Delaware | 0-15175 | 77-0019522 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Common Stock, $0.0001 par value per share | ADBE | The NASDAQ Stock Market LLC (NASDAQ Global Select Market) |
ADOBE INC. | ||
By: | /s/ JOHN MURPHY | |
John Murphy | ||
Executive Vice President and Chief Financial Officer |
• | Adobe achieved record quarterly revenue of $2.74 billion in its second quarter of fiscal year 2019, which represents 25 percent year-over-year growth. Diluted earnings per share was $1.29 on a GAAP-basis, and $1.83 on a non-GAAP basis. |
• | Digital Media segment revenue was $1.89 billion, which represents 22 percent year-over year growth. Creative revenue grew to $1.59 billion and Document Cloud achieved revenue of $296 million. Digital Media Annualized Recurring Revenue (“ARR”) grew to $7.47 billion exiting the quarter, a quarter-over-quarter increase of $406 million. Creative ARR grew to $6.55 billion, and Document Cloud ARR grew to $921 million. |
• | Digital Experience segment revenue was $784 million, representing 34 percent year-over-year growth. |
• | GAAP operating income in the second quarter was $750 million, and non-GAAP operating income was $1.05 billion. GAAP net income was $633 million, and non-GAAP net income was $901 million. |
• | Cash flow from operations was $1.11 billion. |
• | Remaining Performance Obligation was $8.37 billion. |
• | Adobe repurchased approximately 2.5 million shares during the quarter. |
Adobe total Q3 fiscal year 2019 revenue | ~$2.80 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”) | ~$360 million | |
Tax rate | GAAP: ~11% | Non-GAAP: ~11% |
Share count | ~491 million shares | |
Earnings per share | GAAP: ~$1.40 | Non-GAAP: ~$1.95 |
Three Months Ended | Six Months Ended | ||||||||||||||
May 31, 2019 (*) | June 1, 2018 | May 31, 2019 (*) | June 1, 2018 | ||||||||||||
Revenue: | |||||||||||||||
Subscription | $ | 2,456,097 | $ | 1,923,131 | $ | 4,761,064 | $ | 3,716,489 | |||||||
Product | 152,816 | 150,993 | 323,370 | 322,601 | |||||||||||
Services and support | 135,367 | 121,236 | 260,792 | 235,217 | |||||||||||
Total revenue | 2,744,280 | 2,195,360 | 5,345,226 | 4,274,307 | |||||||||||
Cost of revenue: | |||||||||||||||
Subscription | 296,476 | 186,355 | 584,507 | 351,040 | |||||||||||
Product | 9,345 | 10,779 | 21,450 | 23,656 | |||||||||||
Services and support | 101,667 | 84,210 | 198,817 | 165,550 | |||||||||||
Total cost of revenue | 407,488 | 281,344 | 804,774 | 540,246 | |||||||||||
Gross profit | 2,336,792 | 1,914,016 | 4,540,452 | 3,734,061 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 475,958 | 374,128 | 940,595 | 722,897 | |||||||||||
Sales and marketing | 848,927 | 646,215 | 1,630,445 | 1,227,172 | |||||||||||
General and administrative | 219,334 | 178,040 | 435,443 | 348,480 | |||||||||||
Amortization of purchased intangibles | 43,026 | 17,149 | 89,592 | 34,295 | |||||||||||
Total operating expenses | 1,587,245 | 1,215,532 | 3,096,075 | 2,332,844 | |||||||||||
Operating income | 749,547 | 698,484 | 1,444,377 | 1,401,217 | |||||||||||
Non-operating income (expense): | |||||||||||||||
Interest and other income (expense), net | 2,558 | 11,599 | 6,824 | 28,271 | |||||||||||
Interest expense | (40,577 | ) | (20,363 | ) | (81,170 | ) | (40,262 | ) | |||||||
Investment gains (losses), net | (756 | ) | 1,079 | 43,075 | 4,075 | ||||||||||
Total non-operating income (expense), net | (38,775 | ) | (7,685 | ) | (31,271 | ) | (7,916 | ) | |||||||
Income before income taxes | 710,772 | 690,799 | 1,413,106 | 1,393,301 | |||||||||||
Provision for income taxes | 78,179 | 27,632 | 106,272 | 147,058 | |||||||||||
Net income | $ | 632,593 | $ | 663,167 | $ | 1,306,834 | $ | 1,246,243 | |||||||
Basic net income per share | $ | 1.30 | $ | 1.35 | $ | 2.68 | $ | 2.53 | |||||||
Shares used to compute basic net income per share | 487,535 | 491,914 | 487,795 | 491,993 | |||||||||||
Diluted net income per share | $ | 1.29 | $ | 1.33 | $ | 2.65 | $ | 2.50 | |||||||
Shares used to compute diluted net income per share | 492,212 | 498,252 | 493,200 | 499,166 |
* | 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 second quarter of fiscal year 2019 for additional information. |
May 31, 2019 (*) | November 30, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 2,082,910 | $ | 1,642,775 | |||
Short-term investments | 1,396,069 | 1,586,187 | |||||
Trade receivables, net of allowances for doubtful accounts of $12,379 and $14,981, respectively | 1,272,668 | 1,315,578 | |||||
Prepaid expenses and other current assets | 590,998 | 312,499 | |||||
Total current assets | 5,342,645 | 4,857,039 | |||||
Property and equipment, net | 1,205,020 | 1,075,072 | |||||
Goodwill | 10,697,874 | 10,581,048 | |||||
Purchased and other intangibles, net | 1,917,149 | 2,069,001 | |||||
Other assets | 503,221 | 186,522 | |||||
Total assets | $ | 19,665,909 | $ | 18,768,682 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Trade payables | $ | 169,101 | $ | 186,258 | |||
Accrued expenses | 1,314,998 | 1,163,185 | |||||
Debt | 3,145,668 | — | |||||
Income taxes payable | 45,778 | 35,709 | |||||
Deferred revenue | 3,011,552 | 2,915,974 | |||||
Total current liabilities | 7,687,097 | 4,301,126 | |||||
Long-term liabilities: | |||||||
Debt | 987,938 | 4,124,800 | |||||
Deferred revenue | 122,522 | 137,630 | |||||
Income taxes payable | 637,733 | 644,101 | |||||
Deferred income taxes | 133,886 | 46,702 | |||||
Other liabilities | 165,040 | 152,209 | |||||
Total liabilities | 9,734,216 | 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 | 6,050,800 | 5,685,337 | |||||
Retained earnings | 13,183,938 | 11,815,597 | |||||
Accumulated other comprehensive income (loss) | (144,364 | ) | (148,130 | ) | |||
Treasury stock, at cost (114,561 and 113,171, respectively), net of reissuances | (9,158,742 | ) | (7,990,751 | ) | |||
Total stockholders’ equity | 9,931,693 | 9,362,114 | |||||
Total liabilities and stockholders’ equity | $ | 19,665,909 | $ | 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 second quarter of fiscal year 2019 for additional information. |
Three Months Ended | |||||||
May 31, 2019 | June 1, 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 632,593 | $ | 663,167 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, amortization and accretion | 145,609 | 76,360 | |||||
Stock-based compensation | 204,300 | 145,376 | |||||
Unrealized investment (gains) losses, net | 1,700 | (573 | ) | ||||
Changes in deferred revenue | (84,118 | ) | 62,063 | ||||
Changes in other operating assets and liabilities | 209,242 | 30,013 | |||||
Net cash provided by operating activities | 1,109,326 | 976,406 | |||||
Cash flows from investing activities: | |||||||
Purchases, sales and maturities of short-term investments, net | 100,486 | 131,896 | |||||
Purchases of property and equipment | (85,492 | ) | (45,316 | ) | |||
Purchases and sales of long-term investments, intangibles and other assets, net | (4,921 | ) | (4,287 | ) | |||
Acquisitions, net of cash acquired | — | (14,614 | ) | ||||
Net cash provided by investing activities | 10,073 | 67,679 | |||||
Cash flows from financing activities: | |||||||
Purchases of treasury stock | (750,000 | ) | (700,000 | ) | |||
Taxes paid related to net share settlement of equity awards, net of proceeds from treasury stock reissuances | (21,813 | ) | (16,854 | ) | |||
Repayment of capital lease obligations | (288 | ) | (511 | ) | |||
Net cash used for financing activities | (772,101 | ) | (717,365 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (3,234 | ) | (5,715 | ) | |||
Net increase in cash and cash equivalents | 344,064 | 321,005 | |||||
Cash and cash equivalents at beginning of period | 1,738,846 | 2,666,981 | |||||
Cash and cash equivalents at end of period | $ | 2,082,910 | $ | 2,987,986 |
Three Months Ended | |||||||||||
May 31, 2019 (*) | June 1, 2018 | March 1, 2019 (*) | |||||||||
Operating income: | |||||||||||
GAAP operating income | $ | 749,547 | $ | 698,484 | $ | 694,830 | |||||
Stock-based and deferred compensation expense | 203,673 | 146,773 | 187,115 | ||||||||
Amortization of purchased intangibles | 96,714 | 32,378 | 102,690 | ||||||||
Non-GAAP operating income | $ | 1,049,934 | $ | 877,635 | $ | 984,635 | |||||
Net income: | |||||||||||
GAAP net income | $ | 632,593 | $ | 663,167 | $ | 674,241 | |||||
Stock-based and deferred compensation expense | 203,673 | 146,773 | 187,115 | ||||||||
Amortization of purchased intangibles | 96,714 | 32,378 | 102,690 | ||||||||
Investment (gains) losses, net | 756 | (1,079 | ) | (43,831 | ) | ||||||
Income tax adjustments | (33,132 | ) | (15,812 | ) | (76,221 | ) | |||||
Non-GAAP net income | $ | 900,604 | $ | 825,427 | $ | 843,994 | |||||
Diluted net income per share: | |||||||||||
GAAP diluted net income per share | $ | 1.29 | $ | 1.33 | $ | 1.36 | |||||
Stock-based and deferred compensation expense | 0.41 | 0.29 | 0.38 | ||||||||
Amortization of purchased intangibles | 0.20 | 0.06 | 0.21 | ||||||||
Investment (gains) losses, net | — | — | (0.09 | ) | |||||||
Income tax adjustments | (0.07 | ) | (0.02 | ) | (0.15 | ) | |||||
Non-GAAP diluted net income per share | $ | 1.83 | $ | 1.66 | $ | 1.71 | |||||
Shares used in computing diluted net income per share | 492,212 | 498,252 | 494,188 |
* | 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 second quarter of fiscal year 2019 for additional information. |
Third Quarter Fiscal 2019 | ||||
Diluted net income per share: | ||||
GAAP diluted net income per share | $ | 1.40 | ||
Stock-based and deferred compensation expense | 0.42 | |||
Amortization of purchased intangibles | 0.20 | |||
Income tax adjustments | (0.07 | ) | ||
Non-GAAP diluted net income per share | $ | 1.95 | ||
Shares used to compute diluted net income per share | 491.0 |