Oracle Corp

NYSE:ORCL

Earnings Call Transcript 2019-Q1

[Operator]

Welcome to Oracle’s First Quarter 2019 Earnings Conference Call.

Now, I’d like to turn today’s call over to Ken Bond, Senior Vice President.

[Ken Bond, SVP]

Thank you, Victoria. Good afternoon, everyone, and welcome to Oracle’s first quarter fiscal year 2019 earnings conference call. A copy of the press release and financial tables, which includes the GAAP to non-GAAP reconciliation and other financial information, can be viewed and downloaded from our Investor Relations website.

On the call today are Chairman and Chief Technology Officer, Larry Ellison; and CEOs, Safra Catz and Mark Hurd.

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 business, which may potentially affect these forward-looking statements. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements made today.

As a result, we caution you from placing undue reliance on these forward-looking statements and we encourage you to review our most recent reports, including our 10-K and 10-Q and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or market price of our stock. And finally, we are not obligating ourselves to 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.

And with that, I’d like to turn the call over to Safra.

[Safra Catz, CEO]

Thanks, Ken. Good afternoon, everyone. I’ll first go over Q1 before moving on to my guidance. I’ll then turn the call over to Larry and Mark for their comments.

Once again, we had another solid quarter. Constant currency revenue growth was slightly above the midpoint of my guidance and earnings per share was $0.03 above the midpoint of my guidance. As in prior quarters, I’ll review our non-GAAP results, using constant dollar growth rates because that’s how we also look at the business.

Total cloud services and license support revenues for the quarter were $6.6 billion, up 4% in constant currency. This accounted for 72% of total Company revenue and the bulk of it is recurring revenues. In terms of ecosystems, GAAP applications total revenues were $2.8 billion, up 7%, and GAAP platform and infrastructure total revenues were $4.7 billion, up 2%.

Dwelling in a little, total cloud revenues grew in all regions and in terms of product categories, ERP grew in the 30% plus, verticals grew in the 40% plus and public cloud, PaaS and IaaS grew in the 20-plus-percent. Mark will have much more detail when he speaks.

Total revenues for the quarter were $9.2 billion, up 2% from last year. Non-GAAP operating income was $3.8 billion, up 3% from last year and the operating margin was 41%, same as last year. The non-GAAP tax rate for the quarter was 19.1%, slightly below our base rate of 20% and our non-GAAP EPS was $0.71 in U.S. dollars and up 19% in constant currency. The GAAP tax rate was 10.8% and GAAP EPS was $0.57 in U.S. dollars and up 16% in constant currency.

Operating cash flow over the last four quarters was a record $15.5 billion. Over the same four quarters, capital expenditures were $1.6 billion [Audio Gap] of which approximately 64% will be recognized as revenue over the next 12 months.

We remain committed to creating value for our shareholders through internal investments, and targeted acquisitions, as well as with stock repurchases and dividend. This quarter, we repurchased 212 million shares for a total of $10 billion. Over the last 12 months, we have repurchased 440 million shares and reduced the absolute shares outstanding by over 8.5%, while growing free cash flow 10%. The Board of Directors increased the authorization for share repurchases by an additional $12 billion and again declared a quarterly dividend of $0.19 per share.

Now, before I go to guidance, a quick comment on ASC 606, which we adopted this quarter. The estimated $86 million affect to Q1 of last year FY18 revenues, which we had posted on our website last quarter, ended up being $83 million, instead of $86 million. So, basically, about right.

Turning to currency. Exchange rates have moved from a 1% headwind to now being a 2% headwind to revenue, and $0.01 to $0.02 headwind to earnings per share, depending on rounding. Now, I’m not sure what it will be by the end of this quarter. So, with that the guidance.

Total revenues are expected to grow from 0% to 2% in constant currency, because we have a tough comparison with last year’s revenue, especially license. I expect second half revenue growth will be higher. Also, we remain committed to delivering a higher revenue growth rate for all of fiscal year 2019 when compared to that of last fiscal year. Assuming current exchange rate, non-GAAP EPS for Q2 in USD is expected to grow between 11% to 15% and be between $0.77 and $0.79. And non-GAAP EPS in constant currency is expected to grow between 12% to 16% and be between $0.78 and $0.80. Once again, we expect to deliver double-digit non-GAAP EPS growth for fiscal year 2019.

My EPS guidance assumes a base tax rate of 20%. However, one-time tax events could cause actual tax rates for any given quarter to vary from our base rate, but I expect that normalizing for these onetime tax events, our tax rate will average around 20% for fiscal year 2019.

And with that, I’ll turn it over to Larry for his comments.

[Larry Ellison, Chairman and CTO]

Okay. Thanks Safra.

All right. Oracle has two strategic products that will determine our future. Our cloud ERP product is the strategic key to our success in the SaaS applications layer of the cloud. And our autonomous cloud database is the strategic key to our success in the IaaS or infrastructure layer of the cloud.

Oracle is already number one in ERP cloud market share with over 20,000 Fusion and NetSuite customers. Customers are buying Fusion ERP to replace their existing SAP on-premise ERP systems. And customers are buying Fusion ERP to replace their existing Workday cloud ERP system.

ERP is the largest segment in the application business. Continuing our rapid growth in cloud ERP market puts Oracle well on its way to becoming the world’s largest SaaS applications company. That’s our strategy and current market position in the SaaS layer of the cloud. In the IaaS or infrastructure layer of the cloud, we have the world’s most popular and technically most advanced database, the Oracle Autonomous Database.

The Oracle database is so much better than other databases. Even our biggest competitors use it to run their businesses. Salesforce.com uses Oracle to run their Sales Automation Cloud. SAP uses the Oracle database to run their cloud services and nearly all their on-premise customers. Even Amazon uses the Oracle database to run most of their business.

Now that the Oracle Autonomous Database is running in our second generation Bare Metal Cloud infrastructure, customers can both lower their labor costs and cut their Amazon bill in half by running the Oracle database on Oracle cloud infrastructure. The Oracle Autonomous Database automatically catches itself while running, it prevents data theft. No other database can do that. We think these are compelling advantages with the Amazon infrastructure business. We think these compelling advantages will allow us to compete very effectively against Amazon in the infrastructure business. Today, we may be behind Amazon in infrastructure market share, but we are way ahead of Amazon in cloud infrastructure technology. We think that will allow us to gain market share in infrastructure in the cloud very, very rapidly.

With that, I’ll turn it over to Mark Hurd.

[Mark Hurd, CEO]

Thanks, Larry.

I’ll give you a few numbers and then few wins in the quarter. First, our apps ecosystem. 91% of our trailing 12 months revenue is now recurring in apps ecosystem with GAAP apps ecosystem now greater than $11 billion in trailing 12 months revenue, up 7% in the quarter. We’re growing faster than market with, as Larry mentioned, an enormous opportunity ahead of us. Nearly two thirds of applications support revenue for Oracle is ERP or HCM with most on-premise customers at very early stage of moving those back office apps to the cloud. I do expect our apps ecosystem to grow roughly double digits for this year.

In SaaS, Safra after mentioned a few numbers, let me give you a few more. Overall, ERP and HCM now annualized revenue is greater than $2.5 billion. Fusion ERP was up 40% in revenue organically. NetSuite ERP had a spectacular quarter. Revenue -- as I think we’ve mentioned through previous call, the momentum we’ve been seeing in NetSuite. We were up 26% in revenue, and bookings were almost up 40%, 39% in the quarter. That follows on bookings growth that was greater than, call it roughly 70% for NetSuite in Q4. Our verticals were up 41%, and annualized revenue is now $800 million.

Our tech ecosystem in GAAP is now greater than $21 billion on a trailing 12 months basis, and Q1 was up 2%. Bring Your Own License continues to perform well as both Q1 database new license and support revenue were up mid single digits.

Now, I’m going to shift to talking about a few customer wins in the quarter. I’m going to try to keep it to a few. But, I want to give you a flavor for some of the wins that -- on top of what we did in Q4 what we did in Q1, and talk first about ERP and what we did in that category.

First, Academy Sports, a nice win for us in North America. Airbnb, they bought ERP. And Larry mentioned. This is actually a replacement of Workday Financials at Airbnb. Conn's, they’re retailer, very nice win for us. They also bought not just ERP, but bought HCM as well as a package back office deal in the quarter. Legg Mason, many of you may know is an investment advisor. Legg Mason bought ERP in the quarter. That also was a replacement of Workday Financials.

I’ll talk a little bit about a company called Federal Express. FedEx is -- in the FedEx side of the house, a traditional Oracle user, they bought a company called TNT in Europe that was an SAP user, and they are now going to standardize all of their ERP on Oracle Fusion ERP. In addition to that, they bought Payroll from us in the quarter. They happened to be a Workday HCM customer but bought Payroll from Oracle. This is one of the most significant transactions we’ve had over a course of a number of significant transactions, but a very strategic and significant one with a replacement of SAP as a combination of a migration of an existing Oracle customer. A few other customers, City of Sunnyvale; Equity Bank in Europe; the Federal Home Loan Mortgage Corporation bought ERP. Still on ERP, just to be clear. Highmark Health, Noble Corporation, that’s a big oil and gas driller, $4 billion or $5 billion company, nice win for us in the quarter. Santander Consumer, part of their business is going to Oracle ERP. Saudi Telecom, another combination ERP, HCM customer in the quarter. The State of Nebraska. TIAA, another investment firm, again another ERP win the quarter.

Talk a little bit about HCM. VITAS Hospice Healthcare bought also a bit of ERP in the quarter, a relatively large HCM transaction for us in the quarter; Canon that many of you will also know; Allnex, manufacturing company in Europe; Fortis, significant customer of HCM win; the government of Saskatchewan; Marriott, one of the biggest HCM transactions that we’ve ever taken down, we took down in the quarter as well.

I thought I’d mentioned at the same time, another back office category that is becoming more significant for us, which is supply chain management. Our HCM product has been out now a while. The number of customers is now again significant. Prospect Medical healthcare company; Rotary International; Academy Sports, again as you can see, a portfolio deal for us in ERP in the quarter; Beckman Coulter, $6 billion company going to Oracle supply chain management and the Cloud; City of Sunnyvale, which I mentioned earlier; Noble Energy, which you saw me mention earlier; Zebra Technologies, which I mentioned earlier.

So, again significant amount, as you can tell in the back office. Once you win ERP Financials, the opportunity then to HCM and supply chain management is significant. I thought I’d close by just mentioning a few infrastructure wins at the end of quarter. And these are both infrastructure and PaaS wins.

AIG; Emerson Electric; Hermes Parcelnet; Nuance Communications; Network Rail; Reliance Standard Life Insurance Company; Swiss Re; Toronto Dominion; Standard Industries. And I thought I’d also mention a couple of ISVs. I traditionally don’t talk about ISVs as much. But, in the quarter three significant ISVs, FICO, Asseco and HighJump. HighJump is the leading provider of supply chain software management and warehouse, advantage and some of it -- they’ll be using our platform and our cloud to deliver their applications into the market. Asseco is an e-commerce payment platform. FICO is a leading analytics software company in the personalization space. All will be using Oracle PaaS platform as the base by which they bring software to market.

With that I’ll close by just saying, listen, our pipeline is, as you can tell by these -- I hope you can tell by these wins, our SaaS pipeline is at a record level, and to Larry’s point, led by both ERP. And that’s not just Fusion now, but the NetSuite improvement is material and significant. Our pipeline in PaaS is also at the highest level it’s been. And it was overall solid quarter for us. Looking forward to Safra’s point earlier, we do expect revenue growth in the second half to be higher than last year and EPS will grow double digits for the year.

With that I’ll give it back to Ken and then we’ll take your questions.

[Ken Bond, SVP]

Thanks, Mark. Victoria, if you’ll now please instruct the audience on the questions, we’ll go ahead and get started Q&A portion of the call.

[Operator]

Yes, sir. [Operator Instructions] Our first question comes from Kirk Materne with Evercore ISI.

Kirk Materne

Thanks very much. I just had a question for Mark regarding the applications business. Obviously, you spent a lot of time outlining some of the wins this quarter. Can you just unpack maybe a little bit more your confidence in terms of the business, heading into the rest of the year? I’m just kind of curious, how much of that comes from maybe some of your existing customers finally moving on to the cloud in terms of the ERP and maybe HCM areas, and just your confidence that the improvement in NetSuite you saw this quarter is sustainable, as we go forward from here? Thanks.

Mark Hurd

I just don’t know what words I can use to get -- to show more confidence in the apps business than what I’ve done. I think, the NetSuite performance is sort of -- Kirk, what I’d describe it is sort of the best of NetSuite and best of Oracle combined. We’ve had significant -- I think the management team in NetSuite has done a great job. Our attrition is down. We’ve also been able to supplement the NetSuite sales organization, with our traditional recruiting, our traditional college hires. And frankly, they’ve done a fantastic job incubating them, absorbing them and getting them productive. They probably wouldn’t have done this as a public company because of short-term quarterly earnings per share requirements. We invested in them. I think I’ve mentioned that before, both in R&D and in sales. And to be very blunt with you, it’s paid off. The Q4 bookings numbers were spectacular that translated to Q1 revenue growth. Their Q1 bookings were a little bit ahead of the plan that I’ve had for them. And so, again, when you have this sort of bookings growth back to back, we can pretty much predict, not perfectly but pretty close to what the annual revenue is going to be. And I expect that as I’ve said, I think in the Q4 call, they will accelerate their revenue growth from last year to this year. And it’s going to be relatively material, call it 7, 8, 9, 10 points of growth rate. I’m talking about growth rate comparisons year-over-year.

In the traditional Oracle business and the Fusion business, I don’t know what more I can do to read you these list of customers. I mean, this is just a broad set of customers across regions. And now, that we’re bringing on both supply chain, as I tried to mention and outlined a few supply chain win supplemented by now the maturation in our manufacturing. The great news about this business is most of the people we compete with aren’t in a great position to bring their customers to the cloud. If you will, I’m saying now, Kirk, the traditional ERP on-premise spenders. So, our HCM business I talked about. So, my confidence level in the apps ecosystem is pretty hot. 91% of our revenue, as I mentioned is recurring. So, our ability to predict our pipeline, our conversion rates are quite high. The morale of our -- listen, let me end it this way. Our team here at Oracle believes, their destiny is to win every deal. That’s how they -- they believe that we’re going position - from a technology perspective to be in a position to win virtually every deal. And that’s the attitude we go into with this. And so, long answer to tell you, confidence on my side is really high, shows up in our pipeline and our results.

[Operator]

Our next question comes from Sarah Hindlian with Macquarie.

Sarah Hindlian

Mark, Kirk asked about the apps ecosystem, and you’re clearly bullish on that. But can you talk to us a little bit about some of the bookings trends you’re seeing in the overall tech ecosystem? And then, as a follow-up, Mark. I’d really appreciate it, if you could let me know what’s going on with Thomas Kurian and provide us with some sort of an update. That would be greatly appreciated.

Mark Hurd

I got the second question. I think the first question was bookings trends?

Sarah Hindlian

It’s really around cloud bookings.

Mark Hurd

Okay. All right. I got it. First, I’d say, we try to give you as much clarity as I can. In our next-gen PaaS infrastructure business, we’re talking about mid-20s sort of growth rate in bookings. Early days, to sort of Larry’s point, but very encouraging in terms of these sort of short term results we have. When you start seeing these early indicators, ISVs move. And that’s one of the reasons I outlined the ISVs. This is really good news because ISVs are some of the most discriminating. It’s sort of like our GBUs. They’re probably the biggest ISV I know of. And their excitement to move to what Larry’s describing is our Oracle Cloud Infrastructure is how fast can we get that done. And now, when you see other ISVs lining up, these are very strong indicators to us of our future as it relates to OCI. And nobody can do what we can do with the Oracle database OCI that Larry already mentioned that.

I think I talked about the SaaS bookings growth. Our bookings overall in cloud for the quarter accelerated on a rate basis. The growth rate accelerated. So, that was obviously a good indication for us of overall bookings growth. Again, I’m trying to focus here more on the revenue in long run is I think the best indicator of where we are. Bookings to us -- it was a good description before we have revenue. And so, what I’m trying to do now is keep you focused on really what the prize is, because if the bookings don’t translate to revenue, they don’t mean anything to us. So, we’re trying to get very focused on revenue. That has a couple other aspects to us, which is also our renewal rates, making sure our renewal rates, we believe are continuing to improve, if you start looking at our renewal rates as they go forward. So, the combination of bookings and renewals going up gives us a better revenue outlook.

On Thomas Kurian, which I think was your question. Thomas is a good guy, works hard. He’s taken a break and we expect him back.

Sarah Hindlian

That’s very helpful. Is there a timeline on when he’ll be back or is it just some kind of over the next few months something along those lines?

Mark Hurd

I’ll stick to what I said. He’s taken a break. We expect him back.

[Operator]

Our next question comes from Brad Zelnick with Credit Suisse.

Brad Zelnick

I’ve got one for Larry and a quick follow-up for Safra. Larry, with the introduction of autonomous database, you’ve committed to a more accelerated innovation cycle. And you now have the next major database version 19c just around the corner? How do you envision the newer cadence impacting customer adoption patterns, and ultimately the purchasing cycle?

Larry Ellison

Well, I think people are moving to the cloud infrastructure. Again, it’s very early days. So, there are two things that are going on. We’re delivering our technology in the cloud prior to making it available on-premise. It just allows us to -- it's just easier to get our cloud product out and make it available to a large number of customers for their -- for development of new applications, for the lift and shift of existing applications. So, a lot of our customers are now experimenting with a data warehouse here and there’s now an OLTP system that’s available for -- with the autonomous database. And they’re in the process now of trying it in the cloud. And we’ve gotten a lot of people that were very, very surprised. We had very positive feedback. I think the strangest one for me was someone who is running Exadata on-premise, which is theoretically the fastest system on which you can run the Oracle database. They moved it to the Oracle Autonomous Database cloud, which by the way also runs on Exadata in the cloud and they got a 5 times performance increase. It’s simply that the machine learning tuning for the autonomous database is just better than human beings. And they were shocked. And so, now, they’re moving additional workloads to the Oracle cloud.

I think, the fact that we can upgrade these things faster will actually increase the adoption rate. Albeit now, we got to confess, these are pretty early days. We have tens of thousands of database customers. An awful lot of them are now moving their first workloads and experimenting with their first workloads in the cloud. Once they get through that process, I think we’ll have a very, very rapid migration of workloads from on-premise into the Oracle cloud.

Mark Hurd

Just to add numbers to Larry’s point. I mean, if you look at the quarter, I said, we have mid-single-digit growth in database license and database support. The real driver of that was the options that come along with autonomous database. The multi-tenant Active Data Guard at the RAC were really the leading drivers of that growth.

Larry Ellison

Yes. I’d like to just follow up on what Mark said. People are bringing their own database license to the cloud. So, what we’re seeing is, they want to use autonomous database in the cloud. Autonomous database requires the multi-tenancy option and it requires real application clustering option. And they’re trying it. They try it, they’re getting great performance, they’re going terrific availability. They go back and then to do a license deal where they acquire the pieces that are missing on multi-tenancy and real application clusters, and then they lift their entire license from on-premise and move it to the cloud. And we think that’s maybe the vast majority of our cloud. Our database cloud customers are going to be taking their existing on-premise license, augmenting it with certain new features required for autonomous database and then buying the infrastructure piece in the cloud while bringing their own license.

Brad Zelnick

Thanks very much, very helpful color. And just quickly for Safra, we continue to see you express a strong opinion on the value of your stock, buying back $10 billion worth of shares this quarter and the additional authorization as well. How should we think about the rate and pace of buybacks versus other uses of cash going forward? Thanks.

Safra Catz

We think our stock is an unbelievable buy, so we are buying back. And I’m not going to tell you exactly how much, but you can see I’ve got $20 billion in authorization, which I’ll use up when I use it. But, at these prices with our growing cash flows, with our earnings growing like they are, it seems like an amazing deal to buy our stock. So, we’re putting our money where our mouth is, frankly.

[Operator]

Our next question comes from line of John DiFucci with Jefferies and Company.

John DiFucci

Thank you. My question is for Safra. Safra, cash flow grew last year for the first time in several years. So, I guess two questions on cash flow. One, this quarter operating cash flow was up modestly and free cash flow was flat. Was there anything affecting cash flow this quarter relative to a year ago? And then, to two, -- I’ll let you answer that first.

Safra Catz

Yes. Let’s do this one at a time. So -- by the way, operating cash flow was record, okay, both latest 12 months and in the quarter. A couple of things that move around that I don’t know, you wouldn’t necessarily have visibility into, which is how much of a tax deduction we get, when our employees exercise their options. And compared to last year, there’s $300 million plus difference, so less of that in addition, with lower tax rates. The value of that is lower. So, I expect that you’re going to see operating cash flow and cash flows in general continue to increase, because our business is growing now. And at any one time, you may see some seasonality within the working capital line, but -- when we do, for example, a tax payment or something like that, but other than that, you should see an overall line going in an upward direction.

John DiFucci

Thank you. That’s my second question. So you answered it. Thanks a lot.

Safra Catz

Thank you.

[Operator]

Our next question comes from the line of Heather Bellini with Goldman Sachs.

Heather Bellini

Great, thank you. I had a question Safra for you. Given Mark had great comments to say about the cloud business. But I’m wondering, is it safe to assume that the software support revenue is continuing to grow? And then, my follow-up question is also, if you could share any color on trends that you’ve seen in short-term deferred revenue in the quarter? Thank you.

Safra Catz

Okay. So, yes. You should assume that support is growing. Our base continues to grow. And as far as short-term deferred revenue was let’s say about $10.35 billion. And the reality is that gross deferred was up about 4%. We net it down quite a bit in the quarter for uncollected invoices. So, invoices had been sent out mostly for Q4 bookings and things like that which are as yet uncollected. We net down; other folks don’t net down. And so, that’s our short-term deferred revenue. Going great.

Mark Hurd

One thing on support, Heather, I know you know this, but just to be clear, there is multiple things going on inside support. Database support is growing. So, it’s growing rather nicely, and our renewal rates are inclining slightly. So, you they’re very high. But this quarter, we had just slight incline as we did in apps. But apps support revenue is declining and will continue to decline if we do our job, because our job is to move them to the cloud, to move them to SaaS. And so, when you ask that question, I don’t want to give the wrong impression, if somebody who’s looking for every line of support to grow, we’re actually working against that.

Heather Bellini

No, no, I just meant the net of it, like the database where you said it’s growing rather nicely; apps is declining, but net of it is that total...

Mark Hurd

That is true. I just want to make sure you know that we’re seeing an incline, meaning that if you looked actually at our renewal rates, and I’d like you to know this that as a percent of what we get cancelled, more of that cancellation whatever is moving to our cloud. So, actually, our net cancellation rate is actually declining in apps as well, but the driver of that is the movement to our cloud. So, I just want to make sure that we didn’t leave you with wrong…

Heather Bellini

Just to be clear, Mark. Did you say that database support attach rate is increasing?

Safra Catz

Attach rate, it’s a 100%. It’s just about renewals and database. Database installed base continues to grow.

[Operator]

Our next question comes from the line of Mark Moerdler of Sanford Bernstein.

Mark Moerdler

Thank you for taking my call. I’ve got a question for you. Cloud Services and license support was slightly less than what the street had expected. Can you drill in, help us better understand, if you had weakness, where that weakness was? Was it maintenance, was it PaaS, was it IaaS, was it SaaS? How should we think about that? I’d appreciate.

Safra Catz

Well, I think most of -- any kind of what miss from the numbers you have was that in fact there was really just some currency difference between when I gave my guidance and when and what it ended up being. So, it was basically double the negative that I was expecting.

Mark Hurd

I’d say -- so, to be very blunt with you, I’d say, relative to Safra’s point, when she gave the guidance, when we said in the room, relative to that number on that line you’re talking about, Oracle’s performance in Q1 beat that number. Now, the implication of currency during the quarter moved on us from the time we mentioned it to the time we reported. So, again, I don’t know what’s in everybody’s model, but relative to our view, we did better in that line and we did based on our on our forecast at the end of the quarter.

[Operator]

Our next question comes from the line of Phil Winslow with Wells Fargo.

Phil Winslow

Mark, you highlighted mid-single-digit growth in database license and support. Just a competitive question for both you and Larry here. What are you seeing in terms of competitive environment in database in particularly, because we obviously get questions about no NoSQL players, and what ACID compliance means there with some of them achieving that and then, your cloud vendors as well such as Amazon with them announcing bringing RDS on-premise? So, just competitive environment there would be great.

Larry Ellison

Yes. Again, we think we have a very, very large lead in technology. Now, there might be a reason why you decide to use a database, it’s not as good. If you’re committed the Amazon cloud and you’re getting a lot of stuff at the Amazon cloud and Amazon sells Redshift or Amazon sells a number of different databases, right. Aurora is actually the MySQL database that we’re responsible for. So, people tell I’m going to use whatever Amazon has in the cloud. And there a number of people do that. And that happened to us in the previous generation when a lot of people chose to use Microsoft’s database because the content was easily available with Windows. So, we do see that. We weren’t -- we’re not the only database around. However, in terms of technology, if you want the highest performance, if you want the highest reliability, if you want the highest security and if you want the lower cost, the performance translates into cost. The reason the Oracle database is much cheaper than the Amazon database is because Amazon charges per minute. We charge per minute. If we can do more in one minute, twice as much in one minute than they can, we’re half the price.

So, we think, while people will go to the Amazon cloud and buy whatever is there as part of Amazon infrastructure, anyone who’s actually shopping for the best database, in terms of reliability, in terms of ease of use, in terms of lowest cost, they’re all going to take Oracle.

Mark Hurd

So, numerically, just to end it, you’re growing mid-single-digits. You have half the market and the market is growing 3, I don’t know, you must have gained a point share. So, it’s just all the points we talk about. I mean, we just -- all these different names you mentioned, and Larry talked about the technical part of these; numerically, it’s just hard to dispute the evidence that over the past year, two years, rolling eight quarters we just gained share.

[Operator]

Our final question comes from line of Michael Turits with Raymond James.

Michael Turits

Mark, question for you on the vertical markets. How are they doing and how are you doing in terms of moving those vertical applications to cloud, how’d you expect that to impact the cloud growth rate?

Mark Hurd

Well, I think the vertical businesses are continuing to make - I made a comment in my script about their growth in SaaS, being in excess of 40% for the quarter. So, that’s a good number. They’ve also now to the point where they’re SaaS business is bigger than their license business. So, in terms of the pivot from an applications perspective, they’ve done, I think a good job. Their license business -- within that license business, there’s other opportunity for us to do more of hosting, if you will, some of that business on our OCI cloud. Again, I mentioned earlier, they’re about the biggest ISV in the world from an applications perspective. And they are perhaps the absolute best ISV test case you could ever have for the applications running an OCI. And they are beginning that move to OCI or if you will, our next generation cloud infrastructure and it’s going quite well. So, there’s a combination of the SaaS growth, which is that 40% as I described, and then the movement of some of those applications to our OCI, if you will, if you will, a sort of a hosting part of the business, both going well. So, our vertical is growing, their license business by the way, still allows us to grow, support our vertical businesses. So, overall, quite healthy.

[Ken Bond, SVP]

Thank you, Mark. And a telephonic replay of this conference call will be available for 24 hours. Dial-in information can be found in the press release issued earlier today. Please call the Investor Relations department for any follow-up question from this call. We look forward to speaking with you. Thanks for joining us today. With that I’ll turn the call back to Victoria for closing.

[Operator]

Thank you for joining today’s Oracle first quarter 2019 earnings conference call. We appreciate your participation. You may now disconnect.