Oracle Corporation

Good afternoon. Thank you for standing by. Welcome to Oracle's third quarter 2022 conference call. Now my pleasure to hand today's conference over to Oracle's Senior Vice President, Ken Bond.

Thank you, Holly. Good afternoon, everyone, and welcome to Oracle's third 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 at from the 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 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 forward-looking statements in light of new information or future events. Before taking questions, we'll begin with a few prepared remarks. However, we will be making no comments regarding Cerner. With that, I'd like to turn the call over to Safra.

Thanks, Ken, and good afternoon, everyone. I'd like to start by acknowledging the tragic events unfolding in Eastern Europe as a result of the Russian invasion of Ukraine. We are working incredibly hard to help our Ukrainian employees and support our customers and partners. We have suspended all Oracle operations in Russia, and we did so well over a week ago. I'll now turn to Oracle's third quarter results. I'll review our non-GAAP results using constant dollar growth rates unless I say otherwise. And clearly, we had an excellent quarter with total revenue growing over 7%. Not only was total revenue above the midpoint of my guidance, but it was also the highest organic growth rate since we began our transition to the cloud. We saw broad-based outperformance in all segments, And for the first time in more than 10 years, all segments of our business saw growth. Total cloud revenues when annualized are now 11.2 billion and they grew 26%. I expect the cloud revenue will exit the fiscal year growing in the mid 20s. Total cloud services and licensed support revenues for the quarter were 7.6 billion, up 8%, and accounted for 73% of total company revenue. Gap application subscription revenues saw record level organic growth of 10% and were 3.2 billion. Fusion apps were up 29% with strategic back office applications now having annualized revenue of $5.1 billion and growing 30%, including Fusion ERP up 35%, and Fusion HCM up 22%, and NetSuite ERP up 29%. Gap infrastructure subscription revenues were $4.5 billion, up 7%, and higher than last quarter. And excluding legacy hosting services, infrastructure cloud services grew more than 60%. And I expect the infrastructure revenue growth rate will trend higher over time. OCI consumption, which includes autonomous database, was up 93%, also higher than last quarter. and total cloud at customer revenue was up 43%, with the backlog for cloud at customer machines growing to triple digits. Database subscription revenues, including database support and database cloud services, were up 4%, and again, higher than last quarter. License revenues were $1.3 billion, up 4% with strong performance in our tech business. So all in, total revenues for the quarter were $10.5 billion, up over 7%, and as I mentioned earlier, our highest organic growth rate in over 10 years. Operating expenses were up 10% this quarter as we invest to meet growing demand for our cloud services, The gross margins for cloud services and licensed support was 84%, and the gross profit dollars grew 5%. I expect the full year growth in gross profit dollars for cloud services and licensed support will be higher than last year. Our plan is to continue to grow profits while we push our top-line growth into double digits next year. Non-GAAP operating income was 4.8 billion, up 4% from last year. And the operating margin was 46%, higher than all of our competitors. Earnings per share was adversely affected by around 5 cents per share, primarily due to share price declines of equity investments impacted by the widespread downturn in equity markets last quarter. The non-GAAP tax rate for the quarter was 19%, in line with our base tax rate, and earnings per share was $1.13 in U.S. dollars, up 1% in constant currency, and down 3% in U.S. dollars. The GAAP tax rate was 18.4%, slightly below our base rate, and the GAAP earnings per share was 84 cents in U.S. dollars. Operating cash flow for the last four quarters was 10.4 billion, and our free cash flow over the same period was 6.6 billion. Both results were negatively affected by a one-time litigation charge in Q2. Capital expenditures for the last four quarters were 3.8 billion, and CapEx for Q3 was 1.1 billion, and we're on track to invest 4 billion in CapEx this year. We now have more than 23 billion in cash and marketable securities. The short-term deferred revenue balance is 7.9 billion, up 1%, with gross deferred revenue growing 6%. The remaining performance obligation or RPO balance is $38.5 billion, up 13% in constant currency due to very strong bookings. Approximately 59% 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, strategic acquisitions, stock repurchases, and prudent use of debt and a dividend. This quarter, we repurchased 7 million shares for a total of 600 million as we reduced the buybacks in advance of the purchase of Cerner. We've paid out dividends of 3.5 billion over the last 12 months and the board of directors again declared a quarterly dividend of 32 cents per share. Our business is strong as our fast growing cloud business continues to become a larger proportion of the overall business. A few points. First, my guidance assumes that Cerner does not close in Q4, though it very well may close in the quarter. And again, Cerner should be accretive in the first year. Secondly, cloud is fundamentally a more profitable business to on-premise, and I expect that our full-year non-GAAP operating margins for fiscal year 2022, which we're finishing now, will be 1% to 2% higher than pre-pandemic levels of 44%. Let me now turn to my guidance for Q4, which I'll provide on a non-GAAP basis. Now, the US dollar strengthened dramatically in November. And as you all know, it was a lot of fluctuations this quarter. But assuming currency exchange rates remain the same as they are right now, I expect we will see a currency headwind of 2 to 3% on revenue and 5 cents negative for EPS in Q4. Of course, the dollar could easily strengthen from here. Total revenue for Q4 is expected to grow between 6 to 8% in constant currency and grow between 3% to 5% in USD. Cloud service and license support revenue for Q4 is expected to grow between 6% to 8% in constant currency and grow between 4% to 6% in USD. Non-GAAP EPS for Q4 is expected to be between 140 and 144 in constant currency GAAP EPS is expected to be between 135 and 139 in USD. Now, both non-GAAP and GAAP EPS are expected to decline year over year due to some large investment gains we saw last year, as well as a very low tax rate last year. It was 10.7%. Both of these mask the strong earnings growth and momentum we continue to see out of our core cloud business. My EPS guidance for Q4 assumes a base tax rate of 19%. As I always say, however, one-time tax events could cause actual rates for any given quarter to be higher or lower, but I expect that in normalizing for these one-time tax events our non-GAAP tax rates will average around 19 or so. And with that, I'll turn it over to Larry for his comments.