Oracle Q4 2022 Earnings Call Transcript

Quartr
Provided by Quartr
June 13, 2022

There are 9 speakers on the call.

Operator

Good afternoon. Thank you for standing by. Welcome to Oracle's Q4 2022 Conference Call. It's now my pleasure to hand today's conference over to Oracle's Senior Vice President, Ken Bond.

Speaker 1

Great. Thank you, David. Good afternoon, everyone, and welcome to Oracle's 4th quarter and fiscal year 2022 earnings conference call. 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. Additionally, a list of many customers who purchased Oracle Cloud Services or went live on Oracle Cloud recently will be available from the Investor Relations website.

Speaker 1

Call. On the call today are Chairman and Chief Technology Officer, Larry Ellison and Chief Executive Officer, Safra Katz. As a reminder, today's discussion will include forward looking statements including predictions, expectations, estimates or other information that might be considered forward looking. Throughout today's discussion, we will present some important factors relating to our Services, which may potentially affect these forward looking statements. And these forward looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today.

Speaker 1

As a result, we caution you against placing undue reliance on these forward looking statements, and we encourage you to review our most recent reports, including our 10 ks 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. And finally, we are not obligating ourselves to revise our results Oracle's new information or future events. Before taking questions, we'll begin with a few prepared remarks. And with that, I'd like to turn the call over to Sarah.

Speaker 2

CFO. Thanks, Ken, and good afternoon, everyone. As you can see, we had an excellent quarter across the board With total revenue growing 10% in constant currency, the highest organic growth we've seen since 2011 $240,000,000 above the high end of my constant currency guidance. Earnings were equally strong call. As EPS was $0.20 above the high end of guidance, what Q4 demonstrates is that our business is accelerating.

Speaker 2

A growing list of customers, many new to Oracle are choosing us for more products and services as they understand the benefits of Oracle Technology. Our technology helps make our customers modern, efficient and more productive. And they got to see that during the pandemic and now it's very clear. Those customers are then becoming larger Oracle customers. Fusion customers are buying OCI.

Speaker 2

OCI customers are buying Fusion and NetSuite, database customers are moving to autonomous on OCI, industry vertical customers are going all in on Fusion. We have real momentum all around. Going forward and despite the macro environment, we continue to expect the revenue growth in our cloud business will accelerate substantially in fiscal year 2023. We are also excited about completing the Cerner acquisition. Larry spoke at our Oracle Health Strategy session last week and he'll give you more details today and I'll fill in with some numbers.

Speaker 2

As you can see in the financial statements, the currency headwind this past quarter was 5%, which was considerably higher than the 2% to 3% it was during our last earnings call. Following my regular custom, I'll be reviewing our non GAAP USD results using constant currency growth rates, so you have a clear view of the business as we manage it. Now for Q4. Total cloud services and license support revenue for the quarter with $7,600,000,000 up 7% in constant currency, again driven by Fusion, NetSuite Autonomous Database and of course Gen 2 OCI. Total cloud revenues, that's IaaS plus SaaS was $2,500,000,000 in USD, up 22% in constant currency.

Speaker 2

Application subscription revenues We're $3,200,000,000 up 9% in constant currency. Our strategic back office cloud applications now have an annualized revenue of $5,400,000,000 and grew 24% in constant currency this quarter, Infrastructure subscription revenues were $4,400,000,000 up 5% in constant currency. Infrastructure Cloud Services now have an annualized revenue of more than $3,200,000,000 And excluding our legacy hosting services, Infrastructure Cloud Services grew 49%, including OCI consumption revenue, which was up 83%, cloud customer consumption revenue, which was up 108% and Autonomous Database, which was up 29%. License revenues were $2,500,000,000 up 25% in constant currency, lead by database sales for use in the cloud by major application cloud SaaS Companies. Call.

Speaker 2

As a result, our database business had an exceptional quarter with total database revenue up double digits. So all in, total revenue for the quarter were 11,800,000,000 up 10% in constant currency. Operating expenses were up 11% as we continue to invest to meet growing demand for our cloud services. For the quarter, the gross margin for cloud services and license support was 82% And the gross profit dollars grew 4%. The full year growth of this gross profit was 4%, Higher than the 2% we saw last year, and I expect it will be significantly higher in FY 2023.

Speaker 2

Though we will continue to invest in growth, we should benefit from economies of scale of running our cloud business call. As it gets larger, you should keep in mind that our fundamental principle going forward once again higher than all of our competitors. And even while we've been investing aggressively for growth, call. We've maintained our financial discipline. The non GAAP tax rate for the quarter was 10.1 and below our base tax rate of 19%, as we received a benefit from the resolution of some tax matters in Q4.

Speaker 2

EPS was $1.54 in U. S. Dollars, up 7% in constant currency, unchanged in USD. GAAP EPS was $1.16 down 8% in constant currency, down 15% in USD. Let me go through the full fiscal year, though I've given you some full year numbers so far every once in a while.

Speaker 2

Call. For the full fiscal year, total company revenues were $42,400,000,000 up 7% in constant currency and our highest annual growth rate in more than 10 years. Total applications revenue grew 8% compared to 5% last year and total infrastructure revenue grew 7% compared to 2% growth last year. Clearly, our revenue growth accelerated this year as investments into our cloud businesses up 5% in USD, up 8% in constant currency. The full year operating margin percentage was 46%, up 2% from pre pandemic levels and down a little bit, down 1% from last year.

Speaker 2

Operating cash flow over the last four quarters conference call. It's now my pleasure to hand today's conference over to Oracle's conference call. It's now my pleasure to hand today's conference over to Oracle's conference call. It's now my pleasure to hand today's conference over to Oracle's conference call. And free cash flow was $5,000,000,000 with capital expenditures of $4,500,000,000 during the year.

Speaker 2

For the quarter, operating cash flow was $4,000,000,000 and free cash flow was $2,600,000,000 At quarter end, we had nearly $22,000,000,000 in cash and marketable securities, but that's lower now that Cerner has closed. The short term deferred revenue balance was $8,400,000,000 up slightly in constant currency. The remaining performance obligation or RPO balance is 46,600,000,000 call. Approximately 57% is expected to be recognized as revenue over the next 12 months. Call.

Speaker 2

As we've said before, we're committed to returning value to our shareholders through technical innovations, strategic acquisitions, stock repurchases, prudent use of debt and a dividend. This quarter, we repurchased 8,000,000 shares call for a total of $600,000,000 In addition, we paid out dividends of $3,500,000,000 over the last 12 months and the Board of Directors declared a quarterly dividend of $0.32 per share. With the completion of the Cerner acquisition, which happened after the end of Q4. Actually, I guess last week, call. We've added about $15,800,000,000 of debt and we anticipate retaining our investment grade credit rating, Meaning that for the time being, we're going to focus on reducing our debt balance, while continuing share repurchases at current levels.

Speaker 2

In addition, I don't believe the dividend will be impacted at all. Once the debt level has declined, we'll reexamine share repurchase levels. Now to the guidance. We feel very optimistic about our business momentum and we also recognize that there is increasing macro uncertainty right now. In addition, since we ceased operations in Russia in March and made other adjustments in the region, we have factored out around 100,000,000 quarterly earnings per quarter from guidance that we used to receive from these customers.

Speaker 2

Taking all that into account, I do expect our cloud business, which grew 22% this year, will organically grow More than 30% in constant currency in FY 2023. Cloud service and license support call. As I said earlier, our fundamental principle is to grow EPS while accelerating cloud revenue growth. Given our increasing confidence in organic revenue growth, we will continue to prudently invest back in the business and you can already see the returns in our performance. Revenue growth accelerated from 2% in FY 2021 call to 7% this year.

Speaker 2

Clearly, there's strong demand for our cloud services and we intend to capitalize it to capitalize on it. As such, I expect our CapEx spend will be higher in FY 2023 to meet the demand. We expect to add another 6 regions in fiscal 2023 in addition to the 38 cloud regions across 20 countries that we have already serving our customers. I also want to share how we will be running Cerner, since it will impact their contribution to Oracle going forward. We are already working actively to build and implement world class healthcare cloud capabilities.

Speaker 2

Larry will go over that. This means that we are reviewing their entire product portfolio to identify areas where we can include Oracle technology rather than 3rd party products as well as moving them to OCI. These efforts will deliver a more stable, secure and innovative product portfolio for customers, while using less third party product. We remain confident in our ability to grow Cerner's top line and Bottomline faster than they were able to do so on their own as these changes are implemented. Now let me turn to my guidance.

Speaker 2

I'll review Q1 on a non GAAP basis and If currency exchange rate remain the same as they are now, currency should have a 3% to 4% negative impact call on total revenue and maybe $0.05 to 0 point 06 dollars negative effect on EPS in Q1. Conference call. However, actual currency impact may be different. Total revenues for Q1, including Cerner, Are expected to grow from 20% to 22% in constant currency and are expected to grow 17% 2019 percent in USD at today's exchange rate. As with past acquisitions, have added conservatism for the Cerner revenue contribution to account for the transition.

Speaker 2

For Q1, total cloud excluding Cerner Is expected to grow from 25% to 28% in constant currency and is expected to grow from 22% to 25% in USD. As I mentioned above, for fiscal year 2023, Total cloud excluding Cerner is expected to grow over 30% in constant currency. Total cloud growth in Q1, including Cerner, is expected to grow from 47 13 in constant currency. Non GAAP EPS is expected to grow between 1% to 5% and be between $1.04 $1.08 in USD. And as I've said before, Cerner will be accretive to earnings this year, Q1.

Speaker 2

My EPS guidance for Q1 assumes a base tax rate of 19%. However, one time tax events could cause actual tax rates for any given quarter to vary. And with that, I'll turn it over to Larry for his comments.

Speaker 3

Thank you, Safra. As Safra said, call. Our plan is to accelerate cloud revenue growth, while continuing to grow earnings per share. First, let me provide some detail on how call. It all starts with our 2 most important verticals, healthcare and financial services.

Speaker 3

Cisco. In healthcare, we're in the process of building a complete suite of applications for the entire healthcare ecosystem, starting with healthcare providers like hospitals and clinics. We're modernizing Cerner's clinical systems by adding capabilities like voice user interface and applications like disease specific AI models for cancer and other diseases. We're including an IoT device network to improve patient diagnostics and monitoring. We're adding administrative and systems, including managing the incredibly complex contract workforce that hospitals have as doctors are not full time employees nor are Services.

Speaker 3

We are going to help recruiting, scheduling and paying those contract workers according to their contracts. Inventory at hospitals are enormously it's enormously complicated. Inventories aren't in a central location. You find inventory in nurses' stations outside operating rooms, outside the intensive care unit. There's inventory everywhere.

Speaker 3

Managing that inventory is very complicated. For payers, including insurance companies and governments. We're automating payment authorization and billing systems. Pharmaceutical Companies. We're integrating our clinical trial system directly into the hospital clinical system, making clinical trials Easier to start and faster to complete.

Speaker 3

We can do all of this and more because we're building these healthcare applications using the latest, most productive technologies in the cloud, namely the Oracle Autonomous Database and the Apex Low Code Programming Language. Using these tools, security and reliability are built into the technology platform, not the application. In our Financial Services vertical, we're working with major money center banks and leading logistics companies to automate B2B Commerce from directly within the Oracle ERP Cloud. For example, when a hospital wants to buy an x-ray machine, that hospital simply enters a purchase request for the x-ray machine into their Oracle ERP procurement system. That procurement system then sends that order directly to the selling company's Oracle ERP Order Management System and automatically originates a corresponding loan request uses their Oracle ERP order management system to check product availability and submit a shipping request The entire B2B Commerce process is automated within the Oracle Cloud.

Speaker 3

Purchasing, selling, loan origination, shipping, billing and payments. Automating B2B Commerce is yet another huge opportunity for Oracle. We already have over 30,000 cloud ERP customers, including many of the world's most important banks and leading logistics companies. Let's take a moment to look at the progress we continue to make in our Oracle ERP Cloud, starting with Healthcare. We've got a very strong position in healthcare with the providers including Kaiser, Mayo Clinic, Cleveland Clinic, Mount Sinai, Northwell Health, Tenet, Atrium Health, Hi, Markel, Humana, Cigna and many others.

Speaker 3

In Q4, we closed UnitedHealthcare, a win over SAP. We won the NHS, the UK's 2nd major move to the cloud. We won New South Wales Ministry of Health in Australia for ERP and SCM. We won WellSpan, a regional provider in Pennsylvania with 8 hospitals. We won AvChem, U.

Speaker 3

K. Life Sciences Company increasing their footprint in ERP and SCM. Going live in Q4 were the Cleveland Clinic with ERP and SCM UCHealth for ERP and SCM. Pfizer on Enterprise Performance Management, UK Health went live, Atrium Health webinar. In Financial Services, our other really big vertical, We have a as I said earlier, we have a very strong position with the Money Center Bank, with ERP.

Speaker 3

Bank of America uses Fusion Applications, JPMorgan Chase uses Fusion Applications, so does Santander, Bank New York Mellon, HSBC, Lloyds, Macquarie, Credit Suisse, UBS, Credit Agricole, SMFB, TD Bank, Society General, Vanguard, State Street, I can go on and on, but let me go to the results in Q4. In Q4, we won at Citibank, a big ERP win against SAP. We won at Chubb. We wanted PNC, the 6th largest bank in the United States. We wanted SMBC, largest Japanese owned bank in the United States.

Speaker 3

We won Overseas China Banking Corp. We won Mizuho, the 3rd largest bank in Japan, TIAA, Desjardins, Sumitomo also in Japan, GNP, one of Mexico's largest financial services company. We have a very, very strong position in financial services. That's one of the key groups of partners that we're working to automate B2B Commerce along with the logistics companies. In retail, call.

Speaker 3

We won, but we already have Kohl's, Office Depot, Macy's, Kroger's, Albertsons, Tesco, McDonald's, Chipotle, Tiffany, Sachs, Williams Sonoma, Walmart, CVS. But in Q4, we added to that list. We added Lowe's and Albertsons and Sherwin Williams and Abercrombie and Fitch. We had major go lives at Macy's, Nextdoor's and the co op stores, all in retail. In communications, where we're already present at AT and T, Orange, MTN, Barty Airtel, Rogers, Wintry, Telecom Italia, KPN and SAC.

Speaker 3

We won Virgin Media. We had a major expansion at AT and T and ERP SDM expansion. We won a major expansion ERP and EPM at Verizon. Very, very strong quarter in telecommunications with a huge go live for at KPN, the Dutch telecom company in ERP and SCM. Service Wins.

Speaker 3

We already have PwC, KPMG, Booz Allen, TrueBlue, Securitas, Waste Management, Skanska, McDermott, Jacobs. We won in Q4 BDO, Verisk Analytics, and the Mudopto Log Group. Go live in Q4 and services included Pricewaterhouse, ManpowerGroup, TriNet and Republic Services. In the public sector, we had a major win at the state of Missouri, wall to wall at the state of Missouri, ERP, SCM, HCM, that was a win over Workday, SAP and everybody else. We won at the Scottish Government.

Speaker 3

We won at the UK Home Office. We won a state of Switzerland, BAWD. We won general organization for social insurance in Saudi Arabia. We won a deal with the police department in the state of Victoria and Australia. We had major go lives and Public Sector in the City of St.

Speaker 3

Louis and Norfolk County, U. K. In hospitality, where we already have Marriott, Hilton, Caesars, MGM, Loews, Royal Caribbean and Park Hotels. We added Airbnb for ERP expansion, a win over Workday and InterContinental Hotels and Resorts. Logistics, again, this is our other big group of partners in our major effort to automate B2B Commerce from within the Oracle ERP Cloud.

Speaker 3

We have a very strong position Globally in logistics. Our customers include UPS, FedEx, DHL, Swift, Schneider, Union Pacific, Yellow. We added Ann Post, the Postal Service of Ireland. The go lives included DHL, UPS and Deutsche Post. In Higher Ed, we're already installed at Princeton, Cambridge, Julliard, Vanderbilt, UCLA, University of Chicago, Edinburgh, Rutgers, Baylor, UCSD and lots and lots of others.

Speaker 3

We added the University of Maine, East Tennessee State, Villanova, and the State University of New York at Stony Brook. Other notable wins in the quarter on the high-tech we won, we won Teradata, we won a big win at Toyota Motor and ERP win. At DENSO, again, let's see app team was a win another ERP win in Energy Technip Energies. Okay. So it was a very, very strong quarter.

Speaker 3

We're very excited about our momentum in ERP and how we can expand ERP from what it was in when it was an on premise system to what it can be in terms of B2B Commerce Automation now that it's a cloud system. With that, I'm going to turn it back to Sakharov.

Speaker 1

CFO. Thank you, Larry. David, if you'd please pull the audience for questions, we'll go to the Q and A portion of the call.

Operator

We'll take our first question from Mark Murphy with JPMorgan. Your line is now open.

Speaker 4

Yes. Thank you very much and congratulations on

Speaker 3

the double digit growth in the quarter.

Speaker 4

So Larry, your vision of a national health records database is very compelling. It would be a profound benefit to society. Just considering that several $1,000,000,000,000 are spent on healthcare. What do you see as the size of the opportunity for Oracle and Cerner if you solve that particular problem?

Speaker 3

Well, the National Health Records Database solves 2 problems and it allows patients in the case of an emergency to have their caregivers get immediate access to all of their health records, Which will deliver way better outcomes for people. The other is public health officials will get much better information about the state of health in their country. So, I mean, the amount of say having this knowledge, it's we dramatically improve healthcare, but we also save an enormous amount of money By doing that, I don't know if you remember when we sent that hospital ship to New York City because the officials in New York thought they were about to run out of the hospital beds. It turns out they were wrong. We didn't run out of hospital beds, but they didn't know.

Speaker 3

They don't have public health officials don't have access To that kind of information, they're a bit flying it was very clear there. In a lot of cases, they were flying blind during the pandemic. By providing this information, we save a lot of lives and we save a lot of money. The scale of the opportunity is gigantic because it's not people think of it as a national opportunity. It's a global opportunity.

Speaker 3

Every country, I mean, if you look at Western Europe, Western Europe's budgets are dominated by healthcare. If they can save lives and save money by putting in modern information systems, they'll do it and they'll do it quickly. It's clearly going to be our largest business.

Operator

Thank you. Securities. Next, we'll go to Keith Weiss with Morgan Stanley. Your line is open.

Speaker 5

Excellent. Thank you guys for taking the questions and congratulations on Q4. So Safra, you mentioned on the conference call that you guys are putting up this type of result Even on the backdrop, that's not the most stable kind of macro backdrop. And we're seeing a lot of other software companies seeing slip deals, seeing issues with consumer Internet companies lowering their spend. You guys seem to be working through this very well.

Speaker 5

Can you give us some color into how you're doing it? Is it better execution? Is the Oracle value proposition going through more clearly. Can you help us understand where you're able to put up the bigger beats when a lot of guys are working with skinnier beats at all during this period.

Speaker 2

Okay. Well, first of all, you have to understand, we're a very big company. We have thousands, hundreds of thousands of existing customers. Our products also are so compelling That often customers save money by moving to OCI. They also many of our customers realized during the pandemic that they absolutely had to have modern systems.

Speaker 2

Those companies that didn't have modern systems Barely survived through the pandemic. They have to have a digital connection with their customers, with their employees, with their suppliers. Those are the kinds of products we have. And when customers move, let's say, from Amazon to us, the moment they try us, they realize, woah, This is better and more economical. And of course, for Oracle workloads, you can't get anywhere close to what we can do.

Speaker 2

So we have a lot of things working in our favor. Our products, of course, our Fusion products Our superb, I mean we have so many customers. This call is not long enough to reach them. And of course, NetSuite is again industry leading like Fusion for a different part of the market, incredible momentum. And now we by the way, as I mentioned, there's about $100,000,000 a quarter that is just the Russia, Ukraine region That we stopped charging our customers in Ukraine when they were invaded, even though we continue to help them.

Speaker 2

And of course, we suspended everything in Russia. So we just are just Trying to meet our customers' needs, the biggest issue is having enough to meet demand. And I'm actually very happy with the way we manage the supply chain this past quarter, and I'm hoping that It will be it will continue to get better, because that will give us more capacity and more capability to deliver to our customers. So I mean, we just have so much momentum. We have so many happy customers And they're just, new customers are just buying more.

Speaker 2

You get into this cycle, that's very virtuous and People really build confidence in our capability to execute and also the overall economic message and offering that we're giving. We've always tried to give a compelling financial offering and I think that's really resonating in these times.

Speaker 5

Excellent. Super helpful. Thank you.

Speaker 2

Thanks, Keith.

Operator

Next, we'll go to Brad Zelnick with Deutsche Bank. Your line is now open.

Speaker 6

Great. Thanks very much for taking my questions and congrats on the great results. Larry, we've picked up a meaningful uptick In the number of large enterprise agreements or ULAs that customers are doing with Oracle and in particular to satisfy their database needs both on premise and also in the cloud. Do you have any telemetry or other insights into customer behavior to see where they're deploying these licenses. And you can can you talk about why BYOL is so important to your strategy and the longevity of Oracle Database and maybe just for Safra as well.

Speaker 6

That license number was so strong and in your prepared remarks, you mentioned license growth was led by database use in the cloud by major app cloud SaaS Companies. Just wondering if there's any more color you can provide there. Thanks.

Speaker 3

Yes. With the exception of Workday, most of the big application companies may be conspicuously, salesforce.com is a very large Oracle user and they license our database for use in their cloud. But they're not the only ones. There are a lot of SaaS SaaS companies that use our database in the cloud and that keeps our license business very, very strong, our database license business very, very strong. Don't confuse license for on premise.

Speaker 3

Some licenses classically are used on premise, But a lot of the new licenses that we're selling, allow our customers to take those licenses and run them in the cloud, whether it's our cloud or other people's clouds, or in the case of Salesforce in their own cloud. So, it's the Oracle database is still the number one database in the world by a significant margin and it's the number one database in the cloud Very helpful. Thank you.

Operator

Next, we'll go to Mark Moerdler with Bernstein Research. Your line is open.

Speaker 7

Thank you very much and congratulations on the strong quarter and the very positive commentary and guidance. I'd like to drill a little more on this question of people's concerns. With the increasing concerns of recession by many, can you tell me what you're seeing for the apps part of the business and more specifically for ERP? Citi. I'm trying to understand is how will the shift of ERP to the cloud be impacted by any economic slowdown or won't it be?

Speaker 7

How should we think about that? Thank you.

Speaker 3

Well, I'm not sure I call it counter I'm sorry, Sabra, please go.

Speaker 2

No, you go ahead, Larry. You go ahead.

Speaker 3

Okay. I'm not sure I'd call it countercyclical, but the cloud systems cost a lot less than the on premise systems to run. And they give you much better information. They allow you to control expenses better. They don't cost that much to implement because you pay for them over time.

Speaker 3

So we what we're seeing is an let's take a look at NetSuite, which is the low end of the market and you think those would be the companies to be most affected by the recession. It's not JPMorgan Chase. They'll keep building they'll keep putting in new systems, but some smaller entrepreneur led companies you think that the recession we got them. We got the most revenue we ever got from NetSuite this past quarter and the highest growth rate that we've ever gotten from NetSuite this past quarter. They are accelerating into the recession because we think the benefits are enormous and it equips the companies to compete more effectively.

Speaker 3

And again we don't see that business slowing down quite the contrary. We see our ERP business both Fusion and NetSuite accelerating Steve in spite of the macroeconomic situation. Zafar?

Speaker 2

Yes. I think people don't realize how exorbitantly expensive it is to run those large SAP systems. They have data centers associated with them. They have 100, sometimes thousands of technicians to run them. They're old, they're clunky And moving to Fusion ERP is just a totally different world and costs so the costs are tiny In comparison, I think people sort of forget that.

Speaker 2

And this supplies really to cloud offering In that area really is unrivaled, frankly, unrivaled. And we our win rates just continue. And we're very optimistic about it and we've sold a lot, a lot is still being implemented And we expect, that you'll see that in the numbers while our customers end up spending less than what they used to spend with on premise.

Speaker 7

Perfect. I really appreciate. Thank you. And again,

Speaker 3

congratulations. CFO.

Speaker 2

Thank you.

Speaker 3

Thank you.

Operator

Okay. Next, we'll go to Phil Winslow with Credit Suisse. Your line is now open.

Speaker 8

Great. Thanks for taking my question. Last quarter, Safra, you expected organic revenue growth to reach double digits next fiscal year. Congratulations on reaching that double digit milestone this quarter. Now within today's results, 2 really stood out to us.

Speaker 8

First was the upside to license revenue and then second was your commentary about total database revenue growing in the double digits. So my question is Safran, Larry, can you give us more color on what's driving that reacceleration in license revenue in particular, even as cloud revenue inflected to highest growth rate in more than 4 years. Is this BYOL, you're bringing the heat? Is this autonomous database growing getting big enough and growing fast enough to lift the overall number, etcetera? And is this the broad based demand that you mentioned on the Q3 call or is this more big deal driven?

Speaker 8

Thanks.

Speaker 2

So it's a little of both. You see, First of all, large enterprises understand that having an unlimited agreement for some period of time An unlimited agreement gives them unbelievable flexibility. Any large customer, large database user that does not have an unlimited agreement with us is really not optimizing for their spend because it gives them incredible flexibility. They can use on premise for as long as they need it. They can move to the cloud and get a much lower price in the cloud with BYOL and they can move back and forth and it just gives them The kind of flexibility those agreements are the ultimate sort of the foundation of so much of what goes on.

Speaker 2

In addition, of course, in technology, we also have our leading Java business, which on premise is in extensive use and in the cloud is at no charge. So customers can be motivated to bring their Java to the Oracle Cloud and to use it at no charge, their Java program and to use it at no charge. So we have a lot of things that incent bringing your Oracle databases to our cloud and of course all your Java work to our cloud. So, both of those are absolutely critical for our license numbers to be as strong as they are. And the Oracle database, I've been following Oracle for well since the 80s.

Speaker 2

And I always we always hear about some new product that's about to Overtake Oracle. And the reality is that the Oracle database is beyond the gold standard. If you really need work done and if you want to protect your most critical data and you want to use large amounts of it, it is going to be the Oracle database that is head and shoulders above every other product. And invariably, some folks try other things. When they get bigger, They always come back to the Oracle database.

Speaker 2

It is irreplaceable because of its technical capabilities that are so far superior and that becomes very, very, very clear to customers and more and more of them license continue their license and extend those unlimited agreements Whether for on premise and in the cloud, it's not either or, it's both. And that is the best use of it.

Speaker 8

I want to add

Speaker 3

one thing to that, which is The Oracle Autonomous Database is interesting because it's autonomous. In other words, it doesn't require human beings to run it like database administrators, things like that. Recently inside of Oracle, inside of our cloud, virtually every database going up for it to run our cloud the autonomous database because people don't want to hire database administrators inside of Oracle Corporation. It's just much cheaper to run. And I think in that sense, the Autonomous Database is countercyclical.

Speaker 3

You do save a huge amount of money just by moving from the conventional Oracle database to the autonomous database. It's actually more secure, more reliable and costs way less to run. You You don't need a bunch of experts running it. You don't need anyone to run it. There's a programming language called Apex, which uses, it's a low code programming environment, where you use 10% the name amount of programmers that you would use if you were programming and our other programming language called Java.

Speaker 3

And, Apex is also becoming very popular inside of Oracle to build applications. I see this as 2 interesting trends as people using more modern technology

Speaker 8

Awesome. Thanks for the added color. Appreciate it. Keep up the good work.

Operator

And our final question comes from Kirk Materne with Evercore ISI. Your line is open.

Speaker 4

Thanks very much. Thanks for taking the questions and congrats on the good quarter. Severity, can you just give any additional color on the CapEx outlook for fiscal 2023 relative to what we saw this year? And then just to clarify on the buyback, I I just want to make sure I heard it correctly. Is the pace of buyback that we saw this last quarter still reasonable for the near term even with the incremental debt from Cerner?

Speaker 4

Thanks.

Speaker 2

Yes. Let me hit the buyback first, because I know I gave you quite a word sandwich there at the end. I was losing steam. We bought back $600,000,000 this past quarter. I think we bought back about $600,000,000 the previous quarter.

Speaker 2

I expect call to do about the same this quarter. Usually, I don't give you the number in advance, but since previous quarter To those 2, we did $7,000,000,000 in a couple of $8,000,000,000 We're not going to be at that level. We'll be at the $600,000,000 call for a few quarters until I see where our debt levels are. And so $600,000,000 a quarter is probably what I'm targeting. It could be a little bit more potentially, but that's kind of where I'm at.

Speaker 2

And then, on CapEx. Okay. So you noticed how I mentioned how many regions we have. We have just put out, put up so many regions over the past year and a half or 2. I think we now have more than Amazon or we're in I think we do already have more than Amazon already.

Speaker 2

We are going to build another 6 and we're going to expand, the ones that we have because they are being used so extensively in many cases. They are spoken for. And so, I expect CapEx, which was Where it was this year, I think it will be a little bit more than what it was this year, next year. I'll be giving a little bit more detailed guidance as I see it playing out over the year. But we have so much I mean, we have so much cloud demand that I am going to continue to spend in capital expenditure, but I do believe that as a percentage Of our revenue growth, I think I'll start really feeling those economies of scale and increasing my gross margins and my operating margins significantly.

Speaker 4

Great. Thank you all.

Speaker 1

A telephonic replay of this conference call will be available 24 hours on the Investor Relations website. Thanks for joining us today. With that, I'll turn it back to David for closing.

Operator

This concludes today's conference call. You may now disconnect.

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Earnings Conference Call
Oracle Q4 2022
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