SOURCE: Oracle Corporation

Oracle Corporation

December 16, 2015 16:27 ET

Oracle Reports GAAP EPS of $0.51; Non-GAAP EPS of $0.63

Cloud SAAS and PAAS Revenues Up 34% in U.S. Dollars and Up 39% in Constant Currency

REDWOOD SHORES, CA--(Marketwired - Dec 16, 2015) - Oracle Corporation (NYSE: ORCL) today announced fiscal 2016 Q2 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 6% in U.S. dollars and unchanged in constant currency. Cloud plus On-Premise Software Revenues were $7.0 billion, down 4% in U.S. dollars and up 2% in constant currency. Total Cloud Revenues were $649 million, up 26% in U.S. dollars and up 31% in constant currency. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $484 million, up 34% in U.S. dollars and up 39% in constant currency. Cloud infrastructure as a service (IaaS) revenues were $165 million, up 7% in U.S. dollars and up 11% in constant currency. Total On-Premise Software Revenues were $6.4 billion, down 7% in U.S. dollars and unchanged in constant currency. Total Hardware Revenues were $1.1 billion, down 16% in U.S. dollars and down 10% in constant currency. Total Services Revenues were $861 million, down 8% in U.S. dollars and unchanged in constant currency.

Operating Income was $3.0 billion and Operating Margin was 33%. Non-GAAP Operating Income was $3.7 billion and non-GAAP Operating Margin was 41%. Net Income was $2.2 billion while non-GAAP Net Income was $2.7 billion. Earnings Per Share was $0.51, while non-GAAP Earnings Per Share was $0.63. Without the impact of the U.S. dollar strengthening compared to foreign currencies, Oracle's reported GAAP Earnings Per Share would have been 5 cents higher and non-GAAP Earnings Per Share would have been 6 cents higher.

Short-term deferred revenues were $7.0 billion, up 3% in U.S. dollars and up 9% in constant currency compared with a year ago. Operating cash flow on a trailing twelve-month basis was $12.9 billion.

"We're very pleased with our non-GAAP EPS of $0.63, beating the mid-point of guidance by 4 cents despite a stronger than expected currency headwind," said Oracle CEO, Safra Catz. "We grew our SaaS and PaaS revenue 38% in constant dollars this past quarter, and we expect that revenue growth rate to accelerate to nearly 50% in Q3 and close to 60% in Q4. This rapid increase in our cloud revenue will help drive our SaaS and PaaS cloud gross margins from 43% in Q2 to approaching 60% in Q4 and drive significant EPS growth in Q4."

"It was a very strong growth quarter for our cloud business, with SaaS and PaaS bookings up 75% in constant currency and billings up 68% in U.S. dollars," said Oracle CEO, Mark Hurd. "We did 100 Fusion HCM deals and over 300 Fusion ERP deals in the quarter. We now have more than 1,500 ERP customers in the cloud -- that's at least ten times more ERP customers than Workday."

"We are still on-target to sell and book more than $1.5 billion of new SaaS and PaaS business this fiscal year," said Oracle Executive Chairman and CTO Larry Ellison. "That is considerably more SaaS and PaaS new business than any other cloud services provider including salesforce.com."

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 January 6, 2016, with a payment date of January 27, 2016.

Q2 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 Q2 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: 1507329.

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 SaaS and PaaS gross margins, revenues, EPS and bookings; and the timing of such growth are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) 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 systems 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 December 16, 2015. Oracle undertakes no duty to update any statement in light of new information or future events.

   
   
ORACLE CORPORATION  
   
Q2 FISCAL 2016 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
($ in millions, except per share data)  
   
  Three Months Ended November 30,      
% Increase  
 
  2015   % of Revenues   2014   % of Revenues   % Increase (Decrease) in US $   (Decrease) in Constant Currency (1)  
REVENUES                            
  Cloud software as a service and platform as a service $ 484   5 % $ 361   4 % 34 % 39 %
  Cloud infrastructure as a service   165   2 %   155   1 % 7 % 11 %
    Total cloud revenues   649   7 %   516   5 % 26 % 31 %
  New software licenses   1,677   19 %   2,045   21 % (18 %) (12 %)
  Software license updates and product support   4,683   52 %   4,768   50 % (2 %) 5 %
    Total on-premise software revenues   6,360   71 %   6,813   71 % (7 %) 0 %
      Total cloud and on-premise software revenues   7,009   78 %   7,329   76 % (4 %) 2 %
  Hardware products   573   6 %   717   8 % (20 %) (14 %)
  Hardware support   550   6 %   617   6 % (11 %) (5 %)
    Total hardware revenues   1,123   12 %   1,334   14 % (16 %) (10 %)
    Total services revenues   861   10 %   935   10 % (8 %) 0 %
        Total revenues   8,993   100 %   9,598   100 % (6 %) 0 %
                             
OPERATING EXPENSES                            
  Sales and marketing   1,945   22 %   1,897   20 % 3 % 10 %
  Cloud software as a service and platform as a service   280   3 %   165   2 % 70 % 79 %
  Cloud infrastructure as a service   91   1 %   87   1 % 5 % 9 %
  Software license updates and product support   293   3 %   296   3 % (1 %) 8 %
  Hardware products   325   3 %   369   4 % (12 %) (5 %)
  Hardware support   174   2 %   218   2 % (20 %) (15 %)
  Services   690   8 %   764   8 % (10 %) (3 %)
  Research and development   1,444   16 %   1,389   14 % 4 % 6 %
  General and administrative   285   3 %   272   3 % 5 % 10 %
  Amortization of intangible assets   423   5 %   568   6 % (26 %) (26 %)
  Acquisition related and other   (7 ) 0 %   (20 ) 0 % 67 % 69 %
  Restructuring   95   1 %   51   0 % 85 % 104 %
                             
        Total operating expenses   6,038   67 %   6,056   63 % 0 % 5 %
                             
OPERATING INCOME   2,955   33 %   3,542   37 % (17 %) (8 %)
  Interest expense   (371 ) (4 %)   (282 ) (3 %) 31 % 31 %
  Non-operating income, net   84   1 %   9   0 % 842 % 1,135 %
                             
INCOME BEFORE PROVISION FOR INCOME TAXES   2,668   30 %   3,269   34 % (18 %) (9 %)
  Provision for income taxes   471   6 %   767   8 % (39 %) (32 %)
                             
NET INCOME $ 2,197   24 % $ 2,502   26 % (12 %) (3 %)
                             
EARNINGS PER SHARE:                            
  Basic $ 0.52       $ 0.57              
  Diluted $ 0.51       $ 0.56              
                             
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                            
  Basic   4,239         4,417              
  Diluted   4,316         4,505              
                             
(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 November 30, 2015 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
 
Q2 FISCAL 2016 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)
in US $
    % Increase (Decrease) in Constant Currency (2)  
    2015
GAAP
   
Adj.
    2015
Non-GAAP
    2014
GAAP
   
Adj.
    2014
Non-GAAP
    GAAP     Non-GAAP     GAAP     Non-GAAP  
                                                             
TOTAL REVENUES   $ 8,993     $ 3     $ 8,996     $ 9,598     $ 10     $ 9,608     (6 %)   (6 %)   0 %   0 %
                                                                         
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES   $ 7,009     $ 3     $ 7,012     $ 7,329     $ 8     $ 7,337     (4 %)   (4 %)   2 %   2 %
  Cloud software as a service and platform as a service     484     $ 3       487       361       3       364     34 %   34 %   39 %   38 %
  Cloud infrastructure as a service     165       -       165       155       -       155     7 %   7 %   11 %   11 %
  New software licenses     1,677       -       1,677       2,045       -       2,045     (18 %)   (18 %)   (12 %)   (12 %)
  Software license updates and product support     4,683       -       4,683       4,768       5       4,773     (2 %)   (2 %)   5 %   5 %
                                                                         
TOTAL HARDWARE REVENUES   $ 1,123     $ -     $ 1,123     $ 1,334     $ 2     $ 1,336     (16 %)   (16 %)   (10 %)   (10 %)
  Hardware products     573       -       573       717       -       717     (20 %)   (20 %)   (14 %)   (14 %)
  Hardware support     550       -       550       617       2       619     (11 %)   (11 %)   (5 %)   (5 %)
                                                                         
TOTAL OPERATING EXPENSES   $ 6,038     $ (765 )   $ 5,273     $ 6,056     $ (839 )   $ 5,217     0 %   1 %   5 %   7 %
  Cloud software as a service and platform as a service     280       (4 )     276       165       (3 )     162     70 %   70 %   79 %   79 %
  Stock-based compensation (3)     250       (250 )     -       237       (237 )     -     5 %   *     5 %   *  
  Amortization of intangible assets (4)     423       (423 )     -       568       (568 )     -     (26 %)   *     (26 %)   *  
  Acquisition related and other     (7 )     7       -       (20 )     20       -     67 %   *     69 %   *  
  Restructuring     95       (95 )     -       51       (51 )     -     85 %   *     104 %   *  
CLOUD SOFTWARE AS A SERVICE AND PLATFORM AS A SERVICE MARGIN %     42 %             43 %     54 %             55 %   (1,218) bp.   (1,200) bp.   (1,295) bp.   (1,280) bp.
OPERATING INCOME   $ 2,955     $ 768     $ 3,723     $ 3,542     $ 849     $ 4,391     (17 %)   (15 %)   (8 %)   (8 %)
OPERATING MARGIN %     33 %             41 %     37 %             46 %   (405) bp.   (431) bp.   (307) bp.   (385) bp.
INCOME TAX EFFECTS (5)   $ 471     $ 230     $ 701     $ 767     $ 234     $ 1,001     (39 %)   (30 %)   (32 %)   (24 %)
NET INCOME   $ 2,197     $ 538     $ 2,735     $ 2,502     $ 615     $ 3,117     (12 %)   (12 %)   (3 %)   (5 %)
DILUTED EARNINGS PER SHARE   $ 0.51             $ 0.63     $ 0.56             $ 0.69     (8 %)   (8 %)   2 %   0 %
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,316       -       4,316       4,505       -       4,505     (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:
                             
    Three Months Ended   Three Months Ended
    November 30, 2015   November 30, 2014
    GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing $ 55   $ (55 )   $ -   $ 43   $ (43 )   $ -
  Cloud infrastructure as a service   1     (1 )     -     1     (1 )     -
  Software license updates and product support   6     (6 )     -     4     (4 )     -
  Hardware products   2     (2 )     -     1     (1 )     -
  Hardware support   1     (1 )     -     2     (2 )     -
  Services   7     (7 )     -     9     (9 )     -
  Research and development   151     (151 )     -     134     (134 )     -
  General and administrative   27     (27 )     -     43     (43 )     -
    Subtotal   250     (250 )     -     237     (237 )     -
  Cloud software as a service and platform as a service   4     (4 )     -     3     (3 )     -
  Acquisition related and other   -     -       -     1     (1 )     -
    Total stock-based compensation $ 254   $ (254 )   $ -   $ 241   $ (241 )   $ -
                         
(4) Estimated future annual amortization expense related to intangible assets as of November 30, 2015 was as follows:
                         
  Remainder of Fiscal 2016 $ 757                    
  Fiscal 2017   1,005                    
  Fiscal 2018   858                    
  Fiscal 2019   751                    
  Fiscal 2020   608                    
  Fiscal 2021   466                    
  Thereafter   1,154                    
  Total intangible assets, net $ 5,599                    
                           
(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 17.6% and 23.5% in the second quarter of fiscal 2016 and 2015, respectively, and an effective non-GAAP tax rate of 20.4% and 24.3% in the second quarter of fiscal 2016 and 2015, respectively. The differences between our GAAP and non-GAAP tax rates in the second 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  
   
Q2 FISCAL 2016 YEAR TO DATE FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
($ in millions, except per share data)  
   
  Six Months Ended November 30,       % Increase  
  2015   % of Revenues   2014   % of Revenues   % Increase (Decrease) in US $   (Decrease) in Constant Currency (1)  
REVENUES                            
  Cloud software as a service and platform as a service $ 934   5 % $ 698   4 % 34 % 39 %
  Cloud infrastructure as a service   325   2 %   293   1 % 11 % 17 %
    Total cloud revenues   1,259   7 %   991   5 % 27 % 32 %
  New software licenses   2,829   16 %   3,415   19 % (17 %) (11 %)
  Software license updates and product support   9,379   54 %   9,499   52 % (1 %) 6 %
    Total on-premise software revenues   12,208   70 %   12,914   71 % (5 %) 2 %
      Total cloud and on-premise software revenues   13,467   77 %   13,905   76 % (3 %) 4 %
  Hardware products   1,142   7 %   1,295   7 % (12 %) (4 %)
  Hardware support   1,108   6 %   1,204   7 % (8 %) (1 %)
    Total hardware revenues   2,250   13 %   2,499   14 % (10 %) (2 %)
    Total services revenues   1,724   10 %   1,790   10 % (4 %) 5 %
                                 
        Total revenues   17,441   100 %   18,194   100 % (4 %) 3 %
                             
OPERATING EXPENSES                            
  Sales and marketing   3,675   21 %   3,603   20 % 2 % 10 %
  Cloud software as a service and platform as a service   555   3 %   314   2 % 77 % 85 %
  Cloud infrastructure as a service   180   1 %   166   1 % 8 % 14 %
  Software license updates and product support   584   4 %   568   3 % 3 % 12 %
  Hardware products   628   4 %   667   4 % (6 %) 3 %
  Hardware support   355   2 %   410   2 % (14 %) (7 %)
  Services   1,401   8 %   1,455   8 % (4 %) 4 %
  Research and development   2,834   16 %   2,718   15 % 4 % 7 %
  General and administrative   542   3 %   547   3 % (1 %) 4 %
  Amortization of intangible assets   875   5 %   1,116   6 % (22 %) (22 %)
  Acquisition related and other   25   0 %   4   0 % 505 % 661 %
  Restructuring   178   1 %   120   0 % 48 % 74 %
                             
        Total operating expenses   11,832   68 %   11,688   64 % 1 % 7 %
                             
OPERATING INCOME   5,609   32 %   6,506   36 % (14 %) (4 %)
  Interest expense   (745 ) (4 %)   (544 ) (3 %) 37 % 37 %
  Non-operating income, net   114   1 %   25   0 % 355 % 529 %
                             
INCOME BEFORE PROVISION FOR INCOME TAXES   4,978   29 %   5,987   33 % (17 %) (6 %)
  Provision for income taxes   1,033   6 %   1,302   7 % (21 %) (10 %)
                             
NET INCOME $ 3,945   23 % $ 4,685   26 % (16 %) (5 %)
                             
EARNINGS PER SHARE:                            
  Basic $ 0.92       $ 1.06              
  Diluted $ 0.90       $ 1.04              
                             
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                            
  Basic   4,278         4,434              
  Diluted   4,364         4,527              
                             
(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 six months ended November 30, 2015 compared with the corresponding prior year period decreased our revenues by 7 percentage points, operating expenses by 6 percentage points and operating income by 10 percentage points.
   
   
   
ORACLE CORPORATION
 
Q2 FISCAL 2016 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)
in US $
    % Increase (Decrease) in Constant Currency (2)  
    2015 GAAP     Adj.     2015 Non-GAAP     2014 GAAP     Adj.     2014 Non-GAAP     GAAP     Non-GAAP     GAAP     Non-GAAP  
                                                                         
TOTAL REVENUES   $ 17,441     $ 6     $ 17,447     $ 18,194     $ 13     $ 18,207     (4 %)   (4 %)   3 %   3 %
                                                                         
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES   $ 13,467     $ 5     $ 13,472     $ 13,905     $ 11     $ 13,916     (3 %)   (3 %)   4 %   4 %
  Cloud software as a service and platform as a service     934       4       938       698       5       703     34 %   34 %   39 %   38 %
  Cloud infrastructure as a service     325       -       325       293       -       293     11 %   11 %   17 %   17 %
  New software licenses     2,829       -       2,829       3,415       -       3,415     (17 %)   (17 %)   (11 %)   (11 %)
  Software license updates and product support     9,379       1       9,380       9,499       6       9,505     (1 %)   (1 %)   6 %   6 %
                                                                         
TOTAL HARDWARE REVENUES   $ 2,250     $ 1     $ 2,251     $ 2,499     $ 2     $ 2,501     (10 %)   (10 %)   (2 %)   (3 %)
  Hardware products     1,142       -       1,142       1,295       -       1,295     (12 %)   (12 %)   (4 %)   (4 %)
  Hardware support     1,108       1       1,109       1,204       2       1,206     (8 %)   (8 %)   (1 %)   (1 %)
                                                                         
TOTAL OPERATING EXPENSES   $ 11,832     $ (1,582 )   $ 10,250     $ 11,688     $ (1,691 )   $ 9,997     1 %   3 %   7 %   9 %
  Stock-based compensation (3)     504       (504 )     -       451       (451 )     -     12 %   *     12 %   *  
  Amortization of intangible assets (4)     875       (875 )     -       1,116       (1,116 )     -     (22 %)   *     (22 %)   *  
  Acquisition related and other     25       (25 )     -       4       (4 )     -     505 %   *     661 %   *  
  Restructuring     178       (178 )     -       120       (120 )     -     48 %   *     74 %   *  
                                                                         
OPERATING INCOME   $ 5,609     $ 1,588     $ 7,197     $ 6,506     $ 1,704     $ 8,210     (14 %)   (12 %)   (4 %)   (4 %)
                                                                         
OPERATING MARGIN %     32 %             41 %     36 %             45 %   (360) bp.   (384) bp.   (239) bp.   (322) bp.
                                                                         
INCOME TAX EFFECTS (5)   $ 1,033     $ 451     $ 1,484     $ 1,302     $ 467     $ 1,769     (21 %)   (16 %)   (10 %)   (8 %)
                                                                         
NET INCOME   $ 3,945     $ 1,137     $ 5,082     $ 4,685     $ 1,237     $ 5,922     (16 %)   (14 %)   (5 %)   (6 %)
                                                                         
DILUTED EARNINGS PER SHARE   $ 0.90             $ 1.16     $ 1.04             $ 1.31     (13 %)   (11 %)   (1 %)   (2 %)
                                                                         
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING     4,364       -       4,364       4,527       -       4,527     (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:
                             
    Six Months Ended   Six Months Ended
    November 30, 2015   November 30, 2014
    GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing $ 107   $ (107 )   $ -   $ 86   $ (86 )   $ -
  Cloud software as a service and platform as a service   8     (8 )     -     5     (5 )     -
  Cloud infrastructure as a service   2     (2 )     -     2     (2 )     -
  Software license updates and product support   12     (12 )     -     9     (9 )     -
  Hardware products   3     (3 )     -     3     (3 )     -
  Hardware support   3     (3 )     -     3     (3 )     -
  Services   14     (14 )     -     14     (14 )     -
  Research and development   298     (298 )     -     242     (242 )     -
  General and administrative   57     (57 )     -     87     (87 )     -
    Subtotal   504     (504 )     -     451     (451 )     -
  Acquisition related and other   3     (3 )     -     4     (4 )     -
    Total stock-based compensation $ 507   $ (507 )   $ -   $ 455   $ (455 )   $ -
                                           
(4) Estimated future annual amortization expense related to intangible assets as of November 30, 2015 was as follows:
                         
  Remainder of Fiscal 2016 $ 757                    
  Fiscal 2017   1,005                    
  Fiscal 2018   858                    
  Fiscal 2019   751                    
  Fiscal 2020   608                    
  Fiscal 2021   466                    
  Thereafter   1,154                    
  Total intangible assets, net $ 5,599                    
                           
(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 20.8% and 21.7% in the first half of fiscal 2016 and 2015, respectively, and an effective non-GAAP tax rate of 22.6% and 23.0% in the first half of fiscal 2016 and 2015, respectively. The differences between our GAAP and non-GAAP tax rates in the first half 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
 
Q2 FISCAL 2016 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
 
    November 30,   May 31,
    2015   2015
ASSETS            
             
  Current Assets:            
    Cash and cash equivalents   $ 17,411   $ 21,716
    Marketable securities     34,924     32,652
    Trade receivables, net     3,956     5,618
    Inventories     238     314
    Prepaid expenses and other current assets     2,089     2,220
      Total Current Assets     58,618     62,520
               
  Non-Current Assets:            
    Property, plant and equipment, net     3,855     3,686
    Intangible assets, net     5,599     6,406
    Goodwill, net     34,171     34,087
    Deferred tax assets     1,341     1,458
    Other assets     2,899     2,746
      Total Non-Current Assets     47,865     48,383
             
TOTAL ASSETS   $ 106,483   $ 110,903
             
LIABILITIES AND EQUITY            
  Current Liabilities:            
    Notes payable, current   $ 2,000   $ 1,999
    Accounts payable     415     806
    Accrued compensation and related benefits     1,597     1,839
    Deferred revenues     6,998     7,245
    Other current liabilities     2,744     3,317
      Total Current Liabilities     13,754     15,206
               
  Non-Current Liabilities:            
    Notes payable, non-current     39,940     39,959
    Income taxes payable     4,273     4,386
    Other non-current liabilities     2,184     2,254
      Total Non-Current Liabilities     46,397     46,599
  Equity     46,332     49,098
             
TOTAL LIABILITIES AND EQUITY   $ 106,483   $ 110,903
             
             
             
ORACLE CORPORATION  
   
Q2 FISCAL 2016 FINANCIAL RESULTS  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
($ in millions)  
             
    Six Months Ended
November 30,
 
    2015     2014  
Cash Flows From Operating Activities:                
  Net income   $ 3,945     $ 4,685  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation     429       324  
    Amortization of intangible assets     875       1,116  
    Deferred income taxes     (83 )     (321 )
    Stock-based compensation     507       455  
    Tax benefits on the exercise of stock options and vesting of restricted stock-based awards     147       136  
    Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     (40 )     (74 )
    Other, net     77       103  
    Changes in operating assets and liabilities, net of effects from acquisitions:                
      Decrease in trade receivables, net     1,614       1,813  
      Decrease in inventories     61       14  
      Decrease in prepaid expenses and other assets     139       439  
      Decrease in accounts payable and other liabilities     (960 )     (861 )
      (Decrease) increase in income taxes payable     (367 )     191  
      Increase (decrease) in deferred revenues     13       (230 )
                     
        Net cash provided by operating activities     6,357       7,790  
                   
Cash Flows From Investing Activities:                
  Purchases of marketable securities and other investments     (17,638 )     (17,514 )
  Proceeds from maturities and sales of marketable securities and other investments     15,088       10,153  
  Acquisitions, net of cash acquired     (147 )     (5,122 )
  Capital expenditures     (641 )     (426 )
                   
        Net cash used for investing activities     (3,338 )     (12,909 )
                   
Cash Flows From Financing Activities:                
  Payments for repurchases of common stock     (6,258 )     (4,087 )
  Proceeds from issuances of common stock     640       907  
  Shares repurchased for tax withholdings upon vesting of restricted stock-based awards     (77 )     (7 )
  Payments of dividends to stockholders     (1,286 )     (1,070 )
  Proceeds from borrowings, net of issuance costs     -       9,945  
  Repayments of borrowings     -       (1,500 )
  Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards     40       74  
  Distributions to noncontrolling interests     (85 )     (196 )
                   
        Net cash (used for) provided by financing activities     (7,026 )     4,066  
                   
Effect of exchange rate changes on cash and cash equivalents     (298 )     (563 )
                 
Net decrease in cash and cash equivalents     (4,305 )     (1,616 )
                 
Cash and cash equivalents at beginning of period     21,716       17,769  
                 
Cash and cash equivalents at end of period   $ 17,411     $ 16,153  
                 
                 
                 
ORACLE CORPORATION
Q2 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          
                                                       
Capital Expenditures   (628 )     (727 )     (948 )     (1,391 )     (1,636 )     (1,606 )        
                                                       
Free Cash Flow $ 14,729     $ 14,546     $ 13,561     $ 12,945     $ 11,828     $ 11,297          
                                                       
% Growth over prior year   4 %     0 %     (6 )%     (10 )%     (20 )%     (22 )%        
                                                       
                                                       
GAAP Net Income $ 10,948     $ 10,896     $ 10,827     $ 9,938     $ 9,501     $ 9,198          
                                                       
Free Cash Flow as a % of Net Income   135 %     133 %     125 %     130 %     124 %     123 %        
                                                       
(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 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           $ 934  
  Cloud infrastructure as a service   138     155     155     160     608       160     165             325  
    Total cloud revenues   475     516     527     576     2,093       611     649             1,259  
  New software licenses   1,370     2,045     1,982     3,138     8,535       1,151     1,677             2,829  
  Software license updates and product support   4,731     4,768     4,661     4,686     18,847       4,696     4,683             9,379  
    Total on-premise software revenues   6,101     6,813     6,643     7,824     27,382       5,847     6,360             12,208  
      Total cloud and on-premise software revenues   6,576     7,329     7,170     8,400     29,475       6,458     7,009             13,467  
                                                             
  Hardware products   578     717     712     818     2,825       570     573             1,142  
  Hardware support   587     617     587     589     2,380       558     550             1,108  
      Total hardware revenues   1,165     1,334     1,299     1,407     5,205       1,128     1,123             2,250  
                                                                 
      Total services revenues   855     935     858     899     3,546       862     861             1,724  
                                                                 
        Total revenues $ 8,596   $ 9,598   $ 9,327   $ 10,706   $ 38,226     $ 8,448   $ 8,993           $ 17,441  
                                                           
AS REPORTED REVENUE GROWTH RATES                                                          
  Cloud software as a service and platform as a service   32 %   39 %   30 %   29 %   32 %     34 %   34 %           34 %
  Cloud infrastructure as a service   26 %   60 %   28 %   25 %   33 %     16 %   7 %           11 %
    Total cloud revenues   31 %   45 %   29 %   28 %   33 %     29 %   26 %           27 %
  New software licenses   (2 %)   (4 %)   (7 %)   (17 %)   (9 %)     (16 %)   (18 %)           (17 %)
  Software license updates and product support   7 %   6 %   2 %   0 %   4 %     (1 %)   (2 %)           (1 %)
    Total on-premise software revenues   5 %   3 %   (1 %)   (8 %)   (1 %)     (4 %)   (7 %)           (5 %)
      Total cloud and on-premise software revenues   6 %   5 %   1 %   (6 %)   1 %     (2 %)   (4 %)           (3 %)
                                                             
  Hardware products   (14 %)   0 %   (2 %)   (6 %)   (5 %)     (1 %)   (20 %)           (12 %)
  Hardware support   (1 %)   1 %   (2 %)   (1 %)   (1 %)     (5 %)   (11 %)           (8 %)
      Total hardware revenues   (8 %)   1 %   (2 %)   (4 %)   (3 %)     (3 %)   (16 %)           (10 %)
                                                                 
      Total services revenues   (7 %)   (3 %)   (3 %)   (4 %)   (4 %)     1 %   (8 %)           (4 %)
                                                                 
        Total revenues   3 %   3 %   0 %   (5 %)   0 %     (2 %)   (6 %)           (4 %)
                                                           
CONSTANT CURRENCY GROWTH RATES (2)                                                          
  Cloud software as a service and platform as a service   32 %   41 %   34 %   35 %   35 %     38 %   39 %           39 %
  Cloud infrastructure as a service   25 %   62 %   32 %   31 %   36 %     23 %   11 %           17 %
    Total cloud revenues   30 %   47 %   33 %   34 %   36 %     34 %   31 %           32 %
  New software licenses   (2 %)   0 %   0 %   (10 %)   (4 %)     (9 %)   (12 %)           (11 %)
  Software license updates and product support   6 %   9 %   8 %   8 %   8 %     8 %   5 %           6 %
    Total on-premise software revenues   4 %   6 %   6 %   0 %   4 %     4 %   0 %           2 %
      Total cloud and on-premise software revenues   6 %   8 %   7 %   2 %   5 %     6 %   2 %           4 %
                                                             
  Hardware products   (14 %)   4 %   6 %   3 %   0 %     9 %   (14 %)           (4 %)
  Hardware support   (2 %)   5 %   4 %   7 %   4 %     4 %   (5 %)           (1 %)
      Total hardware revenues   (8 %)   4 %   5 %   5 %   2 %     6 %   (10 %)           (2 %)
                                                                 
      Total services revenues   (8 %)   1 %   3 %   5 %   0 %     10 %   0 %           5 %
                                                                 
        Total revenues   2 %   7 %   6 %   3 %   4 %     7 %   0 %           3 %
                                                           
                                                           
GEOGRAPHIC REVENUES                                                          
                                                           
REVENUES                                                          
  Americas $ 4,620   $ 5,221   $ 5,134   $ 6,133   $ 21,107     $ 4,716   $ 4,960           $ 9,677  
  Europe, Middle East & Africa   2,589     2,911     2,813     3,067     11,380       2,456     2,645             5,101  
  Asia Pacific   1,387     1,466     1,380     1,506     5,739       1,276     1,388             2,663  
        Total revenues $ 8,596   $ 9,598   $ 9,327   $ 10,706   $ 38,226     $ 8,448   $ 8,993           $ 17,441  
                                                           
                                                           
HEADCOUNT                                                          
                                                           
GEOGRAPHIC AREA                                                          
  Americas   54,073     57,243     58,117     58,415             59,901     59,999                
  Europe, Middle East & Africa   23,349     26,997     26,989     26,988             27,030     27,541                
  Asia Pacific   45,496     46,312     46,456     46,962             48,139     48,620                
        Total company   122,918     130,552     131,562     132,365             135,070     136,160                
                                                                   
(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
Q2 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             $ 7,611  
  Total hardware revenues $ 583     $ 716     $ 686     $ 751     $ 2,737     $ 589     $ 595             $ 1,184  
                                                                       
AS REPORTED GROWTH RATES                                                                      
  Total cloud and on-premise software revenues   5 %     6 %     5 %     6 %     6 %     2 %     (3 %)             (1 %)
  Total hardware revenues   (9 %)     3 %     5 %     1 %     0 %     1 %     (17 %)             (9 %)
                                                                       
CONSTANT CURRENCY GROWTH RATES (2)                                                                      
  Total cloud and on-premise software revenues   6 %     8 %     7 %     9 %     7 %     6 %     0 %             3 %
  Total hardware revenues   (8 %)     5 %     7 %     4 %     2 %     6 %     (14 %)             (5 %)
                                                                       
                                                                       
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             $ 3,940  
  Total hardware revenues $ 338     $ 380     $ 379     $ 423     $ 1,519     $ 330     $ 316             $ 646  
                                                                       
AS REPORTED GROWTH RATES                                                                      
  Total cloud and on-premise software revenues   10 %     4 %     (3 %)     (22 %)     (5 %)     (6 %)     (8 %)             (7 %)
  Total hardware revenues   (6 %)     2 %     (6 %)     (4 %)     (3 %)     (2 %)     (17 %)             (10 %)
                                                                       
CONSTANT CURRENCY GROWTH RATES (2)                                                                      
  Total cloud and on-premise software revenues   7 %     9 %     9 %     (8 %)     3 %     7 %     3 %             5 %
  Total hardware revenues   (7 %)     8 %     8 %     15 %     6 %     14 %     (6 %)             3 %
                                                                       
                                                                       
ASIA PACIFIC                                                                      
  Total cloud and on-premise software revenues $ 970     $ 1,051     $ 980     $ 1,105     $ 4,107     $ 901     $ 1,016             $ 1,916  
  Total hardware revenues $ 244     $ 238     $ 234     $ 233     $ 949     $ 209     $ 212             $ 420  
                                                                       
AS REPORTED GROWTH RATES                                                                      
  Total cloud and on-premise software revenues   3 %     2 %     (3 %)     (10 %)     (3 %)     (7 %)     (3 %)             (5 %)
Total hardware revenues   (8 %)     (7 %)     (12 %)     (16 %)     (11 %)     (14 %)     (11 %)             (13 %)
                                                                       
CONSTANT CURRENCY GROWTH RATES (2)                                                                      
  Total cloud and on-premise software revenues   2 %     7 %     4 %     (1 %)     3 %     7 %     6 %             6 %
  Total hardware revenues   (8 %)     (3 %)     (6 %)     (8 %)     (6 %)     (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             $ 13,467  
  Total hardware revenues $ 1,165     $ 1,334     $ 1,299     $ 1,407     $ 5,205     $ 1,128     $ 1,123             $ 2,250  
                                                                       
AS REPORTED GROWTH RATES                                                                      
  Total cloud and on-premise software revenues   6 %     5 %     1 %     (6 %)     1 %     (2 %)     (4 %)             (3 %)
  Total hardware revenues   (8 %)     1 %     (2 %)     (4 %)     (3 %)     (3 %)     (16 %)             (10 %)
                                                                       
CONSTANT CURRENCY GROWTH RATES (2)                                                                      
  Total cloud and on-premise software revenues   6 %     8 %     7 %     2 %     5 %     6 %     2 %             4 %
  Total hardware revenues   (8 %)     4 %     5 %     5 %     2 %     6 %     (10 %)             (2 %)
                                                                       
(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.
   
   
APPENDIX A
 
ORACLE CORPORATION
Q2 FISCAL 2016 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 and platform as a service, software license updates and product support and hardware support deferred revenues: Business combination accounting rules require us to account for the fair values of cloud software as a service and platform as a service contracts, software license updates and product support contracts and hardware 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 and platform as a service revenues, software license updates and product support revenues and hardware support revenues is intended to include, and thus reflect, the full amount of such revenues. We believe the adjustment to these revenues is 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 software as a service and platform as a service and hardware support contracts; however, we cannot be certain that our customers will renew our cloud software as a service and platform as a service contracts, software license updates and product support contracts or our hardware support contracts.

  • 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 options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the original terms of those options. 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, we generally will incur these expenses in connection with any future acquisitions.

Contact Information

  • Contact:
    Ken Bond
    Oracle Investor Relations
    1.650.607.0349
    Email Contact


    Deborah Hellinger
    Oracle Corporate Communications
    1.212.508.7935
    Email Contact