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Oracle Corporation (ORCL)

F1Q2011 Earnings Call Transcript

September 16, 2010 5:00 pm ET


Ken Bond – VP, IR

Jeff Epstein – EVP and CFO

Safra Catz – President

Larry Ellison – CEO

Mark Hurd – President


Adam Holt – Morgan Stanley

Heather Bellini – ISI Group

Sarah Friar – Goldman Sachs

Jason Maynard – Wells Fargo

John DiFucci – JP Morgan

Kash Rangan – Bank of America/Merrill Lynch

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Phil Winslow – Credit Suisse



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Good day, everyone, and welcome to today's Oracle Corporation quarterly conference call. Today's conference is being recorded. At this time, I would like to introduce Ken Bond, Vice President of Investor Relations for Oracle. Please go ahead, sir.

Ken Bond

Thank you, Ruthie. Good afternoon, everyone, and welcome to Oracle's first quarter fiscal year 2011 earnings conference call. With us on the call today are Chief Executive Officer, Larry Ellison; President, Safra Catz; President, Mark Hurd; and Chief Financial Officer, Jeff Epstein.

As a reminder, today's discussion will include forward-looking statements including predictions, expectations, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, these statements are also subject to the risks and uncertainties that may cause actual results to differ materially from statements being made today. Throughout today's discussion, we will attempt to present some important factors relating to our business, which may potentially affect these forward-looking statements.

We encourage you to review our most recent reports on Form 10-K and 10-Q and any applicable amendments for a complete discussion of these factors, and other risks that may affect our future results or the market price of our stock. As a result, we caution you against placing undue reliance on these forward-looking statements, which reflect our opinion only as of today. And as a reminder, we are not obligating ourselves to revise or publicly release any revisions to these forward-looking statements in light of new information or future events.

A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation and other supplemental financial information, can be viewed and downloaded from our Investor Relations website. We will begin the call with a few prepared remarks before taking questions from the audience.

With that, I would like to turn the call over to Jeff for his opening remarks.

Jeff Epstein

Thank you, Ken, and welcome, Mark. Good afternoon, everyone, and thank you for joining us. I will review our non-GAAP financial results, focusing on U.S. dollar growth rates unless otherwise stated. This quarter, foreign exchange rates weren't much of a factor in our overall results compared to our guidance of a negative 2% currency effect to new license revenue, and a negative 3% currency effect to total revenue.

We beat the high end of our guidance range for new license revenue, total revenue, and earnings per share with record earnings per share for the first quarter. On a constant dollar basis, we also beat our guidance ranges for new license revenue, total revenue, and earnings per share. In short, Q1 was an excellent quarter for Oracle.

In the first quarter, new license revenues were $1.3 billion, up 25%. The Americas grew 33%, EMEA was up 12%, and Asia was up 26%. With each region up double digits on a constant dollar basis as well, our results continue to underscore the strength and diversity of our business and the quarter was not dependent on any unusually large deals.

Technology new license revenues were $937 million, up 32% as the Americas grew 44%, EMEA was up 25%, and Asia was up 19%. Applications new license revenues were $349 million, up 10% from last year. The Americas grew 14%, EMEA was down 19%, and Asia was up 54%.

Our software license updates and product support revenues were $3.5 billion, up 11% from last year. Customer support attached and renewal rates continue at the usual high levels. Revenues from our hardware systems products were $1.1 billion, while revenues from hardware system support were $680 million. Our services revenues were $1.1 billion, up 18% as we continue to manage this business to profitable margins. Our total revenues were $7.6 billion, up 50% from last year.

Non-GAAP operating income was $2.9 billion, up 27%. The non-GAAP operating margin was 39% for the quarter. Our tax rate for the first quarter was 24.7% as we saw some one-time benefits to our tax rate. Our Q1 non-GAAP earnings per share were $0.42, $0.05 above the high end of our EPS guidance range of $0.35 to $0.37. Earnings per share were up 38% from last year.

In Q1, we repurchased 10.8 million shares at an average price of $23.13 per share for a total of $250 million. As we have previously discussed, the rate of our stock buyback will fluctuate each quarter taking into account alternative uses for our cash and our stock price.

Turning to the balance sheet, we have $23.6 billion in cash and investments. Our day sales outstanding improved again to 45 days compared to 46 days last year and is a testament to the quality of our receivables, the quality of our customers, and the effectiveness of our collection efforts. Finally, we generated $8.5 billion in free cash flow during the last four quarters.

Now, I will I turn the call over to Safra.

Safra Catz

Thanks, Jeff. I'm going to just make a few brief comments on Q1 and then I'll review the guidance for Q2 and turn the call over to Larry and Mark.

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