Oracle Corporation (ORCL)

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Oracle (ORCL)

F1Q10 Earnings Call

September 16, 2009 5:00 pm ET

Executives

Ken Bond - Investor Relations

Jeffrey E. Epstein - Chief Financial Officer, Executive Vice President

Safra A. Catz - President, Director

Lawrence J. Ellison - Chief Executive Officer, Director

Charles E. Phillips Jr. - President, Director

Analysts

John Difucci - J.P. Morgan

Sara Friar - Goldman Sachs

Adam Holt - Morgan Stanley

Heather Bellini - ISI

Joel Fishbein - Lazard Capital Markets

Kash Rangan - Merrill Lynch

Presentation

Operator

Good day, everyone and welcome to today's Oracle Corporation first quarter fiscal year 2010 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, Kristen and good afternoon everyone and welcome to Oracle's first quarter fiscal year 2010 earnings conference call. I’m Ken Bond, Vice President Investor Relations and with us on the call today are Chief Executive Officer Larry Ellison; President Safra Catz; President Charles Phillips; and Executive Vice President 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 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 effect these forward-looking statements. 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 the results of any revisions of these forward-looking statements in light of new information or future events.

We would encourage you to review our most recent reports on Forms 10-K and 10-Q and any applicable amendments for a complete discussion of these factors and other risks that may cause our future results or the market price of our stock.

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 website at www.oracle.com/investor.

We’ll begin with a few prepared remarks but before we do take questions from the audience, we want to remind everybody that we will only be discussing Oracle’s Q1 of fiscal year 2010 results.

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

Jeffrey E. Epstein

Thank you, Ken. Good afternoon, everyone and thank you for joining us. I will review our non-GAAP financial results, focusing on constant currency growth rates, unless otherwise stated.

First a note about foreign exchange rate movements -- in June, we told you that using then current exchange rates would reduce our Q1 revenue growth by 5 points compared to constant currency. During the first quarter, the U.S. strengthened again compared to last Q1, further reducing our international revenues, expenses, and profits when measured in U.S. dollars. As a result, currency movements reduced new license revenues by 3%, total revenues by 5%, net income by 4%, and earnings per share by 5% or $0.02 per share compared to Q1 of last year.

Now let’s review the income statement. In the first quarter, our new software license revenues were $1.0 billion, down 14% in constant currency and down 17% in U.S. dollars. The Americas declined 5%, EMEA was down 20%, and Asia declined 22%.

Technology new license revenues were $711 million, down 19% in constant currency and down 22% in U.S. dollars. The Americas declined 11%, EMEA was down 26% and Asia declined 22%.

Applications new license revenues were $317 million, unchanged from last year on a constant currency basis, and down 4% in U.S. dollars. The Americas grew by 6%, EMEA was up 3%, and Asia declined 23%.

Our software license updates and product support revenues were $3.1 billion, up 8% in constant currency and up 3% in U.S. dollars. These revenues are annual fees customers pay to receive updated versions of and enhancements to their existing products. Our services revenues were $909 million, down 18% in constant currency and down 22% in U.S. dollars.

Our total revenues were $5.1 billion, down 2% in constant currency and down 7% in U.S. dollars. Operating income was $2.3 billion, up 11% in constant currency and up 7% in U.S. dollars. Our non-GAAP operating margin grew by 570 basis points to 46% in U.S. dollars. This is the highest Q1 operating margin in Oracle's history as a public company and further demonstrates the success of our operating model.

Our tax rate was 28.0%, which is below our guidance of 29% due largely to lower than expected interest income, which is generally taxed in jurisdictions with higher rates.

Our Q1 non-GAAP earnings per share were $0.30, at the mid-point of our EPS guidance range of $0.29 to $0.31. This was up 8% in constant currency and up 3% in U.S. dollars. Our non-GAAP earnings per share would have been $0.02 higher had foreign exchange rates remained the same as they were in Q1 of last year.

In Q1, we repurchased 11.4 million shares at an average price of $21.24 per share for a total of $243 million. As we have previously discussed, the rate of our stock buy-back will fluctuate each quarter, taking into account alternative uses for our cash and our stock price.

Read the rest of this transcript for free on seekingalpha.com