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 Q3 FY17 GAAP EPS UP 6% TO $0.53 and NON-GAAP EPS UP 7% TO $0.69
   Wednesday, March 15, 2017 4:00:00 PM ET

Oracle Corporation (ORCL ) today announced fiscal 2017 Q3 results. Total Revenues were $9.2 billion, up 2% in U.S. dollars and up 3% in constant currency. Non-GAAP Total Revenues were $9.3 billion, up 3% in U.S. dollars and up 4% in constant currency. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $1.0 billion, up 73% in U.S. dollars and up 74% in constant currency. Non-GAAP SaaS and PaaS revenues were $1.1 billion, up 85% in U.S. dollars and up 86% in constant currency. Total Cloud Revenues, including infrastructure as a service (IaaS), were $1.2 billion, up 62% in U.S. dollars and up 63% in constant currency. Total Cloud and On-Premise Software Revenues were $7.4 billion, up 4% in U.S. dollars and up 5% in constant currency.

Operating Income was $3.0 billion and Operating Margin was 32%. Non-GAAP Operating Income was $3.9 billion, up 3% in U.S. dollars and up 4% in constant currency, and non-GAAP Operating Margin was 43%. Net Income was $2.2 billion while non-GAAP Net Income was $2.9 billion, up 6% in U.S. dollars and up 7% in constant currency. Earnings Per Share was $0.53, while non-GAAP Earnings Per Share was $0.69, up 7% in U.S. dollars. Without the impact of the U.S. dollar strengthening compared to foreign currencies, Oracle’s reported GAAP Earnings Per Share would have been 1 cent higher.

Short-term deferred revenues were $7.4 billion, up 7% in U.S. dollars and constant currency compared with a year ago. Operating cash flow on a trailing twelve-month basis was $13.5 billion.

"The hyper-growth we continue to experience in the cloud has rapidly driven both our SaaS and PaaS businesses to scale," said Oracle CEO, Safra Catz. "On an annualized non-GAAP basis, our total cloud business has reached the $5 billion mark, and our SaaS and PaaS businesses grew at the astonishing rate of 85% in Q3. That growth and the resulting scale enabled our SaaS and PaaS businesses to increase non-GAAP gross margins to 65%. Our new, large, fast growing, high-margin cloud businesses are driving Oracle’s total revenue and earnings up and improving nearly every important non-GAAP business metric you care to inspect; total revenue is up, margins are up, operating income is up, net income is up, EPS is up. Take a look. Q3 was a very strong quarter."

"Over the last year, we sold more new SaaS and PaaS than Salesforce.com, and we’re growing more than 3 times faster," said Oracle CEO, Mark Hurd. "If these trends continue, where we are selling more SaaS and PaaS in absolute dollars AND growing dramatically faster, it’s just a matter of when we catch and pass Salesforce.com in total cloud revenue."

"Both our SaaS and PaaS businesses are doing great, but I’m even more excited about our second generation IaaS business," said Oracle Chairman and CTO, Larry Ellison. "Our new Gen2 IaaS is both faster and lower cost than Amazon Web Services. And now our biggest customers can run their largest and most demanding Oracle database workloads in the Oracle Cloud - something that is absolutely impossible to do in the Amazon Cloud."

Oracle also announced that its Board of Directors declared a quarterly cash dividend of $0.19 per share of outstanding common stock, reflecting a 27% increase over the current quarterly dividend of $0.15. 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 12, 2017, with a payment date of April 26, 2017.

Q3 Fiscal 2017 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 2017 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: 83283985.

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 our growth in SaaS, PaaS and total cloud revenue and expected future sales compared to competitors 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 software, hardware, services or Oracle Cloud offerings are compromised or if such offerings contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and financial exposure. (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, including the continued slow economic recovery in 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. (7) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. A detailed discussion of these factors and other risks that affect our business is contained in our U.S. Securities and Exchange Commission (SEC) filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation’s Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle’s Investor Relations website at http://www.oracle.com/investor . All information set forth in this press release is current as of March 15, 2017. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE  CORPORATION
Q3 FISCAL 2017 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
                                                                                                                                                               Three Months Ended                                      % Increase % Increase
                                                                                                                                                                                                                                  (Decrease)
                                                                                                                                                               February 28,       % of     February 29,       % of     (Decrease) in Constant
                                                                                                                                                               2017               Revenues 2016               Revenues in US $    Currency (1)
REVENUES
                      Cloud software as a service and platform as a service                                                                                    $           1,011  11%      $              583 6%       73%        74%
                      Cloud infrastructure as a service                                                                                                        178                2%       152                2%       17%        19%
                      Total cloud revenues                                                                                                                     1,189              13%      735                8%       62%        63%
                      New software licenses                                                                                                                    1,414              15%      1,680              18%      (16%)      (15%)
                      Software license updates and product support                                                                                             4,762              52%      4,669              52%      2%         3%
                      Total on-premise software revenues                                                                                                       6,176              67%      6,349              70%      (3%)       (2%)
                      Total cloud and on-premise software revenues                                                                                             7,365              80%      7,084              78%      4%         5%
                      Hardware products                                                                                                                        520                6%       604                7%       (14%)      (13%)
                      Hardware support                                                                                                                         508                5%       531                6%       (4%)       (3%)
                      Total hardware revenues                                                                                                                  1,028              11%      1,135              13%      (9%)       (9%)
                      Total services revenues                                                                                                                  812                9%       793                9%       2%         3%
                      Total revenues                                                                                                                           9,205              100%     9,012              100%     2%         3%
OPERATING EXPENSES
                      Sales and marketing                                                                                                                      2,004              22%      1,903              21%      5%         6%
                      Cloud software as a service and platform as a service                                                                                    380                4%       292                3%       30%        32%
                      Cloud infrastructure as a service                                                                                                        125                1%       88                 1%       43%        44%
                      Software license updates and product support                                                                                             270                3%       293                3%       (8%)       (8%)
                      Hardware products                                                                                                                        290                3%       338                4%       (14%)      (14%)
                      Hardware support                                                                                                                         147                2%       171                2%       (14%)      (14%)
                      Services                                                                                                                                 680                7%       657                7%       4%         4%
                      Research and development                                                                                                                 1,521              17%      1,419              16%      7%         8%
                      General and administrative                                                                                                               241                3%       290                3%       (17%)      (15%)
                      Amortization of intangible assets                                                                                                        397                4%       408                5%       (3%)       (3%)
                      Acquisition related and other                                                                                                            30                 0%       11                 0%       187%       174%
                      Restructuring                                                                                                                            161                2%       115                1%       39%        42%
                      Total operating expenses                                                                                                                 6,246              68%      5,985              66%      4%         5%
OPERATING INCOME                                                                                                                                               2,959              32%      3,027              34%      (2%)       (1%)
                      Interest expense                                                                                                                         (450)              (5%)     (360)              (4%)     25%        25%
                      Non-operating income, net                                                                                                                189                2%       65                 0%       190%       187%
INCOME BEFORE PROVISION FOR INCOME TAXES                                                                                                                       2,698              29%      2,732              30%      (1%)       0%
                      Provision for income taxes                                                                                                               459                5%       590                6%       (22%)      (22%)
NET INCOME                                                                                                                                                     $           2,239  24%      $           2,142  24%      5%         6%
EARNINGS PER SHARE:
                      Basic                                                                                                                                    $             0.55          $             0.51
                      Diluted                                                                                                                                  $             0.53          $             0.50
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
                      Basic                                                                                                                                    4,107                       4,182
                      Diluted                                                                                                                                  4,204                       4,256
(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, 2016, 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, 2017 compared with the corresponding prior year period decreased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 1 percentage point.
ORACLE  CORPORATION
Q3 FISCAL 2017 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
                                                                                           Three Months Ended                                                                                                                                                                                                                         % Increase (Decrease)                                                       % Increase (Decrease) in
                                                                                                                                                                                                                                                                                                                                      in US $                                                                     Constant Currency (2)
                                                                                           February 28,                                                                  February 28,                            February 29,                                                                  February 29,                           GAAP                                  Non-GAAP                              GAAP                                  Non-GAAP
                                                                                           2017                                                                          2017                                    2016                                                                          2016
                                                                                           GAAP                                   Adj.                                   Non-GAAP                                GAAP                                   Adj.                                   Non-GAAP
TOTAL REVENUES                                                                             $          9,205                       $           69                         $          9,274                        $          9,012                       $      2                               $          9,014                       2%                                    3%                                    3%                                    4%
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES                                               $          7,365                       $           69                         $          7,434                        $          7,084                       $      2                               $          7,086                       4%                                    5%                                    5%                                    6%
                                Cloud software as a service and platform as a service      1,011                                  69                                     1,080                                   583                                    2                                      585                                    73%                                   85%                                   74%                                   86%
                                Cloud infrastructure as a service                          178                                    -                                      178                                     152                                    -                                      152                                    17%                                   17%                                   19%                                   19%
                                New software licenses                                      1,414                                  -                                      1,414                                   1,680                                  -                                      1,680                                  (16%)                                 (16%)                                 (15%)                                 (15%)
                                Software license updates and product support               4,762                                  -                                      4,762                                   4,669                                  -                                      4,669                                  2%                                    2%                                    3%                                    3%
TOTAL OPERATING EXPENSES                                                                   $          6,246                       $        (916)                         $          5,330                        $          5,985                       $(794)                                 $          5,191                       4%                                    3%                                    5%                                    3%
                                Sales and marketing (3)                                    2,004                                  (75)                                   1,929                                   1,903                                  (57)                                   1,846                                  5%                                    4%                                    6%                                    5%
                                Cloud software as a service and platform as a service (4)  380                                    (6)                                    374                                     292                                    (4)                                    288                                    30%                                   30%                                   32%                                   31%
                                Stock-based compensation (4)                               247                                    (247)                                  -                                       199                                    (199)                                  -                                      24%                                   *                                     24%                                   *
                                Amortization of intangible assets (5)                      397                                    (397)                                  -                                       408                                    (408)                                  -                                      (3%)                                  *                                     (3%)                                  *
                                Acquisition related and other                              30                                     (30)                                   -                                       11                                     (11)                                   -                                      187%                                  *                                     174%                                  *
                                Restructuring                                              161                                    (161)                                  -                                       115                                    (115)                                  -                                      39%                                   *                                     42%                                   *
CLOUD SOFTWARE AS A SERVICE AND PLATFORM AS A SERVICE MARGIN %                             62%                                                                           65%                                     50%                                                                           51%                                    1,245 bp.                             1,450 bp.                             1,231 bp.                             1,434 bp.
OPERATING INCOME                                                                           $          2,959                       $         985                          $          3,944                        $          3,027                       $  796                                 $          3,823                       (2%)                                  3%                                    (1%)                                  4%
OPERATING MARGIN %                                                                         32%                                                                           43%                                     34%                                                                           42%                                    (144) bp.                             12 bp.                                (131) bp.                             19 bp.
INCOME TAX EFFECTS (6)                                                                     $             459                      $         336                          $             795                       $             590                      $  207                                 $             797                      (22%)                                 0%                                    (22%)                                 1%
NET INCOME                                                                                 $          2,239                       $         649                          $          2,888                        $          2,142                       $  589                                 $          2,731                       5%                                    6%                                    6%                                    7%
DILUTED EARNINGS PER SHARE                                                                 $            0.53                                                             $            0.69                       $            0.50                                                             $            0.64                      6%                                    7%                                    7%                                    8%
DILUTED WEIGHTED AVERAGE COMMON                                                            4,204                                  -                                      4,204                                   4,256                                  -                                      4,256                                  (1%)                                  (1%)                                  (1%)                                  (1%)
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, 2016, 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,                           February 29,
                                                                                           2017                                   2016
                                Stock-based compensation (4)                               $               (96)                   $           (57)
                                Acquired deferred sales commissions amortization           21                                     -
                                Total non-GAAP sales and marketing adjustments             $               (75)                   $           (57)
(4)                             Stock-based compensation was included in the following GAAP operating expense categories:
                                                                                           Three Months Ended                                                                                                    Three Months Ended
                                                                                           February 28, 2017                                                                                                     February 29, 2016
                                                                                           GAAP                                   Adj.                                   Non-GAAP                                GAAP                                   Adj.                                   Non-GAAP
                                Cloud infrastructure as a service                          $                  1                   $             (1)                      $                 -                     $                  1                   $     (1)                              $                 -
                                Software license updates and product support               6                                      (6)                                    -                                       6                                      (6)                                    -
                                Hardware products                                          2                                      (2)                                    -                                       1                                      (1)                                    -
                                Hardware support                                           1                                      (1)                                    -                                       1                                      (1)                                    -
                                Services                                                   14                                     (14)                                   -                                       7                                      (7)                                    -
                                Research and development                                   191                                    (191)                                  -                                       154                                    (154)                                  -
                                General and administrative                                 32                                     (32)                                   -                                       29                                     (29)                                   -
                                Subtotal                                                   247                                    (247)                                  -                                       199                                    (199)                                  -
                                Sales and marketing                                        96                                     (96)                                   -                                       57                                     (57)                                   -
                                Cloud software as a service and platform as a service      6                                      (6)                                    -                                       4                                      (4)                                    -
                                Acquisition related and other                              22                                     (22)                                   -                                       -                                      -                                      -
                                Total stock-based compensation                             $               371                    $         (371)                        $                 -                     $               260                    $  (260)                               $                 -
(5)                             Estimated future annual amortization expense related to intangible assets as of February 28, 2017 was as follows:
                                Remainder of fiscal 2017                                   $               402
                                Fiscal 2018                                                1,362
                                Fiscal 2019                                                1,248
                                Fiscal 2020                                                1,058
                                Fiscal 2021                                                883
                                Fiscal 2022                                                779
                                Thereafter                                                 2,056
                                Total intangible assets, net                               $            7,788
(6)                             Income tax effects were calculated reflecting an effective GAAP tax rate of 17.0% and 21.6% in the third quarter of fiscal 2017 and 2016, respectively, and an effective non-GAAP tax rate of 21.6% and 22.6% in the third quarter of fiscal 2017 and 2016, respectively. The difference between our GAAP and non-GAAP tax rate in the third quarter of fiscal 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. The difference between our GAAP and non-GAAP tax rate in the third quarter of fiscal 2016 was primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
*                               Not meaningful
ORACLE  CORPORATION
Q3 FISCAL 2017 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
                                                                                                                                                               Nine Months Ended                                                    % Increase
                                                                                                                                                                                                                         % Increase (Decrease)
                                                                                                                                                               February 28,       % of       February 29,       % of     (Decrease) in Constant
                                                                                                                                                               2017               Revenues   2016               Revenues in US $    Currency (1)
REVENUES
                      Cloud software as a service and platform as a service                                                                                    $           2,686  10%        $           1,517  6%       77%        79%
                      Cloud infrastructure as a service                                                                                                        525                2%         477                2%       10%        13%
                      Total cloud revenues                                                                                                                     3,211              12%        1,994              8%       61%        63%
                      New software licenses                                                                                                                    3,792              14%        4,509              17%      (16%)      (15%)
                      Software license updates and product support                                                                                             14,331             54%        14,048             53%      2%         3%
                      Total on-premise software revenues                                                                                                       18,123             68%        18,557             70%      (2%)       (2%)
                      Total cloud and on-premise software revenues                                                                                             21,334             80%        20,551             78%      4%         5%
                      Hardware products                                                                                                                        1,478              5%         1,746              7%       (15%)      (14%)
                      Hardware support                                                                                                                         1,559              6%         1,639              6%       (5%)       (4%)
                      Total hardware revenues                                                                                                                  3,037              11%        3,385              13%      (10%)      (9%)
                      Total services revenues                                                                                                                  2,464              9%         2,517              9%       (2%)       (1%)
                      Total revenues                                                                                                                           26,835             100%       26,453             100%     1%         2%
OPERATING EXPENSES
                      Sales and marketing                                                                                                                      5,883              22%        5,578              21%      5%         6%
                      Cloud software as a service and platform as a service                                                                                    1,060              4%         847                3%       25%        27%
                      Cloud infrastructure as a service                                                                                                        333                1%         268                1%       24%        26%
                      Software license updates and product support                                                                                             786                3%         877                3%       (10%)      (9%)
                      Hardware products                                                                                                                        775                3%         967                4%       (20%)      (19%)
                      Hardware support                                                                                                                         439                2%         526                2%       (17%)      (16%)
                      Services                                                                                                                                 2,073              8%         2,058              8%       1%         2%
                      Research and development                                                                                                                 4,551              17%        4,253              16%      7%         8%
                      General and administrative                                                                                                               859                3%         832                3%       3%         5%
                      Amortization of intangible assets                                                                                                        1,010              4%         1,283              5%       (21%)      (21%)
                      Acquisition related and other                                                                                                            84                 0%         35                 0%       141%       144%
                      Restructuring                                                                                                                            346                1%         293                1%       18%        21%
                      Total operating expenses                                                                                                                 18,199             68%        17,817             67%      2%         3%
OPERATING INCOME                                                                                                                                               8,636              32%        8,636              33%      0%         1%
                      Interest expense                                                                                                                         (1,317)            (5%)       (1,105)            (4%)     19%        19%
                      Non-operating income, net                                                                                                                437                2%         179                0%       144%       141%
INCOME BEFORE PROVISION FOR INCOME TAXES                                                                                                                       7,756              29%        7,710              29%      1%         1%
                      Provision for income taxes                                                                                                               1,653              6%         1,623              6%       2%         2%
NET INCOME                                                                                                                                                     $           6,103  23%        $           6,087  23%      0%         1%
EARNINGS PER SHARE:
                      Basic                                                                                                                                    $             1.49            $             1.43
                      Diluted                                                                                                                                  $             1.45            $             1.41
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
                      Basic                                                                                                                                    4,110                         4,246
                      Diluted                                                                                                                                  4,207                         4,328
(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, 2016, 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, 2017 compared with the corresponding prior year period decreased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 1 percentage point.
ORACLE  CORPORATION
Q3 FISCAL 2017 YEAR TO DATE FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
                                                                              Nine Months Ended                                                                                                                                                                                                                                % Increase (Decrease)                                                         % Increase (Decrease) in
                                                                                                                                                                                                                                                                                                                               in US $                                                                       Constant Currency (2)
                                                                              February 28,                                                                    February 28,                             February 29,                                                                    February 29,                            GAAP                                   Non-GAAP                               GAAP                                   Non-GAAP
                                                                              2017                                                                            2017                                     2016                                                                            2016
                                                                              GAAP                                    Adj.                                    Non-GAAP                                 GAAP                                    Adj.                                    Non-GAAP
TOTAL REVENUES                                                                $        26,835                         $         122                           $        26,957                          $        26,453                         $         8                             $        26,461                         1%                                     2%                                     2%                                     3%
TOTAL CLOUD AND ON-PREMISE SOFTWARE REVENUES                                  $        21,334                         $         121                           $        21,455                          $        20,551                         $         7                             $        20,558                         4%                                     4%                                     5%                                     5%
                       Cloud software as a service and platform as a service  2,686                                   120                                     2,806                                    1,517                                   6                                       1,523                                   77%                                    84%                                    79%                                    86%
                       Cloud infrastructure as a service                      525                                     -                                       525                                      477                                     -                                       477                                     10%                                    10%                                    13%                                    13%
                       New software licenses                                  3,792                                   -                                       3,792                                    4,509                                   -                                       4,509                                   (16%)                                  (16%)                                  (15%)                                  (15%)
                       Software license updates and product support           14,331                                  1                                       14,332                                   14,048                                  1                                       14,049                                  2%                                     2%                                     3%                                     3%
TOTAL HARDWARE REVENUES                                                       $          3,037                        $             1                         $          3,038                         $          3,385                        $         1                             $          3,386                        (10%)                                  (10%)                                  (9%)                                   (9%)
                       Hardware products                                      1,478                                   -                                       1,478                                    1,746                                   -                                       1,746                                   (15%)                                  (15%)                                  (14%)                                  (14%)
                       Hardware support                                       1,559                                   1                                       1,560                                    1,639                                   1                                       1,640                                   (5%)                                   (5%)                                   (4%)                                   (4%)
TOTAL OPERATING EXPENSES                                                      $        18,199                         $    (2,395)                            $        15,804                          $        17,817                         $(2,376)                                $        15,441                         2%                                     2%                                     3%                                     3%
                       Sales and marketing (3)                                5,883                                   (199)                                   5,684                                    5,578                                   (163)                                   5,415                                   5%                                     5%                                     6%                                     6%
                       Stock-based compensation (4)                           756                                     (756)                                   -                                        602                                     (602)                                   -                                       26%                                    *                                      26%                                    *
                       Amortization of intangible assets (5)                  1,010                                   (1,010)                                 -                                        1,283                                   (1,283)                                 -                                       (21%)                                  *                                      (21%)                                  *
                       Acquisition related and other                          84                                      (84)                                    -                                        35                                      (35)                                    -                                       141%                                   *                                      144%                                   *
                       Restructuring                                          346                                     (346)                                   -                                        293                                     (293)                                   -                                       18%                                    *                                      21%                                    *
OPERATING INCOME                                                              $          8,636                        $      2,517                            $        11,153                          $          8,636                        $  2,384                                $        11,020                         0%                                     1%                                     1%                                     2%
OPERATING MARGIN %                                                            32%                                                                             41%                                      33%                                                                             42%                                     (46) bp.                               (27) bp.                               (49) bp.                               (34) bp.
INCOME TAX EFFECTS (6)                                                        $          1,653                        $         823                           $          2,476                         $          1,623                        $     658                               $          2,281                        2%                                     9%                                     2%                                     9%
NET INCOME                                                                    $          6,103                        $      1,694                            $          7,797                         $          6,087                        $  1,726                                $          7,813                        0%                                     0%                                     1%                                     1%
DILUTED EARNINGS PER SHARE                                                    $            1.45                                                               $            1.85                        $            1.41                                                               $            1.81                       3%                                     3%                                     4%                                     3%
DILUTED WEIGHTED AVERAGE COMMON                                               4,207                                   -                                       4,207                                    4,328                                   -                                       4,328                                   (3%)                                   (3%)                                   (3%)                                   (3%)
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, 2016, 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,                            February 29,
                                                                              2017                                    2016
                       Stock-based compensation (4)                           $             (228)                     $         (163)
                       Acquired deferred sales commissions amortization       29                                      -
                       Total non-GAAP sales and marketing adjustments         $             (199)                     $         (163)
(4)                    Stock-based compensation was included in the following GAAP operating expense categories:
                                                                              Nine Months Ended                                                                                                        Nine Months Ended
                                                                              February 28, 2017                                                                                                        February 29, 2016
                                                                              GAAP                                    Adj.                                    Non-GAAP                                 GAAP                                    Adj.                                    Non-GAAP
                       Cloud software as a service and platform as a service  $                17                     $           (17)                        $                 -                      $                13                     $       (13)                            $                 -
                       Cloud infrastructure as a service                      3                                       (3)                                     -                                        3                                       (3)                                     -
                       Software license updates and product support           18                                      (18)                                    -                                        18                                      (18)                                    -
                       Hardware products                                      6                                       (6)                                     -                                        4                                       (4)                                     -
                       Hardware support                                       3                                       (3)                                     -                                        4                                       (4)                                     -
                       Services                                               31                                      (31)                                    -                                        22                                      (22)                                    -
                       Research and development                               574                                     (574)                                   -                                        452                                     (452)                                   -
                       General and administrative                             104                                     (104)                                   -                                        86                                      (86)                                    -
                       Subtotal                                               756                                     (756)                                   -                                        602                                     (602)                                   -
                       Sales and marketing                                    228                                     (228)                                   -                                        163                                     (163)                                   -
                       Acquisition related and other                          33                                      (33)                                    -                                        3                                       (3)                                     -
                       Total stock-based compensation                         $            1,017                      $      (1,017)                          $                 -                      $               768                     $     (768)                             $                 -
(5)                    Estimated future annual amortization expense related to intangible assets as of February 28, 2017 was as follows:
                       Remainder of fiscal 2017                               $               402
                       Fiscal 2018                                            1,362
                       Fiscal 2019                                            1,248
                       Fiscal 2020                                            1,058
                       Fiscal 2021                                            883
                       Fiscal 2022                                            779
                       Thereafter                                             2,056
                       Total intangible assets, net                           $            7,788
(6)                    Income tax effects were calculated reflecting an effective GAAP tax rate of 21.3% and 21.0% in the first nine months of fiscal 2017 and 2016, respectively, and an effective non-GAAP tax rate of 24.1% and 22.6% in the first nine months of fiscal 2017 and 2016, respectively. The difference between our GAAP and non-GAAP tax rate in the first nine months of fiscal 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.  The difference between our GAAP and non-GAAP tax rate in the first nine months of fiscal 2016 was primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
*                      Not meaningful
ORACLE  CORPORATION
Q3 FISCAL 2017 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
                                                                February 28,        May 31,
                                                                2017                2016
ASSETS
Current Assets:
          Cash and cash equivalents                             $          19,748   $          20,152
          Marketable securities                                 39,604              35,973
          Trade receivables, net                                3,721               5,385
          Inventories                                           391                 212
          Prepaid expenses and other current assets             2,547               2,591
                                  Total Current Assets          66,011              64,313
Non-Current Assets:
          Property, plant and equipment, net                    5,070               4,000
          Intangible assets, net                                7,788               4,943
          Goodwill, net                                         42,504              34,590
          Deferred tax assets                                   918                 1,291
          Other assets                                          3,091               3,043
                                  Total Non-Current Assets      59,371              47,867
TOTAL ASSETS                                                    $        125,382    $        112,180
LIABILITIES AND EQUITY
Current Liabilities:
          Notes payable and other borrowings, current           $            3,498  $            3,750
          Accounts payable                                      481                 504
          Accrued compensation and related benefits             1,516               1,966
          Deferred revenues                                     7,388               7,655
          Other current liabilities                             2,907               3,333
                                  Total Current Liabilities     15,790              17,208
Non-Current Liabilities:
          Notes payable and other borrowings, non-current       50,469              40,105
          Income taxes payable                                  5,162               4,908
          Other non-current liabilities                         2,938               2,169
                                  Total Non-Current Liabilities 58,569              47,182
Equity                                                          51,023              47,790
TOTAL LIABILITIES AND EQUITY                                    $        125,382    $        112,180
ORACLE  CORPORATION
Q3 FISCAL 2017 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
                                                                                           Nine Months Ended
                                                                                           February 28,     February 29,
                                                                                           2017             2016
Cash Flows From Operating Activities:
Net income                                                                                 $         6,103  $          6,087
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation                                                                               722              643
Amortization of intangible assets                                                          1,010            1,283
Deferred income taxes                                                                      111              (143)
Stock-based compensation                                                                   1,017            768
Tax benefits on the vesting of restricted stock-based awards and exercise of stock options 378              188
Other, net                                                                                 96               116
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net                                                         1,673            1,746
(Increase) decrease in inventories                                                         (178)            87
Decrease in prepaid expenses and other assets                                              308              95
Decrease in accounts payable and other liabilities                                         (862)            (890)
Decrease in income taxes payable                                                           (388)            (112)
(Decrease) increase in deferred revenues                                                   (330)            24
Net cash provided by operating activities                                                  9,660            9,892
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments                                   (15,571)         (21,549)
Proceeds from maturities and sales of marketable securities and other investments          11,825           18,845
Acquisitions, net of cash acquired                                                         (10,406)         (313)
Capital expenditures                                                                       (1,496)          (1,009)
Net cash used for investing activities                                                     (15,648)         (4,026)
Cash Flows From Financing Activities:
Payments for repurchases of common stock                                                   (3,067)          (8,467)
Proceeds from issuances of common stock                                                    1,309            802
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards      (237)            (82)
Payments of dividends to stockholders                                                      (1,844)          (1,918)
Proceeds from borrowings, net of issuance costs                                            13,932           --
Repayments of borrowings                                                                   (4,094)          (2,000)
Distributions to noncontrolling interests                                                  (200)            (85)
Net cash provided by (used for) financing activities                                       5,799            (11,750)
Effect of exchange rate changes on cash and cash equivalents                               (215)            (249)
Net decrease in cash and cash equivalents                                                  (404)            (6,133)
Cash and cash equivalents at beginning of period                                           20,152           21,716
Cash and cash equivalents at end of period                                                 $       19,748   $        15,583
ORACLE  CORPORATION
Q3 FISCAL 2017 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING 4-QUARTERS (1)
($ in millions)
                                                                               Fiscal 2016                            Fiscal 2017
                                                                               Q1          Q2       Q3       Q4       Q1          Q2       Q3       Q4
GAAP Operating Cash Flow                                                       $13,682     $13,113  $14,252  $13,685  $13,679     $14,249  $13,453
Capital Expenditures                                                           (1,636)     (1,606)  (1,606)  (1,189)  (1,042)     (1,604)  (1,676)
Free Cash Flow                                                                 $12,046     $11,507  $12,646  $12,496  $12,637     $12,645  $11,777
% Growth over prior year                                                       (20%)       (22%)    (8%)     (5%)     5%          10%      (7%)
GAAP Net Income                                                                $  9,501    $  9,198 $  8,844 $  8,901 $  8,986    $  8,820 $  8,917
Free Cash Flow as a % of Net Income                                            127%        125%     143%     140%     141%        143%     132%
(1)               To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flow generated from operations. We believe free cash flow is also useful as one of the bases for comparing our performance with our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity.
ORACLE  CORPORATION
Q3 FISCAL 2017 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
($ in millions)
                                                                                                                        Fiscal 2016                                        Fiscal 2017
                                                                                                    Q1        Q2        Q3          Q4        TOTAL    Q1        Q2        Q3          Q4 TOTAL
       REVENUES
       Cloud software as a service and platform as a service                                        $     451 $     484 $      583  $     690 $  2,207 $     798 $     878 $  1,011       $   2,686
       Cloud infrastructure as a service                                                            160       165       152         169       646      171       175       178            525
                                  Total cloud revenues                                              611       649       735         859       2,853    969       1,053     1,189          3,211
       New software licenses                                                                        1,151     1,677     1,680       2,766     7,276    1,030     1,347     1,414          3,792
       Software license updates and product support                                                 4,696     4,683     4,669       4,814     18,861   4,792     4,777     4,762          14,331
                                  Total on-premise software revenues                                5,847     6,360     6,349       7,580     26,137   5,822     6,124     6,176          18,123
                                  Total cloud and on-premise software revenues                      6,458     7,009     7,084       8,439     28,990   6,791     7,177     7,365          21,334
       Hardware products                                                                            570       573       604         725       2,471    462       497       520            1,478
       Hardware support                                                                             558       550       531         558       2,197    534       517       508            1,559
                                  Total hardware revenues                                           1,128     1,123     1,135       1,283     4,668    996       1,014     1,028          3,037
                                  Total services revenues                                           862       861       793         872       3,389    808       844       812            2,464
                                  Total revenues                                                    $  8,448  $  8,993  $   9,012   $10,594   $37,047  $  8,595  $  9,035  $  9,205       $26,835
       AS REPORTED REVENUE GROWTH RATES
       Cloud software as a service and platform as a service                                        34%       34%       57%         66%       49%      77%       81%       73%            77%
       Cloud infrastructure as a service                                                            16%       7%        (2%)        5%        6%       7%        6%        17%            10%
                                  Total cloud revenues                                              29%       26%       40%         49%       36%      59%       62%       62%            61%
       New software licenses                                                                        (16%)     (18%)     (15%)       (12%)     (15%)    (11%)     (20%)     (16%)          (16%)
       Software license updates and product support                                                 (1%)      (2%)      0%          3%        0%       2%        2%        2%             2%
                                  Total on-premise software revenues                                (4%)      (7%)      (4%)        (3%)      (5%)     0%        (4%)      (3%)           (2%)
                                  Total cloud and on-premise software revenues                      (2%)      (4%)      (1%)        0%        (2%)     5%        2%        4%             4%
       Hardware products                                                                            (1%)      (20%)     (15%)       (11%)     (13%)    (19%)     (13%)     (14%)          (15%)
       Hardware support                                                                             (5%)      (11%)     (10%)       (5%)      (8%)     (4%)      (6%)      (4%)           (5%)
                                  Total hardware revenues                                           (3%)      (16%)     (13%)       (9%)      (10%)    (12%)     (10%)     (9%)           (10%)
                                  Total services revenues                                           1%        (8%)      (7%)        (3%)      (4%)     (6%)      (2%)      2%             (2%)
                                  Total revenues                                                    (2%)      (6%)      (3%)        (1%)      (3%)     2%        0%        2%             1%
       CONSTANT CURRENCY GROWTH RATES (2)
       Cloud software as a service and platform as a service                                        38%       39%       61%         68%       52%      79%       83%       74%            79%
       Cloud infrastructure as a service                                                            23%       11%       2%          8%        11%      10%       9%        19%            13%
                                  Total cloud revenues                                              34%       31%       44%         51%       40%      61%       64%       63%            63%
       New software licenses                                                                        (9%)      (12%)     (11%)       (10%)     (11%)    (10%)     (19%)     (15%)          (15%)
       Software license updates and product support                                                 8%        5%        5%          4%        5%       3%        3%        3%             3%
                                  Total on-premise software revenues                                4%        0%        0%          (2%)      0%       1%        (3%)      (2%)           (2%)
                                  Total cloud and on-premise software revenues                      6%        2%        3%          2%        3%       6%        3%        5%             5%
       Hardware products                                                                            9%        (14%)     (10%)       (10%)     (7%)     (18%)     (12%)     (13%)          (14%)
       Hardware support                                                                             4%        (5%)      (5%)        (4%)      (3%)     (3%)      (5%)      (3%)           (4%)
                                  Total hardware revenues                                           6%        (10%)     (8%)        (7%)      (5%)     (11%)     (9%)      (9%)           (9%)
                                  Total services revenues                                           10%       0%        (2%)        (1%)      2%       (5%)      0%        3%             (1%)
                                  Total revenues                                                    7%        0%        1%          0%        2%       3%        1%        3%             2%
GEOGRAPHIC REVENUES
REVENUES
       Americas                                                                                     $  4,716  $  4,960  $   4,942   $  5,847  $20,466  $  4,817  $  4,935  $  5,219       $14,971
       Europe, Middle East & Africa                                                                 2,456     2,645     2,661       3,120     10,881   2,413     2,558     2,558          7,529
       Asia Pacific                                                                                 1,276     1,388     1,409       1,627     5,700    1,365     1,542     1,428          4,335
                                  Total revenues                                                    $  8,448  $  8,993  $   9,012   $10,594   $37,047  $  8,595  $  9,035  $  9,205       $26,835
HEADCOUNT
GEOGRAPHIC AREA
       Americas                                                                                     59,901    59,999    60,437      60,329             61,221    63,251    62,613
       Europe, Middle East & Africa                                                                 27,030    27,541    27,275      27,061             26,895    27,922    27,809
       Asia Pacific                                                                                 48,139    48,620    48,694      48,872             49,234    50,509    50,481
                                  Total company                                                     135,070   136,160   136,406     136,262            137,350   141,682   140,903
       (1)                        The sum of the quarterly information presented may vary from the year-to-date information presented due to rounding.
       (2)                        We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2016 and 2015 for the fiscal 2017 and fiscal 2016 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.
ORACLE  CORPORATION
Q3 FISCAL 2017 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC REVENUES ANALYSIS (1)
($ in millions)
                                                                                                                       Fiscal 2016                                                       Fiscal 2017
                                                                                             Q1           Q2           Q3           Q4           TOTAL        Q1            Q2           Q3           Q4 TOTAL
    AMERICAS
    Total cloud and on-premise software revenues                                             $     3,684  $     3,927  $     3,964  $     4,771  $    16,346  $      3,876  $     4,000  $     4,280     $      12,156
    Total hardware revenues                                                                  $        589 $        595 $        571 $        650 $     2,404  $         526 $        510 $        511    $        1,547
    AS REPORTED GROWTH RATES
    Total cloud and on-premise software revenues                                             2%           (3%)         (1%)         (3%)         (2%)         5%            2%           8%              5%
    Total hardware revenues                                                                  1%           (17%)        (17%)        (14%)        (12%)        (11%)         (14%)        (11%)           (12%)
    CONSTANT CURRENCY GROWTH RATES (2)
    Total cloud and on-premise software revenues                                             6%           0%           1%           (2%)         1%           6%            2%           7%              5%
    Total hardware revenues                                                                  6%           (14%)        (13%)        (11%)        (9%)         (10%)         (14%)        (11%)           (12%)
    EUROPE / MIDDLE EAST / AFRICA
    Total cloud and on-premise software revenues                                             $     1,873  $     2,066  $     2,069  $     2,462  $     8,471  $      1,903  $     2,008  $     2,019     $        5,931
    Total hardware revenues                                                                  $        330 $        316 $        349 $        382 $     1,377  $         275 $        294 $        300    $           868
    AS REPORTED GROWTH RATES
    Total cloud and on-premise software revenues                                             (6%)         (8%)         (5%)         4%           (3%)         2%            (3%)         (2%)            (1%)
    Total hardware revenues                                                                  (2%)         (17%)        (8%)         (10%)        (9%)         (17%)         (7%)         (14%)           (13%)
    CONSTANT CURRENCY GROWTH RATES (2)
    Total cloud and on-premise software revenues                                             7%           3%           2%           5%           4%           7%            2%           2%              3%
    Total hardware revenues                                                                  14%          (6%)         (1%)         (8%)         (1%)         (13%)         (2%)         (10%)           (8%)
    ASIA PACIFIC
    Total cloud and on-premise software revenues                                             $        901 $     1,016  $     1,051  $     1,206  $     4,173  $      1,012  $     1,169  $     1,066     $        3,247
    Total hardware revenues                                                                  $        209 $        212 $        215 $        251 $        887 $         195 $        210 $        217    $           622
    AS REPORTED GROWTH RATES
    Total cloud and on-premise software revenues                                             (7%)         (3%)         7%           9%           2%           12%           15%          2%              9%
    Total hardware revenues                                                                  (14%)        (11%)        (8%)         8%           (7%)         (7%)          (1%)         1%              (2%)
    CONSTANT CURRENCY GROWTH RATES (2)
    Total cloud and on-premise software revenues                                             7%           6%           13%          11%          9%           8%            11%          0%              6%
    Total hardware revenues                                                                  (3%)         (3%)         (3%)         9%           0%           (9%)          (3%)         0%              (4%)
    TOTAL COMPANY
    Total cloud and on-premise software revenues                                             $     6,458  $     7,009  $     7,084  $     8,439  $    28,990  $      6,791  $     7,177  $     7,365     $      21,334
    Total hardware revenues                                                                  $     1,128  $     1,123  $     1,135  $     1,283  $     4,668  $         996 $     1,014  $     1,028     $        3,037
    AS REPORTED GROWTH RATES
    Total cloud and on-premise software revenues                                             (2%)         (4%)         (1%)         0%           (2%)         5%            2%           4%              4%
    Total hardware revenues                                                                  (3%)         (16%)        (13%)        (9%)         (10%)        (12%)         (10%)        (9%)            (10%)
    CONSTANT CURRENCY GROWTH RATES (2)
    Total cloud and on-premise software revenues                                             6%           2%           3%           2%           3%           6%            3%           5%              5%
    Total hardware revenues                                                                  6%           (10%)        (8%)         (7%)         (5%)         (11%)         (9%)         (9%)            (9%)
    (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, 2016 and 2015 for the fiscal 2017 and fiscal 2016 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

APPENDIX A

ORACLE CORPORATIONQ3 FISCAL 2017 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 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.

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. 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 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.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/q3-fy17-gaap-eps-up-6-to-053-and-non-gaap-eps-up-7-to-069-300424316.html

SOURCE Oracle Corporation

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