10-QPeriod: Q3 FY2018

ORACLE CORP Quarterly Report for Q3 Ended Feb 28, 2018

Filed March 21, 2018For Securities:ORCLORCL-PD

Summary

Oracle Corporation's (ORCL) 10-Q filing for the period ending February 28, 2018, reveals a company in transition, with a significant strategic emphasis on growing its cloud offerings (SaaS, PaaS, IaaS). Total revenues showed a modest increase driven by cloud and on-premise software, while hardware and services revenues saw declines. The company's financial results were notably impacted by the U.S. Tax Cuts and Jobs Act of 2017, which resulted in a substantial one-time tax expense, leading to a net loss for the quarter, despite underlying operational improvements. Operationally, Oracle continues to see strong growth in its cloud segments, which is crucial for its long-term strategy. However, this shift towards cloud is impacting traditional software license revenues. The company also managed its cash flow effectively through operating activities, supported by its large cash and marketable securities balance, and continued its share repurchase program. Investors should closely monitor the ongoing transition to cloud services and the long-term implications of the tax law changes.

Financial Highlights

57 data points
Beta

Revenue

$9.77B

61.1% Gross Margin

Net Income

-$4.05B

-41.4% Net Margin

EPS (Diluted)

$-0.98

Total Assets

$138.20B

Cash & Equivalents

$19.49B

Free Cash Flow

$3.02B

Financial Statements
Beta
Revenue$9.77B
Gross Profit$5.97B
R&D Expenses$1.50B
Operating Expenses$6.36B
Operating Income$3.31B
Interest Expense$533.00M
Net Income-$4.05B
EPS (Basic)$-0.98
EPS (Diluted)$-0.98
Shares Outstanding (Basic)4.12B
Shares Outstanding (Diluted)4.12B

Key Highlights

  • 1Total revenues increased by 6% year-over-year to $9.77 billion for the third quarter, driven by a 7% increase in cloud and on-premise software revenues.
  • 2Cloud revenues (SaaS, PaaS, IaaS) showed strong growth, increasing by 24% for SaaS and 28% for PaaS/IaaS in the third quarter on a reported basis.
  • 3Net loss of $4.02 billion for the quarter, primarily due to a $7.6 billion expense related to the U.S. Tax Cuts and Jobs Act's one-time transition tax on foreign earnings.
  • 4Operating income increased by 15% to $3.41 billion, demonstrating underlying operational strength excluding the tax impact.
  • 5The company repurchased approximately $6.5 billion of its common stock during the first nine months of fiscal 2018.
  • 6Cash and cash equivalents and marketable securities stood at $70.46 billion as of February 28, 2018, providing substantial liquidity.
  • 7Hardware revenues decreased by 3% and services revenues decreased by 2% year-over-year for the third quarter.

Frequently Asked Questions

The primary driver of Oracle's net loss of $4.02 billion for the third quarter was a one-time expense of $7.6 billion related to the U.S. Tax Cuts and Jobs Act of 2017. This charge accounts for the transition tax on certain foreign subsidiary earnings generated prior to December 31, 2017.

Oracle's cloud business continues to show strong growth. Cloud software as a service (SaaS) revenues increased by 24% year-over-year, and cloud platform as a service (PaaS) and infrastructure as a service (IaaS) revenues grew by 28% in the third quarter. This segment is a key strategic focus for the company.

The U.S. Tax Cuts and Jobs Act, enacted in December 2017, reduced the U.S. federal corporate tax rate to 21%. While it created a significant one-time tax expense for Oracle related to repatriating foreign earnings, the company expects the law to provide greater flexibility in accessing and utilizing its foreign cash balances going forward. Oracle's blended U.S. federal statutory tax rate for fiscal 2018 is expected to be approximately 29% due to its May fiscal year-end.

Oracle maintains a strong liquidity position. As of February 28, 2018, the company had $19.49 billion in cash and cash equivalents and $50.97 billion in marketable securities, totaling over $70.45 billion. This substantial balance, combined with operating cash flows, provides ample resources for operations, investments, and capital returns.