )     -     201 %   *     226 %   *  
  Restructuring     293       (293 )     -       168       (168 )     -     74 %   *     100 %   *  
                                                                         
OPERATING INCOME   $ 8,636     $ 2,384     $ 11,020     $ 9,889     $ 2,527     $ 12,416     (13 %)   (11 %)   (4 %)   (4 %)
                                                                         
OPERATING MARGIN %     33 %             42 %     36 %             45 %   (329) bp.     (344) bp.     (228) bp.     (293) bp.  
                                                                         
INCOME TAX EFFECTS (5)   $ 1,623     $ 658     $ 2,281     $ 1,956     $ 715     $ 2,671     (17 %)   (15 %)   (8 %)   (7 %)
                                                                         
NET INCOME   $ 6,087     $ 1,726     $ 7,813     $ 7,181     $ 1,812     $ 8,993     (15 %)   (13 %)   (6 %)   (6 %)
                                                                         
DILUTED EARNINGS PER SHARE   $ 1.41             $ 1.81     $ 1.59             $ 1.99     (12 %)   (9 %)   (2 %)   (2 %)
                                                                         
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,328       -       4,328       4,516       -       4,516     (4 %)   (4 %)   (4 %)   (4 %)
                                                                         
(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, 2015, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
                               
(3) Stock-based compensation was included in the following GAAP operating expense categories:
                               
      Nine Months Ended   Nine Months Ended
      February 29, 2016   February 28, 2015
      GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing   $ 163   $ (163 )   $ -   $ 131   $ (131 )   $ -
  Cloud software as a service and platform as a service     13     (13 )     -     8     (8 )     -
  Cloud infrastructure as a service     3     (3 )     -     3     (3 )     -
  Software license updates and product support     18     (18 )     -     15     (15 )     -
  Hardware products     4     (4 )     -     4     (4 )     -
  Hardware support     4     (4 )     -     4     (4 )     -
  Services     22     (22 )     -     23     (23 )     -
  Research and development     452     (452 )     -     380     (380 )     -
  General and administrative     86     (86 )     -     116     (116 )     -
    Subtotal     765     (765 )     -     684     (684 )     -
  Acquisition related and other     3     (3 )     -     5     (5 )     -
    Total stock-based compensation   $ 768   $ (768 )   $ -   $ 689   $ (689 )   $ -
                           
(4) Estimated future annual amortization expense related to intangible assets as of February 29, 2016 was as follows:
                           
  Remainder of Fiscal 2016   $ 353                    
  Fiscal 2017     1,016                    
  Fiscal 2018     867                    
  Fiscal 2019     760                    
  Fiscal 2020     615                    
  Fiscal 2021     470                    
  Thereafter     1,168                    
    Total intangible assets, net   $ 5,249                    
                             
(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 21.0% and 21.4% in the first nine months of fiscal 2016 and 2015, respectively, and an effective non-GAAP tax rate of 22.6% and 22.9% in the first nine months of fiscal 2016 and 2015, respectively. The differences between our GAAP and non-GAAP tax rates in the first nine months of fiscal 2016 and 2015 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
   
* Not meaningful
   
   
   
ORACLE CORPORATION
         
Q3 FISCAL 2016 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
         
    February 29,   May 31,
    2016   2015
ASSETS            
  Current Assets:            
    Cash and cash equivalents   $ 15,583   $ 21,716
    Marketable securities     35,184     32,652
    Trade receivables, net     3,844     5,618
    Inventories     212     314
    Prepaid expenses and other current assets     2,246     2,220
      Total Current Assets     57,069     62,520
  Non-Current Assets:            
    Property, plant and equipment, net     4,011     3,686
    Intangible assets, net     5,249     6,406
    Goodwill, net     34,284     34,087
    Deferred tax assets     1,382     1,458
    Other assets     2,899     2,746
      Total Non-Current Assets     47,825     48,383
TOTAL ASSETS   $ 104,894   $ 110,903
LIABILITIES AND EQUITY            
  Current Liabilities:            
    Notes payable, current   $ -   $ 1,999
    Accounts payable     410     806
    Accrued compensation and related benefits     1,536     1,839
    Deferred revenues     6,912     7,245
    Other current liabilities     2,967     3,317
      Total Current Liabilities     11,825     15,206
  Non-Current Liabilities:            
    Notes payable, non-current     40,106     39,959
    Income taxes payable     4,418     4,386
    Other non-current liabilities     2,209     2,254
      Total Non-Current Liabilities     46,733     46,599
  Equity     46,336     49,098
TOTAL LIABILITIES AND EQUITY   $ 104,894   $ 110,903
             
             
             
ORACLE CORPORATION  
   
Q3 FISCAL 2016 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
($ in millions)  
             
    Nine Months Ended  
    February 29,
2016
    February 28,
2015
 
Cash Flows From Operating Activities:                
  Net income   $ 6,087     $ 7,181  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation     643       502  
    Amortization of intangible assets     1,283       1,642  
    Deferred income taxes     (143 )     (486 )
    Stock-based compensation     768       689  
    Tax benefits on the exercise of stock options and vesting of restricted stock-based awards     188       284  
    Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     (61 )     (167 )
    Other, net     116       126  
    Changes in operating assets and liabilities, net of effects from acquisitions:                
      Decrease in trade receivables, net     1,746       1,867  
      Decrease (increase) in inventories     87       (78 )
      Decrease in prepaid expenses and other assets     95       362  
      Decrease in accounts payable and other liabilities     (890 )     (1,204 )
      Decrease in income taxes payable     (112 )     (369 )
      Increase (decrease) in deferred revenues     24       (296 )
                   
        Net cash provided by operating activities     9,831       10,053  
                 
Cash Flows From Investing Activities:                
  Purchases of marketable securities and other investments     (21,549 )     (23,339 )
  Proceeds from maturities and sales of marketable securities and other investments     18,845       15,042  
  Acquisitions, net of cash acquired     (313 )     (6,232 )
  Capital expenditures     (1,009 )     (794 )
                   
        Net cash used for investing activities     (4,026 )     (15,323 )
                 
Cash Flows From Financing Activities:                
  Payments for repurchases of common stock     (8,467 )     (6,079 )
  Proceeds from issuances of common stock     802       1,456  
  Shares repurchased for tax withholdings upon vesting of restricted stock-based awards     (82 )     (11 )
  Payments of dividends to stockholders     (1,918 )     (1,600 )
  Proceeds from borrowings, net of issuance costs     -       9,945  
  Repayments of borrowings     (2,000 )     (1,500 )
  Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     61       167  
  Distributions to noncontrolling interests     (85 )     (196 )
                 
        Net cash (used for) provided by financing activities     (11,689 )     2,182  
                 
Effect of exchange rate changes on cash and cash equivalents     (249 )     (980 )
                 
Net decrease in cash and cash equivalents     (6,133 )     (4,068 )
                 
Cash and cash equivalents at beginning of period     21,716       17,769  
                 
Cash and cash equivalents at end of period   $ 15,583     $ 13,701  
                 
                 
                 
ORACLE CORPORATION
Q3 FISCAL 2016 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($ in millions)
 
  Fiscal 2015     Fiscal 2016
  Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4
                                                           
GAAP Operating Cash Flow $ 15,357     $ 15,273     $ 14,509     $ 14,336     $ 13,464     $ 12,903     $ 14,114      
                                                           
Capital Expenditures   (628 )     (727 )     (948 )     (1,391 )     (1,636 )     (1,606 )     (1,606 )    
                                                           
Free Cash Flow $ 14,729     $ 14,546     $ 13,561     $ 12,945     $ 11,828     $ 11,297     $ 12,508      
                                                           
% Growth over prior year   4 %     0 %     (6 )%     (10 )%     (20 )%     (22 )%     (8 )%    
                                                           
                                                           
GAAP Net Income $ 10,948     $ 10,896     $ 10,827     $ 9,938     $ 9,501     $ 9,198     $ 8,844      
                                                           
Free Cash Flow as a % of Net Income   135 %     133 %     125 %     130 %     124 %     123 %     141 %    
                                                           
   
(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
Q3 FISCAL 2016 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
($ in millions)
           
  Fiscal 2015     Fiscal 2016  
Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3     Q4   TOTAL  
REVENUES                                                        
  Cloud software as a service and platform as a service $ 337     $ 361     $ 372     $ 416     $ 1,485     $ 451     $ 484     $ 583         $ 1,517  
  Cloud infrastructure as a service   138       155       155       160       608       160       165       152           477  
    Total cloud revenues   475       516       527       576       2,093       611       649       735           1,994  
  New software licenses   1,370       2,045       1,982       3,138       8,535       1,151       1,677       1,680           4,509  
  Software license updates and product support   4,731       4,768       4,661       4,686       18,847       4,696       4,683       4,669           14,048  
    Total on-premise software revenues   6,101       6,813       6,643       7,824       27,382       5,847       6,360       6,349           18,557  
      Total cloud and on-premise software revenues   6,576       7,329       7,170       8,400       29,475       6,458       7,009       7,084           20,551  
                                                                           
  Hardware products   578       717       712       818       2,825       570       573       604           1,746  
  Hardware support   587       617       587       589       2,380       558       550       531           1,639  
    Total hardware revenues   1,165       1,334       1,299       1,407       5,205       1,128       1,123       1,135           3,385  
                                                                               
    Total services revenues   855       935       858       899       3,546       862       861       793           2,517  
                                                                               
      Total revenues $ 8,596     $ 9,598     $ 9,327     $ 10,706     $ 38,226     $ 8,448     $ 8,993     $ 9,012         $ 26,453  
                                                                           
AS REPORTED REVENUE GROWTH RATES                                                                          
  Cloud software as a service and platform as a service   32 %     39 %     30 %     29 %     32 %     34 %     34 %     57 %         42 %
  Cloud infrastructure as a service   26 %     60 %     28 %     25 %     33 %     16 %     7 %     (2 %)         7 %
    Total cloud revenues   31 %     45 %     29 %     28 %     33 %     29 %     26 %     40 %         31 %
  New software licenses   (2 %)     (4 %)     (7 %)     (17 %)     (9 %)     (16 %)     (18 %)     (15 %)         (16 %)
  Software license updates and product support   7 %     6 %     2 %     0 %     4 %     (1 %)     (2 %)     0 %         (1 %)
    Total on-premise software revenues   5 %     3 %     (1 %)     (8 %)     (1 %)     (4 %)     (7 %)     (4 %)         (5 %)
      Total cloud and on-premise software revenues   6 %     5 %     1 %     (6 %)     1 %     (2 %)     (4 %)     (1 %)         (2 %)
                                                                           
  Hardware products   (14 %)     0 %     (2 %)     (6 %)     (5 %)     (1 %)     (20 %)     (15 %)         (13 %)
  Hardware support   (1 %)     1 %     (2 %)     (1 %)     (1 %)     (5 %)     (11 %)     (10 %)         (8 %)
      Total hardware revenues   (8 %)     1 %     (2 %)     (4 %)     (3 %)     (3 %)     (16 %)     (13 %)         (11 %)
                                                                             
      Total services revenues   (7 %)     (3 %)     (3 %)     (4 %)     (4 %)     1 %     (8 %)     (7 %)         (5 %)
                                                                                 
        Total revenues   3 %     3 %     0 %     (5 %)     0 %     (2 %)     (6 %)     (3 %)         (4 %)
                                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                                          
  Cloud software as a service and platform as a service   32 %     41 %     34 %     35 %     35 %     38 %     39 %     61 %         46 %
  Cloud infrastructure as a service   25 %     62 %     32 %     31 %     36 %     23 %     11 %     2 %         12 %
    Total cloud revenues   30 %     47 %     33 %     34 %     36 %     34 %     31 %     44 %         36 %
  New software licenses   (2 %)     0 %     0 %     (10 %)     (4 %)     (9 %)     (12 %)     (11 %)         (11 %)
  Software license updates and product support   6 %     9 %     8 %     8 %     8 %     8 %     5 %     5 %         6 %
    Total on-premise software revenues   4 %     6 %     6 %     0 %     4 %     4 %     0 %     0 %         1 %
      Total cloud and on-premise software revenues   6 %     8 %     7 %     2 %     5 %     6 %     2 %     3 %         4 %
                                                                             
  Hardware products   (14 %)     4 %     6 %     3 %     0 %     9 %     (14 %)     (10 %)         (6 %)
  Hardware support   (2 %)     5 %     4 %     7 %     4 %     4 %     (5 %)     (5 %)         (2 %)
    Total hardware revenues   (8 %)     4 %     5 %     5 %     2 %     6 %     (10 %)     (8 %)         (4 %)
                                                                               
    Total services revenues   (8 %)     1 %     3 %     5 %     0 %     10 %     0 %     (2 %)         2 %
                                                                               
      Total revenues   2 %     7 %     6 %     3 %     4 %     7 %     0 %     1 %         2 %
                                                                           
                                                                           
GEOGRAPHIC REVENUES                                                                          
                                                                           
REVENUES                                                                          
  Americas $ 4,620     $ 5,221     $ 5,134     $ 6,133     $ 21,107     $ 4,716     $ 4,960     $ 4,942         $ 14,620  
  Europe, Middle East & Africa   2,589       2,911       2,813       3,067       11,380       2,456       2,645       2,661           7,761  
  Asia Pacific   1,387       1,466       1,380       1,506       5,739       1,276       1,388       1,409           4,072  
      Total revenues $ 8,596     $ 9,598     $ 9,327     $ 10,706     $ 38,226     $ 8,448     $ 8,993     $ 9,012         $ 26,453  
                                                                           
                                                                           
HEADCOUNT                                                                          
                                                                           
GEOGRAPHIC AREA                                                                          
  Americas   54,073       57,243       58,117       58,415               59,901       59,999       60,437              
  Europe, Middle East & Africa   23,349       26,997       26,989       26,988               27,030       27,541       27,275              
  Asia Pacific   45,496       46,312       46,456       46,962               48,139       48,620       48,694              
      Total company   122,918       130,552       131,562       132,365               135,070       136,160       136,406              
                                                                           
   
(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, 2015 and 2014 for the fiscal 2016 and fiscal 2015 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
   
   
   
ORACLE CORPORATION
Q3 FISCAL 2016 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)
($ in millions)
           
  Fiscal 2015     Fiscal 2016  
  Q1     Q2     Q3     Q4     TOTAL     Q1     Q2     Q3     Q4   TOTAL  
                                                                           
AMERICAS                                                                          
  Total cloud and on-premise software revenues $ 3,614     $ 4,044     $ 4,021     $ 4,926     $ 16,604     $ 3,684     $ 3,927     $ 3,964         $ 11,576  
  Total hardware revenues $ 583     $ 716     $ 686     $ 751     $ 2,737     $ 589     $ 595     $ 571         $ 1,755  
                                                                           
AS REPORTED GROWTH RATES                                                                          
  Total cloud and on-premise software revenues   5 %     6 %     5 %     6 %     6 %     2 %     (3 %)     (1 %)         (1 %)
  Total hardware revenues   (9 %)     3 %     5 %     1 %     0 %     1 %     (17 %)     (17 %)         (12 %)
                                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                                          
  Total cloud and on-premise software revenues   6 %     8 %     7 %     9 %     7 %     6 %     0 %     1 %         2 %
  Total hardware revenues   (8 %)     5 %     7 %     4 %     2 %     6 %     (14 %)     (13 %)         (8 %)
                                                                           
                                                                           
EUROPE / MIDDLE EAST / AFRICA                                                                          
  Total cloud and on-premise software revenues $ 1,992     $ 2,234     $ 2,169     $ 2,369     $ 8,764     $ 1,873     $ 2,066     $ 2,069         $ 6,008  
  Total hardware revenues $ 338     $ 380     $ 379     $ 423     $ 1,519     $ 330     $ 316     $ 349         $ 995  
                                                                           
AS REPORTED GROWTH RATES                                                                          
  Total cloud and on-premise software revenues   10 %     4 %     (3 %)     (22 %)     (5 %)     (6 %)     (8 %)     (5 %)         (6 %)
  Total hardware revenues   (6 %)     2 %     (6 %)     (4 %)     (3 %)     (2 %)     (17 %)     (8 %)         (9 %)
                                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                                          
  Total cloud and on-premise software revenues   7 %     9 %     9 %     (8 %)     3 %     7 %     3 %     2 %         4 %
  Total hardware revenues   (7 %)     8 %     8 %     15 %     6 %     14 %     (6 %)     (1 %)         2 %
                                                                           
                                                                           
ASIA PACIFIC                                                                          
  Total cloud and on-premise software revenues $ 970     $ 1,051     $ 980     $ 1,105     $ 4,107     $ 901     $ 1,016     $ 1,051         $ 2,967  
  Total hardware revenues $ 244     $ 238     $ 234     $ 233     $ 949     $ 209     $ 212     $ 215         $ 635  
                                                                           
AS REPORTED GROWTH RATES                                                                          
  Total cloud and on-premise software revenues   3 %     2 %     (3 %)     (10 %)     (3 %)     (7 %)     (3 %)     7 %         (1 %)
  Total hardware revenues   (8 %)     (7 %)     (12 %)     (16 %)     (11 %)     (14 %)     (11 %)     (8 %)         (11 %)
                                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                                          
  Total cloud and on-premise software revenues   2 %     7 %     4 %     (1 %)     3 %     7 %     6 %     13 %         9 %
  Total hardware revenues   (8 %)     (3 %)     (6 %)     (8 %)     (6 %)     (3 %)     (3 %)     (3 %)         (3 %)
                                                                           
                                                                           
TOTAL COMPANY                                                                          
  Total cloud and on-premise software revenues $ 6,576     $ 7,329     $ 7,170     $ 8,400     $ 29,475     $ 6,458     $ 7,009     $ 7,084         $ 20,551  
  Total hardware revenues