Oracle (ORCL) Misses Q1 Earnings & Revenues, Stock Down
Zacks Investment Research | Sep 15, 2016 09:18PM ET
Oracle Corporation’s (NYSE:ORCL) first-quarter 2017 results were unimpressive. Earnings (including stock based compensation) of 49 cents missed the Zacks Consensus Estimate by 4 cents. Revenues of $8.61 billion also lagged the Zacks Consensus Estimate of $8.72 billion. Shares fell 3.2% in after hour trading.
Earnings (excluding stock based compensation) increased 3.8% to 55 cents, which missed the company’s guided range of 56 to 60 cents. Revenue growth of almost 2% (3% in constant currency) was in line with the bottom-end of the management’s guided range of 2-5%.
Adverse currency movements impacted earnings by a penny and total revenues by 1% in the quarter, primarily due to the Brexit vote. Moreover, higher interest expense related to the large debt offering during the quarter hurt earnings by half a cent.
Top-line Details
Oracle’s top-line growth benefited from the ongoing cloud-based momentum. Total cloud revenues (11.4% of total revenues) soared 61.1% to $986 million in the reported quarter.
Cloud SaaS and PaaS revenues surged 80.3% year over year to $815 million better than the management guided range of 75% to 80%. IaaS revenues increased 7% to $171 million.
Oracle stated that SaaS and PaaS billings were up 49% on a year over year basis, much better than 38% in the previous quarter. The company added 776 new SaaS customers, of which 125 also bought PaaS. The company added 2,032 new PaaS customers. Installed base of PaaS and IaaS is now at 18,892 customers.
Strong cloud results fully offset weak on-premise software revenues (67.6% of total revenues), which declined 0.4% to $5.82 billion. Total cloud and on-premise software revenues grew 5.4% (6% on constant currency) to $6.81 billion.
However, hardware revenues continued to decline in the quarter. Total hardware revenues tanked 11.8% year over year to $996 million. Oracle’s engineered systems grew mid double-digit lead by Exadata that grew over 30% in the quarter.
Services revenues were also down 6.3% to $808 million.
Operating Details
Total operating expenses (including stock based compensation) as percentage of revenues increased 230 basis points (bps) to 64.2% in the reported quarter. The growth was primarily attributed to higher sales and marketing (S&M) expense, which increased 180 bps.
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SaaS and PaaS gross margin was 60.9% significantly higher than 38.9% reported in the year-ago quarter.
Research & development (R&D) expense as percentage of revenues increased 120 bps on a year-over-year basis. General & administrative (G&A) expense increased 70 bps due to higher legal fees.
As a result, adjusted operating margin contracted 230 bps to 35.9%.
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