This summary is based on the third quarter fiscal 2008 earnings call conducted by Oracle Corporation (ORCL: chart) on March 26, 2008.
Co-President, Chief Financial Officer, Director: Safra A. Catz
Chief Executive Officer, Director: Lawrence J. Ellison
Co-President, Director: Charles E. Phillips
Investor Relations: Roy Lobo
Key Investors Issues
- The earnings per share were 26 cents versus 20 cents in last year.
- Quarterly revenue rose 21% over previous year to $5.35 billion.
- For Q4, GAAP EPS is expected to be 37 cents to 38 cents, up from 31 cents last year.
Third Quarter Fiscal 2008 Financial Highlights
For Q3, the firm delivered another very strong growth in EPS and net income of 23% and 22% respectively.
The firm has now completed 15 quarters of its original five-year EPS growth plan of 20% per year and has delivered another earnings growth well in excess of that target.
The highlight of the quarter is clearly the margin, which continues to accelerate.
For the quarter, the firm delivered another nearly 200 basis points in year-to-year margin improvement, bringing the non-GAAP operating margins to 41%. This is in addition to the margin improvement delivered in each of the prior two quarters. Oracle has already met its fiscal year margin improvement goal of 100 to 200 basis points in the first nine months of the year.
On license, the firm was within the guidance range but customers got a little more cautious at the end of the quarter, given what was going on in the financial markets.
Deals are getting done, although they took a bit longer than anticipated in the last few days of the quarter. Interestingly, some of the deals have slipped past the February cut-off already closed in the first few days of March. As you will see from my Q4 guidance, the firm’s pipeline growth continues to build at a very rapid pace.
New software license revenues were up 16% to $1.6 billion. That is after a very tough comparison of 27% growth in Q3 of last year.
Technology new license revenues were extremely strong, growing 20% year over year to $1.2 billion. In technology, the firm is clearly beating the competition and taking market share away from competitors.
The
applications business delivered new license growth of 7% year over year to $451 million, but that’s after a 57% growth rate in Q3 of last year. The firm’s trailing 12 months application license growth rate is 29%, well ahead of peers, more than double of SAP and well ahead of its own expectations.
Hyperion contributed $64 million in license revenue during the quarter and
Agile contributed $14 million. Software license update and product support revenues were up 23% on a non-GAAP basis to $2.6 billion and the firm is still on a revenue run-rate to achieve over $10 billion in this high margin business for fiscal 2008.
- The firm is delivering strong operating income in March as its non-GAAP operating income grew to $2.2 billion, with margins increasing nearly 200 basis points to 41%.
- EPS grew 23% to 30 cents on a non-GAAP basis and on a trailing 12-month basis, operating cash flows increased by $2.3 billion year over year to $7.3 billion, while free cash flow increased 48%.
- The currency impact for the quarter was a positive six points on revenue.
In Q3, Oracle bought back about 24 million shares at an average price of $20.64.
The rate of buy-back will fluctuate from quarter to quarter, taking into account the alternative and anticipated uses of cash, including paying down the debt associated with the acquisition of BEA.
Key Customer Wins
