Oracle Corp Japan

Hello, everyone. I'm Nishio from Nihon Oracle IR. From now on, Nihon Oracle will hold the 3rd quarter financial statement meeting in May 2024. The disclaimer is as described in the mid-term report of the short-term financial statement and the financial statements. Today, I will explain the financial statements of the time from the executive officer, CFO S. Krishna Kumaru, and then take questions from everyone using the Zoom service function in the text. Now, I'd like to turn this call over to KK, Senior Vice President, JPEG, and Japan CFO.

Thank you, Nishio-san. First of all, let me apologize. I have a bad throat, but I'll try and be as clear as possible.

Good afternoon, everyone, and welcome to Oracle Japan's third quarter fiscal year 2024 earnings call. Our cloud business has been a driver of accelerating revenue growth, and we had another excellent performance this Q3. We have become the enterprise technology cloud vendor of choice because our customers have recognized our products and services, bring out their cost efficiencies and modernize their businesses.

Also, They figured out that they can get more while paying less by moving to our cloud services.

We are also a vendor that is selected among enterprise technology vendors, and we feel that if customers use products and services from Oracle, they will be able to monetize the cost efficiency or the business itself. Also, even if the price is lowered, We had a lot of marquee cloud customers in various industries, especially financial services, manufacturing, public sector, etc.

Let me give you a few examples. HID has over 40 years of experience in providing services to municipalities and offer a comprehensive administrative system that include resident record and welfare related operations, which are subject to standardization by local authorities.

Now, I would like to introduce some examples from our cloud business. First of all, we have HID. HID has been providing services to local governments for more than 40 years. We have a so-called comprehensive health care system. We provide services to local governments, As the digital agency emphasizes the need for cloud smart and system modernization, the two companies will work together to provide new initiatives and cost-effective services

including cloud nativization in HID's general administration system in collaboration with Oracle Cloud Infrastructure.

At the Digital Agency, we emphasize the modernization of the cloud and the modernization of the system. Together with our company and HID, we will continue to provide new efforts and high cost-effectiveness services. In particular, HID evaluates that OCI is suitable for municipalities and private services as it is expected to offer significant cost and performance advantages

over other companies' services.

特にHID様におきましては、 OCIというのは地方自治体あるいは民間のサービスにも 非常に適しているという評価をいただいております。 大きなコスト削減、ないしはパフォーマンスの点におきましても、 他のサービスを上回るレベルで、 The second example is Ono Pharmaceutical.

Ono Pharma is transforming the management of global clinical trials with a focus on efficiency and data-driven decision-making.

The aim is to improve the prediction of potential risks and probability

trial success by utilizing Oracle's clinical trial management system.

ここでの目的といたしましては、 OracleのCTMS、Clinical Trial Management Systemを活用することによって、 潜在的なリスクの予測、ないしは、 知見の成功率の予測の改善を図ろうというものであります。

Example number three, Daiwa Institute of Research. Daiwa Institute of Research provides high quality, reliable system services that strongly support IT strategies and underpin business fundamentals of each company as the systems lead for Daiwa Securities Group companies.

The third example is Daiwa Shoken-sama. Daiwa Shoken-sama is the system leader of the Daiwa Shoken Group. They provide high-quality and reliable system services while also promoting a solid IT strategy.

DIR has revamped the order and order analysis infrastructure for global markets divisions of the group company Daiwa Securities Company Limited with Oracle Autonomous Data Warehouse provided by OCI.

As for Daiwa Shoken, by utilizing Oracle Autonomous Data Warehouse by OCI, Daiwa Shoken uses the order analysis infrastructure for the global market for each group company.

Multi-cloud and hybrid cloud environments can increase operational complexity and load costs. But by selecting Oracle Autonomous Data Warehouse as the analysis infrastructure, high performance is achieved at a low cost. And database changes, patches, resource changes, the cost of these were reduced significantly by the autonomous functionality.

Multi-cloud or hybrid cloud environment means that the complexity and cost of operation increases. However, Daiwa Soken selected Oracle Autonomous Data Warehouse as the analysis infrastructure. This was just to give you a sense of the broad outreach in the market that we have with our different products and services and to underline Oracle's presence

in most mission critical systems, applications and industries.

We have talked about several examples, but I think you can see that our various product and service services are widely accepted by the market. And we have received that the most mechanized systems, applications, and other industries have established a solid position as Oracle in the industry.

Now, let me give you a brief overview of the numbers. Total revenue for nine months at 176 billion, 883 million JPY, growing at 8.4% compared to the previous year, driven by our strong growth in cloud revenue.

Let's move on to the numbers. This year, the total sales of the first nine months was 1,768.8 million yen. It was plus 8.4% in the previous year. This is mainly due to the sales of the cloud.

Cloud services revenue was 35,578,000,000 yen up 36.3% and now represent 20% of the company's revenues.

Growth rates in our Fusion ERP Cloud and NetSuite were also very strong.

Infrastructure consumption revenues showed a strong momentum, which includes autonomous database.

Fusion ERP, Cloud, and NetSuite's growth rate has been continuously increasing. The revenue of infrastructure consumption has also increased. By the way, autonomous database is included here.

Operating income was JPY 57,706,000,000 yen, increasing at 9.7%. Net income at JPY 40,181,000,000 yen, up also 9.7%.

そして冬季利益、こちらが401億8100万円、9.7%になっております。 Total revenue and all three margins indicated record high in the third quarter.

We hope to continue the momentum into the rest of the year. Thank you very much.

Thank you very much.

We will now take questions from the audience. This presentation is for those of you who are in the market, so please refrain from asking questions to the press. Please enter the company name, name of the company, and three questions from the Q&A section of the Zoom system. Please note that questions without names will be skipped. I will read each question one by one and answer them by CFO KK. I will not repeat the questions. Mr. Ueno of Daiwa Shoken has already asked a question, so you don't have to ask it again. Let's start the question and answer session. The first question is from Mr. Ueno of Daiwa Shoken. The number of employees has decreased by 3.9% from the end of the third quarter last year, but will this pace be measured?

So the first question is from Ueno-san of Daiwa Securities. From third quarter end of last fiscal year, the number of headcounts have come down by 3.9%. Will this pace continue?

As I've said before, we are a very efficiency-driven company. We look at our costs very closely and carefully. We monitor our costs. We have been trying to reorganize and put the right resources in the right functions. And what you see as a result is minor reduction over a period of 12 months. which I would not read much into it. If you look at our revenues, we actually grew almost very close to 6% last year. For the nine months so far, we've grown about 8% with all the efficiencies that we have gained. That is why you see margin expansion in our business.

I think I've mentioned this before, but I also run a company that focuses on efficiency. As a result, of course, the cost is constantly increasing. shikari to monitaringu shite orimasu. Watakushidomo to itashimashite wa, tekisetsu na risousu wo tekisetsu na ki no posto ni to iu koto de, tekizai tekisho de aru teido no saihen to iu mona okonatte mairimashita. Kekka, ichinenmae ni hikaku itashimasu to, jakkan jinin gen to iu kekka ni wa natte orimasu ga, And just one more

Just one more thing to add. We will continue to hire into our growth businesses as we go into the future. So we will not stop looking for the right resources for the businesses where we want people to be.

I would like to add one more thing. Of course, we will continue to hire people for our growth business in the future, so we will continue to look for people who are suitable for our business.

This is the second question from Ueno-sama. This is related to the number of employees we had earlier. Nihon kigyou wa base upu ni sekkyokuteki desu ga, onsha wa hitori atari jinkei hi no zouka wo kongo mikomu deshoka?

So second question from Ueno-san is also related to headcount or payroll cost. Japanese companies are actively increasing their salaries, but do you expect a salary increase per headcount at Oracle?

As I said, we are a performance-driven company. We reward performances. We look for the right resources and over time, yes, you know, we will also align with the market. So if the market in general is going up, obviously we cannot stay behind. We like to pay the right level of salaries to our employees.

As I said before, we are a performance-oriented company. Of course, if we achieve performance and success, we will have to face it. We are always looking for such people, and I think it is also important to match the market, so while the entire Japanese market is rising, we are not the only ones who are late, so we would like to provide an appropriate standard for employees.

I have a question from Kikuchi-sama from SMBC Nikko Shoken. Please explain the increase in lending to parent companies and the future forecast, the capital of cash.

Next question is from Kikuchi-san of SMBC Nikko Securities. If you could explain about the increase in lending to your parent company and also the outlook going forward and also how you will be using cash.

This is not different from what we have done in the past. Whenever we have excess cash, we look for safer avenues to put our money, safe avenues to put our money. One of the safe avenues is with the parent company, and we get interest rates which are better than the market in Japan. And so we use that opportunity to park our money as and when we require it. we would recall it, you know, whether it's for dividend or whether it's for any acquisitions that we may make in the future, et cetera, et cetera. So depending on our need, we recall the money. So it's kind of business as usual.

There has been no change in our operations so far. If there is a surplus fund, we will put the money in a safe place. One of the means is the parent company. Compared to the market capital of Japan, there is a merit of high capital. If necessary, we will record it according to the needs, whether it is an answer, an acquisition project, or something else. We will maintain the business as usual position as before.

Next question is from Mitsui Sumitomo from DSR Asset Management. The Q3 of the service segment is the increase in revenue. Please explain the effect of the increase in revenue.

The next question is from Watanabe-san of Sumitomo Mitsui DS Asset Management. The service business in third quarter experienced increase in revenue, but a profit came down. And the profit decline was bigger than the revenue increase. So if you could explain the background.

Again, it's more like a timing issue. We have been hiring into our consulting services businesses because there's a lot of cloud projects that we need to deliver on. Some of the hiring converts into revenue and there is a time lag. There's also time lag in different projects when we recognize revenue. So it's more like a timing issue than anything else.

This is based on the timing. In the case of the console business, we are also adopting it. In the process of implementing the cloud project, and with the results coming out, and with the sales rising, there will naturally be a gap in the adoption, so this is also the timing.

Thank you very much. I don't have any questions at the moment, but do you have any questions? Yes. This is a question from Noda-sama from CLSA. Q3, the increase in RPO. フュージョンERPネットスイート ストラテジックサーズの成長率を教えていただけますか?

Next question is from Noda-san of CLSA Securities. Noda-san wants to know the increase rate, the growth rate of RPO in third quarter. That is the first question. And the second question is the growth rate of Fusion ERP, NetSuite, and Strategic SaaS in third quarter.

So we do not disclose the, so you will, we will disclose the RPO numbers when we file our securities report next quarter. And so you will, you will have to wait till that time. The, as far as the, again, you know, we are experiencing significant growth rate in our applications business and our technology cloud business. At this point in time, I don't split those growth rates specifically.

In terms of the current RPO figures, they will be displayed in the next quarter when the Registration Report is submitted. So please refer to that. On the other hand, applications and technology cloud Thank you very much. I don't have any questions right now.

Is that okay? Thank you very much.