EX-99.1 2 adbeex991q415.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1
Investor Relations Contact
Mike Saviage
Adobe
408-536-4416
ir@adobe.com
Public Relations Contact
Edie Kissko
Adobe
408-536-3034
kissko@adobe.com




FOR IMMEDIATE RELEASE
Adobe Reports Record Quarterly and Annual Revenue

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.








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