Q2 2020 Earnings Call
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Welcome to Oracle's second quarter 2020, <unk> earnings Conference call.
I'd like to turn the call over to Ken Bond Senior Vice President Ken.
Thank you Holly good afternoon, everyone and welcome to.
Second quarter fiscal year 2020 earnings conference call.
I'll be the press release and financial tables, which includes a GAAP to non-GAAP reconciliation another supplemental financial information can be viewed and downloaded from our Investor Relations website, all the call today, our chairman and Chief Technology Officer, Larry Ellison, and CEO Safra Catz.
As a reminder, today's discussion will include forward looking statements, including predictions expectations estimates for other information that might be considered forward looking throughout today's discussion we will present, some important factors relating to our business, which may potentially affect these forward looking statements. These forward looking statements are also subject to risks and uncertainties that make.
Cause actual results could differ materially from statements being made today as a result, we caution you against placing undue reliance on these forward looking statements. If we encourage you to review our most recent reports, including our 10-K and 10-Q and any appreciable amendments for a complete discussion of these factors and other risks that may affect our future results for the market price burst.
Sorry.
Finally, we're not obligated ourselves revise our results or publicly release any revision of these forward looking statements in light of new information or future events before taking questions. We'll begin with a few prepared remarks with that I'd like to turn the call over to Safra.
Thanks, Ken.
But before I start I'd like to look now.
College and thank you all for the <unk>. Many many sincere condolences we received upon mark passing.
Thank you they mean a lot to us.
As you could see we had another solid quarter.
Quarter, we finished with total revenue growth within my guidance.
And eat P.S. at the high yet.
Cloud services and likes to support continued see material growth and given that it represents more than 70% of our total revenue it more than offsets decline into smaller nonstrategic businesses.
We continue to be encouraged that our overall revenue growth will further accelerate as we reach the final stages of this ongoing shift in businessmen.
Oh wait I'm spending much more time with customers.
The overriding theme might here is a compelling nature of our.
Our technology and how it is critical to the success of their businesses.
Sure Rich simple Q4.
Format and priced right.
They see Oracle is being strategic to their ongoing operations and they tell me repeatedly that.
<unk> is the right partner to run their mission critical assets, both in the cloud and on premise.
Their comments reinforced our conviction that our product strategy is right.
At Oracle, we've upgraded our internal systems to the cloud.
And we're sharing our experience with customers by describing the dining benefits inefficiencies that can be realized from the move.
No we have thousands of customers and references our own experience adopting oracle cloud applications and infrastructure.
Allows us to serve as a unique and knowledgeable advisor to customers, who want to know how to go about their own digital transformation.
Can give you some context, let me share just a few of the many benefits we are seeing into our business.
With fusion ERP.
Pete Cloud, we're now able to close our book and report earnings in 12 days or less.
Many companies don't report their results for a week.
And not only can we get a resell coke faster, but we saved money too.
By using the am I in process Ses infusion ERP class.
We've been able to eliminate more than 30% over manual accounting activity.
And enabled by fusion HCM cloud, we have seen employee satisfaction levels sore with.
All time high rate for things like hiring and Onboarding new employees.
We've also made it easier for our managers and employees.
It's fusion HCM reduces the time needed to complete the talent review process by more than 70%.
And separately, we're saving more than 20000 hours manager time, each year with our accelerated chop off for process.
In the sales were using our front office cloud platform augmented with machine learning and our own creative cloud to help our.
So our salespeople, so more and sell more quickly.
With marketing cloud campaign planning now takes days, rather than a week and with built in machine learning, we've seen a doubling in lead conversion.
We are automatically.
Capture millions of activities in sales cloud each year and was CPQ cloud ordering is much faster and easier with over 70% of our transactions fully automated.
We need it that handled the increased volumes of trends.
Actions as a result of our customers moved to the cloud.
In addition, we've adopted the Gen two infrastructure, including autonomous database for our customer.
Our internal I.P. costs to run these systems are down.
By millions while at the same time, we're adopting more than 100 new features each water.
Here at Oracle, we're going to continue using our own cloud technology as an intelligent automation engine and continue to simplify our business.
Business model and processes.
In turn I expect that our revenue growth rates will increase.
And even more expense efficiencies.
And as a result, I expect that you will see us expand our margins and grow S double.
For the foreseeable future.
Now onto the number.
I'll review, our non-GAAP results using constant dollar growth rates unless I state otherwise.
Currency cute for Q2 was largely in line with my guidance at nearly 1%.
And the fact that the growth.
With rates look the same in a few categories, it's simply because of rounding.
Total cloud services and license support revenues for the quarter were 6.8 billion up 3% accounting for over 70% of total company revenues.
Most of this is recurring revenue cloud an on premise license revenues were 1.1 billion down 7%.
As more of our GPU customers.
Order cloud instead of license.
In terms of eco system.
GAAP application ecosystem revenues were 2.9 billion up 4% with fusion app up in the low thirtys, including fusion ERP up 38% and fusion HCM up 23.
Per cent.
Next week ERP was up 28%.
Vertical SAS was up low double digits, well data cloud stabilized.
On a trailing 12 month basis more than 90% of our application ecosystem revenue.
Is recurring.
[noise] gas infrastructure ecosystem revenues were 5 billion up 1% with total database revenue up 1% highlighted by be while well an economist database revenues both up over 200%.
But off a small base for now.
On a trailing 12 month basis more than three quarters of our infrastructure ecosystem revenue is recurring.
Just a few days ago, we were able to get our first gen to exit data cloud it customer fully.
Ploy unconnected it was done in just four days.
Previously with our Gen. One architecture, it's typically took.
Significantly longer.
As a result, we're very optimistic about the impact our gen two clouded.
Or will have on our business.
No other cloud provider has the right technology to actually do this.
In terms of geography.
We saw double digit revenue growth in SaaS revenue in all regions, except EMEA.
With especially.
The strong results in Latin America.
In Japan.
Gross margin for cloud services and license support was 85% down slightly from last quarter due to accelerated investments in our gen. Two cloud to address higher demand worldwide.
As we get.
To scale.
I expect our cloud gross margins will grow higher driving an acceleration in our gross profit growth.
By the way our strategic hardware products delivered on premise, which includes exit data grew double digits for the quarter.
Once again, showing that our installed base of customers focused on our world leading database platform continues to grow.
Total revenue for the quarter were 9.6 billion up 1% from last year non-GAAP operating income was 4 billion essentially unchanged.
Change from last year, and operating margin was 42% down from 43% last year. The non-GAAP tax rate for the quarter was 18.8 slightly below our base tax rate of 20% and E. P. S was 90 cents in U.S. D up 13%.
In constant currency and 12% in U.S.G.. The GAAP tax rate was 17.7% and gassy P.S. was 69 cents in U.S.C. up 15% in constant currency, 14% in U.S.C.
Operating cash flow over the last four quarters.
With 13.8.
Over the last four quarters capital expenditures were 1.6 billion and free cash flow was 12.2 billion.
We now have approximately 27 billion in cash and marketable securities and short term net deferred revenue.
This is 8.1 billion down 1% in constant currency due to timing differences in customer payments.
Also the prior year deferred balance was affected by our transition to a s. seasick so sick.
Gross deferred revenue was.
Up over 1% in constant currency and would've been up over 3% if not for the A.S. seasick, So six transition changes.
We remain committed to returning value to our shareholders through technical innovation strategic acquisitions stock repurchases and prudent use.
The debt and the dividend this quarter, we repurchased 91 million shares for a total of 5 billion.
Over the last 12 months.
We've repurchased nearly 500 million shares for a total of 26 billion and over the last five years.
Yes, we've reduced the shares outstanding by more than 25%.
The board of directors again declared a quarterly dividend of 24 cents per share.
My guidance today is on a non-GAAP basis and in constant currency.
Assuming current exchange rates remain the same as they are now.
Currency should have a 1% negative effect on total revenue and one cents negative effect on E. P. S.
So for Q3.
Total revenues are expected.
To grow 1% to 3% in constant currency and assuming a 1% currency headwind total revenues are expected to grow 1% to 3% in U.S. day.
Now I realize that might U.S. D and constant currency revenue guidance sound like.
There are the same number but it's just rounding similar to our revenue growth this quarter I do expect a currency impact of 1% nearly 1%.
non-GAAP P. P. S. In constant currency is expected to grow between 10% to 12%.
Yeah and be between 96, and 98 cents in constant currency and assuming a one cents headwind non-GAAP EPS in U.S. D is expected to grow between 9% and 11% and between and be between 95 and 97 cents.
In the U.S. D.
Total capex for fiscal year 20 is expected to be around 2.2 billion, but it could move higher based on demand for data center growth.
My EPS guidance for Q2 and fiscal year 20, it assumes a base.
Pass rate of 20%, however, onetime tax events could cause actual tax rates for any given quarter to vary from our base tax rate.
But expect that he normalizing for those onetime tax benefits it techs events, our tax rate will average around 20%.
In fiscal year 2020.
And finally for fiscal year 2020, I continue to expect that in constant currency total revenue will grow faster than last year, the and that we add that we will report double digit EPS growth for the year and.
With that.
I'll turn it over to Larry for his comments, but [noise].
As I've said before there are two key product areas that will determine oracle feature in the cloud.
Cloud ERP applications and the autonomous database.
Being the clear number one in both.
These two giant applications and infrastructure market segments.
Enabled the success of our other applications and infrastructure products in adjacent market segments. This is already happening in applications, we have a huge lead and cloud ERP with over 7000.
Fusion ERP customers at 20000 net suite ERP customers are closest cloud ERP competitor is worth it and they claim to have a few hundred ERP customers.
Workday block of success and cloud ERP is creating opportunities for Oracle and cloud HCM.
[noise] more and more we're seeing HCM is being purchased as a part of an ERP cloud application suite as a result today, we have more HCM customers and work that [noise].
[noise] and we're beginning to see that same integrated suite strategy beginning to drive our sales hub.
Customer experience applications and sales and service.
Okay.
That's the P. endeavor, we wrote their ERP applications for the cloud.
As a result, that's a season installed base is very vulnerable [noise].
We've already replaced and successfully migrated many mid size.
That's 80 customers from a safety to fusion ERP.
Importantly, a few months from now in Q1 calendar year 20 Twond.
One of the biggest customers will go live on fusion ERP.
Many of Sep.
Largest customer.
Already working with us to develop plans to migrate.
The fusion ERP.
That's an peas customer base is up for grabs.
They didnt reroute their applications for the cloud.
That is created an enormous opportunity for Oracle.
We're already the clear number one and the cloud ERP market as measured in market share.
And our cloud ERP business is already growing at a rate of over 30%.
By offering a safe and compelling offer alternatives to S&P is old technology.
We can increase our applications.
Both rate far beyond that 30%.
We are very very profitable, but we will be overwhelming winter.
In this generation cloud ERP business.
Now, let's look at some alpha fits the wins in the quarter.
[noise], but that's publications media company bought.
Europe .
Albertsons.
Got you RP area.
Supply chain.
[noise] viewed Robinson worldwide the truck transportation company.
Bought ERP.
Yeah.
[noise] DHL supply chain the German company.
But.
Yorkie.
Mm Hmm.
On supply chain.
[noise] Edwards life Sciences, and medical equipment company.
Yes.
New York.
By the way I am not budgeting any HC associated HCM deals go ahead I have a separate lives for it so.
So a lot of these guys.
Maybe that's.
Next quarter quarter, I'll put the HCM deals right next to the ERP deals. So you could see because you'll all be repeating a lot of these names and I guess my lightly seamless that's the point I made earlier that people are now looking at HCM is just another module that we needed the back office there.
Life Sciences body ERP.
Very good set of manufacturing from bought European supply chain.
Global companies Big energy from brought European.
And supply chain NCR financial services.
Bought ERP EPM and supply chain Netscout Telecommunications company.
Well its supply chain mutual life for sure.
But Europe D and supply chain.
[noise] southern sorry, Central gas pipelines, we got energy company for the ERP Technip other energy company bought ERP, but like I think these booking birdsong in energy.
[noise] sepsis.
Drums health care.
The hospital bought ERP EPM supply chain.
Unilever brought ERP.
Supply chain.
Baker Hughes.
Energy company.
Bought ERP EPM and supply chain.
Girls and.
And let the travel services ERP.
Yeah, and supply chain quite petroleum energy company bought ERP.
And supply chain [noise] Liberty Global Communications Company ERP.
And supply chain manpower.
Global Global services.
The company bought ERP.
Yeah and supply chain Sherwin Williams, that's what they bought ERP EPM and supply chain. The suite a lot of people buying multiple modules is not just the ERP. That's ERP its enterprise performance management its supply chain its manufacturing bank of new work.
Well it.
<unk> ERP.
Mm.
Supply to [noise].
Airport terminal services.
I'm, sorry, melanoma by its younger diamond its yembrick bulk of together airport terminal surfaces, but HCM.
Apparel Bostco retail.
Yeah.
Bank Saudi.
Frothy abroad bought HCM Centerpoint energy, but their energy company bought HCM common manufacturing company. They see a gray bar electric bought weeks, Yeah, Hello logic.
[noise].
You asked at the hospital those are the hospitals and below are run by the run by the federal government in Finland bodies.
Their farm.
Yeah.
North Atlantic refining.
I got this is my somewhat weak energy company.
And Thats a.
These stronghold the energy sector brought HCM per month, so that's our central type one big gas company energy.
Yeah.
[noise] Technip energy company HCM so that.
Health care about HCM touches children's health.
Hospital bought HCM and what the brands brought bcm.
Birmingham City Council bodies quick Petroleum company.
Big Energy company bought HCM.
That is healthier HCM Phoenix like holdings HCM.
In.
Customer experience.
Equinix abroad, but service offerings that enterprises.
Service, Ferrari bars, and sales and marketing.
Hi, kill broad Oh, but service.
Nordstrom box service Paypal.
Oh, I thought about marketing rabobank.
Bought service and Santander Bank bought server.
Okay.
Let me move onto the other segment, which is autonomous database and Gen two infrastructure.
In the database market, we are the overwhelming number.
One.
With the combination of a dominant share on premise.
And.
And.
Very strong market share.
In the cloud, though that I have yet to see any any good data on on database markets here in the cloud our database, but ER business.
Is growing very very rapidly because we have an enormous technology advantage in the cloud over all of our competitors with autonomous data. This economists Davis.
The world only autonomous business.
What does that mean that means when you configure the system.
You don't do anything.
The system Configures itself robots configure the system. The recent capital one lost all that data. They ws is because one of the capital once people maybe configuration here you can't make configuration areas with the autonomous database because human beings don't configure the system.
A lot a lot of these.
Above the full headlines of people, losing their data are caused by human errors.
People forget the top systems remember that one that's some but not all all of all of the systems.
With us about it was a tough used trucks database.
Didnt get passed they didn't bottom or just what autonomous database.
Automatically passes itself when it went a 60 flaws detected by the way they could tested tough the Curt has a pretty well over the phone.
That's what that they knew about it they just didnt get around the patchy such it's hard despite all the databases you had to you as scheduled.
Well downtime you don't scheduled downtime with the autonomous business.
You, possibly autonomous database lock the database is still love it.
But you don't come to the robots are robust touch the data this.
That's why it's autonomy there's no human.
Labor So there's no human error, so if you're willing to pay less.
Not how that human labor.
You get rid of all those mistakes.
This is a gigantic technology advantage by the end were 10 times faster than anything Amazon.
That means were much cheaper.
But anything Amazon.
Much safer.
Well, it's easier to use build applications faster.
So.
We already have thousands of autonomous database customers running in our public cloud we added 2000 more this quarter.
And our autonomous business. This offer said is growing in excess of 200% autonomous.
This is off a small base the middle East that's a relatively new product, but it's it's on its way that being the most successful new product introduction in our company's history.
No this triple digit growth rate.
Well I expect.
[laughter] bike up dramatically because the but other things after just mentioned.
We entered.
Production of our autonomous.
Database cloud at customer Gentoo cloud customer, though when people start putting a calling them as database.
We all are positive as customers will be declare our in our public cloud.
A lot of our customers, especially those in regulated markets big bets.
People.
Government agencies defenses defense ministries people about they need the it's on the database capabilities behind their firewall in their data center and <unk> and over the next few months, we're rolling out this autonomous database gentoo cloud customer.
The older caused a better too.
Trying to create these outposts that their cloud on on the floor on the floor is that their customers.
We actually have at work and if that were in our second generation of as we got we did it early albeit at a reasonable first generation job, but you know the second time to charm and this new Gen. Two stuff was it was can be installed in a.
No. The first when we installed and four days, we expect to do that even faster. So there'll be more time spent I'm asking the hardware and plugging. It in then readying the software because because it just since up with our public cloud and your and your often run.
This is going to be a huge opportunity.
For us to dramatically increase the adoption rate on a bottoms business very excited about though.
The okay.
The when that happens.
We think.
By any measure we will be not only be or have the overwhelming market Shirley.
On Prem, but the overwhelming market share leader in the cloud, we expect to hold onto our database franchise in a big way.
So.
Our it's interesting that both of our autonomous database and our cloud applications.
Our.
Running and our new Gen two highly highly secure infrastructure.
And.
By the end to 2020 by the end of next calendar year. This time next year.
Able to say that we have more gen. Two data centers and work in more countries that Amazon Web services.
As data centers period.
We are adding lots and lots of data centers lots and lots of countries and again, we'll have more and being more data centers more countries and Amazon.
By the end a year from now that's very very excited now let's look at some of our autonomous database in Gen two infrastructure wins.
This quarter.
[noise], Okay, [laughter] via Internet and our international Big manufacturing Surfer Albertsons.
This is another this is this is more synergies that I've got a mentioned when people buy our applications. They buy our ERP obligations. They also build data warehouses associated with it you know with those applications. They do.
A lot of work so a lot of our application customers are beginning to be.
Infrastructure autonomous database customers and infrastructure customers. So yes. When you bought your P. you might also by HCM, but when you buy ERP, you're also going to buy.
The fusion data warehouse, which has an autonomous vis a vis.
Product and infrastructure for Youre going to buy.
Sticks at our and our Gen. Two data center you'd be upcoming infrastructure customer as well as an application customer and we see a lot of overlap we often see people buying suites of applications ERP, plus HCM, what sales and things like that but also applications plus infrastructure.
Hey on financial services.
Biogen.
Bought autonomous data warehouse.
It's still system.
Again, gentoo infrastructure and autonomous data warehouse.
Clear stream services same thing Jeff Gen, two infrastructure economist Datawarehouse embraer or.
In addition, the Brazilian airplane the aircraft manufacturer autonomous database and Genfuel infrastructure.
Equity bank, the senior economist database jumped to infrastructure.
Our thoughts and all company, but a big distribution company in the United States Gen two infrastructure.
Care Services Corp.
Junkfood infrastructure and autonomous database indirect gentoo infrastructure sink Feisal specialists hospitals and research Center Autonomous database, it's autos transaction processing.
The core University of thought of as it as one of those database gentoo infrastructure Manchester.
That's on them as database Genfuel infrastructure M. Jim.
Third seamless.
Autonomous database settlement on them as transaction processing Providence Health care services autonomous database the towards autonomous.
Transaction processing browse and.
Schenker logistics in Germany economists data warehouse.
So sour genfuel infrastructure.
With post gentoo infrastructure autonomous Datawarehouse target based in the United States Economists database autonomous Datawarehouse Technip energy company, but I've mentioned that but I believe HCM ERP for the full suite and gentoo infrastructure and that's on the database the Boston.
Hello.
Genter infrastructure autonomous database.
Thermos Autonomous database economist transaction processing hybrid soft autonomous database, Todd works, Netherlands, Gen, two infrastructure, Tokyo gas and electric.
Autonomous data warehouse Gen two infrastructure trademark.
I say Gen two infrastructure Walgreens, it's autumn as data warehouse, we thought it was transaction processing Gen two infrastructure.
Well I think that autonomous Datawarehouse Gen. Two infrastructure Zim, the big shipping company you see along with Maersk you see this is Jim on lots and lots of good bidders.
I thought it as database I thought on the transaction processing and Gen two infrastructure.
As a critical life insurance economists database Gen two infrastructure.
Banco de Chile autonomous activists autonomous Datawarehouse Gen two infrastructure.
Baxter healthcare.
Autonomous Datawarehouse Cigna corporate services autonomous Datawarehouse gentoo infrastructure.
Event bright.
Gentoo infrastructure Ford Motor Company Gen. Two infrastructure autonomous database, the condiments warehouse Mary Kay Gentoo infrastructure, Samsung electronics Gen. Two.
Trucks are taught him as database autonomous transaction processing.
Verifones Gen two infrastructure autonomous database and autonomous transaction processing.
With that I will turn it over.
To the audience for questions.
Alright, Thank you Larry I'll if you.
Good please prepare the audience for questions.
Ladies and gentlemen, if he would like to ask a question. Please press Star then one on your telephone keypad again that star one for questions.
And our first question is going to come from the line of Michael Turits Raymond James.
Hey, good even everybody.
It was good see that you.
And your guidance for full year for revenue acceleration than double digit EPS growth, but.
Thank you got it does that just a very strong fourth quarter on top of what was the fourth strong first quarter last year. So can you give us a little bit of visibility to what's driving that confidence and also I know it's early but.
Even with what that means for fourth quarter, what it would mean in terms of what that implies about fiscal 21.
So we've got everything finally out and available and as Larry and I. Both mentioned, we've got climate cloud customer we have a lot of orders for that that we.
Not deployed yet so we've got a lot of demand there we've got a ton of MS database, we've got new versions of autonomous database on track.
We've got.
The entire fusion sweet rolling event, including all of the additional modules have all been.
Continuously upgrades. So we've got in men's mounted demand and we have enormous pipelines and our conversion rates are increasing and so the pipe has just expanded so dramatically than I know, we're going to have more bookings, but also.
Previous bookings as those.
Deals are ramping up and more users are using the products, we're very very upbeat about the second half, but even more so next year. We believed that the momentum we will have in the stacking it now.
This year.
Will more than carry through to 2021.
Great. Thanks very much please.
Yeah.
Our next question is when it comes from the line Heather Bellini Goldman Sachs.
Great. Thanks. Thank you so much for the time and I'm going to try and get away with two questions, but I.
I guess the first one separate as you mentioned about license this quarter. It was a little lighter than what I think people were expecting I know, we're talking about a big base, but if there's anything you could call out in terms of whether it to the sales force reorder just macro or.
Whatever.
In terms of of the results in the quarter on that line and then I know just covering the company for Royal given the Lumpiness historically between Q2 in Q3, I know sometimes deals push from one quarter to the next and typically it's better to just average those two quarters, but but how do you feel about the outlook for the Q3 license.
And then I just have one follow up if you don't line up.
Generally feel very good about the Q3 license number as you said it is lumpy. The one thing we do have is that the GB use which of course not a giant part of our license business, but our significant Dave they have moved.
And their cloud products have become available and I do expect that MOCVD orders for new for new services.
In the Gpus will come through as cloud services instead of just plain license.
But I don't think that'll be as significant.
I do I do expect.
That licenses in fact, I will be just fine in Q3.
And then the GB piece.
Okay and then just my follow up I mean, these calls just still don't feel the same without without mark being on them and with all due due respect to him.
It to his passing it just knowing how hard it is going to be to replace.
I mean is there anything to share with us regarding.
Ooh getting some getting someone to kind of help help take its place in some of the responsibilities that you've taken over.
Okay.
This is Larry I'll, just ask the question because I get the question.
So how's our search for a second CEO gone.
Remember when we announced two Ceos. The first on was people thought that was a bit AUD and.
Now now people are finding that we have one ceos a bit on Tuesday.
So.
So let me thank you very simple how's our search.
Going for the news for a second CEO , we don't have one we have no plans of for having a second CEO . It was it was an unusual situation.
We are.
Mark and Safra were absolutely fantastic team.
But.
We have complete confidence in our existing management team, we're doing a lot of.
I think you'll see a lot of announcements at the next layer down that we're hiring a bunch of people over the next layer down who are potential Ceos when both sovereign I retire.
[laughter], which is not anytime soon.
And.
So.
We're going to strengthen the management team, but one of this.
Strategies for strengthened our team is not the higher et cetera.
Thank you very much next question. Please. Thank you have an hour next question is going to come from the line of Brad Zelnick Credit Suisse.
Great. Thanks, so much Larry the momentum in autonomous database is fantastic growing over 100% in your public cloud, but having.
I've been in market now for over a year I know investors are wondering when we might see an inflection in your financial results from autonomous and I. Appreciate many customers are including some of the required database option in their deals, but now that you're making it available on gen. Two cloud of customer how should we think about the appetite from your installed base how material can beat your.
Financials and is there anything you might compare to win Oracle's history.
Well no I mean, there either in terms of technological breakthrough well you I guess with the first diverse commercial relational database.
The very beginning Wow Thats kind of upgraded Oracle Corporation answer maybe at the very first commercial relational database, we had one before IB embedded.
Good or anyone else it so.
That traded that turned this company.
From an idea into of the.
The company's manages most of the world's information.
So I would say autonomy databases that same kind of things.
It is so much different so.
So much.
Super to use so much more reliable.
Than anything else that's in the market I think everyone is going to users.
Virtually everyone is going to use it now that said it is you know it takes a while a when you introduce an all new product. The good news as we haven't a huge installed.
Yeah, It takes a while for that.
For us to ship, a if you will and nexgen technology, and if people comfortable with it and using it and that first year, we've seen a lot of early adopters, but the early adopters and now the files.
And.
We think eventually the only database will.
What's the thought of.
It will replace everything else.
And by the way that eponymous databases only available in Q4.
If we put a cloud into a if we put our cloud in your data center, that's our exited a machine and our middleware machines at all in all of Thats in our storage in your data center and our public.
So we think will be consumed one of those two ways and that will replace our entire best so.
It means that our existing database business from a financial standpoint will more than double or triple or triple probably is a reasonable estimates to look out now go course when.
You are in your business, it's all about timing.
[laughter] and I wish I.
I wish I could tell you exactly.
How much will sell over that over the next.
Uh Huh 18 months.
That that that's the that's kind of tricky that we don't have that many data points, we have four quarters of data points.
And the first couple of quarters of soda. So we're really only have a couple of quarters of did once all I can say has none of us ever ever ever seen an adoption rate.
Like this.
Fantastic. Thank you Larry.
Our next question is going to come from the line of Phil Winslow Wells Fargo.
Hi, great.
Thanks for taking my question just focusing on the applications business, obviously saw a nice pick back up here quarter to quarter in terms of a year over year growth rate.
A question of sovereign I guess, Larry to what do you think about the before the different curves that build up that business, obviously, you've talked about in the past some of the headwinds from things like data cloud and then also some of wins we saw on your fusion vision.
Your next week.
This quarter, where are we would you stack all those curves together are we pass some of those headwinds and we're now looking at sort of acceleration from here in other words.
Q1 was the trough or just help us kind of layer cake that up have you guys.
So let me let me get started and then Larry can add.
When he needs to add so first of all the data cloud has.
But.
I don't know fit will stay that way, but that was a very significant headwind for us in that whole business. It is completely stabilize it grew ever so slightly additionally, the adoption in our ERP cloud is now such that the thousands.
Many many references and what happens in our business is that once you are sort of obviously referenceable if it becomes much much easier for other.
Potential customers to move ahead, one of the things that.
Has been to.
That makes sense.
Leading to a wait and see attitude by some historically business suite customers was the adoption of first availability and now adoption of supply chain. Our supply chain now has many many customers until more of our customers are willing and.
Interested in moving at remember every single quarter.
Hundred plus new features become available and some of those have been must have features for extremely happy customers in the business weight simultaneously as Larry mentioned Sep customers.
Realized that Sep is offerings are not cloud offerings. If you use essay piece technology, you don't get 100, New features every quarter. There's is simply a hosted offering which means that we are the obvious choice for customers who.
Who want to go through and really adopted digital approach in their business and so for US. This is going to be success leans more success, it's an incredibly virtuous cycle as Larry mentioned when it also means is that additional modules are.
Going.
And that's clearly showing up in our other segments and of course, HCM, which is obviously a match and of course and then ultimately the front office, where we've got a lot of new technology rolling out that is being adopted.
Yeah, I think a lot of Sep is very again in the mid market, where we are replacing a lot of sep customers and we got them live and we have references.
But you know right at the very at the very Apexs Sep is customer base in their top 50 customers around the world.
There.
There are a couple of gave US one particular implementation that where we expect to go live in March of next year and Oh.
I would describe them is rooted rooting for us they want to have an alternative.
To a billion dollar S&P upgrade.
Yeah, I think the end of life.
Right.
There are current stuff.
In 2020 bought so if your biggest they'd be customer you got to make it is that some people have bought as you bought actually bought US warehouse club with no planned with no really good plan to implement it it's a it's a five year implementation, they're getting price.
Most of the billion dollars for the upgrade matching going from.
Your existing safety system, taking out Oracle and replacing Hannah and that's the only change basically the feeling change.
And it's host it's not it's not cloud there was no cloud I think I wasn't well, it's easy for Oracle say go down to say piece websites.
And try to find the S&P cloud for ERP I mean, you I mean, you can find it for the stuff. They bought you can find it for Callidus.
Which is on one cloud you can find it for a repo which is on another cloud you can you can find it for little survey monkey.
And all the stuff that they bought but they.
Forgot.
They forgot to write Europe , Thats, our business and I forgot to rewrite ERP there their project that they had to do that whole business by design built the council. So there is no cloud option for Sep is customers. They can't go to workday.
They can even to handle midmarket ERP.
So were it so believe me they want they want an alternative.
Makes sense, whether they should one alternative.
But we've just got to demonstrate that we can say if we take these enormous companies or to the cloud.
In a way that they're not putting their business in any risks and that's.
Why this one particular giant implementation other watching closely but by the way that they're not just watching and waiting a number of their biggest customers in the heart of Germany.
Lots of them are working with these are German customers. The core of S&P are working with us.
And.
And.
Taking some of their to moving some of their divisions already what most some of their divisions to Oracle fusion to persuade themselves that we that we could do this safely they've gone that far they don't want to continue with this obsolete code. This is this opportunity is gigantic.
Because we have one ERP customer on competitor on process.
They don't have a cloud offering necessity and we've got one ERP cloud competitor that just is not doing very well I think hard time getting their their business off the ground Doesnt scale there are a.
There are a lot of problems. So we have a chance we have a chance here.
To be in out to get what used to be in the old world Colgate share offer ERP.
And you know get it looks like Microsoft office to be the Microsoft office of ERP.
We're.
It's sitting there and we just have to get this last proof point out Sep is largest customers. Yes. We can do this we can do it safely and.
We will be.
Overwhelmingly the largest application company in the cloud.
Thank you Larry next question please.
Our next question is going to come from the line of Mark Moerdler Sanford Bernstein.
Thank you very much on for taking my questions.
Problems day to be sounds like it really starting to gain traction given the shift of sales personnel to selling autonomous give us some more colors.
Specifically are you seeing.
The customers buying the required modules as license of including with the cloud are you seeing changes and the size of the customer size of the pipeline hind takes from customer answers to adoption on any of that would be really appreciated.
Okay.
I'm happy to do that.
I think the most interesting thing that's going on as we've decided to take if you will and eight ws approach to selling or talk to this in the cloud so.
We almost prefer selling a $30000 deal to 100000 dollar deal to the 30000 argue with closing four weeks.
So we think.
The way to sell what part of his database is to get it installed on a project and one of our customers get it going help them become successful and then once they understand whats are actually got their hands on autonomous database and they have working up and they are working projects working data warehouses working transaction processing systems.
You starts you land and expand.
And so we're selling thousands and thousands of small deals and some of those deals already coming back as large as larger deals, but our approach again is too and most and most of it is not be while well because they're small I mean, some of it is done and not yeah. Some of us be why all but the majority.
He is not the oil.
It was it was interesting in the early days in ERP. When we are ERP vehicles will use movie or E business, we customers know there were new logos.
The early days and cloud ERP for us they were new logos.
Believe it or not we're actually seeing new logos in database, but again most.
Most of them or our customers, but they're not using their existing licenses are going ahead and using.
Are you using a standard plot pod license plates and coal will be called Takeup.
They pay as they go.
You pay for what you use I mean, it's the promise of the cloud and we're getting in thousands of these because we think the best.
So.
Selling testing for autonomous database is try it get it rather.
Watch it backs itself up and upgrades itself did tunes itself. It can figures itself. There's nothing like it we just got as you know when those hearts and minds and the way to do that is.
Go go wide across our entire customer base, that's what's going on and and again. It is working very very well I think is working very very well because we're seeing just beginning to see the first people coming back and going from 30000 hours a month to 600000 horsepower.
Next question please.
Our final question for today will come from the line of Kirk Materne Evercore.
Hi, yes, thanks very much in thanks for taking the question severance is once you could comment on just sort of the geographic landscape for you all looked like Europe was perhaps a little bit softer and your other geographies this quarter.
Maybe that's just background I was wondering if you just add a little bit color on on sort of what you're seeing across the different theaters. Thanks.
Yes, this quarter AMEA only grew in the single digits as some of the other regions did grow in the high double digits, some very high double digits.
Yeah, I think there's nothing really special going on one way or the other amounted to just the way the quarter falls out for them, but overall our business remained very strong and I think that next quarter could be completely different so.
It was.
If it's really nothing we're not seeing a massive change even month over month or quarter over quarter from from what it looked like obviously.
There's some regions doing very very well for a number of different reasons as they get to roll out new new.
Capabilities, we've got a lot of we've got data centers opening and have opened very very successfully in Latin America and in Asia and in Japan, and so we've got a lot of a usage and increase.
In in some of those.
Areas, which helped explain some of the big growth in some of those areas, but EMEA I think we'll see.
There's nothing special in particular I have no real color to add.
And we'll see what happens after up after today selection in the UK.
Sounds good thank you.
Thank you Safra, a telephonic replay of this conference call we'd be available for 24 hours you.
Dial in information can be found in the press release issued earlier today. Please call the Investor Relations Department any follow up questions from this call. We look forward to speaking you.
With that I'll turn the call back to Holly for closing thank you.
Thank you for joining us for today's Oracle second quarter 2020 earnings Conference call. We appreciate your participation you may now disconnect.
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