Earnings Call Transcript - ORCL Q4 2020

Ken Bond, Senior Vice President

Thank you, Holly. Good afternoon, everyone, and welcome to Oracle's fourth quarter and fiscal year 2020 earnings conference call. 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 Investor Relations website. On the call today are our Chairman and Chief Technology Officer, Larry Ellison; and CEO, Safra Catz. 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 being 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 the market price of our stock. And finally, we are not obligating ourselves to revise our results or publicly release any revision to 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 and good afternoon, everyone. I know that many of you listening to this call are still working under unusual circumstances because of the pandemic. A lot has happened since our March 12th earnings call when we were all still conducting business as usual. Within a couple of weeks the mitigation response to COVID-19 reached levels that few could have imagined. Overall, we found ourselves working with our customers and we believe we have weathered the pandemic well and we're pleased with our overall performance in the quarter. To start, we successfully transitioned our global workforce to working from home and our employees rose to the occasion. They focused on their jobs, building technology, selling technology, and most importantly, helping our customers with some of the challenges that have come with this pandemic. Whether it was supporting systems for federal loan programs with partners or helping states get unemployment checks out or supporting the National Red Cross systems around the world handle the massive volume spikes, or helping HHS, the CDC, and other health authorities around the world or supporting over 100 clinical trials that were hurriedly stood up, we were there to help our customers and I think we are much closer to them as a result. There are many, many, many more stories like this, and they all underscore how proud I am of our employees and customers as we are all actively engaged in the ongoing fight against COVID-19. In addition, we decided to provide training and certification on Oracle Cloud infrastructure and autonomous database through Oracle University free of charge to all who wanted it. We saw a huge surge around the world in demand, with hundreds of thousands of individuals across 150 countries being trained and certified on Oracle's latest technology. Now we entered Q4 with an enormous pipeline of transactional business. As the quarter progressed, we saw a drop-off in deals, especially in the industries most affected by the pandemic. As countries begin reopening their economies, many of these discussions have already resumed. Since these were not losses to competitors, we believe that most of this business will ultimately be booked. And while some customers have deferred projects, we are also rapidly building a new pipeline with customers that are moving their on-premise workloads to the cloud. COVID-19 created challenges that forced companies to reconsider how they work in the cloud, including looking to us as an alternative to AWS and Azure. As we engaged with these customers, they found OCI was more performant than our competitors, more secure, less expensive and easy to use, making OCI now a serious part of the infrastructure discussion. We are also seeing this on the application side of the business, as many customers entered the pandemic unprepared and are now showing renewed interest in modern cloud applications with mobility, social and machine learning built-in. Moving to the numbers, I'll review our non-GAAP results using constant dollar rates unless I say otherwise. Keep in mind for your USD models that the strengthening of the U.S. dollar in the quarter resulted in an unexpected currency headwind as there was a flight to quality, which is the U.S. dollar. The incremental currency headwind was more than $200 million to total revenue and $0.02 to earnings per share, both negative. Total Cloud Services and License Support revenues for the quarter were $6.8 billion, up 3% from last year and accounted for 66% of total company revenue, up from 61% last year. GAAP application subscription revenues were $2.7 billion, up 3% with Fusion apps up 31%. Fusion ERP was up 35% and Fusion HCM was up 29%. NetSuite ERP was up 25% and Vertical SaaS was up 7%. GAAP infrastructure subscription revenues were $4.1 billion, up 3% with database subscription revenue up 6%, which is up from 5% last quarter. License revenues were $2 billion, down 21% after being up 15% last Q4. All in, total revenues for the quarter were $10.4 billion, down 4%. As we saw the pandemic begin to take hold, we acted swiftly to lower our operating expenses by 8%. Non-GAAP operating income was $5.1 billion, down slightly from last year, and the operating margin was 49%, up 2% from last year. As a reminder, to take advantage of very favorable interest rates, we issued $20 billion in debt in the quarter and the added interest expense, which lowered EPS by $0.03, was not in my early March guidance. The non-GAAP tax rate for the quarter was 16.6% below our base tax rate of 20% as a result of some discrete items, and EPS was $1.20 in U.S. dollars, up 3% in U.S. dollars, up 5% in constant currency. As I mentioned, currency had a negative $0.02 impact on EPS. The GAAP tax rate was 15.7%, also a result of some discrete items, and GAAP EPS was $0.99 in U.S. dollars, down 8% in USD and down 5% in constant currency. Now for the full fiscal year, total Cloud Services and License Support revenue was $27.4 billion, up 4% and accounting for 70% of total company revenue, up from 68% last year. Total company revenue for the year was $39.1 billion, up slightly in constant currency. Non-GAAP EPS was $3.85 in USD, up 9% and up double-digits for the third consecutive year at 11% in constant currency. The full year operating margin percentage was up slightly at 44%, and I expect we will see record margins in the coming years as our revenue growth accelerates, and we benefit from greater scale in the cloud. Operating cash flow over the last four quarters was $13.1 billion. During Q4, we saw delays in customer payments due to the pandemic as some customers suffered financial hardship. We worked with those customers and we expect that these payments will be collected in full over the course of this fiscal year. Capital expenditures for the year were $1.6 billion, and free cash flow over the last four quarters was $11.6 billion. We now have more than $43 billion in cash and marketable securities. The short-term deferred revenue balance is $8 billion. Now that's down 3% in constant currency due to timing differences in customer payments, which were more pronounced this quarter, because of COVID-19. But I want to remind you, gross deferred revenue was up 3% in constant currency. As we've said before, we're committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases, prudent use of debt and a dividend. This quarter, we repurchased nearly 107 million shares for a total of $5.2 billion. Over the last 12 months, we've repurchased 361 million shares for a total of $19.2 billion. Over the last 10 years, we have reduced the shares outstanding by nearly 40%. In addition, we have paid out dividends of $3.1 billion over the last 12 months, and the Board of Directors again declared a quarterly dividend of $0.24 per share. Now, before moving to guidance, I'd like to restate what I said on our Q2 and Q3 earnings call, which was that our business is expanding and our revenue is accelerating and our relationships with customers is broadening. But for the timing of the pandemic, we had every reason to believe that this momentum would have carried forward to Q4. And though delayed by a few months, we believe, the pandemic has actually focused customers more clearly on the need for the modern technology, which are uniquely at the core of Oracle's offerings. We are confident in our growth, because our mix of business is becoming increasingly favorable. Our revenue is now clearly in one of three distinct groups: one growing, one stable and one declining. What I see is that while overall revenue growth has averaged around 1% to 2% over the last few years, underneath, the growing businesses have grown at a 30% compound annual growth rate. The declining businesses averaged almost double-digit decline and our stable businesses were up 1% or 2%. We are now at a point where our growing businesses are larger than our declining businesses. And this favorable shift will inevitably drive revenue acceleration going forward. Second, I believe our SaaS business momentum will increase as our very large installed base of application customers continues to move to the cloud and as we take share from our on-premise competitors, SAP for One, that do not have a true SaaS offering. Our products are modern, secure, performant, mobile and importantly, highly referenceable. As more of these ERP workloads move to the cloud, we believe that they will move to Oracle Fusion. Third, we have four decades' worth of Oracle database applications, which have only recently started to move to the cloud. These databases contain the most mission-critical and valuable information of our customers. Now with Autonomous Database, they have a place to go where they get far better technology at a lower price. For those who care about security, performance and cost, the Autonomous Database will be the standard that everyone else is measured against. The Autonomous Database runs on Oracle Cloud Infrastructure in our public cloud and in a customer's own data center with Cloud@Customer. The Autonomous Database is, without question, our most significant database release and will absolutely drive revenue acceleration going forward as it grows. Lastly is the momentum in OCI that I've already mentioned. We're thrilled that once companies see our differentiated OCI technology, they become believers. This is evidenced by the fact that annualized consumption revenue for Gen2 OCI grew over 140% in Q4. By the way, the ACR for Autonomous Database grew nearly 70% in Q4. These two are getting to be a large number. Across all these product categories, industry analysts are universally recognizing our technology innovation and leadership in the cloud. Pick your favorite independent publisher, whether it's Forrester, Gartner or IDC or any others, you will see Oracle in the upper right of every chart. In summary, it's the continuation of leading technologies favorable mix shifts in our existing businesses and higher growth rates from our growing businesses that give me the confidence that our revenue growth will accelerate this year. Now to the guidance. My guidance today is on a non-GAAP basis and in constant currency. Currency is extremely volatile, as you've all seen, and it is clear what happened in Q4. However, assuming current exchange rates remain the same as they are now, though I'm not projecting that, I'm just telling you, currency should have a negative 1% effect on total revenue and $0.01 negative effect on EPS in Q1. Total revenues are expected to grow from 0% to 2% in constant currency. And assuming a 1% currency headwind, total revenues are expected to grow from negative 1% to positive 1% in USD. Non-GAAP EPS in constant currency is expected to grow 5% to 9% and between $0.85 and $0.89 in constant currency, and assuming a $0.01 headwind, non-GAAP EPS in USD is expected to grow between 4% and 8% and be between $0.84 and $0.88 in USD. My EPS guidance for Q1 assumes a base tax rate of 20%. However, onetime tax events could cause actual tax rates for any given quarter to vary. But I expect that in normalizing for these onetime tax events, our tax rate will, in fact, average around 20%. Now given the uncertainty related to the pandemic. Now I'm not going to be providing guidance for the entire fiscal year 2021. But as I said earlier, I have a high level of confidence that our revenue will accelerate as we move on past COVID-19.

Larry Ellison, Chairman and Chief Technology Officer

Thank you, Safra. In this quarter, we announced new customer relationships with Zoom and 8x8, which were significant achievements among several others. Before I delve into more details about these additional wins, I want to emphasize the reasons behind our success. Oracle Cloud Infrastructure is the only second-generation autonomous cloud in the world. Our autonomous software technology, such as the Oracle Autonomous Database and Oracle Autonomous Linux, is what differentiates our Gen2 cloud from Amazon's, Microsoft's, and Google's first-generation clouds. Autonomous self-driving computer systems remove the need for human labor and eliminate human error. This significantly reduces the operational costs of running an autonomous system and greatly enhances data security and system reliability. Major data losses at Amazon were due to human error, something that simply cannot happen if your data is managed by an Oracle autonomous system. This is a major advantage. The Oracle Autonomous Database manages its own provisioning, configuration, encryption, and updates automatically, scaling itself according to usage without requiring downtime for maintenance. Oracle Autonomous Linux, the only autonomous operating system in the world, offers 99.95% availability while continuously maintaining security and patching in real-time. Soon, all popular OCI services will be fully serverless and elastic, features that competitors do not offer. In the Oracle Cloud Infrastructure, you will only pay for what you use, in contrast to other clouds where you often pay for reserved capacity regardless of actual usage, which is progressively less true in Oracle's Autonomous Cloud. Currently, there are 24 live OCI Gen2 regions, and we will surpass AWS's count of 25 regions within this fiscal year by adding 14 more, enabling more customers to access a public cloud without sacrificing data locality or sovereignty. Additionally, we provide Oracle Cloud@Customer, which allows customers to run applications within their own data centers while complying with their security needs. To summarize, Oracle's Gen2 autonomous, serverless, elastic cloud infrastructure outperforms AWS, Azure, and Google Cloud on cost, performance, and security, which accounts for winning clients like Zoom. The demand for Zoom's services has surged nearly 20 times since January, leading them to require additional cloud capacity urgently. Within hours of integrating Oracle services, OCI supported hundreds of thousands of simultaneous meeting participants, and this usage has grown to millions. Zoom chose OCI for its advantages in pricing, performance, scalability, reliability, and security. We handle over 8 petabytes of data daily for Zoom's conferences, demonstrating our scaling capabilities as demand increases. In addition to Zoom, we had a significant win with 8x8, which began transitioning some services to OCI for performance improvements. Their surprising gains from moving out of AWS led them to migrate all services to Oracle upon realizing the performance and cost benefits that OCI provided. Another notable win is the Omani Information Technology and Communications Group, which signed a three-year contract to build a dedicated OCI Gen2 Cloud@Customer data center in Oman, offering public cloud services to government agencies there without compromising data requirements. Jefferies, a leading investment firm, also chose Oracle, planning to move over 500 workloads to our Gen2 public cloud, utilizing OCI to extend their Fusion HCM applications. Another win involved the General Authority of Civil Aviation in Saudi Arabia, which opted for our Cloud@Customer solution primarily for its cost savings and compliance with government regulations. Quest Diagnostics, a leader in diagnostic testing, expanded their Oracle cloud services to support increased COVID-19-related demands. Santander Bank is consolidating databases on our Exadata Cloud@Customer as part of their digital transformation, while TD Bank Group in Canada committed to a multiyear partnership with Oracle’s public cloud. Verizon Business Group moved over 25 critical workloads to OCI Gen2 public cloud, tasked with handling high data operations. Cybereason is utilizing OCI for their SaaS platform focusing on endpoint protection and analytics. A well-known European auto manufacturer is seeking a highly elastic, high-performance cloud environment for advanced simulations. SGS is also transitioning multiple workloads to our OCI Gen2 Public Cloud to enhance their operational efficiency, and Synacor is migrating several production SaaS businesses, resulting in data center reductions. We also secured a contract with Sky.One in Brazil to migrate all workloads to Oracle’s cloud after finding better performance and cost efficiency compared to AWS. Manappuram Finance in India committed to transitioning entirely to the Oracle Public Cloud, establishing a disaster recovery site. Lastly, Altair expanded their contract fivefold to migrate more of their workloads to OCI, among many other agreements in a particularly successful quarter for our infrastructure services. Now, turning to cloud applications, Oracle has emerged as a leader in the cloud ERP sector, boasting over 7,100 Fusion ERP customers and nearly 22,000 NetSuite customers. Our market dominance stems from the fact that our primary competitor, SAP, failed to modernize their ERP applications for cloud functionality. Gartner ranks our Fusion ERP at the top, prominently above SAP, showcasing a significant shift in the market landscape. Although Workday offers a cloud ERP solution, they mainly excel in HCM, which leads to its growth being bundled with ERP purchases. Our growth in Fusion HCM now surpasses that of Workday, cementing our position as a market leader and putting us in a prime position to also dominate the cloud HCM space. During this quarter, notable go-lives included JPMorgan Chase, which deployed Oracle HCM and Recruiting across 100 countries for over 256,000 employees, achieving significant operational transitions. Goldman Sachs faced challenges with Workday HCM prior to acquiring our solution and launching it successfully in a short timeframe. Reports indicate that Oracle HCM is rated significantly higher than Workday by both Gartner and Forrester Research. Additionally, Mount Sinai Hospital transitioned to Oracle Cloud HCM, modernizing their HR tools amid the pandemic. Various other organizations, including KPM Netherlands and a large global insurance provider, chose Oracle for ERP transformations due to our comprehensive capabilities. Westpac New Zealand is also implementing Oracle Cloud ERP to streamline their operations while meeting specific regulatory requirements. In terms of HCM, we secured Kroger as a client, replacing their SAP system with Fusion HCM by highlighting our superior mobile capabilities and integrated AI features. Petronas in Malaysia has also opted to transition from SAP to Fusion HCM. A U.S. managed healthcare company has decided to consolidate 40 disparate HR systems under Fusion HCM for better visibility and efficiency. Other significant HCM contract wins were made with the United Nations, Norfolk County Council, and the University of Texas MD Anderson Cancer Center. There are many more, but I will pause here to turn the discussion back to Safra.

Ken Bond, Senior Vice President

Thank you, Larry. Holly, if we could move to the Q&A portion of the call now?

Operator, Operator

All right. Our first question is going to come from the line of Brad Zelnick, Credit Suisse.

Brad Zelnick, Analyst

Thanks very much for taking my question. Larry, you talked about OCI quite a bit in your prepared remarks, but I don’t think we can hear too much about the success you’re having. In particular, the traction outside your typical customer base with wins like Zoom and 8x8 in the quarter, very impressive. Can you talk more about the impact that the pandemic might be having on your Cloud Infrastructure business? And any change in your confidence level there based on what you're seeing?

Larry Ellison, Chairman and Chief Technology Officer

I believe we are starting to see a shift as more people try our services. The initial users of OCI are primarily those providing applications. We have had significant success with customers like Verizon, who explored various cloud options and concluded that OCI outperforms them. Zoom also discovered that OCI offered better speed and cost efficiency, which is crucial for their operations. They needed to scale up but preferred a solution that saves money while providing more. For businesses developing applications in the cloud, we believe many will choose OCI after testing our platform. While not everyone is convinced that Oracle has the fastest and most cost-effective cloud, firsthand experience reveals the truth. We're at the early stages of this process, and I think many were surprised by Zoom's choice of Oracle, including Zoom itself. They were taken aback by the superior performance, cost savings, and enhanced security they experienced after switching. As users compare our infrastructure to AWS, Azure, and others, we expect them to favor our offerings. They need to examine our cloud rather than just assume AWS or Azure, being larger, are automatically better. When they take a closer look, we come out on top. Verizon is a prime example of someone who tested other options before realizing Oracle provided significantly more value compared to AWS or Azure. We have a vast pool of customers to engage and encourage to evaluate our cloud against AWS results. If we succeed, our Infrastructure Cloud business could be substantial, given that we have hundreds of thousands of database customers, including many of the world's largest companies and governments.

Brad Zelnick, Analyst

Thank you very much, Larry. Much clearer.

Operator, Operator

Thank you. Our next question is going to come from the line of Heather Bellini, Goldman Sachs.

Heather Bellini, Analyst

Great. Thank you both very much for taking the question. I wanted to talk a little bit about the launch of Cloud@Customer Gen 2 that you mentioned with Autonomous Database. And with the ability now to be able to run Autonomous on-premise, can you give us a sense for how you see this accelerating adoption of Autonomous? And then I just was wondering, when you factor in both now that it's available in the cloud, on OCI and on-premise, how much of a tailwind, Safra, is this factored into your view that you think that revenue growth could accelerate in fiscal year 2021? Is this one of the biggest levers to your estimations there? Thank you.

Safra Catz, CEO

Let me just answer the end of that, and then, Larry, I think you should cover it in much more detail. I have not counted on that in my underlying assumptions, but I do believe that it is going to be incredibly successful. And as our initial customers are using it, this is, I believe, a very, very important, very differentiated capability that only we have. And so, though I’ve not relied on it for the acceleration, I do believe that it will be an incredible tailwind for us and not just this year, but really for years to come. Anyway, Larry, why don’t you comment on Cloud@Customer and Autonomous Database?

Larry Ellison, Chairman and Chief Technology Officer

When we shifted our focus to the cloud, we developed a lot of databases for the public cloud, with the Autonomous Database being the standout product. However, it was only available in the public cloud, leaving our extensive installed base—hundreds of thousands of customers without access to this technology. Much of the world's valuable data resides in Oracle databases on-premise, and a major bank wanted to utilize the Oracle Autonomous Database, but they could only purchase it in the public cloud and not in their on-premise data center with Cloud@Customer. For years, our on-premise customers lacked access to our latest database technology. After enhancing our technology for the public cloud, we have finally made it available to on-premise customers through our Cloud@Customer service offering. Now, all our on-premise customers, including large banks and government agencies, can leverage Cloud@Customer to upgrade their databases, making it incredibly appealing for them. There are no upfront capital costs; it resembles buying public cloud services, but we install the database cloud in their data centers using Exadata machines, managing it across the network in conjunction with our public cloud. Our on-premise customers finally have access to our top database technology, the Autonomous Database, which we believe will drive significant change and be a fantastic product for us. Additionally, Gen2 Cloud@Customer is designed to be extremely easy to install and use; you essentially plug it in, and it works seamlessly. We believe this system will attract all of our on-premise customers, aiding their transition to the public cloud during the coexistence of private and public environments. We anticipate it will become one of our most successful products, the Autonomous Database Cloud@Customer.

Heather Bellini, Analyst

Thank you.

Operator, Operator

And our next question is going to come from the line of Sarah Hindlian-Bowler.

Sarah Hindlian-Bowler, Analyst

Great. Thank you, Larry and Safra for taking my questions. And I'm really glad that everybody is safe and well, definitely important right now. I'd like to pivot and focus on the applications business, especially Safra, given your commentary around growing parts of the business getting larger than the shrinking parts. Can you elaborate a little bit on what trends you're seeing in application software? And perhaps, in particular, I'm interested in knowing if you're seeing any accelerations in customer migrations from on-premise into your cloud, and just any color and insights will be greatly appreciated? Thank you so much.

Safra Catz, CEO

Certainly. So we have a number of drivers in this business that basically are accelerating the adoption of our products. First of all, we have more and more referenceable customers, both small to a very large, as you heard Larry talk about it. So we have many, many references, which makes it far easier to convince new customers to go ahead and choose us. Secondly, we have a lot of success upgrading on-premise customers that customers that are – they use products that are on-premise with really no possible way to reach the cloud, and so we've been incredibly successful with the old Lawson base and all that. In addition, the E-Business Suite customers, which is a massive installed base has only recently started to upgrade and only about 6% of our installed base has upgraded to the cloud in absolute ERP. So though they picked up pieces around financials, now they're really starting as they build confidence and especially as larger and larger customers have adopted Fusion ERP, many of them have just been waiting until they could do that. And one of the things, by the way, that was very important was the releases on the supply chain side of the business. Many of our customers are manufacturers and they wanted to – they like having the suite. They wanted a full suite, of course our financials and HCM, but in addition, they wanted a mature supply chain product and now we have many references in the supply chain, of course including ourselves. And so the momentum has really increased. Now part of that, by the way, is that once customers, start with us many of our customers grow over time. So, they'll start with some module, and year-over-year, it is very common that they will grow their installation at least 20% with us. So, we have a lot of different drivers to the relationship. So, some adopt HCM, some take on more divisions, some roll in additional capabilities. And I'll tell you, this pandemic has actually been very, very interesting for some of them, because they got one of the immediate benefits of being in the cloud. And that is for our HCM customers, we rolled out, at no charge, health and safety, which is a module in HCM. And in working with some partners, many of our customers adopted it to start using it, so that they could better support their employees through this pandemic, and so that they could assist them and help keep track of them and help them where necessary. Of course, nothing like that could have been possible on-premise. And it's those kind of things where we can just roll out new capabilities, which is the big difference between being on-premise but hosted like SAP, and being actually in a software-as-a-service model where new functionalities can just be rolled out for you without you calling in a giant system integrator team to put it in. So, we have a lot of momentum right now in this business.

Larry Ellison, Chairman and Chief Technology Officer

Yeah. And I'd like to add to what Safra said. We rolled out the new module. That's something that Oracle made available in our cloud. But then, our customers will be able to access that new module at home, if they’ll take it out. So, and the fact is, all these cloud systems are accessible at home, obviously. They are accessible on your smartphone. So, they're just much more accessible than the previous generation of technology. And that's made a huge difference where people are able to continue operating out of their homes. If you are an accountant, and you're using an Oracle financial system, there is no reason to get in your car and drive to the office. You have the same exact tools sitting in your home office on your laptop computer.

Safra Catz, CEO

These capabilities are modern and mobile, easily accessible. You can interact with them using voice commands and they feature a much more advanced user interface. The difference between 21st-century technology, which proved incredibly useful during the pandemic, and the outdated 20th-century systems some of our customers are still using is striking. Once they start working with us and gain confidence, they quickly realize how crucial this technology is for their future success. Thank you.

Operator, Operator

Thank you. And our last question for the day will come from the line of Mark Moerdler, Sanford Bernstein.

Mark Moerdler, Analyst

Thank you, and appreciate you have time to take my question. Safra, my understanding was that Company didn't furlough employees. They didn't lay anyone off. You treated your employees well. Your license sales were down a bit, and yet you beat big on margin. Can you give us some color on exactly what's driving such a big margin improvement? Thanks.

Safra Catz, CEO

We have a long history of being very careful with our spending. During the pandemic, there was minimal travel, only for essential employees. We transitioned completely to remote work, which eliminated travel and entertainment expenses. Additionally, our compensation costs decreased due to lower commission payments. We focused on managing our expenses while still investing in our future and remain optimistic about the strength of our products. We're confident in our team's ability to promote these products to prospects. It was important for us to maintain a strong technical team and a robust sales force. The entire senior management team worked diligently to cut unnecessary spending, which helped us achieve improved margins.

Larry Ellison, Chairman and Chief Technology Officer

I would like to add my thoughts as well. I completely agree with everything Safra mentioned. We have consistently managed our expenses effectively, and this situation is another instance where we've executed successfully. Equally important, if not more so, is that our profitable businesses are expanding while our less profitable ones are shrinking. The mix, which Safra referred to earlier in the call, includes some declining businesses that we don't prioritize. For instance, we're not concerned about the decline in SPARC server sales compared to when we first acquired Sun. We have several lower-margin businesses, especially in storage systems, that are declining, while we have several rising businesses, such as Fusion HCM, Fusion ERP, Fusion SCM, our infrastructure, OCI Gen 2, and Autonomous Database. These are significantly higher-margin products. As our lower-margin businesses decrease and our higher-margin ones increase, there's a fundamental shift happening. This change in mix should lead to margin expansion during favorable times and margin maintenance during challenging times due to this shift. This mix change is critical and clarifies why, even though Oracle's top-line growth has been modest over the last several years, our bottom-line growth has been outstanding. It's not merely about cost-cutting. Our mix is evolving, our profitable businesses are growing, and our less profitable ones are declining, allowing us to enhance profitability and maintain margins despite top-line challenges. I don't want to downplay the team's efforts, which did a fantastic job monitoring expenses, especially in travel. Clearly, we traveled less and stayed in fewer hotels, among other cost-saving measures. However, it's the combination of their diligent expense management along with this mix change that significantly contributed to our earnings beat in a tough quarter.

Mark Moerdler, Analyst

Thank you.

Ken Bond, Senior Vice President

Thank you, Larry. 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 with any follow-up questions from this call and we look forward to speaking with you. Thank you again for joining us today. With that, I'll turn the call back to Holly for closing.

Operator, Operator

Thank you. Once again, we'd like to thank you for participating in today's Oracle quarter four 2020 earnings conference call. You may now disconnect.