ORCL
$50.17
Oracle
$.58
1.17%
Earnings Details
2nd Quarter November 2017
Thursday, December 14, 2017 4:00:00 PM
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Summary

Oracle Misses

Oracle (ORCL) reported 2nd Quarter November 2017 earnings of $0.68 per share on revenue of $9.6 billion. The consensus earnings estimate was $0.68 per share on revenue of $9.6 billion. The Earnings Whisper number was $0.69 per share. Revenue grew 6.5% on a year-over-year basis.

The company said during its conference call it expects third quarter non-GAAP earnings of $0.68 to $0.70 per share on revenue of $9.39 billion to $9.57 billion. The current consensus earnings estimate is $0.72 per share on revenue of $9.67 billion for the quarter ending February 28, 2018.

Oracle Corporation develops, manufactures, markets, hosts and supports database and middleware software, application software, cloud infrastructure, hardware system including computer server, storage and networking products and related services.

Results
Reported Earnings
$0.68
Earnings Whisper
$0.69
Consensus Estimate
$0.68
Reported Revenue
$9.62 Bil
Revenue Estimate
$9.55 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Q2 FY18 GAAP EPS UP 8% TO $0.52 and NON-GAAP EPS UP 14% TO $0.70

Oracle Corporation (ORCL) today announced fiscal 2018 Q2 results. Total Revenues were up 6% to $9.6 billion, compared to Q2 last year. Cloud plus On-Premise Software Revenues were up 9% to $7.8 billion. Cloud Software as a Service (SaaS) revenues were up 55% to $1.1 billion. Cloud Platform as a Service (PaaS) plus Infrastructure as a Service (IaaS) revenues were up 21% to $396 million. Total Cloud Revenues were up 44% to $1.5 billion.

GAAP Operating Income was up 1% to $3.1 billion and GAAP Operating Margin was 32%. Non-GAAP Operating Income was up 10% to $4.2 billion and non-GAAP Operating Margin was 44%. GAAP Net Income was up 10% to $2.2 billion, while non-GAAP Net Income was up 16% to $3.0 billion. GAAP Earnings Per Share was up 8% to $0.52, while non-GAAP Earnings Per Share was up 14% to $0.70.

Short-term deferred revenues were up 9% to $8.1 billion. Operating cash flow on a trailing twelve-month basis was up 2% to $14.6 billion.

"Overall cloud revenue growth of 44% drove our quarterly revenue and earnings higher," said Oracle CEO, Safra Catz. "With non-GAAP Cloud SaaS Applications growth of 49% leading the way, Oracle delivered 14% non-GAAP earnings per share growth and 6% overall revenue growth. Our success in the quarter was based on the increasing scale and the gathering momentum in our cloud business. I expect the business to continue to grow and strengthen over the coming quarters."

"Our Fusion ERP and Fusion HCM SaaS applications suite revenues grew 65% in the quarter," said Oracle CEO, Mark Hurd. "We are now the clear market leader in enterprise back-office SaaS applications with over 5,000 Fusion customers. And we expect to extend our lead by selling around $2 billion in new enterprise SaaS application cloud subscriptions over the coming four quarters. That’s more new SaaS sales than any of our competitors."

"Oracle will soon deliver the world’s first autonomous "self-driving" database," said Oracle CTO, Larry Ellison. "The new artificially intelligent Oracle database is fully automated and requires no human labor for administration. If a security vulnerability is detected, the database immediately patches itself while running. No other system can do anything like this. Best of all, we guarantee the price of running the Oracle Autonomous Database in the Oracle Cloud is less than half the cost of running a database in the Amazon Cloud."

The Board of Directors increased the authorization for share repurchases by $12 billion. The Board of Directors also declared a quarterly cash dividend of $0.19 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on January 10, 2018, with a payment date of January 24, 2018.

Q2 Fiscal 2018 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (816) 287-5563, Passcode: 425392. To access the live webcast, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle’s Q2 results and Fiscal 2018 financial tables are available on the Oracle Investor Relations website.

A replay of the conference call will also be available by dialing (855) 859-2056 or (404) 537-3406, Passcode: 9396959.

About Oracle

Oracle offers a comprehensive and fully integrated stack of cloud applications and platform services. For more information about Oracle (ORCL), visit www.oracle.com/investor or contact Investor Relations at investor_us@oracle.com or (650) 506-4073.

Trademarks

Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.

"Safe Harbor" Statement: Statements in this press release relating to Oracle’s future plans, expectations, beliefs, intentions and prospects, including statements regarding the growth of our cloud business, extension of our market position and sales in enterprise SaaS applications, and delivery of our new autonomous database, are all "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Our cloud computing strategy, including our Oracle Cloud SaaS, PaaS, IaaS and data as a service offerings, may not be successful. (2) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses, cloud software subscriptions or hardware systems products or purchase or renew support contracts. (3) If the security measures for our products and services are compromised or if our products and services contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and reduced sales. (4) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for support contracts. (5) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (6) Economic, geopolitical and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (7) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. A detailed discussion of these factors and other risks that affect our business is contained in our U.S. Securities and Exchange Commission (SEC) filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation’s Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle’s Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of December 14, 2017. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE
CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Three Months Ended November 30,
% Increase % Increase
(Decrease)
% of
% of
(Decrease) in Constant
2017
Revenues 2016
Revenues in US $
Currency (1)
REVENUES
Cloud software as a service
$
1,123
12%
$
725 8%
55%
53%
Cloud platform as a service and infrastructure as a service
396
4%
328
4%
21%
19%
Total cloud revenues
1,519
16%
1,053
12%
44%
43%
New software licenses
1,353
14%
1,347
15%
0%
(2%)
Software license updates and product support
4,953
51%
4,777
53%
4%
2%
Total on-premise software revenues
6,306
65%
6,124
68%
3%
1%
Total cloud and on-premise software revenues
7,825
81%
7,177
80%
9%
7%
Hardware revenues
940
10%
1,014
11%
(7%)
(9%)
Services revenues
856
9%
844
9%
1%
0%
Total revenues
9,621
100%
9,035
100%
6%
5%
OPERATING EXPENSES
Cloud software as a service
396
4%
316
3%
25%
23%
Cloud platform as a service and infrastructure as a service
241
3%
156
2%
55%
53%
Software license updates and product support
257
3%
242
3%
6%
5%
Hardware
351
4%
386
5%
(9%)
(11%)
Services
720
7%
697
8%
3%
1%
Sales and marketing
2,082
22%
1,960
21%
6%
4%
Research and development
1,475
15%
1,510
17%
(2%)
(3%)
General and administrative
321
3%
303
3%
6%
5%
Amortization of intangible assets
400
4%
302
3%
33%
33%
Acquisition related and other
17
0%
40
0%
(58%)
(59%)
Restructuring
292
3%
86
1%
241%
227%
Total operating expenses
6,552
68%
5,998
66%
9%
8%
OPERATING INCOME
3,069
32%
3,037
34%
1%
(1%)
Interest expense
(475)
(5%)
(451)
(5%)
5%
5%
Non-operating income, net
273
3%
99
1%
176%
178%
INCOME BEFORE PROVISION FOR INCOME TAXES
2,867
30%
2,685
30%
7%
4%
Provision for income taxes
634
7%
653
7%
(3%)
(3%)
NET INCOME
$
2,233
23%
$
2,032
23%
10%
7%
EARNINGS PER SHARE:
Basic
$
0.54
$
0.50
Diluted
$
0.52
$
0.48
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic
4,160
4,104
Diluted
4,283
4,195
(1)
We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2017, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended November 30, 2017 compared with the corresponding prior year period increased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 2 percentage points.
ORACLE
CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Three Months Ended November 30,
% Increase (Decrease)
% Increase (Decrease) in
in US $
Constant Currency (2)
2017
2017
2016
2016
GAAP
Non-GAAP
GAAP
Non-GAAP
GAAP
Adj.
Non-GAAP
GAAP
Adj.
Non-GAAP
TOTAL REVENUES
$
9,621
$
9
$
9,630
$
9,035
$
35
$
9,070
6%
6%
5%
4%
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES
7,825
9
7,834
7,177
35
7,212
9%
9%
7%
7%
TOTAL CLOUD REVENUES
1,519
9
1,528
1,053
34
1,087
44%
41%
43%
39%
Cloud software as a service
1,123
7
1,130
725
34
759
55%
49%
53%
47%
Cloud platform as a service and infrastructure as a service
396
2
398
328
-
328
21%
22%
19%
20%
Software license updates and product support
4,953
-
4,953
4,777
1
4,778
4%
4%
2%
2%
TOTAL OPERATING EXPENSES
$
6,552
$(1,122)
$
5,430
$
5,998
$
(735)
$
5,263
9%
3%
8%
2%
Cloud software as a service (4)
396
(11)
385
316
(6)
310
25%
24%
23%
22%
Cloud platform as a service and infrastructure as a service (4) 241
(2)
239
156
(1)
155
55%
54%
53%
52%
Sales and marketing (3)
2,082
(93)
1,989
1,960
(59)
1,901
6%
5%
4%
3%
Stock-based compensation (4)
307
(307)
-
241
(241)
-
27%
*
27%
*
Amortization of intangible assets (5)
400
(400)
-
302
(302)
-
33%
*
33%
*
Acquisition related and other
17
(17)
-
40
(40)
-
(58%)
*
(59%)
*
Restructuring
292
(292)
-
86
(86)
-
241%
*
227%
*
CLOUD SOFTWARE AS A SERVICE MARGIN %
65%
66%
56%
59%
841 bp.
682 bp.
857 bp.
699 bp.
CLOUD PLATFORM AS A SERVICE AND INFRASTRUCTURE AS A SERVICE MARGIN %
39%
40%
52%
53%
(1,332) bp.
(1,274) bp.
(1,340) bp.
(1,282) bp.
OPERATING INCOME
$
3,069
$
1,131
$
4,200
$
3,037
$
770
$
3,807
1%
10%
(1%)
8%
OPERATING MARGIN %
32%
44%
34%
42%
(172) bp.
164 bp.
(189) bp.
155 bp.
INCOME TAX EFFECTS (6)
$
634
$
374
$
1,008
$
653
$
228
$
881
(3%)
14%
(3%)
12%
NET INCOME
$
2,233
$
757
$
2,990
$
2,032
$
542
$
2,574
10%
16%
7%
14%
DILUTED EARNINGS PER SHARE
$
0.52
$
0.70
$
0.48
$
0.61
8%
14%
4%
12%
DILUTED WEIGHTED AVERAGE COMMON
4,283
-
4,283
4,195
-
4,195
2%
2%
2%
2%
SHARES OUTSTANDING
(1)
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.
(2)
We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2017, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
(3)
Non-GAAP adjustments to sales and marketing expenses were as follows:
Three Months Ended
November 30,
2017
2016
Stock-based compensation (4)
$
(98)
$
(68)
Acquired deferred sales commissions amortization
5
9
Total non-GAAP sales and marketing adjustments
$
(93)
$
(59)
(4)
Stock-based compensation was included in the following GAAP operating expense categories:
Three Months Ended
Three Months Ended
November 30, 2017
November 30, 2016
GAAP
Adj.
Non-GAAP
GAAP
Adj.
Non-GAAP
Software license updates and product support
$
7
$
(7)
$
-
$
6
$
(6)
$
-
Hardware
3
(3)
-
3
(3)
-
Services
14
(14)
-
9
(9)
-
Research and development
237
(237)
-
188
(188)
-
General and administrative
46
(46)
-
35
(35)
-
Subtotal
307
(307)
-
241
(241)
-
Cloud software as a service
11
(11)
-
6
(6)
-
Cloud platform as a service and infrastructure as a service
2
(2)
-
1
(1)
-
Sales and marketing
98
(98)
-
68
(68)
-
Acquisition related and other
-
-
-
11
(11)
-
Total stock-based compensation
$
418
$
(418)
$
-
$
327
$
(327)
$
-
(5)
Estimated future annual amortization expense related to intangible assets as of November 30, 2017 was as follows:
Remainder of fiscal 2018
$
781
Fiscal 2019
1,411
Fiscal 2020
1,210
Fiscal 2021
1,023
Fiscal 2022
918
Fiscal 2023
567
Thereafter
884
Total intangible assets, net
$
6,794
(6)
Income tax effects were calculated reflecting an effective GAAP tax rate of 22.1% and 24.3% in the second quarter of fiscal 2018 and 2017, respectively, and an effective non-GAAP tax rate of 25.2% and 25.5% in the second quarter of fiscal 2018 and 2017, respectively. The difference between our GAAP and non-GAAP tax rates in the second quarters of fiscal 2018 and 2017 was primarily due to the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets.
*
Not meaningful
ORACLE
CORPORATION
Q2 FISCAL 2018 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
Six Months Ended November 30,
% Increase
% Increase (Decrease)
% of
% of
(Decrease) in Constant
2017
Revenues
2016
Revenues in US $
Currency (1)
REVENUES
Cloud software as a service
$
2,189
12%
$
1,382
8%
58%
57%
Cloud platform as a service and infrastructure as a service
797
4%
639
3%
25%
23%
Total cloud revenues
2,986
16%
2,021
11%
48%
47%
New software licenses
2,319
12%
2,377
13%
(2%)
(4%)
Software license updates and product support
9,904
53%
9,570
55%
3%
2%
Total on-premise software revenues
12,223
65%
11,947
68%
2%
1%
Total cloud and on-premise software revenues
15,209
81%
13,968
79%
9%
7%
Hardware revenues
1,884
10%
2,010
12%
(6%)
(8%)
Services revenues
1,716
9%
1,652
9%
4%
2%
Total revenues
18,809
100%
17,630
100%
7%
5%
OPERATING EXPENSES
Cloud software as a service
770
4%
600
3%
29%
27%
Cloud platform as a service and infrastructure as a service
468
3%
288
2%
62%
60%
Software license updates and product support
515
3%
516
3%
0%
(1%)
Hardware
724
4%
776
5%
(7%)
(8%)
Services
1,422
8%
1,393
8%
2%
0%
Sales and marketing
4,074
22%
3,879
22%
5%
4%
Research and development
3,049
16%
3,030
17%
1%
0%
General and administrative
642
3%
618
4%
4%
3%
Amortization of intangible assets
811
4%
613
3%
32%
32%
Acquisition related and other
28
0%
54
0%
(48%)
(48%)
Restructuring
416
2%
185
1%
125%
118%
Total operating expenses
12,919
69%
11,952
68%
8%
7%
OPERATING INCOME
5,890
31%
5,678
32%
4%
2%
Interest expense
(944)
(5%)
(867)
(5%)
9%
9%
Non-operating income, net
505
3%
247
2%
104%
105%
INCOME BEFORE PROVISION FOR INCOME TAXES
5,451
29%
5,058
29%
8%
6%
Provision for income taxes
1,009
5%
1,194
7%
(15%)
(16%)
NET INCOME
$
4,442
24%
$
3,864
22%
15%
13%
EARNINGS PER SHARE:
Basic
$
1.07
$
0.94
Diluted
$
1.04
$
0.92
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic
4,158
4,112
Diluted
4,283
4,208
(1)
We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2017, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the six months ended November 30, 2017 compared with the corresponding prior year period increased our revenues by 2 percentage points, operating expenses by 1 percentage point and operating income by 2 percentage points.
ORACLE
CORPORATION
Q2 FISCAL 2018 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
Six Months Ended November 30,
% Increase (Decrease)
% Increase (Decrease) in
in US $
Constant Currency (2)
2017
2017
2016
2016
GAAP
Non-GAAP
GAAP
Non-GAAP
GAAP
Adj.
Non-GAAP
GAAP
Adj.
Non-GAAP
TOTAL REVENUES
$ 18,809
$
34
$
18,843
$ 17,630
$
53
$
17,683
7%
7%
5%
5%
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES
15,209
34
15,243
13,968
53
14,021
9%
9%
7%
7%
TOTAL CLOUD REVENUES
2,986
34
3,020
2,021
52
2,073
48%
46%
47%
45%
Cloud software as a service
2,189
30
2,219
1,382
52
1,434
58%
55%
57%
54%
Cloud platform as a service and infrastructure as a service
797
4
801
639
-
639
25%
25%
23%
24%
Software license updates and product support
9,904
-
9,904
9,570
1
9,571
3%
3%
2%
2%
TOTAL OPERATING EXPENSES
$ 12,919
$
(2,060)
$
10,859
$ 11,952
$ (1,478)
$
10,474
8%
4%
7%
2%
Cloud software as a service (4)
770
(20)
750
600
(11)
589
29%
28%
27%
26%
Cloud platform as a service and infrastructure as a service (4) 468
(4)
464
288
(2)
286
62%
62%
60%
60%
Sales and marketing (3)
4,074
(171)
3,903
3,879
(124)
3,755
5%
4%
4%
2%
Stock-based compensation (4)
610
(610)
-
489
(489)
-
25%
*
25%
*
Amortization of intangible assets (5)
811
(811)
-
613
(613)
-
32%
*
32%
*
Acquisition related and other
28
(28)
-
54
(54)
-
(48%)
*
(48%)
*
Restructuring
416
(416)
-
185
(185)
-
125%
*
118%
*
CLOUD SOFTWARE AS A SERVICE MARGIN %
65%
66%
57%
59%
812 bp.
718 bp.
825 bp.
732 bp.
CLOUD PLATFORM AS A SERVICE AND INFRASTRUCTURE AS A SERVICE MARGIN %
41%
42%
55%
55%
(1,360) bp.
(1,302) bp.
(1,366) bp
(1,307) bp.
OPERATING INCOME
$
5,890
$
2,094
$
7,984
$
5,678
$
1,531
$
7,209
4%
11%
2%
9%
OPERATING MARGIN %
31%
42%
32%
41%
(89) bp.
161 bp.
(100) bp.
157 bp.
INCOME TAX EFFECTS (6)
$
1,009
$
885
$
1,894
$
1,194
$
486
$
1,680
(15%)
13%
(16%)
11%
NET INCOME
$
4,442
$
1,209
$
5,651
$
3,864
$
1,045
$
4,909
15%
15%
13%
13%
DILUTED EARNINGS PER SHARE
$
1.04
$
1.32
$
0.92
$
1.17
13%
13%
11%
11%
DILUTED WEIGHTED AVERAGE COMMON
4,283
-
4,283
4,208
-
4,208
2%
2%
2%
2%
SHARES OUTSTANDING
(1)
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed
explanation of the adjustments made to comparable GAAP measures, the reasons why management
uses these measures, the usefulness of these measures and the material
limitations on the usefulness of these measures, please see Appendix A.
(2)
We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2017, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
(3)
Non-GAAP adjustments to sales and marketing expenses were as follows:
Six Months Ended
November 30,
2017
2016
Stock-based compensation (4)
$
(187)
$
(133)
Acquired deferred sales commissions amortization
16
9
Total non-GAAP sales and marketing adjustments
$
(171)
$
(124)
(4)
Stock-based compensation was included in the following GAAP operating expense categories:
Six Months Ended
Six Months Ended
November 30, 2017
November 30, 2016
GAAP
Adj.
Non-GAAP
GAAP
Adj.
Non-GAAP
Software license updates and product support
$
14
$
(14)
$
-
$
12
$
(12)
$
-
Hardware
6
(6)
-
6
(6)
-
Services
28
(28)
-
17
(17)
-
Research and development
472
(472)
-
382
(382)
-
General and administrative
90
(90)
-
72
(72)
-
Subtotal
610
(610)
-
489
(489)
-
Cloud software as a service
20
(20)
-
11
(11)
-
Cloud platform as a service and infrastructure as a service
4
(4)
-
2
(2)
-
Sales and marketing
187
(187)
-
133
(133)
-
Acquisition related and other
1
(1)
-
11
(11)
-
Total stock-based compensation
$
822
$
(822)
$
-
$
646
$
(646)
$
-
(5)
Estimated future annual amortization expense related to intangible assets as of November 30, 2017 was as follows:
Remainder of fiscal 2018
$
781
Fiscal 2019
1,411
Fiscal 2020
1,210
Fiscal 2021
1,023
Fiscal 2022
918
Fiscal 2023
567
Thereafter
884
Total intangible assets, net
$
6,794
(6)
Income tax effects were calculated reflecting an effective GAAP tax rate of 18.5% and 23.6% in the first half of fiscal 2018 and 2017, respectively, and an effective non-GAAP tax rate of 25.1% and 25.5% in the first half of fiscal 2018 and 2017, respectively. The difference between our GAAP and non-GAAP tax rate in fiscal 2018 was primarily due to the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets.
The difference between our GAAP and non-GAAP tax rate in the first half of fiscal 2018 and 2017 was primarily due to the net tax effects on stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets.
*
Not meaningful
ORACLE
CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
November 30, May 31,
2017
2017
ASSETS
Current Assets:
Cash and cash equivalents
$
21,310
$
21,784
Marketable securities
50,270
44,294
Trade receivables, net
3,798
5,300
Inventories
436
300
Prepaid expenses and other current assets
2,731
2,837
Total Current Assets
78,545
74,515
Non-Current Assets:
Property, plant and equipment, net
5,868
5,315
Intangible assets, net
6,794
7,679
Goodwill, net
42,964
43,045
Deferred tax assets
1,222
1,143
Other assets
3,369
3,294
Total Non-Current Assets
60,217
60,476
TOTAL ASSETS
$ 138,762
$ 134,991
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable and other borrowings, current
$
2,499
$
9,797
Accounts payable
554
599
Accrued compensation and related benefits
1,500
1,966
Deferred revenues
8,076
8,233
Other current liabilities
2,865
3,583
Total Current Liabilities
15,494
24,178
Non-Current Liabilities:
Notes payable and other borrowings, non-current
58,170
48,112
Income taxes payable
6,082
5,681
Other non-current liabilities
2,716
2,774
Total Non-Current Liabilities 66,968
56,567
Equity
56,300
54,246
TOTAL LIABILITIES AND EQUITY
$ 138,762
$ 134,991
ORACLE
CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Six Months Ended November 30,
2017
2016
Cash Flows From Operating Activities:
Net income
$
4,442
$
3,864
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
573
463
Amortization of intangible assets
811
613
Deferred income taxes
95
103
Stock-based compensation
822
646
Other, net
81
85
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net
1,529
1,680
Increase in inventories
(135)
(116)
Decrease in prepaid expenses and other assets
138
321
Decrease in accounts payable and other liabilities
(618)
(499)
Increase in income taxes payable
22
9
Decrease in deferred revenues
(344)
(208)
Net cash provided by operating activities
7,416
6,961
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments
(18,022)
(10,090)
Proceeds from maturities and sales of marketable securities and other investments
11,566
6,080
Acquisitions, net of cash acquired
--
(9,854)
Capital expenditures
(1,072)
(1,056)
Net cash used for investing activities
(7,528)
(14,920)
Cash Flows From Financing Activities:
Payments for repurchases of common stock
(2,454)
(2,569)
Proceeds from issuances of common stock
1,353
746
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards (434)
(188)
Payments of dividends to stockholders
(1,579)
(1,232)
Proceeds from borrowings, net of issuance costs
9,945
13,932
Repayments of borrowings
(7,300)
(3,750)
Distributions to noncontrolling interests
(34)
(200)
Net cash (used for) provided by financing activities
(503)
6,739
Effect of exchange rate changes on cash and cash equivalents
141
(340)
Net decrease in cash and cash equivalents
(474)
(1,560)
Cash and cash equivalents at beginning of period
21,784
20,152
Cash and cash equivalents at end of period
$21,310
$ 18,592
ORACLE
CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($ in millions)
Fiscal 2017
Fiscal 2018
Q1
Q2
Q3
Q4
Q1
Q2
Q3 Q4
GAAP Operating Cash Flow
$ 13,679
$ 14,249
$ 13,453
$ 14,126 $ 14,817
$ 14,581
Capital Expenditures
(1,042)
(1,604)
(1,676)
(2,021)
(2,195)
(2,037)
Free Cash Flow
$ 12,637
$ 12,645
$ 11,777
$ 12,105 $ 12,622
$ 12,544
% Growth over prior year
5%
10%
(7%)
(3%)
0%
(1%)
GAAP Net Income
$
8,986
$
8,820 $
8,917 $
9,335 $
9,713
$
9,914
Free Cash Flow as a % of Net Income
141%
143%
132%
130%
130%
127%
(1)
To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flow generated from operations. We believe free cash flow is also useful as one of the bases for comparing our performance with our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity.
ORACLE
CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES (1)
($ in millions)
Fiscal 2017
Fiscal 2018
Q1
Q2
Q3
Q4
TOTAL
Q1
Q2
Q3 Q4 TOTAL
REVENUES
Cloud software as a service
$
657
$
725 $
865
$
964 $
3,211 $ 1,067
$ 1,123
$
2,189
Cloud platform as a service and infrastructure as a service
312
328
324
397
1,360
400
396
797
Total cloud revenues
969
1,053
1,189
1,361
4,571
1,467
1,519
2,986
New software licenses
1,030
1,347
1,414
2,626
6,418
966
1,353
2,319
Software license updates and product support
4,792
4,777
4,762
4,897
19,229
4,951
4,953
9,904
Total on-premise software revenues
5,822
6,124
6,176
7,523
25,647
5,917
6,306
12,223
Total cloud and on-premise software revenues
6,791
7,177
7,365
8,884
30,218
7,384
7,825
15,209
Total hardware revenues
996
1,014
1,028
1,114
4,152
943
940
1,884
Total services revenues
808
844
812
894
3,358
860
856
1,716
Total revenues
$ 8,595
$ 9,035
$
9,205
$ 10,892
$ 37,728
$ 9,187
$ 9,621
$ 18,809
AS REPORTED REVENUE GROWTH RATES
Cloud software as a service
50%
57%
64%
67%
61%
62%
55%
58%
Cloud platform as a service and infrastructure as a service
80%
75%
55%
40%
60%
28%
21%
25%
Total cloud revenues
59%
62%
62%
58%
60%
51%
44%
48%
New software licenses
(11%)
(20%)
(16%)
(5%)
(12%)
(6%)
0%
(2%)
Software license updates and product support
2%
2%
2%
2%
2%
3%
4%
3%
Total on-premise software revenues
0%
(4%)
(3%)
(1%)
(2%)
2%
3%
2%
Total cloud and on-premise software revenues
5%
2%
4%
5%
4%
9%
9%
9%
Total hardware revenues
(12%)
(10%)
(9%)
(13%)
(11%)
(5%)
(7%)
(6%)
Total services revenues
(6%)
(2%)
2%
3%
(1%)
6%
1%
4%
Total revenues
2%
0%
2%
3%
2%
7%
6%
7%
CONSTANT CURRENCY GROWTH RATES (2)
Cloud software as a service
52%
59%
65%
69%
62%
62%
53%
57%
Cloud platform as a service and infrastructure as a service
84%
78%
57%
42%
62%
27%
19%
23%
Total cloud revenues
61%
64%
63%
60%
62%
51%
43%
47%
New software licenses
(10%)
(19%)
(15%)
(4%)
(11%)
(7%)
(2%)
(4%)
Software license updates and product support
3%
3%
3%
3%
3%
2%
2%
2%
Total on-premise software revenues
1%
(3%)
(2%)
0%
(1%)
1%
1%
1%
Total cloud and on-premise software revenues
6%
3%
5%
6%
5%
8%
7%
7%
Total hardware revenues
(11%)
(9%)
(9%)
(12%)
(10%)
(6%)
(9%)
(8%)
Total services revenues
(5%)
0%
3%
4%
1%
5%
0%
2%
Total revenues
3%
1%
3%
4%
3%
6%
5%
5%
(1)
The sum of the quarterly information presented may vary from the year-to-date information presented due to rounding.
(2)
We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2017 and 2016 for the fiscal 2018 and fiscal 2017 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
ORACLE
CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC GAAP REVENUES ANALYSIS (1)
($ in millions)
Fiscal 2017
Fiscal 2018
Q1
Q2
Q3
Q4
TOTAL
Q1
Q2
Q3 Q4 TOTAL
AMERICAS
Total cloud and on-premise software revenues
$
3,876
$
4,000
$
4,280
$
5,076
$
17,231
$
4,256
$
4,414
$
8,670
Total hardware revenues
$
526
$
510 $
511 $
542 $
2,089 $
485
$
482
$
968
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues
5%
2%
8%
6%
5%
10%
10%
10%
Total hardware revenues
(11%)
(14%)
(11%)
(17%)
(13%)
(8%)
(5%)
(7%)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues
6%
2%
7%
6%
5%
9%
10%
10%
Total hardware revenues
(10%)
(14%)
(11%)
(17%)
(13%)
(8%)
(6%)
(7%)
EUROPE / MIDDLE EAST / AFRICA
Total cloud and on-premise software revenues
$
1,903
$
2,008
$
2,019
$
2,489
$
8,419 $
2,019
$
2,259
$
4,278
Total hardware revenues
$
275
$
294 $
300 $
352 $
1,221 $
271
$
272
$
543
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues
2%
(3%)
(2%)
1%
(1%)
6%
12%
9%
Total hardware revenues
(17%)
(7%)
(14%)
(8%)
(11%)
(1%)
(8%)
(5%)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues
7%
2%
2%
5%
4%
3%
7%
5%
Total hardware revenues
(13%)
(2%)
(10%)
(4%)
(7%)
(4%)
(12%)
(8%)
ASIA PACIFIC
Total cloud and on-premise software revenues
$
1,012
$
1,169
$
1,066
$
1,319
$
4,568 $
1,109
$
1,152
$
2,261
Total hardware revenues
$
195
$
210 $
217 $
220 $
842 $
187
$
186
$
373
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues
12%
15%
2%
9%
9%
10%
(1%)
4%
Total hardware revenues
(7%)
(1%)
1%
(12%)
(5%)
(4%)
(11%)
(8%)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues
8%
11%
0%
9%
7%
10%
(2%)
4%
Total hardware revenues
(9%)
(3%)
0%
(12%)
(6%)
(4%)
(12%)
(8%)
TOTAL COMPANY
Total cloud and on-premise software revenues
$
6,791
$
7,177
$
7,365
$
8,884
$
30,218
$
7,384
$
7,825
$
15,209
Total hardware revenues
$
996
$
1,014
$
1,028
$
1,114
$
4,152 $
943
$
940
$
1,884
AS REPORTED GROWTH RATES
Total cloud and on-premise software revenues
5%
2%
4%
5%
4%
9%
9%
9%
Total hardware revenues
(12%)
(10%)
(9%)
(13%)
(11%)
(5%)
(7%)
(6%)
CONSTANT CURRENCY GROWTH RATES (2)
Total cloud and on-premise software revenues
6%
3%
5%
6%
5%
8%
7%
7%
Total hardware revenues
(11%)
(9%)
(9%)
(12%)
(10%)
(6%)
(9%)
(8%)
(1)
The sum of the quarterly information presented may vary from the year-to-date information presented due to rounding.
(2)
We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2017 and 2016 for the fiscal 2018 and fiscal 2017 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
ORACLE
CORPORATION
Q2 FISCAL 2018 FINANCIAL RESULTS
SUPPLEMENTAL TOTAL CLOUD AND ON-PREMISE SOFTWARE GAAP REVENUES ANALYSIS (1)
($ in millions)
Fiscal 2017
Fiscal 2018
Q1
Q2
Q3
Q4
TOTAL
Q1
Q2
Q3 Q4 TOTAL
APPLICATIONS REVENUES
Cloud software as a service
$
657
$
725 $
865 $
964 $
3,211 $ 1,067
$ 1,123
$ 2,189
On-premise software revenues
1,584
1,610
1,632
1,898
6,724
1,579
1,554
3,134
Total cloud and on-premise software revenues
$ 2,241
$ 2,335
$ 2,497
$ 2,862
$
9,935 $ 2,646
$ 2,677
$ 5,323
AS REPORTED GROWTH RATES
Cloud software as a service
50%
57%
64%
67%
61%
62%
55%
58%
On-premise software revenues
(5%)
(11%)
(8%)
(10%)
(8%)
0%
(3%)
(2%)
Total cloud and on-premise software revenues
6%
3%
9%
7%
6%
18%
15%
16%
CONSTANT CURRENCY GROWTH RATES (2)
Cloud software as a service
52%
59%
65%
69%
62%
62%
53%
57%
On-premise software revenues
(4%)
(9%)
(7%)
(9%)
(7%)
(1%)
(5%)
(3%)
Total cloud and on-premise software revenues
8%
5%
9%
8%
8%
17%
13%
15%
PLATFORM AND INFRASTRUCTURE REVENUES
Cloud platform as a service and infrastructure as a service
$
312
$
328 $
324 $
397 $
1,360 $
400
$
396
$
797
On-premise software revenues
4,238
4,514
4,544
5,625
18,923
4,338
4,752
9,089
Total cloud and on-premise software revenues
$ 4,550
$ 4,842
$ 4,868
$ 6,022
$
20,283 $ 4,738
$ 5,148
$ 9,886
AS REPORTED GROWTH RATES
Cloud platform as a service and infrastructure as a service
80%
75%
55%
40%
60%
28%
21%
25%
On-premise software revenues
1%
(1%)
(1%)
3%
1%
2%
5%
4%
Total cloud and on-premise software revenues
5%
2%
2%
5%
3%
4%
6%
5%
CONSTANT CURRENCY GROWTH RATES (2)
Cloud platform as a service and infrastructure as a service
84%
78%
57%
42%
62%
27%
19%
23%
On-premise software revenues
2%
(1%)
0%
4%
1%
1%
3%
2%
Total cloud and on-premise software revenues
5%
2%
2%
6%
4%
3%
4%
4%
(1)
The sum of the quarterly information presented may vary from the year-to-date information presented due to rounding.
(2)
We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2017 and 2016 for the fiscal 2018 and fiscal 2017 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

APPENDIX A

ORACLE CORPORATIONQ2 FISCAL 2018 FINANCIAL RESULTSEXPLANATION OF NON-GAAP MEASURES

To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, which exclude certain business combination accounting entries and expenses related to acquisitions, as well as other significant expenses including stock-based compensation, that we believe are helpful in understanding our past financial performance and our future results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

Cloud software as a service, cloud platform as a service and infrastructure as a service, and software license updates and product support deferred revenues: Business combination accounting rules require us to account for the fair values of cloud-based service contracts and software license updates and product support contracts assumed in connection with our acquisitions. Because these contracts are generally one year in duration, our GAAP revenues generally for the one year period subsequent to our acquisition of a business do not reflect the full amount of revenues on these assumed cloud and support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment to our cloud software as a service revenues, cloud platform as a service and infrastructure as a service revenues, and software license updates and product support revenues is intended to include, and thus reflect, the full amount of such revenues. We believe the adjustments to these revenues are useful to investors as a measure of the ongoing performance of our business. We have historically experienced high renewal rates on our software license updates and product support contracts and our objective is to increase the renewal rates on acquired and new cloud-based service contracts; however, we cannot be certain that our customers will renew our cloud-based contracts or software license updates and product support contracts.

Deferred sales commissions amortization: Certain acquired companies capitalized sales commissions associated with subscription agreements and amortized these amounts over the related contractual terms. Business combination accounting rules generally require us to eliminate these capitalized sales commissions balances as of the acquisition date and our post-combination GAAP sales and marketing expenses generally do not reflect the amortization of these deferred sales commissions balances. The non-GAAP adjustment to increase our sales and marketing expenses is intended to include, and thus reflect, the full amount of amortization related to such balances as though the acquired companies operated independently in the periods presented. We believe this adjustment to sales and marketing expenses is useful to investors as a measure of the ongoing performance of our business. The presentation of this non-GAAP adjustment commenced in the second fiscal quarter of fiscal 2017 as a result of our acquisition of NetSuite. Such adjustment was not material in prior periods.

Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.

Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP operating expenses and net income measures. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.

Acquisition related and other expenses; and restructuring expenses: We have excluded the effect of acquisition related and other expenses and the effect of restructuring expenses from our non-GAAP operating expenses and net income measures. We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related and other expenses consist of personnel related costs for transitional employees, other acquired employee related costs, stock-based compensation expenses (in addition to the stock-based compensation expenses described above), integration related professional services, certain business combination adjustments including adjustments after the measurement period has ended and certain other operating items, net. Substantially all of the stock-based compensation expenses included in acquisition related and other expenses resulted from unvested stock awards assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the original terms of those stock awards. Restructuring expenses consist of employee severance and other exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses. Although acquisition related expenses and restructuring expenses generally diminish over time with respect to past acquisitions and/or strategic initiatives, we generally will incur these expenses in connection with any future acquisitions and/or strategic initiatives.

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SOURCE Oracle Corporation

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