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Q3 FY19 GAAP EPS INCREASED TO $0.76 and NON-GAAP EPS UP 8% TO $0.87

Operating Income Up 3% in USD and 7% in Constant Currency

REDWOOD SHORES, Calif., March 14, 2019 /PRNewswire/ -- Oracle Corporation (ORCL) today announced fiscal 2019 Q3 results. Total Revenues were $9.6 billion, down 1% in USD and up 3% in constant currency compared to Q3 last year. Cloud Services and License Support revenues were $6.7 billion, while Cloud License and On-Premise License revenues were $1.3 billion. Total Cloud Services and License Support plus Cloud License and On-Premise License revenues were $7.9 billion, unchanged in USD and up 3% in constant currency.

GAAP Operating Income was up 3% to $3.4 billion and GAAP Operating Margin was 35%. Non-GAAP Operating Income was up 2% to $4.3 billion and non-GAAP Operating Margin was 44%. GAAP Net Income increased to $2.7 billion and non-GAAP Net Income was down 8% to $3.2 billion. GAAP Earnings Per Share increased to $0.76 while non-GAAP Earnings Per Share was up 8% to $0.87.

Short-term deferred revenues were up 1% to $8.0 billion compared to a year ago. Operating Cash Flow was $14.8 billion during the trailing twelve months.

"I'm pleased with Q3 non-GAAP results as revenues grew 3%, operating income increased 5% and EPS grew 12% in constant currency," said Oracle CEO, Safra Catz. "Our overall operating margin improved to 44% as our lower margin hardware business continued to get smaller while our higher margin cloud business continued to get bigger. With year-to-date non-GAAP EPS growth rate now at 16% in constant currency, we will comfortably deliver another year of double-digit EPS growth."

"Our Fusion HCM, ERP, Supply Chain and Manufacturing Cloud applications revenue in total grew 32% in Q3," said Oracle CEO, Mark Hurd. "Our NetSuite ERP Cloud applications also delivered strong results with a revenue growth rate of 30%. That said, let me call your attention to the following approved statement about Oracle's entire applications business from industry analyst IDC."

Per IDC's latest annual market share results, Oracle is the #1 Enterprise Applications vendor in North America based on market share and revenue, surpassing Salesforce.com and SAP.
Source: IDC Semiannual Software Tracker, Oct. 2018. Market share and revenue for 2H2017-1H2018. North America is the USA and Canada. Enterprise Applications refer to the IDC markets CRM, Enterprise Resource Management (including HCM, Financials, Procurement, Order Management, PPM, EAM), SCM, and Production Applications.

"The future of Oracle's Cloud Infrastructure business rests upon our highly-secure Gen2 Cloud Infrastructure featuring the world's first and only Autonomous Database," said Oracle CTO, Larry Ellison. "By the end of Q3 we had nearly 1,000 paying Autonomous Database customers and we added around 4,000 new Autonomous Database trials in Q3. It's early days, but this is the most successful introduction of a new product in Oracle's forty year history."

Oracle also announced that its Board of Directors declared a quarterly cash dividend of $0.24 per share of outstanding common stock, reflecting a 26% increase over the current quarterly dividend of $0.19.  Larry Ellison, Oracle's Chairman of the Board, Chief Technology Officer and largest stockholder, did not participate in the deliberation or the vote on this matter.  This increased dividend will be paid to stockholders of record as of the close of business on April 11, 2019, with a payment date of April 25, 2019.

Q3 Fiscal 2019 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 Q3 results and fiscal 2019 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: 9995836.

About Oracle

The Oracle Cloud offers a complete suite of integrated applications for Sales, Service, Marketing, Human Resources, Finance, Supply Chain and Manufacturing, plus Highly- Automated and Secure Generation 2 Infrastructure featuring the Oracle Autonomous Database. For more information about Oracle (ORCL), visit us at 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 the growth of our EPS and the future of Oracle's Cloud Infrastructure business, 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 strategy, including our Oracle Software as a Service and Infrastructure as a Service offerings, may not be successful. (2) If we are unable to develop new or sufficiently differentiated products and services, integrate acquired products and services, or enhance and improve our existing products and support services in a timely manner, or price our products and services to meet market demand, customers may not purchase or subscribe to our software, hardware or cloud offerings or renew software support, hardware support or cloud subscriptions contracts. (3) Enterprise customers rely on our cloud, license and hardware offerings and related services to run their businesses and significant coding, manufacturing or configuration errors in our cloud, license and hardware offerings and related services could expose us to product liability, performance and warranty claims, as well as cause significant harm to our brand and reputation, which could impact our future sales. (4) If the security measures for our products and services are compromised and as a result, our customers' data or our IT systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable, our brand and reputation could be damaged and we may experience legal claims and reduced sales. (5) Our business practices with respect to data could give rise to operational interruption, liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection. (6) Economic, political 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) Our international sales and operations subject us to additional risks that can adversely affect our operating results. (8) We have a selective and active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. A detailed discussion of these factors and other risks that affect our business is contained in our U.S. Securities and Exchange Commission (SEC) filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle's Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of March 14, 2019. Oracle undertakes no duty to update any statement in light of new information or future events.

 

ORACLE  CORPORATION


Q3 FISCAL 2019 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)






% Increase




Three Months Ended February 28,

% Increase

(Decrease)





% of 


% of 

(Decrease)

in Constant




2019

Revenues

2018

Revenues

in US $

Currency (1)


REVENUES









Cloud services and license support 

$ 6,662

69%

$   6,587

68%

1%

4%



Cloud license and on-premise license

1,251

13%

1,299

14%

(4%)

0%



Hardware

915

10%

994

10%

(8%)

(4%)



Services

786

8%

796

8%

(1%)

3%



Total revenues

9,614

100%

9,676

100%

(1%)

3%


OPERATING EXPENSES









Cloud services and license support 

937

10%

894

9%

5%

7%



Hardware

339

4%

393

4%

(14%)

(10%)



Services

700

7%

709

7%

(1%)

3%



Sales and marketing

2,051

21%

2,042

21%

0%

4%



Research and development 

1,426

15%

1,496

16%

(5%)

(3%)



General and administrative

316

3%

339

4%

(7%)

(4%)



Amortization of intangible assets

407

4%

394

4%

3%

3%



Acquisition related and other

(4)

0%

3

0%

(208%)

(217%)



Restructuring

43

1%

91

1%

(53%)

(51%)



Total operating expenses 

6,215

65%

6,361

66%

(2%)

0%


OPERATING INCOME 

3,399

35%

3,315

34%

3%

7%



Interest expense

(509)

(5%)

(533)

(5%)

(5%)

(5%)



Non-operating income, net 

198

2%

409

4%

(52%)

(52%)


INCOME BEFORE PROVISION FOR INCOME TAXES

3,088

32%

3,191

33%

(3%)

1%



Provision for income taxes (2)

343

4%

7,238

75%

(95%)

(95%)


NET INCOME (LOSS)

$ 2,745

28%

$ (4,047)

(42%)

168%

168%











EARNINGS (LOSS) PER SHARE:









Basic

$    0.78


$   (0.98)






Diluted

$    0.76


$   (0.98)





WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:









Basic

3,526


4,122






Diluted

3,617


4,122


















































(1)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2018, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended February 28, 2019 compared with the corresponding prior year period decreased our revenues by 4 percentage points, operating expenses by 2 percentage points and operating income by 4 percentage points.





(2)

Provision for income taxes for the periods presented included the impacts of the U.S. 2017 Tax Cuts and Jobs Act, which was signed into law during our third quarter of fiscal 2018, and for which additional discussion is included in Appendix A.











 

ORACLE  CORPORATION


Q3 FISCAL 2019 FINANCIAL RESULTS

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

($ in millions, except per share data)




Three Months Ended February 28,


% Increase (Decrease)
in US $

% Increase (Decrease) in
Constant Currency (2) 



2019




2019



2018




2018


GAAP

Non-GAAP

GAAP

Non-GAAP




GAAP


Adj.


Non-GAAP



GAAP


Adj.


Non-GAAP























TOTAL REVENUES

$ 9,614


$       4


$       9,618



$   9,676


$           5


$       9,681


(1%)

(1%)

3%

3%


Cloud services and license support

6,662


4


6,666



6,587


5


6,592


1%

1%

4%

4%





















TOTAL OPERATING EXPENSES

$ 6,215


$ (873)


$       5,342



$   6,361


$     (874)


$       5,487


(2%)

(3%)

0%

0%


Sales and marketing (3)

2,051


(89)


1,962



2,042


(84)


1,958


0%

0%

4%

4%


Stock-based compensation (4)

338


(338)


-



302


(302)


-


12%

*

12%

*


Amortization of intangible assets (5)

407


(407)


-



394


(394)


-


3%

*

3%

*


Acquisition related and other

(4)


4


-



3


(3)


-


(208%)

*

(217%)

*


Restructuring

43


(43)


-



91


(91)


-


(53%)

*

(51%)

*


OPERATING INCOME

$ 3,399


$   877


$       4,276



$   3,315


$      879


$       4,194


3%

2%

7%

5%


OPERATING MARGIN %

35%




44%



34%




43%


110 bp.

115 bp.

139 bp.

119 bp.


INCOME TAX EFFECTS (6)

$     343


$   466


$          809



$   7,238


$  (6,582)


$          656


(95%)

23%

(95%)

28%


NET INCOME (LOSS)

$ 2,745


$   411


$       3,156



$  (4,047)


$   7,461


$       3,414


168%

(8%)

168%

(4%)


DILUTED EARNINGS (LOSS) PER SHARE (7)

$    0.76




$         0.87



$    (0.98)




$         0.81


177%

8%

177%

12%


DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (7) 

3,617


-


3,617



4,122


114


4,236


(12%)

(15%)

(12%)

(15%)










































(1)

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.






















(2)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2018, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.






















(3)

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








Three Months Ended


















February 28,


















2019


2018

















Stock-based compensation (4)

$     (89)


$    (87)

















Acquired deferred sales commissions amortization

-


3

















Total non-GAAP sales and marketing adjustments

$     (89)


$    (84)




































(4)

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




























Three Months Ended



Three Months Ended









February 28, 2019



February 28, 2018









GAAP


Adj.


Non-GAAP



GAAP


Adj.


Non-GAAP








Cloud services and license support

$       26


$    (26)


$             -



$        21


$       (21)


$             -








Hardware

2


(2)


-



2


(2)


-








Services

12


(12)


-



13


(13)


-








Research and development

254


(254)


-



221


(221)


-








General and administrative

44


(44)


-



45


(45)


-








Subtotal

338


(338)


-



302


(302)


-








Sales and marketing

89


(89)


-



87


(87)


-








Total stock-based compensation

$     427


$ (427)


$             -



$      389


$     (389)


$             -



























(5)

Estimated future annual amortization expense related to intangible assets as of February 28, 2019 was as follows:



Remainder of fiscal 2019

$     401



















Fiscal 2020

1,492



















Fiscal 2021

1,269



















Fiscal 2022

1,018



















Fiscal 2023

622



















Fiscal 2024

391



















Thereafter

485



















Total intangible assets, net

$ 5,678






































(6)

Income tax effects were calculated reflecting an effective GAAP tax rate of 11.1% and 226.8% in the third quarter of fiscal 2019 and 2018, respectively, and an effective non-GAAP tax rate of 20.4% and 16.1% in the third quarter of fiscal 2019 and 2018, respectively. The difference between our GAAP and non-GAAP tax rates in the third quarter of fiscal 2019 and 2018 was primarily due to the impacts of the U.S. Tax Cuts and Jobs Act of 2017 (refer to Appendix A for additional information).


(7)

In the third quarter of fiscal 2018, GAAP diluted loss per share was calculated excluding the dilutive effects of 114 million shares related to employee stock plans as the effect would be anti-dilutive.






















*

Not meaningful













 

ORACLE  CORPORATION


Q3 FISCAL 2019 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)






% Increase




Nine Months Ended February 28,

% Increase

(Decrease)





% of 


% of 

(Decrease)

in Constant




2019

Revenues

2018

Revenues

in US $

Currency (1)


REVENUES









Cloud services and license support 

$ 19,908

70%

$ 19,454

69%

2%

4%



Cloud license and on-premise license

3,334

12%

3,525

12%

(5%)

(3%)



Hardware 

2,711

10%

2,878

10%

(6%)

(3%)



Services

2,416

8%

2,512

9%

(4%)

(1%)



Total revenues

28,369

100%

28,369

100%

0%

2%


OPERATING EXPENSES









Cloud services and license support 

2,807

10%

2,645

9%

6%

8%



Hardware

998

4%

1,116

4%

(11%)

(8%)



Services

2,127

7%

2,126

8%

0%

3%



Sales and marketing

6,191

22%

6,118

22%

1%

4%



Research and development 

4,464

16%

4,541

16%

(2%)

0%



General and administrative

935

3%

977

3%

(4%)

(2%)



Amortization of intangible assets

1,265

4%

1,205

4%

5%

5%



Acquisition related and other

29

0%

32

0%

(10%)

(7%)



Restructuring

275

1%

506

2%

(46%)

(45%)



Total operating expenses 

19,091

67%

19,266

68%

(1%)

1%


OPERATING INCOME 

9,278

33%

9,103

32%

2%

5%



Interest expense

(1,557)

(5%)

(1,477)

(5%)

5%

5%



Non-operating income, net 

681

2%

891

3%

(23%)

(24%)


INCOME BEFORE PROVISION FOR INCOME TAXES

8,402

30%

8,517

30%

(1%)

2%



Provision for income taxes (2) 

1,059

4%

8,206

29%

(87%)

(87%)


NET INCOME 

$    7,343

26%

$       311

1%

2,263%

3,666%











EARNINGS PER SHARE:









Basic

$      1.98


$      0.07






Diluted

$      1.93


$      0.07





WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:









Basic

3,716


4,146






Diluted

3,811


4,268


















































(1)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2018, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the nine months ended February 28, 2019 compared with the corresponding prior year period decreased our revenues by 2 percentage points, operating expenses by 2 percentage points and operating income by 3 percentage points.





(2)

Provision for income taxes for the periods presented included the impacts of the U.S. 2017 Tax Cuts and Jobs Act, which was signed into law during our third quarter of fiscal 2018, and for which additional discussion is included in Appendix A.











 

ORACLE  CORPORATION


Q3 FISCAL 2019 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)




Nine Months Ended
February 28,


% Increase (Decrease)
in US $

% Increase (Decrease) in
Constant Currency (2) 



2019




2019



2018




2018


GAAP

Non-GAAP

GAAP

Non-GAAP




GAAP


Adj.


Non-GAAP



GAAP


Adj.


Non-GAAP























TOTAL REVENUES

$ 28,369


$        17


$    28,386



$ 28,369


$        39


$    28,408


0%

0%

2%

2%



Cloud services and license support

19,908


17


19,925



19,454


39


19,493


2%

2%

4%

4%






















TOTAL OPERATING EXPENSES

$ 19,091


$  (2,828)


$    16,263



$ 19,266


$  (2,933)


$    16,333


(1%)

0%

1%

2%



Sales and marketing (3)

6,191


(278)


5,913



6,118


(255)


5,863


1%

1%

4%

3%



Stock-based compensation (4)

981


(981)


-



935


(935)


-


5%

*

5%

*



Amortization of intangible assets (5)

1,265


(1,265)


-



1,205


(1,205)


-


5%

*

5%

*



Acquisition related and other

29


(29)


-



32


(32)


-


(10%)

*

(7%)

*



Restructuring

275


(275)


-



506


(506)


-


(46%)

*

(45%)

*


OPERATING INCOME

$    9,278


$   2,845


$    12,123



$    9,103


$   2,972


$    12,075


2%

0%

5%

3%


OPERATING MARGIN %

33%




43%



32%




43%


62 bp.

20 bp.

81 bp.

20 bp.


INCOME TAX EFFECTS (6)

$    1,059


$   1,122


$       2,181



$    8,206


$  (5,688)


$       2,518


(87%)

(13%)

(87%)

(11%)


NET INCOME 

$    7,343


$   1,723


$       9,066



$       311


$   8,660


$       8,971


2,263%

1%

3,666%

4%


DILUTED EARNINGS PER SHARE

$      1.93




$         2.38



$      0.07




$         2.10


2,547%

13%

4,117%

16%


DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING

3,811


-


3,811



4,268


-


4,268


(11%)

(11%)

(11%)

(11%)










































(1)

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.






















(2)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2018, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.






















(3)

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




























Nine Months Ended


















February 28,


















2019


2018

















Stock-based compensation (4)

$     (278)


$     (275)

















Acquired deferred salnull