Oracle beats on profits, misses on revenue, stock drops

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Oracle executive chairman Larry Ellison and co-CEO Safra Catz.
source
Business Insider

Oracle just reported second quarter earnings.

It reported:

    61 cents earnings per share. Analysts were expecting of 60 cents, so that’s a beat. $9.0 billion in sales. Analysts expected $9.11 billion, so that’s a miss.

Stock is down about 2% in after-hours trading.

Here’s the press release.

Q2 SAAS AND PAAS CLOUD REVENUES UP 81%, AND UP 89% IN NON-GAAP CONSTANT CURRENCY

Total Quarterly Cloud Revenue $1.1 Billion — First Quarter Over One Billion Dollar Mark

REDWOOD SHORES, Calif., Dec. 15, 2016 /PRNewswire/ — Oracle Corporation (NYSE: ORCL) today announced fiscal 2017 Q2 results. Total Revenues were $9.0 billion, flat in U.S. dollars and up 1% in constant currency. Non-GAAP Total Revenues were $9.1 billion, up 1% in U.S. dollars and up 2% in constant currency. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $878 million, up 81% in U.S. dollars and up 83% in constant currency. Non-GAAP SaaS and PaaS revenues were $912 million, up 87% in U.S. dollars and up 89% in constant currency. Total Cloud Revenues, including infrastructure as a service (IaaS), were $1.1 billion, up 62% in U.S. dollars and up 64% in constant currency. Cloud plus On-Premise Software Revenues were $7.2 billion, up 2% in U.S. dollars and up 3% in constant currency.

Operating Income was $3.0 billion and Operating Margin was 34%. Non-GAAP Operating Income was $3.8 billion and non-GAAP Operating Margin was 42%. Net Income was $2.0 billion while non-GAAP Net Income was $2.6 billion. Earnings Per Share was $0.48, while non-GAAP Earnings Per Share was $0.61. Without the impact of the U.S. dollar strengthening compared to foreign currencies and an unforeseen Egyptian currency exchange loss, Oracle’s reported GAAP and non-GAAP Earnings Per Share would have been 2 cents higher.

Short-term deferred revenues were $7.4 billion, up 6% in U.S. dollars and up 8% in constant currency compared with a year ago. Operating cash flow on a trailing twelve-month basis was $14.2 billion, up 9% from the prior year.

“For four consecutive quarters our Cloud SaaS & PaaS revenue growth rate has increased,” said Oracle CEO, Safra Catz. “As we get bigger in the cloud, we grow faster in the cloud. Our non-GAAP constant currency SaaS and PaaS growth rate is now up to 89%. This growth rate acceleration has driven our quarterly cloud revenue over the $1 billion mark. When salesforce.com crossed the billion dollar milestone their SaaS and PaaS subscription growth rate had slowed down to 36%, even after you include all their acquisitions.”

“Oracle has now passed salesforce.com and become number one in SaaS cloud applications sales to customers with over 1,000 employees according to the latest IDC report,” said Oracle CEO, Mark Hurd. “In other words, this year we are selling more enterprise SaaS than any cloud services provider in the world. We expect to book over $2 billion in new annually recurring cloud business this year alone. And, with the acquisition of NetSuite, we plan on being the #1 cloud applications service provider for companies with less than 1,000 employees as well.”

“Our Database as a Service cloud revenue was $100 million for the quarter, driving growth in our overall database business,” said Larry Ellison, Oracle Chairman and CTO. “We expect our Database as a Service and IaaS businesses will grow even faster than our skyrocketing SaaS business. A lot of people were taken by surprise when IDC ranked Oracle #1 in Enterprise SaaS, surpassing salesforce.com and overcoming their fifteen year head-start. Stay tuned. More surprises coming. I think we’re going to do even better with IaaS and the Oracledatabase in the cloud.”

The Board of Directors also declared a quarterly cash dividend of $0.15 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on January 5, 2017, with a payment date of January 26, 2017.

ORACLE CORPORATION

Q2 FISCAL 2017 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

Three Months Ended November 30,

% Increase

% Increase (Decrease)

% of

% of

(Decrease)

in Constant

2016

Revenues

2015

Revenues

in US $

Currency (1)

REVENUES

Cloud software as a service and platform as a service

$ 878

10%

$ 484

5%

81%

83%

Cloud infrastructure as a service

175

2%

165

2%

6%

9%

Total cloud revenues

1,053

12%

649

7%

62%

64%

New software licenses

1,347

15%

1,677

19%

(20%)

(19%)

Software license updates and product support

4,777

53%

4,683

52%

2%

3%

Total on-premise software revenues

6,124

68%

6,360

71%

(4%)

(3%)

Total cloud and on-premise software revenues

7,177

80%

7,009

78%

2%

3%

Hardware products

497

5%

573

6%

(13%)

(12%)

Hardware support

517

6%

550

6%

(6%)

(5%)

Total hardware revenues

1,014

11%

1,123

12%

(10%)

(9%)

Total services revenues

844

9%

861

10%

(2%)

0%

Total revenues

9,035

100%

8,993

100%

0%

1%

OPERATING EXPENSES

Sales and marketing

1,960

21%

1,945

22%

1%

2%

Cloud software as a service and platform as a service

361

4%

280

3%

29%

31%

Cloud infrastructure as a service

111

1%

91

1%

22%

24%

Software license updates and product support

242

3%

293

3%

(17%)

(16%)

Hardware products

242

3%

325

3%

(25%)

(24%)

Hardware support

144

2%

174

2%

(18%)

(17%)

Services

697

8%

690

8%

1%

3%

Research and development

1,510

17%

1,444

16%

5%

5%

General and administrative

303

3%

285

3%

6%

8%

Amortization of intangible assets

302

3%

423

5%

(29%)

(29%)

Acquisition related and other

40

0%

(7)

0%

713%

707%

Restructuring

86

1%

95

1%

(10%)

(5%)

Total operating expenses

5,998

66%

6,038

67%

(1%)

0%

OPERATING INCOME

3,037

34%

2,955

33%

3%

3%

Interest expense

(451)

(5%)

(371)

(4%)

22%

22%

Non-operating income, net

99

1%

84

1%

17%

2%

INCOME BEFORE PROVISION FOR INCOME TAXES

2,685

30%

2,668

30%

1%

1%

Provision for income taxes

653

7%

471

6%

39%

39%

NET INCOME

$ 2,032

23%

$ 2,197

24%

(8%)

(7%)

EARNINGS PER SHARE:

Basic

$ 0.50

$ 0.52

Diluted

$ 0.48

$ 0.51

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

4,104

4,239

Diluted

4,195

4,316

(1)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2016, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended November 30, 2016 compared with the corresponding prior year period decreased our revenues by 1 percentage point and operating expenses by 1 percentage point.