Ken Bond - Senior Vice President Larry Ellison - Chairman and Chief Technology Officer Safra Catz - Chief Executive Officer Mark Hurd - Chief Executive Officer

Raimo Lenschow - Barclays Kash Rangan - Bank of America Merrill Lynch John DiFucci - Jefferies Adam Holt - MoffettNathanson Heather Bellini - Goldman Sachs Brad Zelnick - Credit Suisse Mark Moerdler - Sanford Bernstein Kirk Materne - Evercore ISI

Welcome to Oracle's Third Quarter 2018 Earnings Conference Call. Now I’d like to turn today’s conference over to Ken Bond, Senior Vice President.

Thank you, Holly. Good afternoon, everyone, and welcome to Oracle’s Third Quarter Fiscal Year 2018 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 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 also are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today. As a result, we caution you against 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. As a reminder, Safra’s comments today will use constant dollar growth rates unless stated otherwise and Mark’s comments will use U.S dollar growth rate. And finally, we are not obligating ourselves to revisit our results or publicly release any revisions 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.

Thanks, Ken. Good afternoon, everyone. I’m going to focus on our non-GAAP results for Q3. I’ll then review guidance for Q4 and turn the call over to Larry and Mark for their comments. As you can see, we had another solid quarter. But before discussing Q3, let me just point out that the GAAP income statement was impacted by one-time net charge totaling $6.9 billion related to 2017 Tax Cuts and Jobs Act. This is clearly a onetime event, so for use of comparison, we have excluded it from our non-GAAP calculation. Now back to the quarter. Total cloud and software revenue were $8 billion, up 7% and up 3% in constant currency. Inside of cloud and software revenue, GAAP total revenue for application, which is new licenses, license updates including support and SaaS were $2.7 billion, up 9% or 6% in constant currency and GAAP total revenues for platform and infrastructure, which is new licenses, license update, including support and PaaS and IaaS were $5.3 billion, up 8% or 3% in constant currency. Cloud SaaS revenue for the quarter was $1.2 billion, up 21% on a GAAP basis from last year in constant currency with -- on non GAAP basis with Fusion Cloud revenues up 52% in constant currency. Cloud PaaS and IaaS revenues for the quarter were $416 million, up 24% from last year in constant currency. Cloud PaaS and IaaS revenue, excluding legacy posting services, saw growth of 49% in constant currency and 56% in U.S dollars. As legacy hosting services become smaller part of total PaaS and IaaS, the underlying growth of PaaS and next generation IaaS will be more visible. As for cloud margins, our SaaS business continues to scale in grow and the gross margin has expanded to 67%, up from 65% last Q3. We expect to see further improvement and remain committed to our goal of 80% PaaS gross margin. Now the gross margin for PaaS and IaaS was 35%, down from last year. However, in looking ahead, I believe we’re at the point where PaaS and IaaS gross margins will begin to improve with Q4 slightly higher than Q3. Total new license and less license updates, including support revenues were $6.4 billion, up 4% in USD with software updates and support revenue of over $5 billion for the first time ever, reflecting continued excellent renewal rate and the strength of our installed base of customers. Total non-GAAP revenues for the company were $9.8 billion, up 1% from last year in constant currency and up 5% in U.S. dollars. Non-GAAP operating income was $4.3 billion, up 4% from last year in constant currency 9% in U.S. dollars. The operating margin was 44%, which was up from 43% last year. There were a couple of the one-time in and out in the expenses impacting this but basically the operating margin has now increased year-over-year for sixth consecutive quarters. And while I can’t promise this will happen every quarter, I do expect that operating margin will continue to expand. The non-GAAP tax rate for the quarter was materially lower than guidance at 16.1%, reflecting the impact from the new tax law, as well as other one-time benefits. The GAAP tax rate was 222%, reflecting the $6.9 billion tax charge related to the new tax law. Non-GAAP earnings per share was $0.83, up 20% in USD and up 15% in CD. The GAAP loss per share was $0.98, driven by the one-time charges related to the new tax law. Operating cash flow over the last four quarters was $15.2 billion, up 13% in U.S dollars and free cash flow over the last four quarters was $13.3 billion also up 13% in U.S. dollars. Capital expenditures for the quarter were $286 million and we expect that cloud CapEx spending will continue to be driven by our ARR and should we see higher than expected ARR growth, we’d expect to see higher CapEx as investments as well. We now have more than $70 billion in cash and marketable securities, net of debt our cash balance is nearly $10 billion, the short-term deferred revenue balance is $8 billion, up 4% in constant currency. This quarter we repurchased nearly 81 million shares for a total of nearly $4 billion. Over the last 12 months, we repurchased $143 million shares for a total $7 billion and we also paid out dividends of nearly $3.2 billion. The Board of Directors again declared a quarterly dividend of $0.19 per share. As we move to Q4 guidance, I want to remind you that we have a bit of a tough comparison as the last Q4 we beat our EPS guidance by $0.10. I will give you guidance for non-GAAP Q4 in U.S. dollars and also in constant currency. Assuming prior exchange rates, currency could be as much as 3% positive on total revenue and $0.03 positive on earnings per share, so for Q4. Cloud revenues including SaaS, PaaS and IaaS are expected to grow 19% to 23% in USD, 17% to 21% in constant currency. Total revenues are expected to grow from 1% to 3% in USD and negative 2% to 0% in constant currency. Non-GAAP EPS in USD is expected to be between $0.92 and $0.95 and EPS in constant currency expected to be between $0.89 and $0.92. This assumes a non-GAAP tax rate of around 20%. The important thing for you to know is that for fiscal 2019, I expect the new tax law will translate for us to a tax rate of 19.5%. However, in any given quarter, we could see one-time tax events that will cause our actual tax rates to vary from our base rate, but I expected a normalizing for these one-time tax events our tax rate will average around 19.5%. With that, I will turn it over to Mark for his comments.

Thanks, Safra. I'm just going to start with a few customer wins for the quarter and then make a couple of comments and I’ll turn it over to Larry. First, in ERP wins, Avis Budget Group, Barrick Gold, by the way also bought HCM at the same time, Baylor Scott & White Health, ERP and Fusion HCM; Blue Cross Blue Shield of Florida Fusion ERP, Broadcom Fusion ERP; Caesars Entertainment, Fusion ERP and HCM; Dubai Ports, Fusion ERP; Eastern Line Technologies, Fusion ERP; Master Lock; MTM Group; William Morison Supermarket, all Fusion ERP; and HCM Arthur Gallagher; City of Memphis, again Dubai Ports; Grant Thornton; Henkel's McCoy, Marina Healthcare, also MTN brought HCM; National Oilwell Varco; Principle Financial Group; First Group, also William Morrison Supermarkets, and a really-really large U.S. bank who bought HCM from us which is one of the largest HCM transactions in ARRs that we have ever received. With that a couple of comments on a quarter. Safra mentioned our revenue numbers up 6% with software and cloud revenue year-to-date, up 8% and operating income up 10% and EPS up 16%, up 20% in Q2. We talked a little bit about our ecosystem. Our app ecosystems year-to-date is up 12%, we continue to grow faster than the market. Less than 15% our apps customers have started to move their core apps to the cloud. Between customers that are partially moved and those not started yet, we have an enormous opportunity. SaaS bookings ARR, ARR was roughly where I expected it to be in Q3 and with SaaS revenue now approaching $5 billion, I'll focus my comments on SaaS revenue as opposed to ARR. SaaS revenue up 24%, now over $4.6 billion run rate, ERP up 62% organically, overall ERP is now $1.5 billion annualized run rate. Fusion HCM was up 71%, that's a revenue number, doesn't include the bookings that I described a couple of minutes ago, verticals up 20%. Now we move to tech. By the way on the verticals, I want to mention the 20% growth is compared up 110% last year. On our technical system, year-to-date our technology ecosystem is up at 6% with the database ecosystem also up at the same time roughly 6%. And again we’re growing faster than the market. The fact is that we are taking market share and with autonomous database just beginning to show up in our pipeline, this will only strengthen our technology ecosystem growth. As the infrastructure revenues up 28% with our NexGen PaaS infrastructure business growing 56% and we’re already over $1.1 billion annualized run rate. A few highlights Oracle clouds, which includes database and service, up 34%. Public cloud infrastructure was actually up 142%, storage infrastructure up 82%, compute infrastructure up 121%, network infrastructure up 181%. Cloud revenue of 25% growth now at $6.3 billion annual run rate and 80% of our trailing 12 months software and cloud revenue that are now recurring in nature. We're executing well on a big and growing pipeline. Our pipeline is at a record level and our year-to-date performance with top line growth at 60% USD and 16% EPS growth reflect our success. Looking forward for the full year, I expect our apps ecosystem as I said early in the year will grow around 10%. The tech ecosystem will grow around 5% and our EPS will be above 10%. With that, I'll turn it over to Larry.

Thank you, Mark. Oracle was fully autonomous self-driving database is now available in the Oracle cloud. No other cloud provider has a fully automated database. One that automatically and immediately applies security of assets without requiring any scheduled downtime. Oracle's autonomous database features are absolutely unique. There are more autonomous cloud services to come. Over the next few months, we expect to deliver autonomous analytics, autonomous mobility, autonomous application development and autonomous integration services. Oracle's new suite of autonomous PaaS services delivers an unprecedented level of automation and cost savings to our customers. Our highly automated suite of autonomous PaaS services reduces cost by reducing human labor and improves reliability and security by reducing human error. No other cloud provider has anything like it.

Thank you, Larry. Holly if we could prepare the audience for Q&A please.

[Operator Instructions] Our first question will come from the line of Raimo Lenschow, Barclays.

I had a question around IaaS, PaaS, you saw an acceleration of growth which is greater. And Mark you talked in February when we talked about bring your own license as a factor that we need to consider. Can u talk a little bit about momentum you saw around IaaS, PaaS and bring your own licenses this quarter? Thank you.

Raimo, it’s why I continue to try to focus here on the ecosystem number. I mean I think again without autonomous database frankly being GA at this point being generally available as Larry mentioned a bit in his comments. We grew the tech ecosystem 6% and it shows up in different categories. It shows up in license and again licenses today are not really on prem, licensees are now currency that you can use in the cloud or you can use it on prem, so licenses are now able to be used both ways. And so we’ve seen strong database, I’d say strong database momentum in the context to being able to licenses and use in the cloud or on prem. By the way, we continue to see support grow in database at the same time. And you saw as I mentioned in my comments, growth in databases of service simultaneously 34% at all of the core next gen infrastructure categories grew in excess of 100%, storage is actually up 82% but compute up 121. We saw a good momentum. And again, the key for us so is that all tech eco system growth and I think with autonomous data base as we get a GA and build references, it’s going to do nothing to get better.

Our next question will come from the line of Kash Rangan, Bank of America Merrill Lynch.

Safra, I am looking at your SaaS guidance. Clearly, the business seems moderating into the 28%-ish type growth here. At this point, how do we get the margin leverage that you’ve always talked about heading to 80%? Seems like on a year-over-year basis, you're showing an improvement but from 60%, 70% to 80% and what looks to be perhaps I am not putting words in your mouth, and it’s basically your. So seems like a pretty big leap. And I just am curious to get your thoughts how the company manages to accomplish that goal? Thank you and that’s it for me.

So in running our SaaS business, it’s really now getting to a scale and we’re able to use the number of new technologies that we’re rolling out through the business that is giving us a lot more capacity. So before we had to invest more for the same amount of users than we do now and so we’ve got quite a lot of capacity improvement. And in fact we’re not going to need to make too many more infrastructure investments into the SaaS business and yet handle a much larger install base. I don’t know if anybody else wants to add to that…

For example, as we fully diployed database multi-tenancy in our SaaS, let’s say we double our capacity without spending one penny on hardware. We can help twice as many customers, twice as many transactions, twice as many users without spending one dollar. So those are technologies we can add that allow us to dramatically improve our SaaS market.

It’s a straight math, so at our current SaaS business and you now play out we’re spending $1.3 billion roughly speaking expense when you reverse engineer the gross margin. To Safra’s point, we’re just simply not having the dialog right now, dialog in the context of more expense. So if you just sell forward our bookings, you put $1 billion of revenue on the top, you’re roughly at that number.

And Mark, I think you just said that only 15% of apps customers moved to the cloud, the other 85% is ahead of you. Couldn’t the company grow again faster than SaaS given that you have a significant option and you had a few investments in it? Thank you.

And to clarify, first thing you understand that that 15% have started, this is not 15% have moved all of their apps to the cloud, they just started so this is ton of room here…

There's a lot wrapped into that quote that I put out there. And so let me try to unpack it a little bit. So in terms if you looked at core, meaning I have core e-business suite solutions and I replaced it with a cloud financials SaaS application. That percent of our user base has moved is below single digits. The less than 15% number we put out is the percent of our user base that has some cloud applications that they are now using. The percent of our user base that is in our pipeline now, is getting to be fairly extent, it's multiple 10% of our user base. And to your point when we convert a AI and traditional on premise application to SaaS, we typically get 3 times the revenue. The bulk of our bookings, the bulk of our revenue today is not from our user base. In addition, one of the biggest users we have has now just migrated to the cloud and that would be us, Oracle. We have migrated the entire company to SaaS, that's an important point because we've moved really the suite of ERP capabilities that we had traditionally on premise now to cloud. So to your point the ability to accelerate that growth rate and I have not given this number what we could do by taking market share and all of the above, which we truly believe we are and we’ll continue to do by just moving the user base does turn us into a very, very large SaaS business and to your point very well accelerates our growth rate.

I would like to add one thing to that is that we have some very high growth rate SaaS businesses like ERP and HCM, and we have some that we developed organically and we have some slower growth rate SaaS businesses that we've acquired many years ago. As the mix changes, you see all the growth is coming from Fusion ERP, Fusion HCM, NetSuite, it's also we expect after the quarter, this quarter -- great part of this quarter. As you see this shift to the higher growth rate SaaS services, I expect as our mix changes Fusion ERP, Fusion HCM and that's where it became a larger percentage of the total, again to growth mark, the math just says the growth rate should accelerate because of the mix change. I also think that's very important. Also the renewal rates, the renewal rates are much higher in the high growth SaaS services. So Fusion ERP, Fusion HCM, NetSuite have much higher renewal rates than we have in some of the older acquired SaaS products. So the combination of faster sales and higher renewal rates should dramatically increase our growth rate in our SaaS business. So you raised a simple question and you got a lot of guys in there…

Analytical answer from Larry, thank you.

And the reason I say to you because it's important to understand we actually don’t have a SaaS business that really grows at the rate we report SaaS. We have acquired businesses that are growing low single digits that we've had for a while, Fusion growing mid-60s with the potential to grow higher. We have NetSuite that we acquired that's growing mid to high-teens, but to Larry's point, we think it's going to start we're start to seeing the numbers grow faster and then vertical businesses that are growing roughly 20.

And as you see fusion becoming a more and more -- a larger and larger percentage of our total SaaS business then the change in mix you've got -- right now you would certainly have a very large fusion SaaS business growing at a high rate was then works those slower growing acquired businesses. So the reacceleration again to grow Mark it's just the matter of amount.

Our next question will come from the line of John DiFucci with Jefferies.

My question also I think has to do with the BYOL and I'm just trying to figure this out. So Mark from our field due diligence the flexibility offered customers would be BYOL as something they really appreciate. And it's certainly unique out there just no one else doing that and that's other vendors getting pressure to do, because you guys are doing it. I guess when I look at your results here and I see the cloud revenue been moderating pretty aggressively over the last couple of quarters, I buy into the whole ecosystem thing that you’re talking about, it makes sense to me that BYOL will have that -- that would be a result. But I'm just to figure it out, because it looks pretty aggressive. And I'm getting pinged with emails too. And is that what it is or is it the large numbers too? And I am not sure if we’re going to -- you said it accelerate a couple of times you used that word, and when I think of that whole ecosystem. Well that whole ecosystem is that what you guys think will start to happen at some point hopefully in the near future?

Well that was about 20 questions. So I'm going try to do my best to unpack it. I guess we were talking -- you started talking about database and then you introduced my comments on acceleration, which was mostly in apps and mostly around one portion of the apps ecosystem, which is SaaS. Let me go to tack answer, and Larry is going to want to chime in on this as well. The concept around BYOLs we don’t want our customers to pay twice. So they get the opportunity to buy our license they can bring that license with them to the cloud and they can bring for example a database license to the cloud, and I'll take advantage of that by the appropriate infrastructure compute, storage and then with that perhaps some automation. And if the customers choose to buy that way that will improve our license business in the way it's reported and it may have an effect on our cloud business and tech. And that's why I focus you on the ecosystem growth and the ability for us to grow faster. And then you have to add to it. We are just really bringing autonomous database to the market now. So that's going to go through its phases to bring the market. That and I told you this John over the past several quarters, our tech ecosystem without autonomous database, it's been taking a little bit of share. I think autonomous database is the most important thing we've announced in years. And I don’t think the autonomous database -- I don't want to be sarcastic, because I don’t want to be miss-print it, it will accelerate our tech ecosystem growth.

Your next question will come from the line of Adam Holt, MoffettNathanson.

We've been very focused on here, your total new license or new software revenues which includes license revenue and cloud. There's been some movement about which has been a little bit better, which has been a little bit worse in the last couple of quarters. But how should we -- if we were to boil down all the comments you’ve made on last couple of questions. Think about the mix between license growth and cloud on a go forward basis. Do you think that license growth could get close to breakeven? And then just for your Safra, you started to really buyback some stock, which we love this quarter. Could you give us maybe a sense for what we should be thinking about from a share count perspective going forward? Is this the new normal on now the buyback level? Thank you.

Well, I don’t usually tell you in advance how much I’m going to buyback. So we did $4 billion in this quarter, seems like a reasonable amount to do. Haven’t really -- don’t really know what to tell you, because I don’t usually give guidance from my buybacks, don’t expect it to exceed that in the next quarter.

And then the question about license mix versus cloud?

Well, there is no doubt that BYLO, when you're bringing your license to the cloud, encourage your customers to continue license purchases, it did give a buy more data base licenses, continue to buy data base options like multi-tenancy to buy data bases, data base options like real applications clustering and the like. So you will see -- and again our customers love the idea that once they make an investment in the license, they can use that license on premise or in the cloud, you can deploy it either place. So where historically people have thought of our license business as our traditional on premise business that is -- in fact that is simply not the case. In fact, our license business is now more and more -- our licenses are being deployed in our cloud. By the way, it’s not just -- they're not just being deployed in our cloud, our licenses are being deployed in the sales force and the SAP cloud and the Microsoft cloud, in the Amazon cloud. So again, our license business is not our legacy business, our license technology business not a legacy business. These licenses are going to be used and are being used more and more in modern cloud, not just the oracle cloud but our competitors clouds as well.

And I guess I would just say that, I know how badly everybody want to micro analyze every single number, and it’s why I’ve tried to focus you back on this ecosystem. We’ve grown our software business year-to-date 8%. Some of that shows up in license. Some of that shows up in cloud. Now, we have a couple of drivers we’ve talked about on the call. We’ve a autonomous database, that’s going to show up in both license and cloud, it’s a fungible currency in the context of how -- to the earlier question, but I can now buy a license and I can bring it with me the cloud, it could show up in either buckets. And again focusing on the overall ecosystem growth is important, the apps, we've talked about the user base and our ability to migrate to that user base, what effect will that have, that will show that apps support revenue goes down, SaaS revenue goes up. And so these things are going to go on simultaneously and again I'll say it one more time, I think trying to micro manage every line is probably the long way to look at the company, because we've got multiple drivers here, but they're all driving towards more overall software growth, some could come in cloud, some could come in license, but we're going to continue to gain share in both ecosystem segments.

Our next questions will come from the line of Heather Bellini from Goldman Sachs. Heather, go ahead with your questions.

Mark, I know you don’t want us to micro manage and fix data on license revenue, but you guys were seeing this segment shrink 10% to 15% over the last couple of years in '16, a big change in that performance over the last few quarters. One of the big questions that keeps coming up is what's driving the performance? And again, not trying to micro manage it, but there's a big debate of how much of it is just 12cR2 benefits and therefore maybe more one-time in nature versus maybe customers that are recommitting to Oracle ELAs, because of some of the things they see that you’re doing on the innovation front. And I guess quite frankly, people are just trying to get a sense of how they think about growth in license as a result of all that over the course of the next year?

Well, I think my answer maybe yes. But I do think at the core of it is what we talked about earlier, bring your own license, gives now the customers instead of having to figure out how much I am going to buy here or there, I now get the ability to commit to a technology and we now -- we get the customer now have a currency that I can bring to whichever monument I want, whatever quantities I want. And it now gives the customer ultimate flexibility and that's what customers want. So BYOL was a concept has given our customers a lot of relief, you add to that the fact that we also move to universal credits, now gives the customer the opportunity to make even a cloud decision and reapply those credits across multiple cloud services. So this is a very -- Heather, I would say, a very customer friendly environment we created now in terms of the way they acquire our products and it’s having an effect on the market.

Let me try to be clear about this as I could be. With BYOL, when someone brings their database to the cloud, some of that revenue goes into license and some of that revenue goes into cloud. Without BYOL, as we didn't have BYOL, and someone -- an Oracle customer went to the cloud, when 100% of revenue go to the cloud. So there's no question BYOL has lowered our cloud revenue and increased our license revenue.

And technology?

And technology.

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

On autonomous database cloud, Larry or Mark perhaps can you talk about the impact that it would have on converting economics from on-perm, because it would seem I have to imagine you’re going to get better multiples and the 3x that you've talked in the past as you generally get with regular data base and service?

Well, the amazing thing about the autonomous database is the only database on the planet that requires no human labor to administer the database. There are no DBAs tuning the system, there are no DBAs applying security patches, there are no DBAs backing up the system or recovering the system, it's all the done automatically. But with the bulk of the cost of running a data base is human labor, it's not buying the software, it's not buying the cloud surface, not buying the hardware or the cloud services or anything else, it's the human labor and we basically take that to zero. So there is huge value up by getting without this human labor. By the way, it's not only cost savings so I think I said earlier in my opening remarks, we also eliminate human labor, you eliminate human error that gives you a much more secure system, nobody forgets to patch something. And your CEO ends up getting fired or on the front page of the newspaper, no one forgets to apply security patch and your data is stolen, that's all automated. So you have a much more secure system. You have a much more reliable system but you have to be willing to pay less, because human beings cost a lot of money and we've automated them out of the system. So we think this new autonomous database is again maybe the most important thing Oracle has ever done in terms of data management and we are the number one data management company on the planet right now, and have been for some time. We think this is a very big deal. We think the bulk of our customers are going to move the autonomous data base. Now when we talk about migration, when you move from an on premise database to an autonomous data base, you press one button because you don’t have to set up indexes or retune it or do anything else, your data automatically moves from on premise into our autonomous database in our cloud running on high performance year that pretty much guarantees to give you -- if you’re running Exadata on premise it will run at the same speed. If you’re not running at Exadata on premise, it will run 10 times faster by moving to the cloud. And it runs multiples of times faster than Amazon. Now -- okay Oracle’s got a faster database than Amazon it's no big surprise there. But the interesting thing Amazon charges by the minute and we charge by the minute is our prices are essentially the same or close enough. If we run 10 times faster, we are 1/10 the cost of Amazon database and that's what it is. So I mean we’ve been all the public benchmarks are, you can go and look at them, we're 1/10 the cost. We automatically apply security patches, we eliminate human labor, it's a huge benefit to our customers to move to the autonomous database, it just went live a couple of weeks ago and we expect it’s going to change the profile of our company forever.

Brad, to your question about the multiple, the answer to your question is yes.

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

Safra or Mark, software support with constant currency has been growing 2%, 3% year-over-year in the recent quarters, but only at 1% this quarter constant currency. Are you seeing increased cannibalization of the on premise business by your own Oracle cloud SaaS and PaaS or there other factors that are coming in?

Actually, all you’re really seeing is seasonality. If you’re asking our cancellation rate way up, they are not. And in technology and especially with BYOL there’s absolutely no reason. And in some cases for customer to cloud in the apps business, you will see cancellation. They are transacting not that large in the overall base. And so the overall cancellations for the company are actually the same. So they’ve moved at all. And all you’re seeing for the quarter is seasonality. I don’t know Mark if you want to add anything…

Everything she said is right and I’d say nothing other than to say it’s a little bit of a two different stories. So in data base support, data base support is growing I just want to make sure it’s growing. It’s growing materially, it’s not growing 1%, it’s growing more than 1%. Apps support the decline apps support decline is actually in our case is the bulk of our apps support is ERP that is the bulk of our application support. We want to migrate that to SaaS. So overtime, I have no issue if the ERP cancellation goes up as we migrate those customers I talked about earlier does that. And to Larry’s earlier about point of about BYOL, BYOL very likely will have the impact of continuing growth in the tech, support part of our business and the applications now that I described is very much a byproduct of the migration of our support through to SaaS. Does that help?

Just quick follow up. Is it the seasonality then so that Q3 is going to be weaker effectively and other quarters are better. Is that the way should be thinking models, can you give more detail?

It just happens to be when we do the renewal. So I think you will see a return. And because you asked -- you compared a full year to one quarter and I think you will see that it recover I mean as Mark just said, on the tech side -- and remember also that some of it has to do with first year support. So since we’re selling less apps licenses, we have less first year support associated with those licenses. And so -- and that’s been for the past few years, so the amount floating is a little bit less, cancellation rates are the same and then we have some folks on the app side migrate. But that’s it, still growing.

Let me just, real quickly. On the applications business, if someone moves in the e-business suite to the Oracle -- to Fusion ERP, they stop paying support, support goes down and a 100% of the Fusion ERP revenue is recognized in the cloud. This is in contrast to our tech business where if someone has an Oracle license or buys an additional Oracle license and then brings that license to the cloud, our license business stays the same or goes up. And part of the autonomous database that's running in the cloud is recognized as part of a license and support business. And part of the revenue for the autonomous database is recognized as cloud revenue. So it's split. So these two businesses operate very differently. In our applications business, we're migrating people from an older generation of applications to a new generation of applications. We're actually changing from one product to another. We're changing from e-business suites to Fusion ERP, which is a different product. One runs on-premise, one runs in the cloud. Our tech business is very, very different. Oracle database on premise, you run the same Oracle database in the cloud. So we don’t expect any shrinkage. As Mark said, we expect our license business, our new license business, our license and support business for tech, specifically database, to continue to grow even as people migrate those databases to the cloud.

Yes, net-net tech really accelerates completely unchanged.

Our final question will come from the line of Kirk Materne, Evercore ISI.

Mark, when you look at the opportunities front in the ERP market, we've absolutely seen an inflection demand in CRM, I would say, HCM started over last couple of years. When you think about ERP, do you see an inflection on the horizon over the next 12 to 18 months? And can you just discuss maybe why and if we do see that, how do you see the competitive environment shaping up? Thanks.

Well one in ERP, we are the leading vendor in the world, and the number two company is hard for me to find. So let me start with that. So when I look at SaaS, there is no other company that has the ability to take customers to the cloud with a true SaaS offering. So full stop. Second, we have an inflection point clearly with our user base. So our user base as we’ve tried to talk about today has only begun to move. And so just to the earlier question imagine what happens to our applications revenue, when we multiply three to one, actually our revenue doubles, our support revenue doubles, support revenue gets three times that revenue in the cloud. All I did in that math was talk about our user base. The bulk of what we book today in many cases is outside our user base.

Yes, someone else's user base.

We are gaining share from other companies. So I don’t want you to walk away from this cold thinking I got it, their SaaS revenues really limited to their user base. I just talked about that in the context of one catalyst to our SaaS revenue, which is converting our existing customers just upgrading them to the latest version of ERP, which is SaaS. I truly believe the opportunity is materially bigger than that. Most of the ERP market doesn't sit with SAP by the way, doesn't sit with the -- the majority of the market doesn't sit with Oracle or SAP, it sits with this category called others. And as others would like the opportunity to move to SaaS, we're in the best position in the world, worldwide to move those companies to SaaS. So moving our user base has a dramatic implication on our applications ecosystem. If we're successful to continue to take share at the same time, yes, it's a pretty exciting opportunity for us. And that's why you hear us talk about it so much.

Thanks Mark. 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 questions from this call and we look forward to speaking with you. Thank you for joining us today. With that, I’ll now turn the call back to Holly for closing.

Thank you for joining us for today's Oracle Third Quarter 2018 Earnings Conference Call. We appreciate your participation. You may now disconnect.