Achieves Record Creative Cloud, Adobe Document Cloud and
Adobe Experience Cloud Revenue in Fiscal 2017
Adobe (Nasdaq:ADBE) today reported financial results for its
fourth quarter and fiscal year 2017 ended Dec. 1, 2017.
In its fourth quarter of fiscal year 2017, Adobe achieved
quarterly revenue of $2.01 billion, which represents 25 percent
year-over-year growth. In fiscal year 2017, Adobe achieved annual
revenue of $7.30 billion, which also represents 25 percent
year-over-year growth.
"Adobe delivered record revenue of $2 billion in Q4," said
Shantanu Narayen, president and CEO, Adobe. "Our strong business
momentum is driven by the market-leading solutions we provide to
empower people to create and businesses to digitally
transform.”
“Adobe achieved record annual and quarterly revenue, and the
leverage in our business model once again drove record profit and
earnings," said Mark Garrett, executive vice president and CFO,
Adobe. “We are raising our fiscal 2018 revenue target and remain
bullish about delivering strong top line and bottom line
growth.”
Fourth Quarter Fiscal Year 2017 Financial Highlights
- Adobe achieved record quarterly revenue
of $2.01 billion in its fourth quarter of fiscal year 2017, which
represents 25 percent year-over-year growth.
- Diluted earnings per share was $1.00 on
a GAAP-basis, and $1.26 on a non-GAAP basis.
- Digital Media segment revenue was $1.39
billion, with Creative and Document Cloud achieving record
quarterly revenue of $1.16 billion and $235 million,
respectively.
- Digital Media Annualized Recurring
Revenue (“ARR”) grew to $5.23 billion exiting the quarter, a
quarter-over-quarter increase of $359 million.
- Adobe Experience Cloud achieved record
revenue of $550 million, which represents 18 percent year-over-year
growth.
- Operating income grew 37 percent and
net income grew 26 percent year-over-year on a GAAP-basis;
operating income grew 37 percent and net income grew 39 percent
year-over-year on a non-GAAP basis.
- Cash flow from operations was a record
$833 million and deferred revenue grew to an all-time high of $2.49
billion.
- The company repurchased approximately
1.9 million shares during the quarter, returning $297 million of
cash to stockholders.
Fiscal Year 2017 Financial Highlights
- Adobe achieved record annual revenue of
$7.30 billion in fiscal year 2017, representing 25 percent
year-over-year growth.
- The company reported annual GAAP
diluted earnings per share of $3.38 and non-GAAP diluted earnings
per share of $4.31.
- Digital Media segment revenue was $5.01
billion, with Creative and Document Cloud achieving record annual
revenue of $4.17 billion and $837 million, respectively. Digital
Media ARR grew by $1.24 billion during the year.
- Adobe Experience Cloud achieved record
annual revenue of $2.03 billion, representing 24 percent
year-over-year growth.
- Operating income grew 45 percent and
net income grew 45 percent year-over-year on a GAAP-basis;
operating income grew 40 percent and net income grew 42 percent
year-over-year on a non-GAAP basis.
- Adobe generated a record $2.91 billion
in operating cash flow during the year.
- The company repurchased 8.2 million
shares during the year, returning $1.10 billion 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.
Adobe to Webcast Earnings Conference Call
Adobe will webcast its fourth quarter and fiscal year 2017
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,
revenue, annualized recurring revenue, subscription bookings,
non-operating other expense, tax rate on a GAAP and non-GAAP basis,
earnings per share on a GAAP and non-GAAP basis, and share count,
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, acquire, market and offer products and services
that meet customer requirements, introduction of new technology,
complex sales cycles, fluctuations in subscription renewal rates,
our ability to predict such renewals and risks related to the
timing of revenue recognition from our subscription offerings,
potential interruptions or delays in hosted services provided by us
or third parties, risks associated with cyber-attacks, information
security and privacy, failure to realize the anticipated benefits
of past or future acquisitions, changes in accounting principles
and tax regulations, and uncertainty in the financial markets and
economic conditions in the countries we operate as a multinational
corporation. 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 2016 ended Dec. 2, 2016, and Adobe's Quarterly
Reports on Form 10-Q issued in fiscal year 2017.
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 Dec. 1, 2017,
which Adobe expects to file in Jan. 2018.
Adobe assumes no obligation to, and does not currently intend
to, update these forward-looking statements.
About Adobe
Adobe is changing the world through digital experiences. For
more information, visit www.adobe.com.
© 2017 Adobe Systems Incorporated. All rights reserved. Adobe,
Adobe Document Cloud, Adobe Experience Cloud, Creative Cloud, and
the Adobe logo 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 Year Ended December
1,2017*
December 2, 2016
December 1,
2017*
December 2, 2016 Revenue: Subscription
$ 1,695,987 $ 1,262,273 $ 6,133,869 $ 4,584,833 Product 192,876
221,926 706,767 800,498 Services and support 117,732 124,220
460,869 469,099 Total revenue 2,006,595
1,608,419 7,301,505 5,854,430 Cost of
revenue: Subscription 170,218 122,196 623,048 461,860 Product
15,552 17,427 57,082 68,917 Services and support 85,102
76,933 330,361 289,131
Total cost of revenue
270,872 216,556 1,010,491 819,908
Gross profit 1,735,723 1,391,863 6,291,014 5,034,522
Operating expenses: Research and development 324,026 257,849
1,224,059 975,987 Sales and marketing 574,104 495,042 2,197,592
1,910,197 General and administrative 169,567 148,192 624,706
576,202 Amortization of purchased intangibles 18,686 18,500
76,562 78,534 Total operating expenses
1,086,383
919,583 4,122,919 3,540,920 Operating
income 649,340 472,280 2,168,095 1,493,602 Non-operating
income (expense): Interest and other income (expense), net 10,496
553 36,395 13,548 Interest expense (19,116 ) (17,518 ) (74,402 )
(70,442 ) Investment gains (losses), net 2,292 1,385
7,553 (1,570 ) Total non-operating income (expense), net
(6,328 ) (15,580 ) (30,454 ) (58,464 ) Income before income taxes
643,012 456,700 2,137,641 1,435,138 Provision for income taxes
141,463 57,087 443,687 266,356 Net
income $ 501,549 $ 399,613 $ 1,693,954 $
1,168,782 Basic net income per share $ 1.02 $ 0.81
$ 3.43 $ 2.35 Shares used to compute basic net
income per share 492,108 495,641 493,632
498,345 Diluted net income per share $ 1.00 $ 0.80
$ 3.38 $ 2.32 Shares used to compute diluted
net income per share 500,060 501,176 501,123
504,299
_________________________________________
* We early adopted ASU No. 2016-09,
Improvements to Employee Share-Based Payment Accounting, during the
first quarter of fiscal 2017. As required by the standard, excess
tax benefits recognized on stock-based compensation expense were
reflected in our provision for income taxes rather than paid-in
capital on a prospective basis. We recorded excess tax benefits
within our provision for income taxes, rather than paid-in capital,
starting the first quarter of fiscal 2017.
Condensed Consolidated Balance Sheets
(In thousands, except par value;
unaudited)
December 1, 2017 December 2,
2016 ASSETS Current assets: Cash and cash equivalents
$ 2,306,072 $ 1,011,315 Short-term investments 3,513,702 3,749,985
Trade receivables, net of allowances for doubtful accounts of
$9,151 and $6,214, respectively 1,217,968 833,033 Prepaid expenses
and other current assets 210,071 245,441 Total
current assets 7,247,813 5,839,774 Property and equipment,
net 936,976 816,264 Goodwill 5,821,561 5,406,474 Purchased and
other intangibles, net 385,658 414,405 Investment in lease
receivable — 80,439 Other assets 143,548 139,890
Total assets $ 14,535,556 $ 12,697,246
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Trade payables $ 113,538 $ 88,024 Accrued expenses 993,773 739,630
Income taxes payable 14,196 38,362 Deferred revenue 2,405,950
1,945,619 Total current liabilities 3,527,457
2,811,635 Long-term liabilities: Debt 1,881,421 1,892,200
Deferred revenue 88,592 69,131 Income taxes payable 173,088 184,381
Deferred income taxes 279,941 217,660 Other liabilities 125,188
97,404 Total liabilities 6,075,687 5,272,411
Stockholders’ equity: Preferred stock, $0.0001 par value; 2,000
shares authorized — — Common stock, $0.0001 par value 61 61
Additional paid-in-capital 5,082,195 4,616,331 Retained earnings
9,573,870 8,114,517 Accumulated other comprehensive income (loss)
(111,821 ) (173,602 ) Treasury stock, at cost (109,572 and 106,580
shares, respectively), net of reissuances (6,084,436 ) (5,132,472 )
Total stockholders’ equity 8,459,869 7,424,835 Total
liabilities and stockholders’ equity $ 14,535,556 $
12,697,246
Condensed
Consolidated Statements of Cash Flows
(In thousands; unaudited)
Three Months Ended December 1,2017*
December 2, 2016 Cash flows from operating
activities: Net income $ 501,549 $ 399,613 Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation, amortization and accretion 81,234 81,860 Stock-based
compensation expense 120,050 87,530 Unrealized investment (gains)
losses, net (2,251 ) (771 ) Changes in deferred revenue 289,952
216,765 Changes in other operating assets and liabilities (157,314
) (89,396 ) Net cash provided by operating activities 833,220
695,601 Cash flows from investing activities:
Purchases, sales and maturities of short-term investments, net
62,199 (97,891 ) Purchases of property and equipment (37,684 )
(48,633 ) Purchases and sales of long-term investments, intangibles
and other assets, net (4,149 ) 3,426
Net cash provided by (used for) investing
activities
20,366 (143,098 ) Cash flows from financing
activities: Purchases of treasury stock (300,000 ) (300,000 ) Taxes
paid related to net share settlement of equity awards, net of
proceeds from treasury stock reissuances (18,877 ) (6,283 )
Repayment of capital lease obligations (632 ) (22 ) Excess tax
benefits from stock-based compensation — 5,836 Net
cash used for financing activities (319,509 ) (300,469 ) Effect of
exchange rate changes on cash and cash equivalents (2,555 ) (8,391
) Net increase in cash and cash equivalents 531,522 243,643 Cash
and cash equivalents at beginning of period 1,774,550
767,672 Cash and cash equivalents at end of period $
2,306,072 $ 1,011,315
_________________________________________
* We early adopted ASU No. 2016-09,
Improvements to Employee Share-Based Payment Accounting, during the
first quarter of fiscal 2017. As required by the standard, excess
tax benefits recognized on stock-based compensation expense were
reflected in our provision for income taxes rather than paid-in
capital on a prospective basis. We also elected to prospectively
apply the change in presentation of excess tax benefits wherein
excess tax benefits recognized on stock-based compensation expense
were classified as operating activities in our condensed
consolidated statements of cash flows starting the first quarter of
fiscal 2017. Prior period classification of cash flows related to
excess tax benefits was not adjusted.
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
December 1, 2017 December 2,
2016 September 1, 2017
December 1, 2017 December 2,
2016 Operating income: GAAP operating income $
649,340 $ 472,280 $ 545,674 $ 2,168,095 $ 1,493,602 Stock-based and
deferred compensation expense 122,180 86,584 117,968 462,317
351,553 Restructuring and other charges (359 ) (285 ) — (456 )
(1,508 ) Amortization of purchased intangibles 34,817 31,143
36,655 143,492 136,056 Non-GAAP
operating income $ 805,978 $ 589,722 $ 700,297
$ 2,773,448 $ 1,979,703 Net income:
GAAP net income* $ 501,549 $ 399,613 $ 419,569 $ 1,693,954 $
1,168,782 Stock-based and deferred compensation expense 122,180
86,584 117,968 462,317 351,553 Restructuring and other charges (359
) (285 ) — (456 ) (1,508 ) Amortization of purchased intangibles
34,817 31,143 36,655 143,492 136,056 Investment (gains) losses, net
(2,292 ) (1,385 ) (975 ) (7,553 ) 1,570 Income tax adjustments
(25,982 ) (63,118 ) (24,146 ) (130,756 ) (137,350 ) Non-GAAP
net income $ 629,913 $ 452,552 $ 549,071 $
2,160,998 $ 1,519,103 Diluted net
income per share: GAAP diluted net income per share* $ 1.00
$ 0.80 $ 0.84 $ 3.38 $ 2.32 Stock-based and deferred compensation
expense 0.24 0.17 0.24 0.92 0.70 Amortization of purchased
intangibles 0.07 0.06 0.07 0.29 0.27 Investment (gains) losses, net
— — — (0.02 ) — Income tax adjustments (0.05 ) (0.13 ) (0.05 )
(0.26 ) (0.28 ) Non-GAAP diluted net income per share $ 1.26
$ 0.90 $ 1.10 $ 4.31 $ 3.01
Shares used in computing diluted net income per share
500,060 501,176 500,398 501,123 504,299
Three Months Ended December 1, 2017 Effective
income tax rate: GAAP effective income tax rate* 22.0 %
Stock-based and deferred compensation expense 0.2 Income tax
adjustments (1.2 ) Non-GAAP effective income tax rate** 21.0 %
_________________________________________
* We early adopted ASU No. 2016-09,
Improvements to Employee Share-Based Payment Accounting, during the
first quarter of fiscal 2017. As required by the standard, excess
tax benefits recognized on stock-based compensation expense were
reflected in our provision for income taxes rather than paid-in
capital on a prospective basis. We recorded excess tax benefits
within our provision for income taxes, rather than paid-in capital,
starting the first quarter of fiscal 2017. ** Our non-GAAP
effective income tax rate of 21% is an annualized rate based on
estimates for the entire fiscal year, whereas the GAAP effective
income tax rate of 22% is the rate for the quarter based on tax
events within the quarter. Income tax adjustments, which are
included in both GAAP and non-GAAP earnings, will fluctuate from
quarter-to-quarter but will normalize over the fiscal year due to
the timing of tax events including the timing of recognition of
excess tax benefits within each quarter.
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 as well
as non-GAAP measures, which may exclude 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, the related tax impact of all of these items,
income tax adjustments, and the income tax effect of the non-GAAP
pre-tax adjustments from the provision for income taxes. Adobe uses
these non-GAAP measures in order to assess the performance of
Adobe's business and for planning and forecasting in subsequent
periods. Whenever such a non-GAAP measure is used, Adobe 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171214006267/en/
Investor RelationsAdobeMike Saviage,
408-536-4416ir@adobe.comorPublic RelationsAdobeDan
Berthiaume, 408-536-2584dberthia@adobe.com
Adobe (NASDAQ:ADBE)
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