Welcome to Oracle's Third Quarter 2019 Earnings Conference Call. Now I'd like to turn today's call over to Ken Bohn, Senior Vice President.
Thank you, operator. Good afternoon, everyone, and welcome to Oracle's Q3 fiscal year 2019 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 Katz 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 against placing undue reliance on these forward looking statements, and we encourage you to review our most recent reports, including our 10 ks and 10 Q and any applicable amendment 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.
Thanks, Ken. Good afternoon, everyone. I'll first go over Q3 results before moving on to guidance. I'll then turn the call over to Mark and Larry. As in prior quarters, I'll review our non GAAP results using constant dollar growth rates unless I say otherwise.
Total cloud services and license support revenue for the quarter was $6,700,000,000 up 4% in constant currency and now accounts for nearly 70% of total company revenue, largely recurring revenue. As in past quarters, we are seeing robust double digit growth rates for total cloud revenue in all regions, with especially strong growth in Asia Pacific. In terms of product categories, ERP grew in the mid-30s and the verticals grew in the high-30s. Our software business, which is the totaling of cloud services and license support revenue with cloud license and on premise license revenue is 82 percent of total revenue and it grew 3% in constant currency. Our software business has remained remained As a percentage of our total software business, cloud is now more than double what it was just 3 years ago and provides us with the ability to accelerate overall software revenue growth as this mix shift continues.
GAAP applications total revenue were $2,800,000,000 up 7% and GAAP infrastructure total revenues were $5,100,000,000 up 2%. The gross margin for cloud services and license support was 86%, essentially the same as last year with continuing improvement in SaaS gross margins, stability in software support gross margins and continued investment in Oracle Cloud Infrastructure. Once our cloud business is at scale, I expect our gross margins will go significantly higher. Total revenue for the quarter was $9,600,000,000 up 3% from last year. Non GAAP operating income was $4,300,000,000 up 5% from last year and the operating margin was 44%, up from 43% last year.
This quarter last year was greatly impacted by the change in the U. S. Tax law. So comparing the GAAP numbers is not very meaningful after pre tax income. The non GAAP tax rate for the quarter was 20%, up from 16% catch up rate last year and non GAAP EPS was $0.87 in USD and up 12% in constant currency.
This quarter, the GAAP tax rate was 11% and GAAP EPS was 0 point 7 $6 Operating cash flow over the last four quarters is 14,800,000,000 dollars Over the last four quarters, capital expenditures were $1,600,000,000 and free cash flow was $13,200,000,000 down 1% due to timing differences of tax payments and working capital items. We have more than $40,000,000,000 in cash and marketable securities. The short term deferred revenue balance is $8,000,000,000 up 5% in constant currency. The remaining performance obligations or what I'll refer to as contract backlog would be in the queue and is now $31,500,000,000 dollars of which approximately 62% will be recognized as revenue over the next 12 months. Since we remain committed to returning value to shareholders through acquisitions, internal investments and a return of capital with stock repurchases and dividends, this quarter we repurchased 206,000,000 shares for a total of $10,000,000,000 Over the last 12 months, we have repurchased 728,000,000 shares and reduced the absolute shares outstanding by nearly 16%.
And the Board of Directors increased the quarterly dividend 26% from $0.19 to $0.24 per share. Turning to currency, I expect the strengthening U. S. Dollar will continue with a currency headwind of 3% for Q4 revenue and a $0.03 headwind to earnings per share. Okay.
So with that, let me turn to the guidance. So for Q4, total revenues are expected to grow 1% to 3% in constant currency and 0% to negative 2% in U. S. Dollars. Non GAAP EPS in constant currency is expected to grow between 15% to 19% and be between $1.08 $1.12 in constant currency, so we will deliver double digit non GAAP EPS growth for fiscal year 2019.
Taking into account the $0.03 currency headwind, non GAAP EPS for Q4 in USD is expected to grow between 12% 16% and be between 1 point 0 $5 dollars and $1.09 in USD. 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 tax rate. But I expect that in normalizing for one time tax events, our tax rate will average around 20%. And with that, I'll turn the call over to Mark for his comments.
Thanks, Safra. Thanks. Solid quarter for us from top to bottom. Total revenue was up 3% in constant currency with cloud services and license support up 4% percent and EPS 12% plus 12% constant currency. In our apps ecosystem, we continued our momentum growing at 7% and that was an acceleration for us and over $11,000,000,000 in trailing 12 months revenue and 92% of that is now recurring.
We continue to grow revenue faster than market and we have an enormous opportunity ahead of us in ERP and HCM. In terms of SaaS revenue and bookings, Fusion apps were up 35%. By the way, our overall ERP and HCM annualized SaaS revenue is now $2,800,000,000 and that's up in the mid-20s. Again, Fusion apps 35% up. Fusion ERP revenue was up 47% organically.
NetSuite revenue was up 28%. Bookings were up actually even higher in the mid-30s. Our vertical revenue was up 38% and our annualized revenue in the verticals is now over 800 $1,000,000 I'm going to read you a quick quote from IDC and I have to read it precisely or I'll get cards and letters. So let me just make sure I do this exactly as it's written. Per IDC's latest annual market share results, Oracle is the number one enterprise applications vendor in North America based on market share and revenue, surpassing salesforce.com and SAP.
We've seen this momentum building. So this is not any surprise to us, but I think it's always better when you can see it in real numbers from somebody other than us. Let me switch briefly to infrastructure. Our GAAP tech ecosystem was $21,000,000,000 on a trailing 12 months basis and Q3 was up 2%. In Autonomous Database, our momentum continues to build.
We now have 4,000 new trials that were added in Q3 alone, nearly 1,000 paying customers. Ready many new customers and we're seeing great pull through and with 20% of our autonomous data warehouse trials also using analytics. We now have over 35 referenceable customers and we expect to be greater than 100 soon. Cloud customer revenue was up triple digits for the 4th consecutive quarter. So overall, a solid quarter as we hit our revenue targets and saw a 12% EPS growth.
The strength of our bookings growth along with climbing renewal rates gives me the confidence that our cloud apps business is only going to strengthen from here. And going forward given the visibility we have into the revenue backlog which Safford touched on a bit earlier. Looking forward, I do expect FY 2020 revenue growth will be higher than FY 2019 and EPS this year will be certainly grow double digits as Efra mentioned. I'm going to give you a few customer wins as well, trying to give you a flavor for what happened in the quarter for us. Now most of these didn't affect our revenue.
Most of these obviously are all really bookings that occurred in the quarter. But I thought I'd give you some context of both some people in our user base as well as outside our user base. So for example, comp group in the Netherlands, e business suite migration, master brands cabinets in the U. S. And E Business Suite migration, Tyson Krupp in Germany in E Business Suite migration, Willis Towers Watson e business suite migration.
I gave you those just a few of those examples. Those are core sort of e business suite. Black and Veatch was another one engineering company, Core sort of E Business Suite customers as we see this acceleration of our user base moving to the cloud. We had a couple of people soft ERP migrations, Amica, Mutual in the quarter, DePaul University. And then a slew of wins again and I referenced that a lot of the ERP user base that's out there today is outside of our user base or even our traditional on premise competitor from, if you will, the old days.
On semiconductor, nice win in the quarter. Packaging Corporation of America, again, outside of our user base for the quarter. Eaton, another manufacturer. Atrides Credido in the Netherlands. And I could go on, which in the sake of time, I won't, although I'll mention Ashford Hospitality.
These are again outside our user base that are brand new customers to Oracle in the area of ERP. In HCM, Abu Dhabi Airports, ADT, Alarca, Banco Davydanda, Blum Bank, Great Canadian Gaming. We had a really nice win at a company called the Nova Healthcare. This again was not inside our user base. These were a traditional Lawson customer where we actually did multi pillar ERP back office and HCM connected together.
So anyway, I'll stop there during the sake of time, but just a really, again, very impressive set of customers and a good mix of net new logos as well as a movement from our user base. We had a pretty good quarter with some really quality names on the platform side, Fair Isaac, Generali shared services in Italy, Joann Stores, Trans Italia, Unicorp, I mean, some really nice beginnings of what you see in as we move to our Gen2 cloud and autonomous database. I did want to make a couple of quick comments on our growing relationship with the Gap. So who's a global retailer, as I think most of you know, with revenue of greater than $16,000,000,000 And we've been working with the Gap and their transformation to what's really a multi cloud environment, but using many, many Oracle technologies. And they include really everything we got, SaaS, PaaS, delivering innovation, reliability and scalability at every turn.
And as part of even the things they're using in the private cloud, those are all really enabled by Exadata. And we're really thrilled to be Gap's strategic partner in their efforts to spin up their new retail brands and stores faster. And so that's just a few quick wins for the quarter. So overall, good solid quarter for us on the income statement side, but also in the quality of these bookings that we're describing or that I've been describing. And with that, I'll turn it over to Larry.
Thank you, Mark. Oracle's future rests on 2 strategic businesses, cloud applications and cloud infrastructure. The growth in our cloud applications business has been driven by our Fusion Suite and NetSuite. Both the Fusion Suite of applications and NetSuite are growing very, very rapidly. Mark gave you the numbers.
As the names imply, both Fusion and NetSuite are integrated suites of applications, including sales, service, human resources, financials, supply chain and manufacturing applications. No other cloud services provider has such a comprehensive suite of applications covering both the front office and the back office. Most customers want their cloud services provider to make their applications work together. Customers do not like to be responsible for the complex process of integrating lots of different applications running on lots of different vendors clouds. We think our integrated suite approach to the cloud applications business is a primary reason for the very rapid growth in our cloud applications market share.
The introduction of our Gen 2 highly secure infrastructure featuring the Oracle Autonomous Database has been very well received. During Q3, we had nearly 1,000 paying Autonomous Database customers and over 4,000 active trials. Our infrastructure technology is highly differentiated from AWS. Each one of our cloud computers has a separate security processor and memory to insulate customers from intruding upon each other. And it also makes our cloud control code inaccessible by customers.
No other cloud services provider offers this kind of protection across their entire public cloud. The Oracle Autonomous Database is the only database that can respond to a security threat by automatically patching itself while it's still running your application. No downtime is required. No other database has this capability. Oracle technology leadership and cloud infrastructure and database plus our market leadership in cloud applications makes us very optimistic about our future.
I'll turn it back to you, operator.
Our first question comes from Heather Bellini with Goldman Sachs.
Thank you. Good afternoon. Mark, I wanted to ask a question of you. Last month when we were together at our tech conference, you reiterated that fiscal second half twenty nineteen sales growth would accelerate on a constant currency basis versus the first half. And I'm not trying to be nitpicky, but I think it doesn't look like it's accelerating much.
So I was just wondering if anything changed. And I also wanted to ask about fiscal 2020, which you just mentioned that fiscal 2020 constant currency revenue growth would be higher than fiscal 2019. I guess what I'm wondering is, should we be thinking that that constant currency growth acceleration that you're referring to for fiscal 2020 is similar to the type of acceleration in the second half of fiscal twenty nineteen or could it be more meaningful? Thank you.
Yes. So let's go back to it. I think 2019 will grow faster than 2018. Second half is whatever your adjective is around it grow faster than first half, FY 2020 faster than 2019. You get in underneath it, what are the drivers?
At a big level, first, our growing businesses are becoming a bigger part of our total than our other businesses. So as an example, just one example, cloud ERP gets bigger, hardware gets smaller. Obviously, those have offsetting effects. In addition, we have things that attach with that. For example, our consulting services business now in on premise has been declining, but our cloud consulting is inclining as does our overall bookings.
So as a result, these just offset each other. Within it, clearly, I've given you the numbers on certain parts of our apps as the example of ERP and HCM, which are just growing substantively. Larry's comments about autonomous database are 2 huge drivers of growth as we go forward. So I think all those statements 2019 versus 2018, second half, first half 2019 to 2020 are all where you're going to see acceleration of top line growth
in CD. Next question please.
Your next question comes from John DiFucci with Jefferies and Company.
Thank you. So your aggregate results have been, I guess, relatively steady might be the right way to characterize it. And during this period, I think investors really appreciate the share buybacks and the dividend, nice dividend increase this quarter. I guess I want to sort of follow on with that line of thinking, Mark, and this uptick in 2,000 and that's in fiscal 2020. And I you've talked a lot about your cloud apps and we get a lot of information on that.
But can you talk a little bit about what extent the database options might be a driver to some of that revenue acceleration? And how big is the middleware business at this point?
I'll start. I'll let Larry comment also a bit on the options. I think first just when we get into on the database side, I mean the big move here is to autonomous. I think we tried to give you some numbers of the level of interest. The level of the increase in interest coming from even end of Q1, early Q2 into Q3 was just John, it was just subsonu.
Yes, it won't show up in our revenue numbers yet, but I'm talking about in terms of trials and people testing and now frankly people buying. And what we've even seen is what's really nice, somebody buying something for as small as 15, 20, 25 ks as their first move into autonomous database. And actually, even within the quarter, making a second purchase that turns into $200,000 $250,000 These are really encouraging early signs for us. And then to the point that you bring up, we just don't get the database, we get analytics, we get other services that come with it. So as we continue to convert trials into real usage, real usage into expansion, this becomes a core key driver as we move forward.
I'll let Larry follow on with other parts of the options.
Yes. As people use autonomous database in the public cloud, they typically go out and buy the multi tenant option and the real application cluster option, which are required options for autonomous database. So there's no question that the introduction of autonomous database and the consumption of autonomous databases that accelerates will increase the license purchases of those two options.
And just the second part of my question, you used to talk about middleware and how it was on premise middleware stuff wasn't growing all that much or is declining. I'm just curious, can you tell us even just roughly how big that is at this point? Because Mark, you sort of alluded to some of these other businesses that weren't growing or getting smaller smaller?
We never break that out, John. So to my knowledge, unless I'm not going to break I'm not going to start breaking it out today. But clearly, middleware is moving, if you will, from like everything else from on premise into the cloud. We've got a full suite of services in the cloud, but we're not going to break it out into a discrete business today.
Yes. I can say a couple of parts of middleware are doing quite well. I mean, I think it's a mixed story. I think analytics are doing very well in the cloud. As Mark mentioned, 20% of Autonomous Database goes out with analytics and Java had a very good quarter.
Great.
Thank you. One last point, well, since we did do a little bit of that, security is as best a growing business as we could have within the context of the middleware business as well. So again, the problem in middleware is it's not a thing. Multiple products within it. Some like many things we've talked about, many things growing fast and things declining simultaneously.
Great. Thank you.
Next question please.
Your next question comes from Bill Winslow with Wells Fargo.
Great. Thanks for taking my question and congrats on a strong quarter. I just want to build on John's question there about the reacceleration of P and J ahead of us in database. When I think about what really differentiates Oracle and Cloud, it's the Gen 2 OCI that we continue to get kind of increasingly positive data points on, but then also adding Autonomous platform on top of it. And so my question is with the Autonomous Data Warehouse being out for a year and the transactional processing being out since August, how should we think about those 2 kind of combining to the reacceleration on top of ACI.
And you mentioned the 1,000 customers on 4,000 trials. What is actually the driver of people shifting over? Is it speed? Is it cost? Is it performance?
Just some more color on that would be great. So timing and then why?
I'll let Larry start.
Okay. All right. So the primary the driver is many different things. Some of our customers were stunned that they can get a database up and running in 5 minutes. So Todd, we've been collecting references and studying the 1,000 customers and the 4,000 trials and what they find encouraging about the autonomous database.
Certainly, we'll call it productivity improvements. The fact that they can go from not having a database, not having hardware, literally log on to our cloud, create an instance, get move their data and be up and running and doing useful things in 5 minutes is proving to be a shock to a lot of our customers. So getting things up and running quickly, productivity has been a very big issue. We've got one customer who's done a series of tests. They were an AWS user.
And I know we have these ads that promise cut your AWS bill in half. They found that we were running 11.5 times faster than they were running in AWS and they cut their bill by 80%. So a lot so that's and these are university researchers. So they're very, very cost sensitive and they felt it was worthwhile making the move just because we were much less expensive. Autonomous Database was way less expensive than Redshift or Aurora at Amazon.
Some people, they had an existing data warehouse and it was just the compatibility being able to take an existing data warehouse, not spooling up a new one in 5 minutes, but taking an existing data warehouse, lifting it and shifting it over. So we're seeing all three of those use cases. Productivity, motivators, I should say, productivity, compatibility and cost, all driving the usage of Autonomous Database.
Phil, I'd say that we've never had a release in the database area where we could actually talk to a CEO about what was in the release and the CEO would go, I completely get it. And it's not like we're talking about partitioning or something like that. When you talk about the fact that this database patches itself, our customers at the CEO level now understand what a patch is. They understand why it's so important, why it's so strategic. They in many cases have to discuss it with their audit committees.
And the fact that now patching goes from a problem to where they pass that to us and it gets done instantaneously, we have many customers who said if this thing did nothing but that, I would migrate to Autonomous Database. If the fact that you add to the fact to Larry's point that this database tunes itself, creates all its own indexes. It actually is labor less and can you reapply talent to another area. If it did nothing but that, it would be valuable. If it did nothing but give you better security and give you price and performance.
And so this is a release that the reason you're seeing the trials and the level why you hear our enthusiasm the way it is, is the customer response is just extremely high because just makes business sense. This isn't something sold 5 levels down or 4 levels down in the org. This can be sold at the top of the company, if you will, at the CEO level. So it's why it's such an exciting release to us because it has so many business benefits to our customers as opposed to maybe the fact that you would think of traditionally many of our benefits being if you will technical. It's different explaining to a CEO what multi tenant is and what in memory is than frankly the benefits I've just described.
Well, knowing how much we spend on patching, I've got a lead for your CRM system.
I'll stop. I won't get too specific into your situation, but you're a good use case with a very large bank with a tremendous amount of Oracle that frankly in many ways done a fantastic job, but still has a window that has to be closed. And in terms of patch deployment, then this is one vehicle to certainly a vehicle and the only vehicle I'm aware of to get that done.
Well, if Safra can give me some quota attainment for that reference, that'd be great. All right. Thanks, guys.
Thanks, Phil. Next question, please.
Your next question comes from Raimo Lenschow with Barclays.
Hey, thanks for taking my question. I wanted to go back to the apps ecosystem. Mark, can you talk about NetSuite because that's accelerated again this quarter? And I was just wondering like, look, when we talked about a few quarters ago, it was like we tried to bring it over 20%, but now we're in the high 20s. Was there anything special going on?
Or is that kind of is there anything in terms of new run rate that we need to be aware of? Thank you.
Well, I mean, as I've said on multiple calls in a row, they've been doing very well. I mean, this started a tremendous acceleration we had last Q4 when their bookings growth was over 70%. And you're just beginning to see that turn into now revenue. So I believe the new rate is sustainable And I actually think we can do better. And our strategy has been very simple.
And I know I've said it before, but it's been frankly no more complicated than any salespeople internationally and domestically. We've done both to, if you will, localize the product for more countries. We've done many new countries that we've now released. In addition to that, we've been building out more verticals, what we call Suite Success, where we actually bundled in the implementation with what we sell. And that's very, very popular with our customers.
And so I think the team has also done a marvelous job executionally. And if I know I say my comments pretty quick, but as much as the revenue grew in the quarter, our bookings actually grew faster than the revenue. And so we're very excited about NetSuite. We have been excited about NetSuite. And I think they will continue to perform and I actually think we can do better than even what I just described today.
Perfect. Thank you.
Next question please.
Your next question comes from Michael Turits with Raymond James.
Hey, guys. Good evening. So you've been seeing accelerating growth in cloud ERP and HCM and other areas of cloud. Is that growing accelerating enough and becoming a big enough piece of the business that we can now start to see an acceleration in the cloud business overall, which has had some other headwinds?
I mean, I guess I'll start. As I said in my comments, ERP and HCM are becoming a bigger and bigger part of our business. I mean today, our annual SaaS revenues and ERP and HCM is approaching $3,000,000,000 It's growing sort of mid-20s. And I think it's going to get nothing but better than better. Again, I don't want to get too positive only in the context that we're beginning to see acceleration in some key parts.
So we are very focused on our competitors by brand and by industry. We deploy our sales force against those brands and against those industries as well as into our own user base. And the reason I read the references the way I read them was so you get a flavor that both our own user base is beginning to move in bigger numbers as well as the fact that we get competitive. And remember, most of that user base is not sitting with us or our traditional on premise competitors. So yes, I mean clearly it's a point of what I made earlier and I'll stop after this to say that our growing businesses are becoming bigger and bigger and you start putting the growth rates I'm describing on numbers like $3,000,000,000 and you can do your own math.
And so we're very confident and low even with the OCI
investment. Any reason to expect to keep CapEx low even with the OCI investment. Any reason to expect a change in that trajectory where we'd be spending more capital?
No, I expect it to be very similar this next quarter to this past quarter. And for the year, it's basically the same. It's a little bit less than last year. So that's kind of what we're looking at. Of course, if there's a huge opportunity, we may push the gas a little more.
But you have to understand that our SaaS operation is really, really humming and we're getting enormous economies of scale there. That's why the margins keep improving. And so, we're able to sort of do it all within the same investment envelope so far.
Great. Thank you, guys.
Next question please.
Your next question comes from Mark Moerdler with Bernstein Research.
Thank you very much for taking my question. I'm going to do something we haven't done in a while. I'm going to take a bit of a liberty and ask 2 questions. The first is for Safra. You talked a bit on the call about cash flow, which has grown double digits.
It was down roughly 1%. And you gave some color on the call. Can you talk a little bit more about the underlying factors here? Was timing or your definition of what when you recognize cash flow having an impact, are there other things that are impacting that cash? And then I have a follow-up for Mark.
I mean, there are 2 things going on. If you look just at the quarter, it's nothing but cash collections, timing of cash collections, nothing more really than that to focus in on. If you look at year to date, which you may look at in one of the other schedules, it's that and some tax payments. And that's really the two things going on. So nothing special going on, happens every once in a while.
If you look back previous years, you will see that. And it's a very Q3 thing, frankly, because by then we're collecting up a lot of previous quarters bookings billings, excuse me. So that's really it. Nothing special.
Okay. All right. And then as a follow-up for Mark, you've given some color on the autonomous database, but can you specifically discuss the types of workloads that are driving adoption of autonomous and especially new clients for autonomous or even new clients for the Oracle database? Thanks.
Hey, Randall, I think the question, Pleased, ought to get you for announcing you're going to ask 2 questions as opposed to just doing it.
Sorry, Mark. I decided to be polite about it.
Yes. No, it's very thoughtful. I don't know. Larry, you want to start in on that one?
Sure. I mean, there are a lot database does a lot of different things. The researchers that I to look at tissue samples and detect anomalous cells, cancer basic kit using computers to diagnose cancer. And then that's a combination of machine learning and the autonomous database. And that's a net that's an all new application.
So there are several people that are coming in with all new applications in the cloud, especially the ones moving from AWS. Then there are traditional on premise customers who are simply taking it at 1 of their millions of Oracle databases. There are millions of these things out there. And just lifting one of those databases, either transaction processing and the associated application, either transaction processing application or data warehousing application, just lifting it intact, moving the data over and moving the application over to compute, moving the data over to autonomous database and running the same exact thing in the cloud. They're experiencing sometimes shocking performance improvements also.
I know we had one customer that moved from on premise into the cloud and the cloud system ran many times faster than their on premise system.
Then there are customers that
are moving new existing big Oracle customers that are moving new development. The new applications that they're developing from developing them on premise to they move test and development into the cloud. And they're the ones that again, the general reaction there is there is much, much more productive getting running. It's much cheaper to do test and development, much more responsive, much more productive to move test and development from their on premise infrastructure to the cloud infrastructure. So online transaction processing, lifting and shifting applications, data warehousing lifting and shifting, test and development, moving from AWS.
There are lots of different use cases.
Yes. Just a couple of quick follow ons. 1, I'm doing this off top of my head, Mark, but I'm roughly right. 20% of our customers in Autonomous Data Warehouse or Autonomous Database right now are net new to Oracle. We did not have them before net new and 80% are in our user base, roughly 70%, 75 percent.
There's net no competition at all in the transaction. It's simply as Larry described a migration. 75% are actually into the LOB as opposed to IT, which I look at as very good news as well. So we've got a lot of underpinning improving dynamics. My opinion, they're improving dynamics in terms of net new customers in addition to movement of our database and certainly analytical data warehousing is probably the biggest individual driver And
And your next question comes from Brad Zelnick with Credit Suisse.
Excellent. Thanks so much. My question is for Mark. Mark, as we think about the traction you're seeing in cloud ERP and where the demand is coming from, There's the massive on premise install base opportunity, but I think some might not appreciate that more than half the market is the long tail of niche legacy vendors that most people haven't even heard of. Can you just give us a sense for your success in displacing that long tail?
How much you think you're participating there versus the more usual suspects?
By the way, I think that's exactly right, what you said. So I think it's common thought that the ERP market on premise is dominated by 2 vendors, Oracle and the company from Germany. And those 2 vendors together have less than 50% of the market. We have more Fortune 500 customers, for example. They have many big customers.
But the blizzard of implementations or there's a blizzard of companies it's that have the more than 50% market share, 54%, 55%, most of them have moved into private equity. They're not even public companies. They're on their second or third turn through private equity. They've got no migration plan to the cloud. They've got Kluge implemented.
I could go on and on with all of these. And that's why as I mentioned earlier, we actually line up our development resources and our sales resources very focused on these competitors. They would have names like I mentioned a couple like McCormick and Dodge, if you've heard of them. IBM, believe it or not, actually has got an old ERP system. There's a company called Deltek.
I mean, there's a company called Lawson, a company called Epico. There's tens and tens of these to your point. And these are old, old pieces of code. These need to move. They need to move to a more modern platform.
And they are perhaps as attractive as any other market. And in fairness, our user base actually knows our cloud roadmap. They actually have confidence in our R and D. They know we're going to be there to migrate them when they want to be there. They actually without knowing how they're going to get from here to there, knowing their competitors are beginning to move.
So we have as much success today. And if you ask one of our salespeople, would you rather have one of these competitive territories where you're going after one of these niche vendors or do you rather have an e business suite territory. Many of our sales people say, give me that competitive territory because there's an absolute need to move as quick as you can. So yes, it's an incredibly attractive market and it's why you hear us keep talking about it so much because the additional fact is when we sell ERP, we continue to see an attach rate to HCM and frankly an attach rate to even some of our other apps in the CX and front office area as well. So it's why we're so focused on that opportunity.
Awesome. Thanks for the color.
Okay. I think that might be it.
Okay. Any other questions there, operator?
I will now turn the call back over to Ken Bond.
Great. Thank you. 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 for joining us today. And with that, I'll turn the call back to the operator for closing.