Oracle Corporation

Welcome to Oracle's first quarter 2022 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 first quarter fiscal year 2022 earnings conference call. A copy of the press release and financial tables, which includes a gap to non-gap reconciliation and other supplemental financial information can be viewed and downloaded from our investor relations website. Additionally, a list of many customers who purchased Oracle Cloud Services or went live on Oracle Cloud recently will be available from the Investor Relations website following this call. 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 statements being made today. As a result, we caution you from 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're not obligating ourselves to revise our results or 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 good afternoon, everyone. We had a great quarter as total revenue was $100 million above the midpoint of my constant currency guidance. without performance coming from all parts of our business. EPS was also very strong and was $0.08 above the midpoint of my constant currency guidance. As the dollar strengthened from when I gave guidance, and it strengthened significantly, we didn't get the benefit we would have gotten had it stayed at the same level throughout the quarter. Now, from here on, I'll review our non-GAAP results using constant dollar growth rates, unless I say otherwise. So total cloud services and license support revenues for the quarter were $7.4 billion, up 6% in USD, up 5% in constant currency, and accounted for 76% of total company revenue. Total cloud revenues are now at an annualized revenue of $10 billion, with an accelerating growth rate that we expect will exit the fiscal year in the mid-20s. GAAP application subscription revenues were $3 billion, up 7%, with Fusion Apps up 26% in USD and 24% in constant currency. Our strategic back office applications grew 25% in constant currency, including Fusion ERP, up 30%, and NetSuite ERP, up 26%. GAP infrastructure subscription revenues were 4.3 billion, up 3%. And excluding legacy hosting services, infrastructure cloud services grew in the mid 30s, and we saw triple digit booking growth this quarter. So I expect the infrastructure revenue growth will ramp higher through the fiscal year. OCI consumption revenue, which includes autonomous database, was up 80% in constant currency, and clouded customer revenue was up 44%. Database subscription revenues, including database support and database cloud services, were up 6% in USD, up 5% in constant currency, and that's up from 4% last quarter. License revenues were $813 million, down 8% after a tough compare from last year's Q1. So all in, total revenues for the quarter were $9.7 billion, up 4% in USD, up 2% in constant currency. Operating expenses were up 3% this quarter. The gross margin for cloud services and license support was 84%, and the gross profit dollars grew 2%. I expect the full-year growth in gross profit dollars for cloud services and licensed support will be similar to last year. Non-GAAP operating income was $4.3 billion, up 2% from last year, and the operating margin was 45%. The non-GAAP tax rate for the quarter was 18%, slightly below our base tax rate of 19%, and earnings per share with $1.03 in U.S. dollars up 11% in USD and up 9% in constant currency. As a result of some discrete items, the GAAP tax rate was 8.4% and GAAP EPS was 86 cents in U.S. dollars, which was up 19% in U.S. dollars and up 16% in constant currency. Operating cash flow for the last four quarters was $15.3 billion, up 17% in USD, and our free cash flow over the same period was $12.6 billion, up 9% in USD, with capital expenditures of $2.8 billion. Also over the same period, CapEx for Q1 alone was $1.1 billion. We now have more than $39 billion in cash and marketable securities. The short-term deferred revenue balance is $10 billion, up 1% from a year ago due to timing differences in customer payments, but with gross deferred revenue up 5% in constant currency. The remaining performance obligation or RPO, our balance is $38.7 billion, up 10% in constant currency due to strong bookings. Approximately 60% is expected to be recognized as revenue over the next 12 months. As we've said many times before, we're committed to returning value to our shareholders through technical innovation and strategic acquisitions, stock repurchases, prudent use of debt, and a dividend. This quarter, we repurchased 94 million shares for a total of $8 billion. And over the last 10 years, we have reduced the shares outstanding by 46%, and an average price that's about half the current share price. In addition, we paid out dividends of 3.3%. $2 billion over the last 12 months, and the board of directors declared a quarterly dividend of $0.32 per share. Now to guidance, what you're all waiting for. I remain highly confident that fiscal year 22 revenue growth will accelerate because our fast-growing cloud businesses are becoming a larger portion of our total revenue. I see total revenue growth for fiscal year 2022, which is the one we're in, somewhere in the mid-single digits in constant currency and accelerating. Cloud is fundamentally a more profitable business compared to on-premise, and as we look ahead to next year, we expect company operating margins will be the same or better than pre-pandemic levels. Let me now turn to my guidance for Q2. And I'll review this on a non-GAAP basis. Assuming currency exchange rates remain the same as they are now, currency should have a very minor positive effect on total revenue and EPS in Q2. Total revenue for Q2 are expected to grow between 3% to 5% in both USD and constant currency. Cloud service and license support revenue for Q2 are expected to grow more than 5% in both USD and constant currency and then climb higher through the second half of the fiscal year. Non-GAAP EPS for Q2 is expected to grow between 2% and 6% in both USD and constant currency and be between $1.09 and $1.13. My EPS guidance for Q2 assumes a base rate of 19%. However, one-time tax events could cause actual tax rates for any given quarter to vary both up and down. But I expect that in normalizing for these one-time tax events, our non-GAAP tax rate will average around 19% or so. And with that, I'll turn it over to Larry for his comments.