Oracle Corporation

Welcome to Oracle's third quarter 2021 earnings conference call. Now I'd like to turn the call over to Ken Bond, Senior Vice President.

Thank you, Erica. Good afternoon, everyone, and welcome to Oracle's third quarter fiscal year 2021 earnings conference call. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation and other supplemental financial information can be viewed and downloaded from our investor relations website. Additionally, a list of customers mentioned on this customer conference call, as well as many others which have purchased Oracle Cloud Services or went live on Oracle Cloud recently, will be also available from the 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. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements being 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 these board booking statements in light of new information or future events. We'll begin with a few prepared remarks, and then I'll turn the call over to Safra. Safra?

Thanks, Ken, and good afternoon, everyone. We are again reporting earnings 10 days after the end of the fiscal quarter, faster than any other company in the S&P 500. Fusion Cloud ERP enables us to understand our business performance sooner and with greater insight, which is an advantage our customers are rapidly beginning to appreciate. As you can see, we had a great quarter and executed well against our growth plan. Revenue was in line with our USD guidance, while EPS beat the midpoint of guidance by 5 cents. Our total cloud services and license support revenue for the quarter was $7.3 billion, up 5% in US dollars, 2% in constant currency, driven by Fusion, Autonomous Database, and our Gen 2 OCI cloud. Recurring revenue as a percentage of total revenue now represents 72% of total company revenue, and we anticipate this trend to continue as cloud services grow. Application subscription revenues were $3 billion, up 5% in U.S. dollars, 3% in constant currency. Our strategic back-office cloud applications now have annualized revenue of $4 billion and grew 24% this quarter, including Fusion ERP up 27%, NetSuite ERP up 22%, and Fusion HCM up 21%. Infrastructure subscription revenues were 4.3 billion, up 4% in U.S. dollars, up 2% in constant currency. Infrastructure cloud services now have an annualized revenue of more than 2 billion, including OCI consumption revenue, which was up 123%. Autonomous database was up 55%. Clouded customer consumption revenue was up over 200%, but on small numbers. Database subscription revenues, including database support and database cloud services, were up 6% in U.S. dollars and up 3% in constant currencies. License revenues were $1.3 billion, up 4% in U.S. dollars and unchanged in constant currency. So all in, total revenues for the quarter were $10.1 billion, up 3% in U.S. dollars, up slightly in constant currency. Operating expenses were down this quarter, and non-GAAP operating income was $4.8 billion, up 6% from last year. Q3 operating margin was 47% in USD, up 300 basis points from 44% last year, and our best Q3 result in more than 10 years. The non-GAAP tax rate for the quarter was 16.7, slightly below our base tax rate as a result of some discrete items. EPS was $1.16 in U.S. dollars, up 20% in U.S. dollars, up 16% in constant currency. GAAP EPS was $1.68 in U.S. dollars, up 113%. and up 104 percent in constant currency. In the quarter, the GAAP income statement was impacted by a one-time net tax benefit of approximately $2.3 billion related to the transfer of certain assets between subsidiaries. To facilitate comparison across periods, we have excluded the effects of this event from our non-GAAP calculation. Now, operating cash flow over the last four quarters was $14.7 billion with capital expenditures of $1.9 billion and free cash flow in excess of $12.8 billion over the same period. For the quarter, operating cash flow was $3.7 billion, up 23%, and free cash flow was $3.3 billion, up 26 percent from last year. We now have nearly $36 billion in cash and marketable security. The short-term deferred revenue balance was down in constant currency at $8.1 billion, while the short-term gross deferred revenue was up 4 percent in constant currency. As you know, the difference between the two growth rates is due entirely to timing differences in customer payments. The remaining performance obligation, or RPO, balance is $35.3 billion, up 2% in constant currency versus last year. Approximately 61% is expected to be recognized as revenue over the next 12 months, up from 60% a year ago. 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 a dividend. And this quarter, we repurchased more than 64 million shares for a total of $4 billion. In addition, the Board of Directors increased the quarterly dividend 33%. from $0.24 to $0.32 per share. The board of directors also authorized an additional $20 billion for the repurchase of Oracle shares. As I mentioned last quarter, we experienced capacity constraints for OCI cloud services as customer workloads expanded dramatically. In addition, we continue to land many new customers, including ISVs, and we have some very large users coming online shortly that will require significant amounts of capacity. As a result, we're investing aggressively this quarter, this Q4, both OpEx and CapEx to prepare for this increase in cloud consumption and associated revenue in FY22. As such, we are going to target a 49% operating margin for Q4. This will enable us to continue to deliver double-digit earnings growth once again in FY22 for the fifth year in a row. Now to the guidance. Again, my guidance today is on a non-GAAP basis and assumes current exchange rates remain the same as they are now, which is a 4% positive effect on total revenue and 7% positive effect on EPS in Q4. It will look It may look like a positive effect of $0.08 to EPS due to rounding, but it's $0.07. However, actual currency impact could be different. So here it goes. Total revenues are expected to grow from 5% to 7% in U.S. dollars and are expected to grow 1% to 3% in constant currency. Cloud service and license support will grow faster than in Q3, as will strategic back office cloud applications. As a result of the increased investment in the quarter, non-GAAP EPS in USD is expected to grow 7% to 11% and be between $1.28 and $1.32 in USD. Non-GAAP EPS in constant currency is expected to be flat to up 4% and be between $1.20 and $1.24 in constant currency. CapEx 4Q4 is expected to be $1 billion. My EPS guidance for Q4 assumes a base rate of 19%. However, one-time tax events could cause actual tax rates for any given quarter to vary. But I expect that in the normalizing for these one-time tax events, our tax rate will average around 19% or so. And with that, I'll turn it over to Larry for his comments.