Oracle Corporation

Welcome to Oracle's first quarter 2020 earnings conference call. I'd now like to turn today's call over to Ken Bond, Senior Vice President. Ken?

Thank you, Holly. Good afternoon, everyone. Thank you for joining us on short notice. Welcome to Oracle's first quarter fiscal year 2020 earnings conference call. A copy of the press release and financial tables, which includes a GAAP and non-GAAP reconciliation, and other supplemental financial information can be viewed and downloaded from our investor relations website. On the call today are Chairman and Chief Technology Officer Larry Ellison and CEO Safra Katz. As a reminder, today's discussion will include forward-looking statements, including predictions, expectations, estimates, or other information that might be considered forward-looking. Throughout today's discussion, we will present some important factors relating to our business, which may potentially affect these forward-looking statements. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from from statements made today. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports, including our 10-K and 10-Q, and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. And finally, we are not obligating ourselves to revise our results or publicly release any revision of these forward-looking statements in light of new information or future events. Before taking questions, we'll begin with a few prepared remarks. And with that, I'd like to turn the call over to Safra.

Thanks, Ken. And thank you all for joining us on such very short notice. Of course, September 11th is an important day for our country and for us at Oracle. Many of you know that we lost 11 of our employees and many friends that day. And we honor all the victims today and every day. May their memories be a blessing to all of us. We originally planned to hold this call tomorrow. However, as Mark will be taking a leave of absence for health-related reasons, we felt it made sense to share all of our news at once. Mark was extremely engaged with the business through the end of the quarter, but now he needs to focus on his health and taking care of himself. As the three of us have always worked as a team on managing Oracle, Larry and I will cover Mark's responsibilities during his absence with support from the rest of our strong management team. Now, Switching to the first quarter, I will review our non-GAAP results using constant dollar growth rates unless I state otherwise. And though the effects of the currency movements in Q1 were modestly more than expected with a 1.3% headwind to total revenues and a one penny headwind to earnings per share, both results were in line with my guidance range. Total cloud services and license support revenues for the quarter were $6.8 billion, up 4%, and accounting for nearly three-quarters of total company revenues, and most of all of this revenue is recurring. Cloud and on-premise license revenues were $812 million, down 6%. coming off 15% license growth last quarter. And as a reminder, because Q1 is normally our smallest quarter, we tend to see more volatility in new software license growth rates in Q1. In terms of ecosystems, GAAP applications ecosystem revenues were $2.8 billion, up 3%, with Fusion Apps up nearly 2%. 40%, including Fusion ERP up mid-40s and Fusion HCM up low 30s. NetSuite ERP was up in the mid-20s. Vertical SaaS was up high single digits, while Data Cloud was down in the low teens. On a trailing 12-month basis, more than 90% of our application ecosystem revenue is now recurring. GAP infrastructure ecosystem revenues were $4.8 billion, up 3%, with total database revenue up similarly, highlighted by BYOL and autonomous database revenues, both up triple digits. but off a small base for now. On a trailing 12-month basis, more than three-quarters of our infrastructure ecosystem is now recurring. In terms of geographies, we saw double-digit revenue growth in cloud revenue in all regions, with especially strong results in Latin America and Asia Pacific. The growth margin for cloud services and license support was 86%. And as we continue to scale and grow, I expect our cloud growth margins will go higher, driving an acceleration in our gross profit growth. Total revenue for the quarter were $9.2 billion, up 1% from last year. Non-GAAP operating income was $3.8 billion, up 4% from last year, and the operating margin was 42%, up from 41% last year. The non-GAAP tax rate for the quarter was at 9.8%, slightly below our base tax rate of 20%, and EPS was $0.81 in USD and up 16% in constant dollar, and 14% in USD. The GAAP tax rate was 13.9% and GAAP EPS was 63 cents in USD and up 13% in constant currency and 11% in USD. Operating cash flow over the last four quarters was 13.8 billion. Over the last four quarters, Capital expenditures were $1.7 billion, and free cash flow was $12.2 billion. We now have approximately $36 billion in cash and marketable securities, and the short-term deferred revenue balance is $10.9 billion. As we've said before, we're committed to returning value to our shareholders through technical innovation, strategic acquisition, stock repurchases, prudent use of debt, and the dividends. This quarter, we repurchased 89 million shares for a total of $5 billion. Over the last 12 months, we have repurchased 611 million shares for a total of $31 billion. And over the last five years, we have reduced the shares outstanding by more than 25%. the Board of Directors increased the authorization for share repurchases by an additional $15 billion and again declared a quarterly dividend of $0.24 per share. My guidance today is on a non-GAAP basis and in constant currency. Assuming current exchange rates remain the same as they are now, Currency should have a 1% negative effect on total revenue and 1 cent negative on EPS. Of course, that could change. So for Q2, total revenues are expected to grow 1% to 3% in constant currency, and assuming a 1% currency headwind, total revenues are expected to grow from zero to 2% in U.S. dollars. Non-GAAP EPS in constant currency is expected to grow between 10 to 12% and be between 88 and 90 cents in constant currency. And assuming the one cent headwind, non-GAAP EPS in U.S. dollars is expected to grow between 9% and 11% and be between 87 and 89 cents in USD. For fiscal 2020 and the third consecutive fiscal quarter, I expect that we will report double-digit EPS growth in constant currency, total capex for fiscal year 20, is expected to be around $2.2 billion, but it could move a little depending on our bookings and how much we need to invest to accommodate them. My EPS guidance for Q2 and fiscal 20 assumes a base tax rate of 20%. However, one-time tax events could cause actual tax rates for any given quarter to vary from our base tax rate. But I expect that in normalizing for these one-time tax events, our tax rate will average around 20% for fiscal year 2020. I'm turning the call over to Larry for his comments, who will spend a little time highlighting some of the key wins we had during the quarter, with emphasis on back office applications, and then talk about autonomous database.