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Oracle OpenWorld 2018Financial Analyst MeetingApplications Business Update
Mark HurdCEOOctober 25, 2018
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Safe Harbor StatementStatements in this presentation relating to Oracle’s future plans, expectations, beliefs,
intentions and prospects, are “forward-looking statements” and are subject to material risks
and uncertainties. Many factors could affect our current expectations and our actual results,
and could cause actual results to differ materially. A detailed discussion of these factors and
other risks that affect our business is contained in our U.S. Securities and Exchange
Commission (SEC) filings, including our most recent reports on Form 10-K and Form 10-Q,
particularly under the heading “Risk Factors.” Copies of these filings are available online from
the SEC or by contacting Oracle’s Investor Relations Department at (650) 506-4073 or by
clicking on SEC Filings on Oracle’s Investor Relations website at
https://www.oracle.com/investor. All information set forth in this presentation is current as of
October 25, 2018. Oracle undertakes no duty to update any statement in light of new
information or future events.
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To supplement our financial results presented on a GAAP basis, we use non-GAAP measures,
which exclude certain business combination accounting entries and expenses related to
acquisitions and other significant expenses including stock based compensation, that we
believe are helpful in understanding our past financial performance and our future results. Our
non-GAAP financial measures are not meant to be considered in isolation or as a substitute for
comparable GAAP measures, and should be read only in conjunction with our consolidated
financial statements prepared in accordance with GAAP. Today’s discussion includes certain
non-GAAP financial measures, and a GAAP to non-GAAP reconciliation can be viewed at the
end of this presentation.
Non-GAAP Financial Measures
Copyright © 2018, Oracle and/or its affiliates. All rights reserved.
Applications Ecosystem
5
FY14 FY15 FY16 FY17 FY18
$8.9B
$11.0B
+ 11%
Amounts and growth rates are in GAAP USD. Results prior to FY17 do NOT reflect ASC606; FY17 and FY18 results based on ASC606 accounting. Applications ecosystem revenues represent the sum of applications related cloud services and license support revenues; and applications licenses revenues.
Copyright © 2018, Oracle and/or its affiliates. All rights reserved.
Oracle SaaS . . . built organically along w/ select acquisitions
AI Apps+IOT Apps+
Blockchain AppsERP: Subscription Mgmt
CX: Unity
Fusion R1|R2
Fusion R1|R2
Fusion R18A-18D
Fusion R18A-18D
CloudLaunch
Fusion R3|R4|R5
Fusion R3|R4|R5
CRM, HCM &ERP G.A.
CX: Service, Social
Fusion R6|R7
Fusion R6|R7
CX: CPQSimplified
& Mobile UX
Fusion R8|R9
Fusion R8|R9
EPMERP: Revenue Mgmt SCM: Transportation,Global Trade Mgmt, Product Value Chain
CX: Marketing
Fusion R10
Fusion R10
Data CloudCX: Commerce
Fusion R11
Fusion R11
Adaptive Intelligent Apps
SCM: ManufacturingOrder Mgmt
Fusion R12|R13
Fusion R12|R13
IOT Applications
20182011 2013 2014 2015 2016 20172012
6
Copyright © 2018, Oracle and/or its affiliates. All rights reserved.
Oracle SaaS . . . built organically along w/ select acquisitions
AI Apps+IOT Apps+
Blockchain AppsERP: Subscription Mgmt
CX: Unity
Fusion R1|R2
Fusion R1|R2
Fusion R18A-18D
Fusion R18A-18D
CloudLaunch
Fusion R3|R4|R5
Fusion R3|R4|R5
CRM, HCM &ERP G.A.
CX: Service, Social
Fusion R6|R7
Fusion R6|R7
CX: CPQSimplified
& Mobile UX
Fusion R8|R9
Fusion R8|R9
EPMERP: Revenue Mgmt SCM: Transportation,Global Trade Mgmt, Product Value Chain
CX: Marketing
Fusion R10
Fusion R10
Data CloudCX: Commerce
Fusion R11
Fusion R11
Adaptive Intelligent Apps
SCM: ManufacturingOrder Mgmt
Fusion R12|R13
Fusion R12|R13
IOT Applications
20182011 2013 2014 2015 2016 20172012
7
Most Complete SaaS Portfolioin Technology!
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Changed Go-to-Market Model
• Focus – Aligned by buyer . . . by product . . . by competitor
• Reach – Built Global Network of Sales Hubs
• Structure – Altered mix between inside and outside sales– Renewals Team . . . Customer Satisfaction Teams
• Investment – Expanded sales organization inside and outside– Applications Sales HC up ~60% since FY14
– ERP-HCM Sales HC up ~100% since FY14
8
FY14 FY15 FY16 FY17 FY18Back-Office Sales Rep Headcount
Double2014 HC
– Best of Oracle sales organization supplemented by college recruiting “Class of” program
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Customer Motivations to Migrate to Cloud• Faster Pace of Innovation
– 2-4 new releases each year with thousands of new feature & functionalities– New UX (User Experience)– ML/AI (Chatbots/Digital Assistants)– Embedded Analytics
• Lower Cost– Lower Cost of Implementation . . . up & running in months, not years– Lower Cost of Operation . . . automation drives lower labor cost– Cost of Upgrades Built In . . . faster and less complicated upgrades
• Stronger Security– Security patches implemented sooner– Autonomous Database . .. Gen 2 Infrastructure
10
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Applications Market Opportunity
11
Source: 2018H1 IDC WW Semiannual Software Tracker Trailing Twelve Month revenue , including pure-play cloud companies. Dollar growth over 2013H2-2018H1 time period. Amounts are in constant revenue.
Back Office
$74BTTM
Growing $22B2013H2-2018H1
Front Office• Contact Center• Customer Service• Digital Commerce• Marketing Campaign
Management• Sales Force Productivity
& Management
Back Office• Enterprise Asset Management• Enterprise Performance Management• Financials• Human Capital Management• Inventory Management• Logistics• Order Management• Payroll Accounting• Procurement• Production Planning• Project & Portfolio Management
Front Office
$42BTTM
Growing $17B 2013H2-2018H1
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Oracle “Back-Office” Applications Opportunity
• Back-Office Applications = ERP (including NetSuite) + HCM
• Currently >50% of Oracle Applications Ecosystem Revenue
• Back-Office will be a key driver to Applications Ecosystem Growth
• Back-Office Growth Opportunities
– Conversion of installed base from on-premise to SaaS
– Addition of new customers from weaker on-premise vendors
12
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Gartner 2018 Magic Quadrants for Cloud Core Financial Management Suites for Midsize, Large and Global Enterprises
Gartner, Magic Quadrant for Cloud Core Financial Management Suites for Midsize, Large and Global Enterprises, John Van Decker | Robert Anderson | Mike Guay, 29 May 2018. These graphics were published by Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon request from Oracle. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
Copyright © 2018, Oracle and/or its affiliates. All rights reserved.
NetSuite – Increased Investment in Product & Distribution
• Reach– New Country Localizations - Germany, France, China, Japan, Brazil, India and Mexico – Leverage Oracle field office to accelerate NetSuite distribution
• Volume– SuiteSuccess delivers faster time to value . . . opens up new market segments – Strong upsell opportunities w/ Planning/Budgeting, SuiteCommerce, & SuitePeople– Added over 3,000 new customers in the last twelve months
• Industries & Verticals– 12 Industry Cloud Solutions leveraging SuiteSuccess– Targeted market initiatives to specific verticals– Delivering the Suite– 15,000+ Strong Install Base with high retention rate
14
16%
22%
26%
Q3 FY18 Q4 FY18 Q1 FY19
NetSuite ERP Growth
Amounts and growth rates are non-GAAP USD.
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Software Licenses
Software Support
SaaS
SaaS
Current Opportunity #1
Opportunity #1 – Conversion of Installed Base
15
$6.5B On-Premise Application Business,
Converted to SaaS,
At 3X Revenue Multiplier,
Application Ecosystem Doubles!
+$11B
$11B $22BSoftware Support TriplesApps Ecosystem Doubles
(1)
(2)
Sources: Internal analysis. (1) $11B Applications Ecosystem incremental revenue opportunity represents scenario where 100% of license support revenues are converted to SaaS revenues at a 3 times revenue multiplier. (2) $11B to $22B Revenue Opportunity presents scenario where 100% of on-premise support revenue is converted to SaaS revenues at a 3 times revenue multiplier. The above scenarios are not intended as guidance.
Copyright © 2018, Oracle and/or its affiliates. All rights reserved.
Microsoft
SAP 27%
Oracle 21%
Infor
Sage
Epicor SoftwareTOTVS
Unit4Deltek
Yonyou NetworkTyler Technologies
Smaller Vendors
Other 52%
Microsoft SAP Oracle Infor Sage Epicor Software TOTVS Unit4 Deltek Yonyou Network Tyler Technologies Smaller Vendors
Opportunity #2 – Adding New Back Office Customers
16
Info
r
Lawson
GT Nexus
SSA Global
GEAC
Source: IDC Worldwide Enterprise Resource Planning Software Market Shares, 2017: Enterprises Journey to the Cloud.
Copyright © 2018, Oracle and/or its affiliates. All rights reserved.
Opportunity #2 – Adding New Back Office Customers
17
B/O On-Prem B/O On-Prem
B/O SaaS
B/O SaaS
Other Apps
Other Apps
Current Opportunity #2
+$21B
$35B Back-Office, On-Premise revenue not with Oracle or SAP
- 20% conversion from other vendors to Oracle
- 3X Revenue Multiplier
$21B incremental revenue
Win Percentage against Other On-Premise Vendors
$11B to $42BIncremental Revenue Opportunity
(2)
(1)
Sources: Internal analysis. (1) $21B revenue uplift represents scenario where 20% of competitor back-office, on-premise revenue (excluding SAP and Microsoft) is converted to SaaS revenue at a 3 times revenue multiplier. Other remaining revenue for Applications Ecosystem is held constant in this analysis. (2) $11B to $42B Incremental Revenue Opportunity presents various scenarios where portions of competitor revenue is converted to SaaS revenues at a 3 times revenue multiplier. Other remaining revenue for Applications Ecosystem is held constant in this analysis. The above scenarios are not intended as guidance.
10% 20% 30% 40%$11B $21B $32B $42B
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Summary
• Back-Office (ERP and HCM) market nearly 2X size of Front-Office
• ERP & HCM ecosystems growing faster than Apps Ecosystem
• Applications Ecosystem grows from $11B to $43B if:
– Conversion of installed base to SaaS - $11B incremental revenue opportunity
– Addition of new customers - $21B incremental revenue opportunity
– Does not consider the addition of any current SAP customers
– Does not consider growth in SaaS outside of Back-Office
18
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Reconciliation Summary – GAAP to Non-GAAP
Note 1
Slide 14
Q3 FY18 Q4 FY18 Q1 FY19
NetSuite ERP GAAP Growth Rates (in United States dollar) 75% 54% 41%
Business Combination Accounting Adjustments (59%) (32%) (15%)
Non-GAAP Growth Rates (in United States dollar) 16% 22% 26%