10-QPeriod: Q2 FY2019

ORACLE CORP Quarterly Report for Q2 Ended Nov 30, 2018

Filed December 19, 2018For Securities:ORCLORCL-PD

Summary

Oracle Corporation's (ORCL) 10-Q filing for the period ending November 29, 2018, indicates a period of revenue stability with slight growth in cloud services and license support, while hardware and services revenues saw a slight decline. Total revenues remained largely flat year-over-year for both the three and six-month periods. The company continued to demonstrate strong operating income and generated significant cash from operations, though this was significantly impacted by substantial share repurchases which led to a decrease in cash and cash equivalents. The company is actively managing its capital structure, evidenced by significant stock buybacks and dividend payments. Oracle also highlighted progress in its cloud transition strategy, with cloud services and license support revenue showing consistent growth, which is a key focus for investors looking at the company's future. The impact of the U.S. Tax Cuts and Jobs Act of 2017 continues to be a factor in understanding year-over-year tax rate comparisons.

Financial Highlights

53 data points
Beta

Revenue

$9.56B

Net Income

$2.33B

24.4% Net Margin

EPS (Diluted)

$0.61

Total Assets

$118.32B

Cash & Equivalents

$10.82B

Free Cash Flow

$125.00M

Financial Statements
Beta
Revenue$9.56B
R&D Expenses$1.48B
Operating Expenses$6.46B
Operating Income$3.10B
Interest Expense$519.00M
Net Income$2.33B
EPS (Basic)$0.63
EPS (Diluted)$0.61
Shares Outstanding (Basic)3.72B
Shares Outstanding (Diluted)3.82B

Key Highlights

  • 1Total revenues were largely flat, with a slight increase in Cloud services and license support revenue, offsetting decreases in Hardware and Services revenue.
  • 2Operating income showed a modest increase, indicating effective cost management despite stable top-line revenue.
  • 3Significant cash outflows were directed towards stock repurchases, totaling $20.0 billion for the six-month period, leading to a substantial decrease in cash and cash equivalents.
  • 4The company reported strong operating cash flow generation, though it was slightly down year-over-year, impacted by working capital changes.
  • 5Oracle adopted new accounting standards, including Topic 606 for Revenue from Contracts with Customers, with retrospective adjustments applied to prior periods.
  • 6Restructuring activities were ongoing, with significant charges related to the '2019 Restructuring Plan' aimed at improving operational efficiencies.
  • 7The 'Cloud and license' business segment remains the largest contributor to revenue and showed consistent growth, reinforcing the company's strategic focus on cloud solutions.

Frequently Asked Questions

Oracle reported total revenues of $9,562 million for the three months ended November 30, 2018, a slight decrease of 0.3% from $9,589 million in the prior year. For the six-month period, total revenues were $18,755 million, a slight increase of 0.3% from $18,693 million in the prior year. The cloud services and license support segment showed growth, increasing by 2.7% and 3.0% for the three and six-month periods respectively, while hardware and services revenues experienced declines.

Oracle generated $7,268 million in cash from operating activities for the six months ended November 30, 2018, a slight decrease from $7,416 million in the prior year. The most significant use of cash was for financing activities, primarily driven by $20.0 billion in stock repurchases during the six-month period, compared to $2.5 billion in the prior year. This led to a substantial decrease in cash and cash equivalents from $21,620 million at May 31, 2018, to $10,824 million at November 30, 2018.

Oracle adopted Topic 606, 'Revenue from Contracts with Customers,' using the full retrospective method. This involved recasting comparative fiscal 2018 periods to reflect the new standard. The company noted that the adoption did not have a material impact on its previously reported financial position or results of operations, with adjustments made to line items such as trade receivables and deferred revenues.

The 'Cloud and license' segment remains Oracle's largest, accounting for 82% of revenues and showing modest growth, driven by cloud services and license support. The 'Hardware' segment, representing 9% of revenues, saw a decline in revenue and expenses, reflecting a strategic shift towards cloud technologies. The 'Services' segment, at 9% of revenues, also experienced a revenue decrease. Overall, the company's strategic emphasis is clearly on growing its cloud offerings.