Delaware | 0-15175 | 77-0019522 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
ADOBE INC. | ||
By: | /s/ JOHN MURPHY | |
John Murphy | ||
Executive Vice President and Chief Financial Officer |
• | Adobe achieved quarterly revenue of $2.60 billion in its first quarter of fiscal year 2019. Diluted earnings per share was $1.36 on a GAAP-basis, and $1.71 on a non-GAAP basis. |
• | Digital Media segment revenue was $1.78 billion, with Creative revenue growing to $1.49 billion and Document Cloud achieving record revenue of $282 million. Digital Media Annualized Recurring Revenue (“ARR”) grew to $7.07 billion exiting the quarter, a quarter-over-quarter increase of $357 million. Creative ARR grew to $6.21 billion, and Document Cloud ARR grew to $856 million. |
• | Digital Experience segment revenue was a record $743 million. |
• | GAAP operating income in the first quarter was $695 million, and non-GAAP operating income was $985 million. GAAP net income was $674 million, and non-GAAP net income was $844 million. |
• | Cash flow from operations was $1.01 billion, and deferred revenue grew to $3.22 billion exiting the quarter. |
• | Adobe repurchased approximately 2.1 million shares during the quarter. |
Q1 FY2019 Result Based on ASC 606 | Q1 FY2019 Result Based on ASC 605 | Q1 FY2019 Target1 Based on ASC 605 | |
Total revenue | $2.60 billion | $2.58 billion | ~$2.54 billion |
Digital Media segment revenue | 22% year/year growth | 22% year/year growth | ~20% year/year growth |
Digital Experience segment revenue | 34% year/year growth | 32% year/year growth | ~31% year/year growth |
GAAP EPS | $1.36 | $1.31 | ~$1.14 |
Non-GAAP EPS | $1.71 | $1.65 | ~$1.60 |
1 Adobe provided Q1 FY2019 targets on Dec. 13, 2018 based on ASC 605 |
Adobe total fiscal year 2019 revenue | ~$11.150 billion |
Digital Media segment revenue | ~20% year/year growth |
Digital Experience segment revenue | ~34% year/year growth |
Net new Digital Media annualized recurring revenue (“ARR”) | ~$1.500 billion |
Digital Experience annual subscription bookings 1 | ~25% year/year growth |
GAAP tax rate | ~10% |
Non-GAAP tax rate | ~11% |
GAAP EPS | ~$5.59 |
Non-GAAP EPS | ~$7.80 |
1Includes annualized subscription value of SaaS, managed service and term offerings under contract for Analytics Cloud, Marketing Cloud and Magento Commerce Cloud |
Adobe total Q2 fiscal year 2019 revenue | ~$2.700 billion | |
Digital Media segment revenue | ~20% year/year growth | |
Digital Experience segment revenue | ~32% year/year growth | |
Net new Digital Media annualized recurring revenue (“ARR”) | ~$370 million | |
Net non-operating other expense | ~$36 million | |
Tax rate | GAAP: ~12% | Non-GAAP: ~11% |
Share count | ~495 million shares | |
Earnings per share | GAAP: ~$1.20 | Non-GAAP: ~$1.77 |
Three Months Ended | |||||||
March 1, 2019 (*) | March 2, 2018 | ||||||
Revenue: | |||||||
Subscription | $ | 2,304,967 | $ | 1,793,358 | |||
Product | 170,554 | 171,608 | |||||
Services and support | 125,425 | 113,981 | |||||
Total revenue | 2,600,946 | 2,078,947 | |||||
Cost of revenue: | |||||||
Subscription | 288,031 | 164,685 | |||||
Product | 12,105 | 12,877 | |||||
Services and support | 97,150 | 81,340 | |||||
Total cost of revenue | 397,286 | 258,902 | |||||
Gross profit | 2,203,660 | 1,820,045 | |||||
Operating expenses: | |||||||
Research and development | 464,637 | 348,769 | |||||
Sales and marketing | 781,518 | 580,957 | |||||
General and administrative | 216,109 | 170,440 | |||||
Amortization of purchased intangibles | 46,566 | 17,146 | |||||
Total operating expenses | 1,508,830 | 1,117,312 | |||||
Operating income | 694,830 | 702,733 | |||||
Non-operating income (expense): | |||||||
Interest and other income (expense), net | 4,266 | 16,672 | |||||
Interest expense | (40,593 | ) | (19,899 | ) | |||
Investment gains (losses), net | 43,831 | 2,996 | |||||
Total non-operating income (expense), net | 7,504 | (231 | ) | ||||
Income before income taxes | 702,334 | 702,502 | |||||
Provision for income taxes | 28,093 | 119,426 | |||||
Net income | $ | 674,241 | $ | 583,076 | |||
Basic net income per share | $ | 1.38 | $ | 1.18 | |||
Shares used to compute basic net income per share | 488,056 | 492,061 | |||||
Diluted net income per share | $ | 1.36 | $ | 1.17 | |||
Shares used to compute diluted net income per share | 494,188 | 499,433 |
* | Adobe adopted ASU No. 2014-09, Revenue from Contracts with Customers, using the modified retrospective method during the first quarter of fiscal 2019. Prior period results have not been restated to reflect this change in accounting standards. Refer to our Form 10-Q for the first quarter of fiscal year 2019 for additional information. |
March 1, 2019 (*) | November 30, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,738,846 | $ | 1,642,775 | |||
Short-term investments | 1,487,411 | 1,586,187 | |||||
Trade receivables, net of allowances for doubtful accounts of $14,639 and $14,980, respectively | 1,304,796 | 1,315,578 | |||||
Prepaid expenses and other current assets | 565,115 | 312,499 | |||||
Total current assets | 5,096,168 | 4,857,039 | |||||
Property and equipment, net | 1,104,065 | 1,075,072 | |||||
Goodwill | 10,707,715 | 10,581,048 | |||||
Purchased and other intangibles, net | 2,017,103 | 2,069,001 | |||||
Other assets | 542,938 | 186,522 | |||||
Total assets | $ | 19,467,989 | $ | 18,768,682 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Trade payables | $ | 145,292 | $ | 186,258 | |||
Accrued expenses | 1,129,882 | 1,163,185 | |||||
Debt | 892,754 | — | |||||
Income taxes payable | 24,422 | 35,709 | |||||
Deferred revenue | 3,083,839 | 2,915,974 | |||||
Total current liabilities | 5,276,189 | 4,301,126 | |||||
Long-term liabilities: | |||||||
Debt | 3,236,833 | 4,124,800 | |||||
Deferred revenue | 134,353 | 137,630 | |||||
Income taxes payable | 655,036 | 644,101 | |||||
Deferred income taxes | 125,660 | 46,702 | |||||
Other liabilities | 168,433 | 152,209 | |||||
Total liabilities | 9,596,504 | 9,406,568 | |||||
Stockholders’ equity: | |||||||
Preferred stock, $0.0001 par value; 2,000 shares authorized | — | — | |||||
Common stock, $0.0001 par value | 61 | 61 | |||||
Additional paid-in-capital | 5,857,440 | 5,685,337 | |||||
Retained earnings | 12,579,311 | 11,815,597 | |||||
Accumulated other comprehensive income (loss) | (150,432 | ) | (148,130 | ) | |||
Treasury stock, at cost (112,330 and 113,171, respectively), net of reissuances | (8,414,895 | ) | (7,990,751 | ) | |||
Total stockholders’ equity | 9,871,485 | 9,362,114 | |||||
Total liabilities and stockholders’ equity | $ | 19,467,989 | $ | 18,768,682 |
* | Adobe adopted ASU No. 2014-09, Revenue from Contracts with Customers, using the modified retrospective method during the first quarter of fiscal 2019. Prior period results have not been restated to reflect this change in accounting standards. Refer to our Form 10-Q for the first quarter of fiscal year 2019 for additional information. |
Three Months Ended | |||||||
March 1, 2019 | March 2, 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 674,241 | $ | 583,076 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, amortization and accretion | 144,898 | 76,522 | |||||
Stock-based compensation | 184,688 | 135,526 | |||||
Unrealized investment (gains) losses, net | (41,678 | ) | (929 | ) | |||
Changes in deferred revenue | 190,334 | 77,662 | |||||
Changes in other operating assets and liabilities | (139,035 | ) | 117,744 | ||||
Net cash provided by operating activities | 1,013,448 | 989,601 | |||||
Cash flows from investing activities: | |||||||
Purchases, sales and maturities of short-term investments, net | 110,270 | 7,894 | |||||
Purchases of property and equipment | (65,268 | ) | (95,142 | ) | |||
Purchases and sales of long-term investments, intangibles and other assets, net | (77,103 | ) | (6,514 | ) | |||
Acquisitions, net of cash acquired | (99,817 | ) | — | ||||
Net cash used for investing activities | (131,918 | ) | (93,762 | ) | |||
Cash flows from financing activities: | |||||||
Purchases of treasury stock | (500,000 | ) | (300,000 | ) | |||
Taxes paid related to net share settlement of equity awards, net of proceeds from treasury stock reissuances | (280,981 | ) | (240,969 | ) | |||
Repayment of capital lease obligations | (2,931 | ) | (304 | ) | |||
Net cash used for financing activities | (783,912 | ) | (541,273 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (1,547 | ) | 6,343 | ||||
Net increase in cash and cash equivalents | 96,071 | 360,909 | |||||
Cash and cash equivalents at beginning of period | 1,642,775 | 2,306,072 | |||||
Cash and cash equivalents at end of period | $ | 1,738,846 | $ | 2,666,981 |
Three Months Ended | |||||||||||
March 1, 2019 (*) | March 2, 2018 | November 30, 2018 | |||||||||
Operating income: | |||||||||||
GAAP operating income | $ | 694,830 | $ | 702,733 | $ | 720,546 | |||||
Stock-based and deferred compensation expense | 187,115 | 136,414 | 166,504 | ||||||||
Amortization of purchased intangibles | 102,690 | 31,704 | 65,397 | ||||||||
Non-GAAP operating income | $ | 984,635 | $ | 870,851 | $ | 952,447 | |||||
Net income: | |||||||||||
GAAP net income | $ | 674,241 | $ | 583,076 | $ | 678,240 | |||||
Stock-based and deferred compensation expense | 187,115 | 136,414 | 166,504 | ||||||||
Amortization of purchased intangibles | 102,690 | 31,704 | 65,397 | ||||||||
Investment (gains) losses, net | (43,831 | ) | (2,996 | ) | 3,113 | ||||||
Income tax adjustments | (76,221 | ) | 23,987 | (7,051 | ) | ||||||
Non-GAAP net income | $ | 843,994 | $ | 772,185 | $ | 906,203 | |||||
Diluted net income per share: | |||||||||||
GAAP diluted net income per share | $ | 1.36 | $ | 1.17 | $ | 1.37 | |||||
Stock-based and deferred compensation expense | 0.38 | 0.27 | 0.34 | ||||||||
Amortization of purchased intangibles | 0.21 | 0.06 | 0.13 | ||||||||
Investment (gains) losses, net | (0.09 | ) | — | 0.01 | |||||||
Income tax adjustments | (0.15 | ) | 0.05 | (0.02 | ) | ||||||
Non-GAAP diluted net income per share | $ | 1.71 | $ | 1.55 | $ | 1.83 | |||||
Shares used in computing diluted net income per share | 494,188 | 499,433 | 495,118 |
* | Adobe adopted ASU No. 2014-09, Revenue from Contracts with Customers, using the modified retrospective method during the first quarter of fiscal 2019. Prior period results have not been restated to reflect this change in accounting standards. Refer to our Form 10-Q for the first quarter of fiscal year 2019 for additional information. |
First Quarter Fiscal 2019 | ||||
Effective income tax rate: | ||||
GAAP effective income tax rate | 4.0 | % | ||
Stock-based and deferred compensation expense | (1.2 | ) | ||
Amortization of purchased intangibles | (0.6 | ) | ||
Income tax adjustments | 8.5 | |||
Investment (gains) losses | 0.3 | |||
Non-GAAP effective income tax rate | 11.0 | % |
First Quarter Fiscal 2019 | ||||
Diluted net income per share: | ||||
GAAP diluted net income per share | $ | 1.31 | ||
Stock-based and deferred compensation expense | 0.38 | |||
Amortization of purchased intangibles | 0.21 | |||
Investment (gains)/losses | (0.09 | ) | ||
Income tax adjustments | (0.16 | ) | ||
Non-GAAP diluted net income per share | $ | 1.65 | ||
Shares used to compute diluted net income per share | 494.2 |
Second Quarter Fiscal 2019 | ||||
Diluted net income per share: | ||||
GAAP diluted net income per share | $ | 1.20 | ||
Stock-based and deferred compensation expense | 0.43 | |||
Amortization of purchased intangibles | 0.20 | |||
Income tax adjustments | (0.06 | ) | ||
Non-GAAP diluted net income per share | $ | 1.77 | ||
Shares used to compute diluted net income per share | 495.0 |
Second Quarter Fiscal 2019 | ||||
Effective income tax rate: | ||||
GAAP effective income tax rate | 12.0 | % | ||
Stock-based and deferred compensation expense | (1.0 | ) | ||
Amortization of purchased intangibles | (0.5 | ) | ||
Income tax adjustments | 0.5 | |||
Non-GAAP effective income tax rate | 11.0 | % |
Fiscal Year 2019 | ||||
Diluted net income per share: | ||||
GAAP diluted net income per share | $ | 5.59 | ||
Stock-based and deferred compensation expense | 1.73 | |||
Amortization of purchased intangibles | 0.81 | |||
Income tax adjustments | (0.33 | ) | ||
Non-GAAP diluted net income per share | $ | 7.80 | ||
Shares used to compute diluted net income per share | 493.0 |
Fiscal Year 2019 | ||||
Effective income tax rate: | ||||
GAAP effective income tax rate | 10.0 | % | ||
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 | 11.0 | % |