Company Announces Newest Offering, Adobe Document
Cloud
Adobe (Nasdaq:ADBE) today reported financial results for its
first quarter fiscal year 2015 ended Feb. 27, 2015.
Financial Highlights
- Adobe achieved revenue of $1.11
billion, above the high end of the targeted range of $1.05 billion
to $1.10 billion.
- Adobe added 517 thousand net new
Creative Cloud subscriptions in the quarter, which represents 28
percent year-over-year growth when compared to net new subscription
additions in Q1 fiscal year 2014.
- Creative Annualized Recurring Revenue
(“ARR”) grew to $1.79 billion, and total Digital Media ARR grew to
$2.09 billion.
- Adobe Marketing Cloud revenue was $311
million.
- Diluted earnings per share were $0.17
on a GAAP-basis, and $0.44 on a non-GAAP basis.
- Cash flow from operations was $183
million and deferred revenue grew to a record $1.18 billion.
- A record 70 percent of Adobe’s Q1
revenue was from recurring sources, compared to 52 percent of Q1
revenue in fiscal 2014.
- The company repurchased approximately
2.4 million shares during the quarter, returning $174 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 Marketing Cloud and Creative Cloud continue to be growth
engines for Adobe," said Shantanu Narayen, Adobe president and
chief executive officer. "We are excited about today's announcement
of the Adobe Document Cloud, which brings innovative new
capabilities, including built-in e-signing, to millions of
customers."
“Fiscal 2015 is off to a strong start, and Q1 revenue and
earnings are evidence of successful execution against our
strategy,” said Mark Garrett, Adobe executive vice president and
chief financial officer.
Adobe to Webcast Earnings Conference Call
Adobe will webcast its first quarter 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 innovation
and capabilities and the strength of our cloud business and growth
of our revenue and earnings, 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.
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 Quarterly Report on Form 10-Q for our quarter ended Feb.
27, 2015, which Adobe expects to file in March 2015.
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.
Condensed Consolidated Statements of
Income
(In thousands, except per share data;
unaudited)
Three Months Ended February 27,
2015 February 28, 2014 Revenue:
Subscription $ 713,442 $ 423,563 Products 290,774 471,454 Services
and support 104,965 105,103 Total revenue 1,109,181
1,000,120 Cost of revenue: Subscription 95,527
76,732 Products 19,703 27,498 Services and support 51,568
44,279 Total cost of revenue 166,798 148,509
Gross profit 942,383 851,611 Operating expenses:
Research and development 215,509 209,525 Sales and marketing
392,741 410,141 General and administrative 145,081 138,984
Restructuring and other charges 1,755 663 Amortization of purchased
intangibles 14,272 13,552 Total operating expenses
769,358 772,865 Operating income 173,025
78,746 Non-operating income (expense): Interest and other
income (expense), net 3,338 3,145 Interest expense (14,545 )
(16,590 ) Investment gains (losses), net 1,430 (409 ) Total
non-operating income (expense), net (9,777 ) (13,854 ) Income
before income taxes 163,248 64,892 Provision for income taxes
78,360 17,846 Net income $ 84,888 $ 47,046
Basic net income per share $ 0.17 $ 0.09
Shares used to compute basic net income per share 498,754
496,948 Diluted net income per share $ 0.17 $ 0.09
Shares used to compute diluted net income per share 507,526
508,340
Condensed Consolidated Balance
Sheets
(In thousands, except par value;
unaudited)
February 27, 2015 November 28,
2014 ASSETS Current assets: Cash and cash equivalents
$ 712,884 $ 1,117,400 Short-term investments 2,463,936 2,622,091
Trade receivables, net of allowances for doubtful accounts of
$7,201 and $7,867, respectively 532,427 591,800 Deferred income
taxes 60,470 95,279 Prepaid expenses and other current assets
202,442 175,758 Total current assets 3,972,159
4,602,328 Property and equipment, net 784,314 785,123
Goodwill 5,396,174 4,721,962 Purchased and other intangibles, net
629,317 469,662 Investment in lease receivable 80,439 80,439 Other
assets 146,019 126,315 Total assets $ 11,008,422
$ 10,785,829 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Trade payables $ 71,670 $ 68,377
Accrued expenses 564,211 683,866 Debt and capital lease obligations
64 603,229 Accrued restructuring 2,580 17,120 Income taxes payable
19,934 23,920 Deferred revenue 1,129,701 1,097,923
Total current liabilities 1,788,160 2,494,435 Long-term
liabilities: Debt 1,901,554 911,086 Deferred revenue 53,568 57,401
Accrued restructuring 4,495 5,194 Income taxes payable 245,063
125,746 Deferred income taxes 348,644 342,315 Other liabilities
77,918 73,747 Total liabilities 4,419,402 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 3,897,838 3,778,495 Retained earnings
6,756,803 6,924,294 Accumulated other comprehensive income (loss)
(103,810 ) (8,094 ) Treasury stock, at cost (100,786 and 103,350
shares, respectively), net of reissuances (3,961,872 ) (3,918,851 )
Total stockholders' equity 6,589,020 6,775,905 Total
liabilities and stockholders' equity $ 11,008,422 $
10,785,829
Condensed Consolidated Statements of
Cash Flows
(In thousands; unaudited)
Three Months Ended February 27,
2015 February 28, 2014 Cash flows from
operating activities: Net income $ 84,888 $ 47,046 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 79,635 77,636 Stock-based
compensation expense 84,193 82,750 Unrealized investment (gains)
losses, net (9,687 ) 975 Changes in deferred revenue 19,044 52,275
Changes in other operating assets and liabilities (75,058 ) (9,009
) Net cash provided by operating activities 183,015 251,673
Cash flows from investing activities: Purchases,
sales and maturities of short-term investments, net 152,402 (61,746
) Purchases of property and equipment (35,546 ) (29,393 ) Purchases
and sales of long-term investments, intangibles and other assets,
net (14,885 ) (3,283 ) Acquisitions, net of cash (800,342 ) —
Net cash used for investing activities (698,371 ) (94,422 )
Cash flows from financing activities: Purchases of treasury
stock (200,000 ) (200,000 ) Cost of reissuance of treasury stock,
net (93,697 ) (53,776 ) Proceeds from debt 989,280 — Repayment of
debt and capital lease obligations (602,189 ) (4,433 ) Debt
issuance costs (7,718 ) — Excess tax benefits from stock-based
compensation 33,599 — Net cash provided by (used for)
financing activities 119,275 (258,209 ) Effect of exchange
rate changes on cash and cash equivalents (8,435 ) 318 Net
decrease in cash and cash equivalents (404,516 ) (100,640 ) Cash
and cash equivalents at beginning of period 1,117,400
834,556 Cash and cash equivalents at end of period $ 712,884
$ 733,916
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 February 27,
2015 February 28, 2014
November 28, 2014 Operating income: GAAP
operating income $ 173,025 $ 78,746 $ 124,505 Stock-based and
deferred compensation expense 86,597 83,549 85,025 Restructuring
and other charges 1,755 663 19,385 Amortization of purchased
intangibles 33,791 32,054 31,331 Loss contingency — 10,000
— Non-GAAP operating income $ 295,168 $
205,012 $ 260,246 Net income: GAAP net
income $ 84,888 $ 47,046 $ 88,136 Stock-based and deferred
compensation expense 86,597 83,549 85,025 Restructuring and other
charges 1,755 663 19,385 Amortization of purchased intangibles
33,791 32,054 31,331 Investment (gains) losses (1,430 ) 409 (343 )
Loss contingency — 10,000 — Income tax adjustments 18,728
(22,383 ) (27,872 ) Non-GAAP net income $ 224,329 $ 151,338
$ 195,662 Diluted net income per share:
GAAP diluted net income per share $ 0.17 $ 0.09 $ 0.17 Stock-based
and deferred compensation expense 0.17 0.16 0.17 Restructuring and
other charges — — 0.04 Amortization of purchased intangibles 0.07
0.06 0.06 Loss contingency — 0.02 — Income tax adjustments 0.03
(0.03 ) (0.05 ) Non-GAAP diluted net income per share $ 0.44
$ 0.30 $ 0.39 Shares used in computing
diluted net income per share 507,526 508,340 507,451
Three MonthsEnded
February 27, 2015 Effective income tax rate:
GAAP effective income tax rate 48.0 % One-time charge related to
acquisition (42.0 ) Retroactive reinstatement of 2014 R&D tax
credit 16.0 Income tax adjustments (1.0 ) 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, loss
contingencies 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.
Investor Relations ContactAdobeMike Saviage,
408-536-4416ir@adobe.comorPublic
Relations ContactAdobeEdie Kissko,
408-536-3034kissko@adobe.com
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