Forward-Looking Statements Disclosure
This press release contains forward-looking statements, including those related to business momentum, the strength of our cloud business and growth of our bookings, revenue and earnings, and our ability to complete and integrate the acquisition of Fotolia, 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 2013 ended Nov. 29, 2013 and Adobe’s Quarterly Reports on Form 10-Q issued in fiscal year 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 Annual Report on Form 10-K for our year ended Nov. 28, 2014, which Adobe expects to file in Jan. 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.
© 2014 Adobe Systems Incorporated. All rights reserved. Adobe, the Adobe logo, Creative Cloud and Adobe Marketing 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.
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Condensed Consolidated Statements of Income (In thousands, except per share data; unaudited) |
||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
|
November 28,
2014 |
November 29,
2013 |
November 28,
2014 |
November 29,
2013 |
|||||||||||||
| Revenue: | ||||||||||||||||
| Products | $ | 327,951 | $ | 567,232 | $ | 1,627,803 | $ | 2,470,098 | ||||||||
| Subscription | 628,954 | 359,723 | 2,076,584 | 1,137,856 | ||||||||||||
| Services and support | 116,423 | 114,744 | 442,678 | 447,286 | ||||||||||||
| Total revenue | 1,073,328 | 1,041,699 | 4,147,065 | 4,055,240 | ||||||||||||
| Cost of revenue: | ||||||||||||||||
| Products | 21,930 | 26,803 | 97,099 | 138,154 | ||||||||||||
| Subscription | 87,883 | 77,314 | 335,432 | 278,077 | ||||||||||||
| Services and support | 51,130 | 43,399 | 189,549 | 170,326 | ||||||||||||
| Total cost of revenue | 160,943 | 147,516 | 622,080 | 586,557 | ||||||||||||
| Gross profit | 912,385 | 894,183 | 3,524,985 | 3,468,683 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 213,687 | 205,196 | 844,353 | 826,631 | ||||||||||||
| Sales and marketing | 428,362 | 431,540 | 1,671,808 | 1,620,454 | ||||||||||||
| General and administrative | 133,534 | 138,358 | 543,332 | 520,124 | ||||||||||||
| Restructuring and other charges | 19,385 | 2,294 | 19,883 | 26,497 | ||||||||||||
| Amortization of purchased intangibles | 12,412 | 13,959 | 52,424 | 52,254 | ||||||||||||
| Total operating expenses | 807,380 | 791,347 | 3,131,800 | 3,045,960 | ||||||||||||
| Operating income | 105,005 | 102,836 | 393,185 | 422,723 | ||||||||||||
| Non-operating income (expense): | ||||||||||||||||
| Interest and other income (expense), net | 105 | 695 | 7,267 | 4,941 | ||||||||||||
| Interest expense | (12,678 | ) | (16,722 | ) | (59,732 | ) | (67,508 | ) | ||||||||
| Investment gains (losses), net | 343 | 1,461 | 1,156 | (4,015 | ) | |||||||||||
| Total non-operating income (expense), net | (12,230 | ) | (14,566 | ) | (51,309 | ) | (66,582 | ) | ||||||||
| Income before income taxes | 92,775 | 88,270 | 341,876 | 356,141 | ||||||||||||
| Provision for income taxes | 19,483 | 22,950 | 88,325 | 66,156 | ||||||||||||
| Net income | $ | 73,292 | $ | 65,320 | $ | 253,551 | $ | 289,985 | ||||||||
| Basic net income per share | $ | 0.15 | $ | 0.13 | $ | 0.51 | $ | 0.58 | ||||||||
| Shares used to compute basic net income per share | 498,124 | 499,363 | 497,867 | 501,372 | ||||||||||||
| Diluted net income per share | $ | 0.14 | $ | 0.13 | $ | 0.50 | $ | 0.56 | ||||||||
| Shares used to compute diluted net income per share | 507,451 | 511,082 | 508,480 | 513,476 | ||||||||||||
|
Condensed Consolidated Balance Sheets (In thousands, except par value; unaudited) |
||||||||
|
November 28,
2014 |
November 29,
2013 |
|||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,117,400 | $ | 834,556 | ||||
| Short-term investments | 2,622,091 | 2,339,196 | ||||||
| Trade receivables, net of allowances for doubtful accounts of $7,867 and $10,228, respectively | 591,800 | 599,820 | ||||||
| Deferred income taxes | 95,586 | 102,247 | ||||||
| Prepaid expenses and other current assets | 175,758 | 170,110 | ||||||
| Total current assets | 4,602,635 | 4,045,929 | ||||||
| Property and equipment, net | 785,123 | 659,774 | ||||||
| Goodwill | 4,721,962 | 4,771,981 | ||||||
| Purchased and other intangibles, net | 469,662 | 605,254 | ||||||
| Investment in lease receivable | 80,439 | 207,239 | ||||||
| Other assets | 126,315 | 90,121 | ||||||
| Total assets | $ | 10,786,136 | $ | 10,380,298 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Trade payables | $ | 68,377 | $ | 62,096 | ||||
| Accrued expenses | 703,365 | 656,939 | ||||||
| Debt and capital lease obligations | 603,229 | 14,676 | ||||||
| Accrued restructuring | 17,120 | 6,171 | ||||||
| Income taxes payable | 20,456 | 10,222 | ||||||
| Deferred revenue | 1,097,923 | 775,544 | ||||||
| Total current liabilities | 2,510,470 | 1,525,648 | ||||||
| Long-term liabilities: | ||||||||
| Debt and capital lease obligations | 911,086 | 1,499,297 | ||||||
| Deferred revenue | 57,401 | 53,268 | ||||||
| Accrued restructuring | 5,194 | 7,717 | ||||||
| Income taxes payable | 125,746 | 132,545 | ||||||
| Deferred income taxes | 341,610 | 375,634 | ||||||
| Other liabilities | 73,748 | 61,555 | ||||||
| Total liabilities | 4,025,255 | 3,655,664 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $0.0001 par value; 2,000 shares authorized | — | — | ||||||
| Common stock, $0.0001 par value | 61 | 61 | ||||||
| Additional paid-in-capital | 3,778,314 | 3,392,696 | ||||||
| Retained earnings | 6,909,451 | 6,928,964 | ||||||
| Accumulated other comprehensive income (loss) | (8,094 | ) | 46,103 | |||||
| Treasury stock, at cost (103,350 and 104,573 shares, respectively), net of reissuances | (3,918,851 | ) | (3,643,190 | ) | ||||
| Total stockholders' equity | 6,760,881 | 6,724,634 | ||||||
| Total liabilities and stockholders' equity | $ | 10,786,136 | $ | 10,380,298 | ||||
|
Condensed Consolidated Statements of Cash Flows (In thousands; unaudited) |
||||||||
| Three Months Ended | ||||||||
|
November 28,
2014 |
November 29,
2013 |
|||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 73,292 | $ | 65,320 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation, amortization and accretion | 78,147 | 81,350 | ||||||
| Stock-based compensation expense | 84,949 | 86,754 | ||||||
| Unrealized investment gains, net | (121 | ) | (1,741 | ) | ||||
| Changes in deferred revenue | 158,712 | 94,737 | ||||||
| Changes in other operating assets and liabilities | 4,953 | (11,438 | ) | |||||
| Net cash provided by operating activities | 399,932 | 314,982 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases, sales and maturities of short-term investments, net | (8,474 | ) | 11,140 | |||||
| Purchases of property and equipment | (36,775 | ) | (35,121 | ) | ||||
| Proceeds from the sale of property and equipment | — | 24,260 | ||||||
| Purchases and sales of long-term investments, intangibles and other assets, net | (2,908 | ) | (294 | ) | ||||
| Acquisitions, net of cash | (29,802 | ) | — | |||||
| Net cash used for investing activities | (77,959 | ) | (15 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Purchases of treasury stock | (125,000 | ) | (400,000 | ) | ||||
| Proceeds from reissuance of treasury stock, net | 3,619 | 64,892 | ||||||
| Repayment of debt and capital lease obligations | (3,253 | ) | (6,041 | ) | ||||
| Excess tax benefits from stock-based compensation | 21,102 | 40,619 | ||||||
| Net cash used for financing activities | (103,532 | ) | (300,530 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (4,370 | ) | 1,034 | |||||
| Net increase in cash and cash equivalents | 214,071 | 15,471 | ||||||
| Cash and cash equivalents at beginning of period | 903,329 | 819,085 | ||||||
| Cash and cash equivalents at end of period | $ | 1,117,400 | $ | 834,556 | ||||
|
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. |
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| Three Months Ended | Year Ended | |||||||||||||||||||
|
November 28,
2014 |
November 29,
2013 |
August 29,
2014 |
November 28,
2014 |
November 29,
2013 |
||||||||||||||||
| Operating income: | ||||||||||||||||||||
| GAAP operating income | $ | 105,005 | $ | 102,836 | $ | 74,176 | $ | 393,185 | $ | 422,723 | ||||||||||
| Stock-based and deferred compensation expense | 85,025 | 86,468 | 83,682 | 335,856 | 332,289 | |||||||||||||||
| Restructuring and other charges | 19,385 | 2,294 | 201 | 19,883 | 26,497 | |||||||||||||||
| Amortization of purchased intangibles & technology license arrangements | 31,331 | 32,789 | 31,780 | 127,000 | 153,840 | |||||||||||||||
| Loss contingency | — | — | — | 10,000 | — | |||||||||||||||
| Non-GAAP operating income | $ | 240,746 | $ | 224,387 | $ | 189,839 | $ | 885,924 | $ | 935,349 | ||||||||||
| Net income: | ||||||||||||||||||||
| GAAP net income | $ | 73,292 | $ | 65,320 | $ | 44,686 | $ | 253,551 | $ | 289,985 | ||||||||||
| Stock-based and deferred compensation expense | 85,025 | 86,468 | 83,682 | 335,856 | 332,289 | |||||||||||||||
| Restructuring and other charges | 19,385 | 2,294 | 201 | 19,883 | 26,497 | |||||||||||||||
| Amortization of purchased intangibles & technology license arrangements | 31,331 | 32,789 | 31,780 | 127,000 | 153,840 | |||||||||||||||
| Investment (gains) losses | (343 | ) | (1,461 | ) | (669 | ) | (1,156 | ) | 4,015 | |||||||||||
| Loss contingency | — | — | — | 10,000 | — | |||||||||||||||
| Income tax adjustments | (28,433 | ) | (20,806 | ) | (19,114 | ) | (86,701 | ) | (116,897 | ) | ||||||||||
| Non-GAAP net income | $ | 180,257 | $ | 164,604 | $ | 140,566 | $ | 658,433 | $ | 689,729 | ||||||||||
| Diluted net income per share: | ||||||||||||||||||||
| GAAP diluted net income per share | $ | 0.14 | $ | 0.13 | $ | 0.09 | $ | 0.50 | $ | 0.56 | ||||||||||
| Stock-based and deferred compensation expense | 0.17 | 0.17 | 0.16 | 0.66 | 0.65 | |||||||||||||||
| Restructuring and other charges | 0.04 | — | — | 0.04 | 0.05 | |||||||||||||||
| Amortization of purchased intangibles & technology license arrangements | 0.06 | 0.06 | 0.06 | 0.25 | 0.30 | |||||||||||||||
| Investment (gains) losses | — | — | — | — | 0.01 | |||||||||||||||
| Loss contingency | — | — | — | 0.02 | — | |||||||||||||||
| Income tax adjustments | (0.05 | ) | (0.04 | ) | (0.03 | ) | (0.18 | ) | (0.23 | ) | ||||||||||
| Non-GAAP diluted net income per share | $ | 0.36 | $ | 0.32 | $ | 0.28 | $ | 1.29 | $ | 1.34 | ||||||||||
| Shares used in computing diluted net income per share | 507,451 | 511,082 | 507,811 | 508,480 | 513,476 | |||||||||||||||
