Adobe CFO Garrett to Retire, Company Books Charge and Raises Guidance -- Update
January 22 2018 - 7:31PM
Dow Jones News
By Tatyana Shumsky and Maria Armental
Mark Garrett, the finance chief who led Adobe Systems Inc.'s
transition to a subscription business model, is retiring after more
than a decade in the role.
The cloud-based software provider said Monday that Mr. Garrett,
60 years old, and general counsel Mike Dillon, 59, will retire
later this year, but both will remain in their posts until
successors are appointed.
"Mark and Mike have been phenomenal leaders and have played a
pivotal role in making Adobe the company it is today. I'm grateful
to both of them for their many contributions to Adobe's growth and
future success," said Chief Executive Shantanu Narayen in prepared
remarks. The company said it is searching for replacements for
both.
Mr. Garrett led Adobe's shift from selling consumers
shrink-wrapped disks of photo and video-editing software to selling
monthly subscriptions to its suite of cloud-based software. The
move was later copied by others in the industry.
Adobe's creative business revenue, which totaled $2.3 billion in
2012, dipped to $1.8 billion in 2014 during the transition before
climbing to $4.2 billion in fiscal 2017, said Jennifer Lowe,
analyst at UBS AG.
"It's no small feat, it could easily derail many a CFO," Ms.
Lowe said. "Adobe is the poster child for how to do it right."
Adobe transformed from a feast or famine company that relied on
the launch of blockbuster products every few years to drive an
influx of revenue to a more predictable business that collects
monthly income from its expanding base of subscribers, analysts
said.
Over Mr. Garrett's tenure Adobe's recurring revenue grew to
account for 85% of overall revenue, up from 5% more than a decade
ago.
"The way Mark helped guide investors through Adobe's business
transformation was exceptional," said Kirk Materne, senior managing
director at Evercore ISI. "He helped make it a much more digestible
transition as he understood the optics around the income statement
weren't necessarily going to tell the whole story."
The shift made Adobe a pioneer among its peers as other software
makers followed suit and often consulted Mr. Garrett on how to
navigate the change, analysts said.
"Mark Garrett is the Tom Brady of software CFOs -- at the top of
his game," said Brent Thill, managing director at Jefferies.
Prior to joining Adobe in 2007 Mr. Garrett was senior vice
president and chief financial officer at EMC Software Group, within
EMC Corp.
Adobe also said Monday it will book a roughly $85 million
one-time charge in the first quarter tied to recent changes in U.S.
tax law.
But the changes, the company said, are expected to drive "a
significant increase" in earnings in fiscal 2018 as it benefits
from a reduction in the corporate tax rate.
Adobe now expects to earn $4.72 a share, or $6.20 a share on an
adjusted basis, up from its previous forecast of $4.40 a share, or
$5.50 as adjusted. Revenue is expected to reach about $8.73
billion.
In the first quarter, the company expects to earn $1.05 a share,
or $1.43 a share as adjusted. It had previously forecast a profit
of $1.15 a share, or $1.27 adjusted.
"With ready access to our offshore cash, we will continue to
evaluate investment opportunities to grow our business," said Mr.
Garrett in prepared remarks, adding the company is "actively
expanding our campuses in the Bay Area and Utah to accommodate the
growth of our employee base."
As of Dec. 1, Adobe had about $5.82 billion in cash, with
roughly 89% of that held offshore.
Shares rose 2.3% to $202.30 in after-hours trading.
Write to Tatyana Shumsky at tatyana.shumsky@wsj.com and Maria
Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
January 22, 2018 19:16 ET (00:16 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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