10-QPeriod: Q3 FY2019

ORACLE CORP Quarterly Report for Q3 Ended Feb 28, 2019

Filed March 18, 2019For Securities:ORCLORCL-PD

Summary

Oracle Corporation (ORCL) reported its third-quarter fiscal year 2019 results, ending February 28, 2019. The company demonstrated stability in total revenues, which remained flat year-over-year at $9.61 billion for the quarter, largely driven by the strong performance of its Cloud services and license support segment, which saw a 1% increase. However, the hardware segment experienced a notable decline of 8% in revenues. Profitability showed a mixed picture. Operating income increased by 3% to $3.4 billion, reflecting efficient cost management and the shift towards higher-margin cloud services. Net income swung from a significant loss in the prior year's comparable quarter to a substantial profit of $2.75 billion. This improvement was significantly influenced by a large tax benefit recognized in the prior year due to the Tax Cuts and Jobs Act of 2017, with the current year's tax provision being much lower. The company continued its aggressive share repurchase program, underscoring a commitment to returning capital to shareholders.

Financial Highlights

53 data points
Beta

Revenue

$9.61B

Net Income

$2.75B

28.6% Net Margin

EPS (Diluted)

$0.76

Total Assets

$109.44B

Cash & Equivalents

$14.72B

Free Cash Flow

$2.42B

Financial Statements
Beta
Revenue$9.61B
R&D Expenses$1.43B
Operating Expenses$6.21B
Operating Income$3.40B
Interest Expense$509.00M
Net Income$2.75B
EPS (Basic)$0.78
EPS (Diluted)$0.76
Shares Outstanding (Basic)3.53B
Shares Outstanding (Diluted)3.62B

Key Highlights

  • 1Total revenues remained flat at $9.61 billion for the third quarter, showing resilience in a competitive market.
  • 2Cloud services and license support revenue increased by 1% to $6.66 billion, highlighting the continued growth and importance of Oracle's cloud offerings.
  • 3Hardware revenue declined by 8% to $915 million, reflecting a strategic shift away from hardware and towards cloud-based solutions.
  • 4Operating income grew by 3% to $3.4 billion, indicating improved operational efficiency and profitability.
  • 5Net income for the quarter was $2.75 billion, a significant turnaround from a net loss of $4.05 billion in the prior year's comparable period, largely due to tax impacts.
  • 6The company repurchased approximately $4.5 billion worth of its common stock during the quarter, demonstrating a strong commitment to shareholder returns.
  • 7Operating cash flow for the nine months ended February 28, 2019, was $10.13 billion, showcasing robust cash generation capabilities.

Frequently Asked Questions

The stability in total revenues was primarily driven by the Cloud services and license support segment, which experienced growth, offsetting declines in other segments like hardware.

Oracle adopted new accounting standards, including Topic 606 (Revenue from Contracts with Customers) and others, which required recasting prior period results. These adoptions did not materially change the overall financial position or results of operations, but affected the presentation of revenue and expenses, particularly in comparative periods.

Oracle is strategically de-emphasizing its hardware business, focusing more on the marketing and sale of cloud-based infrastructure technologies. This strategic shift is reflected in the declining revenues from the hardware segment.

The substantial increase in net income was largely due to tax-related items. The prior year's comparable quarter included a significant tax benefit related to the Tax Cuts and Jobs Act of 2017, whereas the current quarter's tax provision was significantly lower, contributing to a higher net income. The company also completed its analysis related to the Tax Act, resulting in adjustments to its tax provision.