10-QPeriod: Q1 FY2018

ORACLE CORP Quarterly Report for Q1 Ended Aug 31, 2017

Filed September 18, 2017For Securities:ORCLORCL-PD

Summary

Oracle Corporation's (ORCL) 10-Q filing for the period ending August 31, 2017, reveals a company in transition, with strong growth in its cloud offerings offsetting declines in new software licenses. Total revenues increased by 7% year-over-year, driven significantly by a 62% surge in Cloud SaaS revenues and a 29% rise in Cloud PaaS and IaaS revenues. This shift towards cloud services is a strategic priority, impacting traditional software license sales but positioning Oracle for future growth in subscription-based models. Financially, the company demonstrated solid operating performance, with operating income up 7% and net income increasing by 20%. Operating cash flow also showed healthy growth. While the hardware segment experienced a revenue decline, the overall revenue growth and disciplined expense management contributed to a stable operating margin. Investors should note the ongoing impact of acquisitions, particularly NetSuite, and the company's continued strategic investment in research and development to support its cloud transformation. The company also continued its share repurchase program and dividend payments, signaling confidence in its financial stability.

Financial Highlights

56 data points
Beta

Revenue

$9.19B

59.1% Gross Margin

Net Income

$2.14B

23.3% Net Margin

EPS (Diluted)

$0.50

Total Assets

$133.60B

Cash & Equivalents

$21.32B

Free Cash Flow

$6.09B

Financial Statements
Beta
Revenue$9.19B
Gross Profit$5.43B
R&D Expenses$1.57B
Operating Expenses$6.36B
Operating Income$2.75B
Interest Expense$469.00M
Net Income$2.14B
EPS (Basic)$0.52
EPS (Diluted)$0.50
Shares Outstanding (Basic)4.16B
Shares Outstanding (Diluted)4.28B

Key Highlights

  • 1Total revenues grew 7% to $9.187 billion for the three months ended August 31, 2017, compared to $8.595 billion in the prior year period.
  • 2Cloud revenues showed significant strength, with Cloud Software as a Service (SaaS) up 62% to $1.067 billion and Cloud Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) up 28% to $400 million.
  • 3New software license revenue decreased by 6% to $966 million, reflecting the company's strategic shift towards cloud-based offerings.
  • 4Net income increased by 20% to $2.210 billion, resulting in diluted earnings per share of $0.52, up from $0.43 in the prior year period.
  • 5Operating cash flow increased by 12% to $6.566 billion for the three months ended August 31, 2017, compared to $5.875 billion in the prior year period.
  • 6The company continued to invest in its future, with R&D expenses increasing by 4% to $1.574 billion.
  • 7Oracle repurchased 10.2 million shares of common stock for $500 million during the quarter, while also paying out $788 million in dividends.

Frequently Asked Questions

Oracle is actively transitioning its revenue mix towards cloud-based services. While new software license revenues are declining, there is substantial growth in Cloud SaaS (up 62%) and Cloud PaaS/IaaS (up 28%). This strategic shift is expected to continue, impacting traditional license sales but driving long-term subscription revenue.

Oracle completed the acquisition of NetSuite Inc. in November 2016 for approximately $9.1 billion. This acquisition is aimed at expanding Oracle's cloud software-as-a-service offerings, particularly in cloud ERP. The financial results for the period reflect the integration of NetSuite, contributing to revenue and goodwill on the balance sheet.

Oracle is managing its expenses strategically. While cloud and R&D expenses have increased to support growth initiatives, the company has also seen decreases in hardware-related costs and some other operational expenses. Overall operating expenses grew in line with revenue, maintaining a stable operating margin.

Oracle continues to return capital to shareholders through its stock repurchase program and dividend payments. During this quarter, the company repurchased $500 million worth of shares and paid $788 million in dividends. Approximately $4.8 billion remained available under its stock repurchase program as of August 31, 2017.