Oracle : CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

ORACLE CORPORATION

Q3 FISCAL 2020 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

								% Increase
			Three Months Ended		% Increase	(Decrease)
	February 29,	% of	February 28,	% of	(Decrease)	in Constant
		2020	Revenues		2019	Revenues	in US $	Currency (1)
REVENUES
Cloud services and license support	$	6,930	71%	$	6,662	69%	4%	5%
Cloud license and on‐premise license		1,231	12%		1,251	13%	(2%)	0%
Hardware		857	9%		915	10%	(6%)	(5%)
Services		778	8%		786	8%	(1%)	0%
Total revenues		9,796	100%		9,614	100%	2%	3%
OPERATING EXPENSES
Cloud services and license support		991	10%		937	10%	6%	7%
Hardware		271	3%		339	4%	(20%)	(19%)
Services		702	7%		700	7%	0%	2%
Sales and marketing		2,049	21%		2,051	21%	0%	1%
Research and development		1,500	15%		1,426	15%	5%	5%
General and administrative		288	3%		316	3%	(9%)	(8%)
Amortization of intangible assets		400	4%		407	4%	(2%)	(2%)
Acquisition related and other		7	0%		(4)	0%	297%	295%
Restructuring		60	1%		43	1%	42%	47%
Total operating expenses		6,268	64%		6,215	65%	1%	2%
OPERATING INCOME		3,528	36%		3,399	35%	4%	5%
Interest expense		(456)	(5%)		(509)	(5%)	(10%)	(10%)
Non‐operating income, net		4	0%		198	2%	(98%)	(99%)
INCOME BEFORE PROVISION FOR INCOME TAXES		3,076	31%		3,088	32%	0%	1%
Provision for income taxes		505	5%		343	4%	47%	47%
NET INCOME	$	2,571	26%	$	2,745	28%	(6%)	(5%)
EARNINGS PER SHARE:
Basic	$	0.81		$	0.78
Diluted	$	0.79		$	0.76
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		3,190			3,526
Diluted		3,271			3,617

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, 2019, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended February 29, 2020 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.

1

ORACLE CORPORATION

Q3 FISCAL 2020 FINANCIAL RESULTS

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

($ in millions, except per share data)

																						% Increase (Decrease)	% Increase (Decrease) in
										Three Months Ended								in US $	Constant Currency (2)
			February 29,					February 29,		February 28,					February 28,
				2020						2020				2019						2019		GAAP	Non‐GAAP	GAAP	Non‐GAAP
				GAAP			Adj.	Non‐GAAP			GAAP			Adj.	Non‐GAAP
TOTAL REVENUES		$	9,796	$	1		$	9,797			$	9,614	$	4		$	9,618		2%	2%	3%	3%
	Cloud services and license support			6,930			1			6,931				6,662			4			6,666		4%	4%	5%	5%
TOTAL OPERATING EXPENSES		$	6,268	$	(828)		$	5,440			$	6,215	$	(873)		$	5,342		1%	2%	2%	3%
	Stock‐based compensation (3)			361			(361)			‐			427			(427)			‐	(15%)	*	(15%)	*
	Amortization of intangible assets (4)			400			(400)			‐			407			(407)			‐	(2%)	*	(2%)	*
	Acquisition related and other			7			(7)			‐			(4)			4			‐	297%	*	295%	*
	Restructuring			60			(60)			‐			43			(43)			‐	42%	*	47%	*
OPERATING INCOME		$	3,528	$	829		$	4,357			$	3,399	$	877		$	4,276		4%	2%	5%	3%
OPERATING MARGIN %			36%						44%				35%						44%		65 bp.	1 bp.	78 bp.	6 bp.
INCOME TAX EFFECTS (5)		$	505	$	240		$	745			$	343	$	466		$	809		47%	(8%)	47%	(7%)
NET INCOME		$	2,571	$	589		$	3,160			$	2,745	$	411		$	3,156		(6%)	0%	(5%)	1%
DILUTED EARNINGS PER SHARE		$	0.79					$	0.97			$	0.76					$	0.87		4%	11%	5%	12%
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING			3,271			‐		3,271				3,617			‐		3,617		(10%)	(10%)	(10%)	(10%)
(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, 2019, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective
	periods.
(3) Stock‐based compensation was included in the following GAAP operating expense categories:
				Three Months Ended					Three Months Ended
				February 29, 2020						February 28, 2019
				GAAP			Adj.		Non‐GAAP				GAAP			Adj.		Non‐GAAP
	Cloud services and license support	$	22	$	(22)		$	‐	$	26	$	(26)		$	‐
	Hardware		3			(3)			‐		2			(2)			‐
	Services		14			(14)			‐		12			(12)			‐
	Sales and marketing		67			(67)			‐		89			(89)			‐
	Research and development		238			(238)			‐		254			(254)			‐
	General and administrative		17			(17)			‐			44			(44)			‐
	Total stock‐based compensation	$	361		$	(361)		$	‐		$	427		$	(427)		$	‐
(4) Estimated future annual amortization expense related to intangible assets as of February 29, 2020 was as follows:
	Remainder of fiscal 2020	$	366
	Fiscal 2021		1,345
	Fiscal 2022		1,097
	Fiscal 2023		674
	Fiscal 2024		445
	Fiscal 2025		126
	Thereafter		35
	Total intangible assets, net	$	4,088

(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 16.4% and 11.1% in the third quarter of fiscal 2020 and 2019, respectively, and an effective non‐GAAP tax rate of 19.1% and 20.4% in the third quarter of fiscal 2020 and 2019, respectively. The difference in our GAAP and non‐GAAP tax rates in the third quarter of fiscal 2020 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 rates in the third quarter of fiscal 2019 was primarily due to adjustments in our estimates for the one‐time effects of the U.S. Tax Cuts and Jobs Act of 2017 (refer to Appendix A for additional information), the net tax effects on stock‐based compensation expense, and acquisition related items, including the tax effects of amortization of intangible assets.

* Not meaningful

2

ORACLE CORPORATION

Q3 FISCAL 2020 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

								% Increase
			Nine Months Ended		% Increase	(Decrease)
	February 29,	% of	February 28,	% of	(Decrease)	in Constant
		2020	Revenues		2019	Revenues	in US $	Currency (1)
REVENUES
Cloud services and license support	$	20,546	72%	$	19,908	70%	3%	4%
Cloud license and on‐premise license		3,169	11%		3,334	12%	(5%)	(4%)
Hardware		2,542	9%		2,711	10%	(6%)	(5%)
Services		2,372	8%		2,416	8%	(2%)	(1%)
Total revenues		28,629	100%		28,369	100%	1%	2%
OPERATING EXPENSES
Cloud services and license support		2,994	11%		2,807	10%	7%	8%
Hardware		828	3%		998	4%	(17%)	(16%)
Services		2,147	8%		2,127	7%	1%	2%
Sales and marketing		6,135	21%		6,191	22%	(1%)	0%
Research and development		4,588	16%		4,464	16%	3%	3%
General and administrative		903	3%		935	3%	(3%)	(3%)
Amortization of intangible assets		1,221	4%		1,265	4%	(3%)	(3%)
Acquisition related and other		44	0%		29	0%	54%	55%
Restructuring		181	1%		275	1%	(34%)	(33%)
Total operating expenses		19,041	67%		19,091	67%	0%	1%
OPERATING INCOME		9,588	33%		9,278	33%	3%	5%
Interest expense		(1,416)	(5%)		(1,557)	(5%)	(9%)	(9%)
Non‐operating income, net		195	1%		681	2%	(71%)	(72%)
INCOME BEFORE PROVISION FOR INCOME TAXES		8,367	29%		8,402	30%	0%	1%
Provision for income taxes		1,348	4%		1,059	4%	27%	27%
NET INCOME	$	7,019	25%	$	7,343	26%	(4%)	(3%)
EARNINGS PER SHARE:
Basic	$	2.16		$	1.98
Diluted	$	2.10		$	1.93
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		3,251			3,716
Diluted		3,337			3,811

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, 2019, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the nine months ended February 29, 2020 compared with the corresponding prior year period decreased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 2 percentage points.

3

ORACLE CORPORATION

Q3 FISCAL 2020 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)

																								% Increase (Decrease)	% Increase (Decrease) in
											Nine Months Ended									in US $	Constant Currency (2)
			February 29,			February 29,			February 28,			February 28,
				2020							2020				2019							2019
				GAAP				Adj.	Non‐GAAP				GAAP				Adj.	Non‐GAAP	GAAP	Non‐GAAP	GAAP	Non‐GAAP
TOTAL REVENUES		$	28,629	$	3		$	28,632		$	28,369	$	17		$	28,386		1%	1%	2%	2%
	Cloud services and license support			20,546				3			20,549				19,908				17			19,925		3%	3%	4%	4%
TOTAL OPERATING EXPENSES		$	19,041	$	(2,650)		$	16,391		$	19,091	$	(2,828)		$	16,263		0%	1%	1%	2%
	Stock‐based compensation (3)			1,204				(1,204)			‐				1,259				(1,259)			‐	(4%)	*	(4%)	*
	Amortization of intangible assets (4)			1,221				(1,221)			‐				1,265				(1,265)			‐	(3%)	*	(3%)	*
	Acquisition related and other			44				(44)			‐				29				(29)			‐	54%	*	55%	*
	Restructuring			181				(181)			‐				275				(275)			‐	(34%)	*	(33%)	*
OPERATING INCOME		$	9,588	$	2,653		$	12,241		$	9,278	$	2,845		$	12,123		3%	1%	5%	2%
OPERATING MARGIN %			33%						43%				33%						43%		79 bp.	5 bp.	92 bp.	10 bp.
INCOME TAX EFFECTS (5)		$	1,348	$	769		$	2,117		$	1,059	$	1,122		$	2,181		27%	(3%)	27%	(2%)
NET INCOME		$	7,019	$	1,884		$	8,903		$	7,343	$	1,723		$	9,066		(4%)	(2%)	(3%)	(1%)
DILUTED EARNINGS PER SHARE		$	2.10						$	2.67		$	1.93						$	2.38		9%	12%	11%	14%
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING			3,337				‐		3,337				3,811				‐		3,811		(12%)	(12%)	(12%)	(12%)
(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, 2019, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
(3) Stock‐based compensation was included in the following GAAP operating expense categories:
					Nine Months Ended						Nine Months Ended
					February 29, 2020							February 28, 2019
				GAAP				Adj.		Non‐GAAP				GAAP				Adj.		Non‐GAAP
	Cloud services and license support	$	83	$	(83)		$	‐	$	74	$	(74)		$	‐
	Hardware		8				(8)			‐				7				(7)			‐
	Services		42				(42)			‐				37				(37)			‐
	Sales and marketing		192				(192)			‐				278				(278)			‐
	Research and development		781				(781)			‐				732				(732)			‐
	General and administrative		98				(98)			‐				131				(131)			‐
	Total stock‐based compensation	$	1,204			$	(1,204)		$	‐		$	1,259			$	(1,259)		$	‐
(4) Estimated future annual amortization expense related to intangible assets as of February 29, 2020 was as follows:
	Remainder of fiscal 2020	$	366
	Fiscal 2021		1,345
	Fiscal 2022		1,097
	Fiscal 2023		674
	Fiscal 2024		445
	Fiscal 2025		126
	Thereafter		35
	Total intangible assets, net	$	4,088

(5) Income tax effects were calculated reflecting an effective GAAP tax rate of 16.1% and 12.6% in the first nine months of fiscal 2020 and 2019, respectively, and an effective non‐GAAP tax rate of 19.2% and 19.4% in the first nine months of fiscal 2020 and 2019, respectively. The difference between our GAAP and non‐GAAP tax rates in the first nine months of fiscal 2020 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 rates in the first nine months of fiscal 2019 was primarily due to adjustments in our estimates for the one‐time effects of the U.S. Tax Cuts and Jobs Act of 2017 (refer to Appendix A for additional information), the net tax effects on stock‐based compensation expense, and acquisition related items, including the tax effects of amortization of intangible assets.

* Not meaningful

4

ORACLE CORPORATION

Q3 FISCAL 2020 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

		February 29,		May 31,
		2020		2019
ASSETS
Current Assets:			$	20,514
Cash and cash equivalents	$	23,829
Marketable securities		2,029		17,313
Trade receivables, net		4,162		5,134
Prepaid expenses and other current assets		3,422		3,425
Total Current Assets		33,442		46,386
Non‐Current Assets:
Property, plant and equipment, net		6,248		6,252
Intangible assets, net		4,088		5,279
Goodwill, net		43,781		43,779
Deferred tax assets		2,883		2,696
Other non‐current assets		6,262		4,317
Total Non‐Current Assets		63,262		62,323
TOTAL ASSETS	$	96,704	$	108,709
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable, current	$	2,355	$	4,494
Accounts payable		533		580
Accrued compensation and related benefits		1,317		1,628
Deferred revenues		7,814		8,374
Other current liabilities		3,721		3,554
Total Current Liabilities		15,740		18,630
Non‐Current Liabilities:
Notes payable and other borrowings, non‐current		49,320		51,673
Income taxes payable		13,168		13,295
Other non‐current liabilities		3,595		2,748
Total Non‐Current Liabilities		66,083		67,716
Equity		14,881		22,363
TOTAL LIABILITIES AND EQUITY	$	96,704	$	108,709

5

ORACLE CORPORATION

Q3 FISCAL 2020 FINANCIAL RESULTS CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

		Nine Months Ended
	February 29,		February 28,
		2020		2019
Cash Flows From Operating Activities:
Net income	$	7,019	$	7,343
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,025		900
Amortization of intangible assets		1,221		1,265
Deferred income taxes		(398)		(741)
Stock‐based compensation		1,204		1,259
Other, net		167		144
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net		946		1,106
Decrease in prepaid expenses and other assets		718		168
Decrease in accounts payable and other liabilities		(1,035)		(647)
Decrease in income taxes payable		(789)		(410)
Decrease in deferred revenues		(553)		(258)
Net cash provided by operating activities		9,525		10,129
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments		(399)		(1,310)
Proceeds from maturities of marketable securities and other investments		3,165		10,210
Proceeds from sales of marketable securities		12,575		11,328
Acquisitions, net of cash acquired		(111)		(330)
Capital expenditures		(1,131)		(1,247)
Net cash provided by investing activities		14,099		18,651
Cash Flows From Financing Activities:
Payments for repurchases of common stock		(13,935)		(29,887)
Proceeds from issuances of common stock		1,232		1,468
Shares repurchased for tax withholdings upon vesting of restricted stock‐based awards		(624)		(455)
Payments of dividends to stockholders		(2,330)		(2,126)
Repayments of borrowings		(4,500)		(4,500)
Other, net		(108)		(95)
Net cash used for financing activities		(20,265)		(35,595)
Effect of exchange rate changes on cash and cash equivalents		(44)		(85)
Net increase (decrease) in cash and cash equivalents		3,315		(6,900)
Cash and cash equivalents at beginning of period		20,514		21,620
Cash and cash equivalents at end of period	$	23,829	$	14,720

6

ORACLE CORPORATION

Q3 FISCAL 2020 FINANCIAL RESULTS

FREE CASH FLOW ‐ TRAILING 4‐QUARTERS (1)

($ in millions)

				Fiscal 2019							Fiscal 2020
		Q1		Q2		Q3		Q4		Q1		Q2		Q3	Q4
GAAP Operating Cash Flow	$	15,542	$	15,238	$	14,789	$	14,551	$	13,829	$	13,796	$	13,947
Capital Expenditures		(1,646)		(1,468)		(1,625)		(1,660)		(1,663)		(1,591)		(1,544)
Free Cash Flow	$	13,896	$	13,770	$	13,164	$	12,891	$	12,166	$	12,205	$	12,403
% Growth over prior year
	10%		10%		(1%)		(6%)		(12%)		(11%)		(6%)
GAAP Net Income	$	3,708	$	3,827	$	10,619	$	11,083	$	10,955	$	10,933	$	10,759
Free Cash Flow as a % of Net Income		375%		360%		124%		116%		111%		112%		115%

(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.

7

ORACLE CORPORATION

Q3 FISCAL 2020 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES (1)

($ in millions)

					Fiscal 2019									Fiscal 2020
		Q1		Q2		Q3		Q4		TOTAL		Q1		Q2		Q3	Q4	TOTAL
REVENUES BY OFFERINGS
Cloud services and license support	$	6,609	$	6,637	$	6,662	$	6,799	$	26,707	$	6,805	$	6,811	$	6,930	$	20,546
Cloud license and on‐premise license		867		1,217		1,251		2,520		5,855		812		1,126		1,231		3,169
Hardware		904		891		915		994		3,704		815		871		857		2,542
Services		813		817		786		823		3,240		786		806		778		2,372
Total revenues
$	9,193	$	9,562	$	9,614	$	11,136	$	39,506	$	9,218	$	9,614	$	9,796	$	28,629
AS REPORTED REVENUE GROWTH RATES
Cloud services and license support		3%		3%		1%		0%		2%		3%		3%		4%		3%
Cloud license and on‐premise license		(3%)		(9%)		(4%)		12%		1%		(6%)		(7%)		(2%)		(5%)
Hardware		(4%)		(5%)		(8%)		(11%)		(7%)		(10%)		(2%)		(6%)		(6%)
Services		(5%)		(5%)		(1%)		(7%)		(5%)		(3%)		(1%)		(1%)		(2%)
Total revenues		1%		0%		(1%)		1%		0%		0%		1%		2%		1%
CONSTANT CURRENCY GROWTH RATES (2)
Cloud services and license support		4%		5%		4%		3%		4%		4%		4%		5%		4%
Cloud license and on‐premise license		0%		(6%)		0%		15%		4%		(6%)		(7%)		0%		(4%)
Hardware		(3%)		(3%)		(4%)		(8%)		(5%)		(9%)		(1%)		(5%)		(5%)
Services		(4%)		(2%)		3%		(4%)		(2%)		(2%)		0%		0%		(1%)
Total revenues		2%		2%		3%		4%		3%		2%		1%		3%		2%
CLOUD SERVICES AND LICENSE SUPPORT REVENUES
BY ECOSYSTEM
Applications cloud services and license support	$	2,580	$	2,621	$	2,637	$	2,716	$	10,553	$	2,704	$	2,753	$	2,809	$	8,265
Infrastructure cloud services and license support		4,029		4,016		4,025		4,083		16,154		4,101		4,058		4,121		12,281
Total cloud services and license support	$	6,609	$	6,637	$	6,662	$	6,799	$	26,707	$	6,805	$	6,811	$	6,930	$	20,546
AS REPORTED REVENUE GROWTH RATES
Applications cloud services and license support		6%		6%		6%		3%		5%		5%		5%		6%		5%
Infrastructure cloud services and license support		1%		1%		(2%)		(1%)		0%		2%		1%		2%		2%
Total cloud services and license support		3%		3%		1%		0%		2%		3%		3%		4%		3%
CONSTANT CURRENCY GROWTH RATES (2)
Applications cloud services and license support		7%		7%		8%		5%		7%		6%		6%		7%		6%
Infrastructure cloud services and license support		3%		3%		2%		2%		2%		3%		2%		4%		3%
Total cloud services and license support		4%		5%		4%		3%		4%		4%		4%		5%		4%
GEOGRAPHIC REVENUES
Americas	$	5,161	$	5,243	$	5,266	$	6,184	$	21,856	$	5,150	$	5,304	$	5,363	$	15,817
Europe/Middle East/Africa		2,576		2,782		2,781		3,132		11,270		2,553		2,695		2,835		8,083
Asia Pacific		1,456		1,537		1,567		1,820		6,380		1,515		1,615		1,598		4,729
Total revenues	$	9,193	$	9,562	$	9,614	$	11,136	$	39,506	$	9,218	$	9,614	$	9,796	$	28,629

(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, 2019 and 2018 for the fiscal 2020 and fiscal 2019 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

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APPENDIX A

ORACLE CORPORATION

Q3 FISCAL 2020 FINANCIAL RESULTS

EXPLANATION OF NON‐GAAP MEASURES

To supplement our financial results presented on a GAAP basis, we use the non‐GAAP measures indicated in the tables, which exclude certain business combination accounting entries and expenses related to acquisitions, as well as other significant expenses including stock‐based compensation, that we believe are helpful in understanding our past financial performance and our future results. Our non‐ GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non‐GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non‐GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non‐GAAP measures. Our non‐GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects related to each of the below items except for the impact of the U.S. Tax Cuts and Jobs Act of 2017:

• Cloud services and license support revenues: Business combination accounting rules require us to account for the fair values of cloud services and license support contracts assumed in connection with our acquisitions. The non‐GAAP adjustments to our cloud services and license support revenues are intended to include, and thus reflect, the full amount of such revenues. We believe the adjustments to these revenues are useful to investors as a measure of the ongoing performance of our business as we generally expect to experience high renewal rates for these contracts at their stated values during the post combination 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 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 primarily consist of personnel related costs for transitional and certain other employees, integration related professional services, certain business combination adjustments including adjustments after the measurement period has ended and certain other operating items, net. 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 and other expenses and restructuring expenses generally diminish over time with respect to past acquisitions and/or strategic initiatives, we generally will incur these expenses in connection with any future acquisitions and/or strategic initiatives.
• Impact of the U.S. Tax Cuts and Jobs Act of 2017: The U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law on December 22, 2017. For the three and nine months ended February 28, 2019, we recorded benefits of $236 million and $389 million, respectively, related to adjustments in our estimates of the one‐time effects of the Tax Act, including the one‐time transition tax on certain foreign subsidiary earnings and the remeasurement of net deferred income tax balances affected by the Tax Act. We have excluded the impacts of these benefits from our non‐GAAP income taxes and net income measures for the third quarter and first nine months of fiscal 2019. We believe making these adjustments provides insight to our operating performance and comparability.

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