OracleORCL71,44 $
Oracle (NYSE: ORCL) - american corporation, the largest supplier of server hardware and the world's second largest software maker, second in revenue only to Microsoft. The most famous product of the company is Oracle Database..
In mid-June, Oracle provided financial results for the fourth quarter of 2022, after which the company's shares rose immediately by 10%. Basic moments:
- revenue up 5% to $11.840 billion vs market consensus of $11.660 billion;
- EBITDA slightly increased to $5.334 billion from $5.293 billion last year;
- net earnings per share decreased by 15% to 1.20 $ due to lack of one-time income. The adjusted indicator did not change year-on-year and amounted to 1,54 $ when forecasting in 1,38 $;
- stable financial results allowed the management to announce the payment of dividends, which remained at the level of previous quarters.
Oracle's fiscal 2022 begins in June 2021.
Sales structure
Oracle divides business into two large parts: by type of earnings and geography of sales.
Key segments. Globally, the company has three divisions:
- Cloud and licensed business (86% in the earnings structure) — access to many digital services and corporate applications. In the overall structure of earnings, it occupies a share 86%.
- Hardware Business (7%) – design and manufacture of various high-tech devices.
- Service business (7%) – consulting and extended maintenance services.
Geographic segments. Oracle products are used in all developed and developing countries. The company divides sales into three geographical divisions:
- America: North and South (57% in overall results).
- Asia.
- Europe, Middle East and Africa (EMEA).
Sales structure of the company, billion dollars
| By type of income | 4к2021 | 4к2022 | The change |
|---|---|---|---|
| Cloud and licensed business | 9,533 | 10,151 | 6% |
| Hardware Business | 0,882 | 0,856 | −3% |
| Service business | 0,812 | 0,833 | 3% |
| total revenues | 11,227 | 11,840 | 5% |
| By sales geography | 4к2021 | 4к2022 | The change |
| America | 6,076 | 6,774 | 11% |
| EMEA | 3,324 | 3,260 | −2% |
| Asia | 1,827 | 1,806 | −1% |
| total revenues | 11,227 | 11,840 | 5% |
Structure of the company's sales by type of earnings, billion dollars
Sales structure of the company by sales geography, billion dollars
Profit
Oracle showed a result similar to last year: EBITDA grew insignificantly, and adjusted net income, vice versa, fell off a little 4,524 up to $4.235 billion. But thanks to that, that the company spent the whole year buyback of shares from the market, management was able to completely offset this decrease - adjusted net profit for 1 share has not changed and amounted to 1,54 $.
At the same time, the past fiscal year for the company can not be called completely successful.: the company lost the case in court and made one-off multi-billion dollar write-offs in the second quarter, which worsened financial performance.
Key financial results of the company, billion dollars
| 4к2021 | 4к2022 | The change | |
|---|---|---|---|
| Revenue | 11,227 | 11,840 | 5% |
| EBITDA | 5,293 | 5,334 | 1% |
| EBITDA margin | 47% | 45% | -2 p. P. |
| Net profit | 4,033 | 3,189 | −21% |
| Adjusted net income | 4,524 | 4,235 | −6% |
| Total number of shares, million pieces | 2 847 | 2 667 | −6% |
| net debt | 54,147 | 54,476 | 1% |
Merger deals
TikTok. 6 August 2020, former US President Donald Trump signed an executive order, in which he announced the blocking of the Chinese application TikTok in the United States for national security reasons, if during 45 days the American part of the business will not be bought by a company from the USA. Oracle and Walmart agree to a multi-billion dollar deal, announced at the end of 2020.
But already in 2021, after the change of president, the main owner of TikTok abandoned the idea of selling its American division., since the deal with the departure of trump has lost its meaning. In return, the Chinese company promised the US authorities to develop a new structure for working in the US..
As part of the updated concept of work, TikTok guarantees, that the data of US citizens cannot be shared with the Chinese government. To do this, the Chinese service transferred all information about its users to Oracle servers.. In June 2022, the company announced, that completed the transition to US servers.
For Oracle, this means additional revenue growth in 2023 and the acquisition of a very important and large customer., since the Chinese social network is the most visited online service in the world.
Cerner. After unsuccessful attempt to buy TikTok, Oracle announced the acquisition of another American company - Cerner, which creates software for medical organizations. $30bn deal closed in June 2022 after EU approval.
Dividends, forecast and comparison with competitors
After the publication of financial results, the company's management also announced the next quarterly dividend payment., which amounted to 0,32 $ per share. Register Closing Date - 12 July 2022. The current quarterly dividend yield is 0,5%, and the annual 2%.
Oracle management also announced a forecast for the next quarter:
- total revenue, including Cerner results, will grow by 20-22% to 11.673-11.868 billion dollars;
- sales of the main segment will accelerate to 25-28%, at the end of the year - up to 30%;
- earnings per share will grow by 6-10% to 1.09-1.13 $;
- net debt after acquisition of Cerner to increase by $15.8 billion.
Comparison with competitors
| EV / EBITDA | P / E | Rates of growth | net debt / EBITDA | |
|---|---|---|---|---|
| Oracle | 16,74 | 26,90 | 7% | 3,88 |
| Microsoft | 18,81 | 25,62 | 18% | −0,57 |
| Adobe | 24,84 | 34,87 | 14% | 0,04 |
| VMware | 16,99 | 29,92 | 3% | 2,44 |
| Fortinet | 56,02 | 67,68 | 35% | 0,09 |
What's the bottom line?
Although Oracle did not show breakthrough financial results, the current report pleased investors, as the company presented a strong outlook for next year: the growth rate of the software developer business will accelerate from 5-7 to 25%, which looks pretty good for a US company with an EV/EBITDA estimate of around 17.
