SAN JOSE, Calif. – Dec. 10, 2015 Adobe (Nasdaq:ADBE) today reported financial results for its fourth quarter and fiscal year 2015 ended Nov. 27, 2015.
Fourth Quarter Financial Highlights
Adobe achieved record quarterly revenue of $1.31 billion, representing year-over-year growth of 22 percent.
Diluted earnings per share were $0.44 on a GAAP-basis, and $0.62 on a non-GAAP basis.
Digital Media Annualized Recurring Revenue (“ARR”) grew to $2.99 billion exiting the quarter, an increase of $350 million. Creative ARR grew to $2.60 billion, an increase of $310 million driven by enterprise adoption and the addition of 833 thousand net new individual and team Creative Cloud subscriptions.
Adobe Marketing Cloud achieved revenue of $352 million with strong bookings growth and a stronger-than-expected shift in customer adoption to SaaS-based solutions.
Year-over-year operating income grew 133 percent and net income grew 153 percent on a GAAP-basis; operating income grew 58 percent and net income grew 59 percent on a non-GAAP basis.
Cash flow from operations was $455 million, and deferred revenue grew to a record $1.49 billion.
The company repurchased approximately 1.4 million shares during the quarter, returning $122 million of cash to stockholders.
Fiscal Year 2015 Financial Highlights
Adobe achieved record revenue of $4.80 billion in fiscal year 2015, representing year-over-year growth of 16 percent.
The company reported annual GAAP diluted earnings per share of $1.24 and non-GAAP diluted earnings per share of $2.08.
Adobe grew Digital Media ARR by approximately $1.12 billion during the year and exited the year with $2.99 billion. Net new Creative Cloud individual and team subscriptions grew by more than 2.71 million during fiscal year 2015 to 6.17 million.
Adobe Marketing Cloud achieved a record $1.36 billion in annual revenue and its goal of approximately 30 percent annual bookings growth.
Adobe generated $1.47 billion in operating cash flow during the year.
The company repurchased 8.1 million shares during the year, returning approximately $627 million of cash to stockholders.
A reconciliation between GAAP and non-GAAP results is provided at the end of this press release and on Adobe’s website.

 


 

 

 
Executive Quotes
“Adobe is driving digital experiences that are fundamental to the transformation of every global brand, government and educational institution,” said Shantanu Narayen, president and chief executive officer, Adobe. “Our record revenue and strong momentum are a reflection of our industry-leading content and data solutions in Digital Media and Digital Marketing.”
“Strong growth across key financial metrics reflect the amazing performance we’ve achieved in fiscal 2015,” said Mark Garrett, executive vice president and chief financial officer, Adobe. “Our long-term financial targets, including a 20% revenue CAGR through fiscal 2018, show that the benefits of our move to the cloud are just beginning.”
Adobe to Webcast Earnings Conference Call
Adobe will webcast its fourth quarter and fiscal year 2015 earnings conference call today at 2:00 p.m. Pacific Time from its investor relations website: www.adobe.com/ADBE. Earnings documents, including Adobe management’s prepared conference call remarks with slides, financial targets and an investor datasheet are posted to Adobe’s investor relations website in advance of the conference call for reference. A reconciliation between GAAP and non-GAAP earnings results and financial targets is also provided on the website.
Forward-Looking Statements Disclosure
This press release contains forward-looking statements, including those related to business momentum, product adoption and innovation, revenue, annualized recurring revenue, bookings, earnings per share and operating cash flow, all of which involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: failure to develop, market and distribute products and services that meet customer requirements, introduction of new products and business models by competitors, failure to successfully manage transitions to new business models and markets, fluctuations in subscription renewal rates, risks associated with cyber-attacks and information security, potential interruptions or delays in hosted services provided by us or third parties, uncertainty in economic conditions and the financial markets, and failure to realize the anticipated benefits of past or future acquisitions. For a discussion of these and other risks and uncertainties, please refer to Adobe’s Annual Report on Form 10-K for our fiscal year 2014 ended Nov. 28, 2014, and Adobe’s Quarterly Reports on Form 10-Q issued in fiscal year 2015.
The financial information set forth in this press release reflects estimates based on information available at this time. These amounts could differ from actual reported amounts stated in Adobe’s Annual Report on Form 10-K for our year ended Nov. 27, 2015, which Adobe expects to file in Jan. 2016.
Adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements.
About Adobe Systems Incorporated
Adobe is changing the world through digital experiences. For more information, visit www.adobe.com.
###
© 2015 Adobe Systems Incorporated. All rights reserved. Adobe, the Adobe logo and Creative Cloud are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners.
 
 
 
 
 
 
 

 

2

 

 

Condensed Consolidated Statements of Income
(In thousands, except per share data; unaudited)
 
Three Months Ended
 
Year Ended
 
November 27,
2015
 
November 28,
2014
 
November 27,
2015
 
November 28,
2014
Revenue:
 
 
 
 
 
 
 
Subscription
$
907,434
 
 
$
628,954
 
 
$
3,223,904
 
 
$
2,076,584
 
Product
284,496
 
 
327,951
 
 
1,125,146
 
 
1,627,803
 
Services and support
114,474
 
 
116,423
 
 
446,461
 
 
442,678
 
Total revenue
1,306,404
 
 
1,073,328
 
 
4,795,511
 
 
4,147,065
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
Subscription
106,368
 
 
87,883
 
 
409,194
 
 
335,432
 
Product
24,320
 
 
21,930
 
 
90,035
 
 
97,099
 
Services and support
70,673
 
 
51,130
 
 
245,088
 
 
189,549
 
Total cost of revenue
201,361
 
 
160,943
 
 
744,317
 
 
622,080
 
 
 
 
 
 
 
 
 
Gross profit
1,105,043
 
 
912,385
 
 
4,051,194
 
 
3,524,985
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Research and development
220,514
 
 
213,687
 
 
862,730
 
 
844,353
 
Sales and marketing
441,472
 
 
408,862
 
 
1,683,242
 
 
1,652,308
 
General and administrative
134,052
 
 
133,534
 
 
531,919
 
 
543,332
 
Restructuring and other charges
521
 
 
19,385
 
 
1,559
 
 
19,883
 
Amortization of purchased intangibles
18,050
 
 
12,412
 
 
68,649
 
 
52,424
 
Total operating expenses
814,609
 
 
787,880
 
 
3,148,099
 
 
3,112,300
 
 
 
 
 
 
 
 
 
Operating income
290,434
 
 
124,505
 
 
903,095
 
 
412,685
 
 
 
 
 
 
 
 
 
Non-operating income (expense):
 
 
 
 
 
 
 
 
 
 
Interest and other income (expense), net
22,399
 
 
105
 
 
33,909
 
 
7,267
 
Interest expense
(16,515
)
 
(12,678
)
 
(64,184
)
 
(59,732
)
Investment gains (losses), net
622
 
 
343
 
 
961
 
 
1,156
 
Total non-operating income (expense), net
6,506
 
 
(12,230
)
 
(29,314
)
 
(51,309
)
Income before income taxes
296,940
 
 
112,275
 
 
873,781
 
 
361,376
 
Provision for income taxes
74,235
 
 
24,139
 
 
244,230
 
 
92,981
 
Net income
$
222,705
 
 
$
88,136
 
 
$
629,551
 
 
$
268,395
 
Basic net income per share
$
0.45
 
 
$
0.18
 
 
$
1.26
 
 
$
0.54
 
Shares used to compute basic net income per share
498,384
 
 
498,124
 
 
498,764
 
 
497,867
 
Diluted net income per share
$
0.44
 
 
$
0.17
 
 
$
1.24
 
 
$
0.53
 
Shares used to compute diluted net income per share
506,012
 
 
507,451
 
 
507,164
 
 
508,480
 

 

3

 

 

Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)

 
November 27,
2015(*)
 
November 28,
2014
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
876,560
 
 
$
1,117,400
 
Short-term investments
3,111,524
 
 
2,622,091
 
Trade receivables, net of allowances for doubtful accounts of $7,293 and $7,867, respectively
672,006
 
 
591,800
 
Deferred income taxes
 
 
95,279
 
Prepaid expenses and other current assets
161,802
 
 
175,758
 
Total current assets
4,821,892
 
 
4,602,328
 
 
 
 
 
Property and equipment, net
787,421
 
 
785,123
 
Goodwill
5,366,881
 
 
4,721,962
 
Purchased and other intangibles, net
510,007
 
 
469,662
 
Investment in lease receivable
80,439
 
 
80,439
 
Other assets
159,832
 
 
126,315
 
Total assets
$
11,726,472
 
 
$
10,785,829
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
Trade payables
$
93,307
 
 
$
68,377
 
Accrued expenses
678,364
 
 
683,866
 
Debt and capital lease obligations
 
 
603,229
 
Accrued restructuring
1,520
 
 
17,120
 
Income taxes payable
6,165
 
 
23,920
 
Deferred revenue
1,434,200
 
 
1,097,923
 
Total current liabilities
2,213,556
 
 
2,494,435
 
 
 
 
 
Long-term liabilities:
 
 
 
Debt
1,907,231
 
 
911,086
 
Deferred revenue
51,094
 
 
57,401
 
Accrued restructuring
3,214
 
 
5,194
 
Income taxes payable
256,129
 
 
125,746
 
Deferred income taxes
208,209
 
 
342,315
 
Other liabilities
85,459
 
 
73,747
 
Total liabilities
4,724,892
 
 
4,009,924
 
 
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, $0.0001 par value; 2,000 shares authorized
 
 
 
Common stock, $0.0001 par value
61
 
 
61
 
Additional paid-in-capital
4,184,883
 
 
3,778,495
 
Retained earnings
7,253,431
 
 
6,924,294
 
Accumulated other comprehensive income (loss)
(169,080
)
 
(8,094
)
Treasury stock, at cost (103,025 and 103,350 shares, respectively), net of reissuances
(4,267,715
)
 
(3,918,851
)
Total stockholders’ equity
7,001,580
 
 
6,775,905
 
Total liabilities and stockholders’ equity
$
11,726,472
 
 
$
10,785,829
 
_________________________________________ 
(*)
During the fourth quarter of fiscal 2015, we early-adopted Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes. This standard requires that all deferred tax assets and liabilities, and any related valuation allowance, be classified as non-current on the balance sheets. As of November 27, 2015, our deferred tax assets were netted against non-current deferred income tax liabilities.

 

4

 

 

Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
 
Three Months Ended
 
November 27,
2015
 
November 28,
2014
Cash flows from operating activities:
 
 
 
Net income
$
222,705
 
 
$
88,136
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion
86,359
 
 
78,147
 
Stock-based compensation expense
81,022
 
 
84,950
 
Gain on sale of property
(21,415
)
 
 
Unrealized investment gains, net
(662
)
 
(121
)
Changes in deferred revenue
179,265
 
 
158,712
 
Changes in other operating assets and liabilities
(92,759
)
 
(10,071
)
Net cash provided by operating activities
454,515
 
 
399,753
 
 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases, sales and maturities of short-term investments, net
(277,566
)
 
(8,474
)
Purchases of property and equipment
(64,676
)
 
(36,775
)
Proceeds from the sale of property
57,779
 
 
 
Purchases and sales of long-term investments, intangibles and other assets, net
(1,524
)
 
(2,908
)
Acquisitions, net of cash
 
 
(29,802
)
Net cash used for investing activities
(285,987
)
 
(77,959
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Purchases of treasury stock
(125,000
)
 
(125,000
)
Proceeds from reissuance of treasury stock, net
42
 
 
3,618
 
Repayment of debt and capital lease obligations
 
 
(3,253
)
Excess tax benefits from stock-based compensation
9,808
 
 
21,282
 
Net cash used for financing activities
(115,150
)
 
(103,353
)
Effect of exchange rate changes on cash and cash equivalents
(6,110
)
 
(4,370
)
Net increase in cash and cash equivalents
47,268
 
 
214,071
 
Cash and cash equivalents at beginning of period
829,292
 
 
903,329
 
Cash and cash equivalents at end of period
$
876,560
 
 
$
1,117,400
 

 

5

 

 

Non-GAAP Results
(In thousands, except per share data)
The following tables show Adobe’s GAAP results reconciled to non-GAAP results included in this release.
 
Three Months Ended
 
Year Ended
 
November 27,
2015
 
November 28,
2014
 
August 28,
2015
 
November 27,
2015
 
November 28,
2014
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating income
$
290,434
 
 
$
124,505
 
 
$
246,019
 
 
$
903,095
 
 
$
412,685
 
Stock-based and deferred compensation expense
81,705
 
 
85,025
 
 
84,371
 
 
338,047
 
 
335,856
 
Restructuring and other charges
521
 
 
19,385
 
 
(751
)
 
1,559
 
 
19,883
 
Amortization of purchased intangibles
37,678
 
 
31,331
 
 
41,041
 
 
152,590
 
 
127,000
 
Loss contingency (reversal)
 
 
 
 
(10,000
)
 
(10,000
)
 
10,000
 
Non-GAAP operating income
$
410,338
 
 
$
260,246
 
 
$
360,680
 
 
$
1,385,291
 
 
$
905,424
 
 
 
 
 
 
 
 
 
 
 
Net income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income
$
222,705
 
 
$
88,136
 
 
$
174,465
 
 
$
629,551
 
 
$
268,395
 
Stock-based and deferred compensation expense
81,705
 
 
85,025
 
 
84,371
 
 
338,047
 
 
335,856
 
Restructuring and other charges
521
 
 
19,385
 
 
(751
)
 
1,559
 
 
19,883
 
Amortization of purchased intangibles
37,678
 
 
31,331
 
 
41,041
 
 
152,590
 
 
127,000
 
Investment (gains) losses
(622
)
 
(343
)
 
1,314
 
 
(961
)
 
(1,156
)
Gain on sale of property assets
(21,415
)
 
 
 
 
 
(21,415
)
 
 
Loss contingency (reversal)
 
 
 
 
(10,000
)
 
(10,000
)
 
10,000
 
Income tax adjustments
(8,674
)
 
(27,872
)
 
(15,051
)
 
(35,826
)
 
(86,140
)
Non-GAAP net income
$
311,898
 
 
$
195,662
 
 
$
275,389
 
 
$
1,053,545
 
 
$
673,838
 
 
 
 
 
 
 
 
 
 
 
Diluted net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP diluted net income per share
$
0.44
 
 
$
0.17
 
 
$
0.34
 
 
$
1.24
 
 
$
0.53
 
Stock-based and deferred compensation expense
0.16
 
 
0.17
 
 
0.17
 
 
0.67
 
 
0.65
 
Restructuring and other charges
 
 
0.04
 
 
 
 
 
 
0.04
 
Amortization of purchased intangibles
0.07
 
 
0.06
 
 
0.08
 
 
0.30
 
 
0.24
 
Gain on sale of property assets
(0.04
)
 
 
 
 
 
(0.04
)
 
 
Loss contingency (reversal)
 
 
 
 
(0.02
)
 
(0.02
)
 
0.02
 
Income tax adjustments
(0.01
)
 
(0.05
)
 
(0.03
)
 
(0.07
)
 
(0.15
)
Non-GAAP diluted net income per share
$
0.62
 
 
$
0.39
 
 
$
0.54
 
 
$
2.08
 
 
$
1.33
 
 
 
 
 
 
 
 
 
 
 
Shares used in computing diluted net income per share
506,012
 
 
507,451
 
 
505,809
 
 
507,164
 
 
508,480
 
 
 
 
 

 

6

 

 

Non-GAAP Results (continued)
 
 
 
Three Months
Ended
 
November 27,
2015
Effective income tax rate:
 
 
 
GAAP effective income tax rate
25.0
 %
Stock-based and deferred compensation expense
(1.0
)
Amortization of purchased intangibles
(0.5
)
Income tax adjustments
(2.5
)
Non-GAAP effective income tax rate
21.0
 %
 
 
 
 
 
Use of Non-GAAP Financial Information
 
Adobe continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Adobe uses non-GAAP financial information to evaluate its ongoing operations and for internal planning and forecasting purposes. Adobe’s management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Adobe presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Adobe’s operating results. Adobe believes these non-GAAP financial measures are useful because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. This allows institutional investors, the analyst community and others to better understand and evaluate our operating results and future prospects in the same manner as management.
 
Adobe’s management believes it is useful for itself and investors to review, as applicable, both GAAP information that may include items such as stock-based and deferred compensation expenses, restructuring and other charges, amortization of purchased intangibles and certain activity in connection with technology license arrangements, investment gains and losses and the related tax impact of all of these items, income tax adjustments, the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes, and the non-GAAP measures that exclude such information in order to assess the performance of Adobe’s business and for planning and forecasting in subsequent periods. Whenever Adobe uses such a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above.
 
 
 
 
 
 
 

 

7