Q4 Operating Cash Flow Exceeds $1 Billion; Company Raises Revenue and ARR Targets for Fiscal Year 2019
SAN JOSE, Calif.--(BUSINESS WIRE)--Adobe (Nasdaq:ADBE) today reported financial results for its fourth
quarter and fiscal year 2018 ended Nov. 30, 2018.
In its fourth quarter of fiscal year 2018, Adobe achieved record
quarterly revenue of $2.46 billion, which represents 23 percent
year-over-year growth. In fiscal year 2018, Adobe achieved record annual
revenue of $9.03 billion, which represents 24 percent year-over-year
growth.
"Adobe achieved record revenue of greater than $9 billion and delivered
outstanding earnings performance in fiscal 2018," said Shantanu Narayen,
president and CEO, Adobe. "In 2018 we made significant investments
across our product portfolio, entered new markets, and made strategic
acquisitions which we believe will fuel continued top and bottom-line
performance.”
“We finished the year strong with record results across the board,
meeting or exceeding all of our annual and quarterly targets which did
not include Marketo,” said John Murphy, executive vice president and
CFO, Adobe. “We’re excited to add Marketo and the expanded market
opportunity it provides. We look forward to delivering strong revenue
growth, accelerating earnings growth and healthy margin expansion during
fiscal 2019.”
Adobe acquired Marketo, Inc. on Oct. 31, 2018, which added approximately
$21 million of revenue in the fourth quarter. This press release
provides key financial information with and without the impact of the
Marketo transaction to enable evaluation of the Company’s performance
based on financial targets provided before the acquisition.
Fourth Quarter Fiscal Year 2018 Financial Results
|
|
Q4 FY2018 Targets excl. Marketo1
|
|
Q4 FY2018 Results excl. Marketo2
|
|
Q4 FY2018 Results As reported, incl. Marketo
|
Total revenue
|
|
$2.42 billion
|
|
$2.44 billion
|
|
$2.46 billion
|
GAAP EPS
|
|
$1.42
|
|
$1.48
|
|
$1.37
|
Non-GAAP EPS2
|
|
$1.87
|
|
$1.90
|
|
$1.83
|
Digital Media segment revenue
|
|
~22 percent y/y growth
|
|
23 percent y/y growth
|
|
23 percent y/y growth
|
Digital Experience segment revenue
|
|
~20 percent y/y growth
|
|
22 percent y/y growth
|
|
25 percent y/y growth
|
Net new Digital Media Annualized Recurring Revenue (“ARR”)
|
|
~$385 million
|
|
$430 million
|
|
$430 million
|
1 Adobe provided Q4 FY2018 targets on Sept. 13, 2018
and reaffirmed them on Oct. 15, 2018, both of which preceded its
acquisition of Marketo on Oct. 31, 2018
|
2 A reconciliation between GAAP and non-GAAP results is
provided at the end of this press release and on Adobe’s website
|
|
Other financial highlights in the fourth quarter of fiscal 2018 include:
-
Operating income grew 11 percent and net income grew 35 percent
year-over-year on a GAAP-basis; operating income grew 18 percent and
net income grew 44 percent year-over-year on a non-GAAP basis.
-
Cash flow from operations was a record $1.11 billion.
-
Deferred revenue grew to $3.05 billion.
-
The company repurchased approximately 1.6 million shares during the
quarter, returning $397 million of cash to stockholders.
Fiscal Year 2018 Financial Results
|
|
FY2018 Targets excl. Magento & Marketo1
|
|
FY2018 Results As reported, incl. Magento & Marketo
|
Total revenue
|
|
$8.725 billion
|
|
$9.03 billion
|
Digital Media segment revenue
|
|
~23 percent y/y growth
|
|
26 percent y/y growth
|
Digital Experience segment revenue
|
|
~15 percent y/y growth
|
|
20 percent y/y growth
|
Adobe Experience Cloud subscription revenue2
|
|
~20 percent y/y growth
|
|
26 percent y/y growth
|
Net new Digital Media Annualized Recurring Revenue (“ARR”)
|
|
~$1.1 billion
|
|
$1.45 billion
|
GAAP EPS
|
|
$4.40
|
|
$5.20
|
Non-GAAP EPS3
|
|
$5.50
|
|
$6.76
|
1 Adobe provided annual FY2018 targets on Dec. 14, 2017
|
2 Includes revenue from SaaS, managed service and term
offerings for Analytics Cloud, Marketing Cloud and Magento
Commerce Cloud, as well as total revenue for Adobe Advertising
Cloud
|
3 A reconciliation between GAAP and non-GAAP results is
provided at the end of this press release and on Adobe’s website
|
|
Other financial highlights in fiscal year 2018 include:
-
Operating income grew 31 percent and net income grew 53 percent
year-over-year on a GAAP-basis; operating income grew 31 percent and
net income grew 56 percent year-over-year on a non-GAAP basis.
-
Adobe generated $4.03 billion in operating cash flow during the year.
-
The company repurchased 8.7 million shares during the year, returning
$2.00 billion of cash to stockholders.
ASC 606 Update
Adobe will report its financial results based on Accounting Standards
Coding Topic 606 (“ASC 606”) in its fiscal year 2019, beginning in March
2019 with its first quarter earnings report. The financial targets Adobe
is providing today remain based on ASC 605 as the Company integrates its
acquisition of Marketo into its financial systems. Adobe continues to
believe that moving to 606 in fiscal year 2019 reporting will not
materially impact its revenue. However, the Company now expects there
will be a slight improvement to earnings through fiscal year 2019 due to
benefits from capitalization of sales commissions.
Adobe Updates Financial Targets for Fiscal Year 2019 to Include
Marketo
Adobe provided preliminary fiscal year 2019 financial targets at its
Financial Analyst Meeting on Oct. 15, 2018, before it had closed its
acquisition of Marketo. The Company today is updating those targets and
providing earnings per share targets to reflect the impact of:
-
The acquisition of Marketo, including revenue, operating expense and
the write-down of deferred revenue due to purchase accounting, and
higher other expense in order to fund the acquisition; and
-
Adverse changes in global currency rates since Sept. 2018, which was
the time period used for spot currency rates as a basis for providing
the preliminary fiscal year 2019 targets in mid-October.
The following table and subsequent commentary summarizes Adobe’s annual
fiscal year 2019 targets:
Adobe total fiscal year 2019 revenue
|
|
~$11.150 billion
|
Digital Media segment revenue
|
|
~20 percent year-over-year growth
|
Digital Experience segment revenue
|
|
~34 percent year-over-year growth
|
Digital Media annualized recurring revenue (“ARR”)
|
|
~$1.450 billion of net new ARR
|
Digital Experience annual subscription bookings1
|
|
~25 percent year-over-year growth
|
Tax rate
|
|
GAAP: ~10 percent
|
|
Non-GAAP: ~11 percent
|
Earnings per share
|
|
GAAP: ~$5.54
|
|
Non-GAAP: ~$7.75
|
1 Includes annualized subscription value of SaaS,
managed service and term offerings under contract for Analytics
Cloud, Marketing Cloud and Magento Commerce Cloud
|
|
During fiscal year 2019, after the first quarter Adobe expects revenue
in each quarter to grow by approximately the same year-over-year growth
percentage implied in its targeted revenue for the year. In addition,
the Company expects net new Digital Media ARR in each quarter to be
sequentially similar as that achieved in past fiscal years from quarter
to quarter – with typical summer seasonality which can lead to
sequentially lower net new ARR in the third quarter, as well as normal
year-end sequential strength in fourth quarter net new ARR.
As the financial impact of lost deferred revenue from recent
acquisitions due to purchase accounting tapers off during fiscal year
2019, after the first quarter Adobe expects quarterly operating margins
and quarterly earnings per share growth rates to increase sequentially
during the year.
A reconciliation between GAAP and non-GAAP targets is provided at the
end of this press release and on Adobe’s website.
Adobe Provides First Quarter Fiscal Year 2019 Financial Targets
The following table summarizes Adobe’s first quarter fiscal year 2019
targets:
Adobe total Q1 fiscal year 2019 revenue
|
|
~$2.540 billion
|
Digital Media segment revenue
|
|
~20% year-over-year growth
|
Digital Experience segment revenue
|
|
~31% year-over-year growth
|
Net non-operating other expense
|
|
~$39 million
|
Tax rate
|
|
GAAP: ~3%
|
|
Non-GAAP: ~11%
|
Share count
|
|
~495 million shares
|
Earnings per share
|
|
GAAP: ~$1.14
|
|
Non-GAAP: ~$1.60
|
Net new Digital Media annualized recurring revenue (“ARR”)
|
|
~$330 million
|
|
|
|
A reconciliation between GAAP and non-GAAP targets 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 2018 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, our market opportunity, revenue, operating
margin, the impact of new accounting standards, subscription bookings,
seasonality, annualized recurring revenue, 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 compete effectively, failure to develop,
acquire, market and offer products and services that meet customer
requirements, introduction of new technology, risks associated with
cyber-attacks, potential interruptions or delays in hosted services
provided by us or third parties, information security and privacy,
complex sales cycles, risks related to the timing of revenue recognition
from our subscription offerings, fluctuations in subscription renewal
rates, failure to realize the anticipated benefits of past or future
acquisitions, changes in accounting principles and tax regulations,
uncertainty in the financial markets and economic conditions in the
countries where we operate, and other various risks associated with
being 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 2017 ended Dec. 1, 2017, and Adobe's Quarterly
Reports on Form 10-Q issued in fiscal year 2018.
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. 30, 2018, which Adobe
expects to file in Jan. 2019.
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.
©2018 Adobe Inc. All rights reserved. Adobe, Adobe Experience Cloud,
Adobe Analytics Cloud, Adobe Marketing Cloud, Adobe Advertising Cloud,
and the Adobe logo are either registered trademarks or trademarks of
Adobe Inc. 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
|
|
|
November 30,
2018
|
|
December 1,
2017
|
|
November 30,
2018
|
|
December 1,
2017
|
Revenue:
|
|
|
|
|
|
|
|
|
Subscription
|
|
$
|
2,184,158
|
|
|
$
|
1,695,987
|
|
|
$
|
7,922,152
|
|
|
$
|
6,133,869
|
|
Product
|
|
150,425
|
|
|
192,876
|
|
|
622,153
|
|
|
706,767
|
|
Services and support
|
|
130,042
|
|
|
117,732
|
|
|
485,703
|
|
|
460,869
|
|
Total revenue
|
|
2,464,625
|
|
|
2,006,595
|
|
|
9,030,008
|
|
|
7,301,505
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
Subscription
|
|
257,024
|
|
|
170,218
|
|
|
807,221
|
|
|
623,048
|
|
Product
|
|
10,899
|
|
|
15,552
|
|
|
46,009
|
|
|
57,082
|
|
Services and support
|
|
91,338
|
|
|
85,102
|
|
|
341,769
|
|
|
330,361
|
|
Total cost of revenue
|
|
359,261
|
|
|
270,872
|
|
|
1,194,999
|
|
|
1,010,491
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
2,105,364
|
|
|
1,735,723
|
|
|
7,835,009
|
|
|
6,291,014
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
415,958
|
|
|
324,026
|
|
|
1,537,812
|
|
|
1,224,059
|
|
Sales and marketing
|
|
723,573
|
|
|
574,104
|
|
|
2,620,829
|
|
|
2,197,592
|
|
General and administrative
|
|
212,355
|
|
|
169,567
|
|
|
744,898
|
|
|
624,706
|
|
Amortization of purchased intangibles
|
|
32,932
|
|
|
18,686
|
|
|
91,101
|
|
|
76,562
|
|
Total operating expenses
|
|
1,384,818
|
|
|
1,086,383
|
|
|
4,994,640
|
|
|
4,122,919
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
720,546
|
|
|
649,340
|
|
|
2,840,369
|
|
|
2,168,095
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
Interest and other income (expense), net
|
|
9,657
|
|
|
10,496
|
|
|
39,536
|
|
|
36,395
|
|
Interest expense
|
|
(27,873
|
)
|
|
(19,116
|
)
|
|
(89,242
|
)
|
|
(74,402
|
)
|
Investment gains (losses), net
|
|
(3,113
|
)
|
|
2,292
|
|
|
3,213
|
|
|
7,553
|
|
Total non-operating income (expense), net
|
|
(21,329
|
)
|
|
(6,328
|
)
|
|
(46,493
|
)
|
|
(30,454
|
)
|
Income before income taxes
|
|
699,217
|
|
|
643,012
|
|
|
2,793,876
|
|
|
2,137,641
|
|
Provision for income taxes
|
|
20,977
|
|
|
141,463
|
|
|
203,102
|
|
|
443,687
|
|
Net income
|
|
$
|
678,240
|
|
|
$
|
501,549
|
|
|
$
|
2,590,774
|
|
|
$
|
1,693,954
|
|
Basic net income per share
|
|
$
|
1.39
|
|
|
$
|
1.02
|
|
|
$
|
5.28
|
|
|
$
|
3.43
|
|
Shares used to compute basic net income per share
|
|
488,246
|
|
|
492,108
|
|
|
490,564
|
|
|
493,632
|
|
Diluted net income per share
|
|
$
|
1.37
|
|
|
$
|
1.00
|
|
|
$
|
5.20
|
|
|
$
|
3.38
|
|
Shares used to compute diluted net income per share
|
|
495,118
|
|
|
500,060
|
|
|
497,843
|
|
|
501,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
|
|
|
|
|
|
|
|
November 30,
2018
|
|
December 1,
2017
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,642,775
|
|
|
$
|
2,306,072
|
|
Short-term investments
|
|
1,586,187
|
|
|
3,513,702
|
|
Trade receivables, net of allowances for doubtful accounts of
$14,980 and $9,151, respectively
|
|
1,315,578
|
|
|
1,217,968
|
|
Prepaid expenses and other current assets
|
|
312,499
|
|
|
210,071
|
|
Total current assets
|
|
4,857,039
|
|
|
7,247,813
|
|
|
|
|
|
|
Property and equipment, net
|
|
1,075,072
|
|
|
936,976
|
|
Goodwill
|
|
10,581,048
|
|
|
5,821,561
|
|
Purchased and other intangibles, net
|
|
2,069,001
|
|
|
385,658
|
|
Other assets
|
|
186,522
|
|
|
143,548
|
|
Total assets
|
|
$
|
18,768,682
|
|
|
$
|
14,535,556
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Trade payables
|
|
$
|
186,258
|
|
|
$
|
113,538
|
|
Accrued expenses
|
|
1,163,185
|
|
|
993,773
|
|
Income taxes payable
|
|
35,709
|
|
|
14,196
|
|
Deferred revenue
|
|
2,915,974
|
|
|
2,405,950
|
|
Total current liabilities
|
|
4,301,126
|
|
|
3,527,457
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
Debt
|
|
4,124,800
|
|
|
1,881,421
|
|
Deferred revenue
|
|
137,630
|
|
|
88,592
|
|
Income taxes payable
|
|
644,101
|
|
|
173,088
|
|
Deferred income taxes
|
|
46,702
|
|
|
279,941
|
|
Other liabilities
|
|
152,209
|
|
|
125,188
|
|
Total liabilities
|
|
9,406,568
|
|
|
6,075,687
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
Preferred stock, $0.0001 par value; 2,000 shares authorized
|
|
—
|
|
|
—
|
|
Common stock, $0.0001 par value
|
|
61
|
|
|
61
|
|
Additional paid-in-capital
|
|
5,685,337
|
|
|
5,082,195
|
|
Retained earnings
|
|
11,815,597
|
|
|
9,573,870
|
|
Accumulated other comprehensive income (loss)
|
|
(148,130
|
)
|
|
(111,821
|
)
|
Treasury stock, at cost (113,171 and 109,572, respectively), net of
reissuances
|
|
(7,990,751
|
)
|
|
(6,084,436
|
)
|
Total stockholders’ equity
|
|
9,362,114
|
|
|
8,459,869
|
|
Total liabilities and stockholders’ equity
|
|
$
|
18,768,682
|
|
|
$
|
14,535,556
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
November 30,
2018
|
|
December 1,
2017
|
Cash flows from operating activities:
|
|
|
|
|
Net income
|
|
$
|
678,240
|
|
|
$
|
501,549
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation, amortization and accretion
|
|
106,720
|
|
|
81,234
|
|
Stock-based compensation
|
|
169,621
|
|
|
119,744
|
|
Unrealized investment (gains) losses, net
|
|
3,908
|
|
|
(2,251
|
)
|
Changes in deferred revenue
|
|
271,443
|
|
|
289,952
|
|
Changes in other operating assets and liabilities
|
|
(121,939
|
)
|
|
(157,008
|
)
|
Net cash provided by operating activities
|
|
1,107,993
|
|
|
833,220
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Purchases, sales and maturities of short-term investments, net
|
|
1,606,237
|
|
|
62,199
|
|
Purchases of property and equipment
|
|
(62,563
|
)
|
|
(37,684
|
)
|
Purchases and sales of long-term investments, intangibles and other
assets, net
|
|
(1,211
|
)
|
|
(4,149
|
)
|
Acquisitions, net of cash acquired
|
|
(4,681,341
|
)
|
|
—
|
|
Net cash provided by (used for) investing activities
|
|
(3,138,878
|
)
|
|
20,366
|
|
|
|
|
|
|
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
|
|
(23,036
|
)
|
|
(18,877
|
)
|
Proceeds from debt issuance, net
|
|
2,248,342
|
|
|
—
|
|
Repayment of capital lease obligations
|
|
(575
|
)
|
|
(632
|
)
|
Net cash provided by (used for) financing activities
|
|
1,924,731
|
|
|
(319,509
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
1,785
|
|
|
(2,555
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
(104,369
|
)
|
|
531,522
|
|
Cash and cash equivalents at beginning of period
|
|
1,747,144
|
|
|
1,774,550
|
|
Cash and cash equivalents at end of period
|
|
$
|
1,642,775
|
|
|
$
|
2,306,072
|
|
|
|
|
|
|
|
|
|
|
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 30,
2018
|
|
December 1,
2017
|
|
August 31,
2018
|
|
November 30,
2018
|
|
December 1,
2017
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating income
|
|
$
|
720,546
|
|
|
$
|
649,340
|
|
|
$
|
718,606
|
|
|
$
|
2,840,369
|
|
|
$
|
2,168,095
|
|
Stock-based and deferred compensation expense
|
|
166,504
|
|
|
122,180
|
|
|
161,094
|
|
|
610,785
|
|
|
462,317
|
|
Restructuring and other charges
|
|
—
|
|
|
(359
|
)
|
|
—
|
|
|
—
|
|
|
(456
|
)
|
Amortization of purchased intangibles
|
|
65,397
|
|
|
34,817
|
|
|
44,815
|
|
|
174,294
|
|
|
143,492
|
|
Non-GAAP operating income
|
|
$
|
952,447
|
|
|
$
|
805,978
|
|
|
$
|
924,515
|
|
|
$
|
3,625,448
|
|
|
$
|
2,773,448
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
|
|
$
|
678,240
|
|
|
$
|
501,549
|
|
|
$
|
666,291
|
|
|
$
|
2,590,774
|
|
|
$
|
1,693,954
|
|
Stock-based and deferred compensation expense
|
|
166,504
|
|
|
122,180
|
|
|
161,094
|
|
|
610,785
|
|
|
462,317
|
|
Restructuring and other charges
|
|
—
|
|
|
(359
|
)
|
|
—
|
|
|
—
|
|
|
(456
|
)
|
Amortization of purchased intangibles
|
|
65,397
|
|
|
34,817
|
|
|
44,815
|
|
|
174,294
|
|
|
143,492
|
|
Investment (gains) losses, net
|
|
3,113
|
|
|
(2,292
|
)
|
|
(2,251
|
)
|
|
(3,213
|
)
|
|
(7,553
|
)
|
Income tax adjustments
|
|
(7,051
|
)
|
|
(25,982
|
)
|
|
(10,185
|
)
|
|
(9,060
|
)
|
|
(130,756
|
)
|
Non-GAAP net income
|
|
$
|
906,203
|
|
|
$
|
629,913
|
|
|
$
|
859,764
|
|
|
$
|
3,363,580
|
|
|
$
|
2,160,998
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted net income per share
|
|
$
|
1.37
|
|
|
$
|
1.00
|
|
|
$
|
1.34
|
|
|
$
|
5.20
|
|
|
$
|
3.38
|
|
Stock-based and deferred compensation expense
|
|
0.34
|
|
|
0.24
|
|
|
0.32
|
|
|
1.23
|
|
|
0.92
|
|
Amortization of purchased intangibles
|
|
0.13
|
|
|
0.07
|
|
|
0.09
|
|
|
0.35
|
|
|
0.29
|
|
Investment (gains) losses, net
|
|
0.01
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
Income tax adjustments
|
|
(0.02
|
)
|
|
(0.05
|
)
|
|
(0.02
|
)
|
|
(0.01
|
)
|
|
(0.26
|
)
|
Non-GAAP diluted net income per share
|
|
$
|
1.83
|
|
|
$
|
1.26
|
|
|
$
|
1.73
|
|
|
$
|
6.76
|
|
|
$
|
4.31
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted net income per share
|
|
495,118
|
|
|
500,060
|
|
|
496,866
|
|
|
497,843
|
|
|
501,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP to Non-GAAP Financial Targets
(In millions, except per share data)
The following table shows Adobe's fourth quarter fiscal year 2018
earnings per share target reconciled to the non-GAAP financial target,
which Adobe provided on Sept. 13, 2018 and reaffirmed on Oct. 15, 2018,
included in this document.
|
|
Fourth Quarter
Fiscal Year 2018
|
Diluted net income per share:
|
|
|
|
|
|
GAAP diluted net income per share
|
|
$
|
1.42
|
|
Stock-based and deferred compensation expense
|
|
0.36
|
|
Amortization of purchased intangibles
|
|
0.10
|
|
Income tax adjustments
|
|
(0.01
|
)
|
Non-GAAP diluted net income per share
|
|
$
|
1.87
|
|
|
|
|
Shares used to compute diluted net income per share
|
|
495.0
|
|
|
|
|
|
The following table shows Adobe's fourth quarter fiscal year 2018
earnings per share with and without Marketo reconciled to the non-GAAP
earnings per share included in this document.
|
|
|
Q4 FY2018
As reported, incl. Marketo
|
|
Q4 FY2018
excl. Marketo
|
GAAP EPS
|
|
$
|
1.37
|
|
1.48
|
Non-GAAP EPS
|
|
|
1.83
|
|
1.90
|
|
|
|
|
|
|
Adobe is providing estimated results excluding the impact of its
acquisition of Marketo. These Marketo acquisition costs include the
results of Marketo’s operations, financing costs related to the
acquisition, integration costs and direct acquisition costs. We believe
this enables the evaluation of the Company's performance against its
original targets which excluded Marketo. GAAP EPS excl. Marketo,
excludes the Marketo acquisition costs in the fourth quarter of 2018 of
$54 million, or $0.11 diluted earnings per share. Non-GAAP EPS excl.
Marketo excludes the Marketo acquisition costs in the fourth quarter of
2018 on a non-GAAP basis of $36 million, or $0.07 diluted earnings per
share, driven by the GAAP net loss of $54 million offset by the add back
of amortization of purchased intangibles of $18 million, or $0.04
diluted earnings per share.
The following table shows Adobe's fourth quarter fiscal year 2018
earnings per share excluding Marketo reconciled to the non-GAAP
financial measure included in this document.
|
|
Fourth Quarter
Fiscal Year 2018
excl. Marketo
|
Diluted net income per share:
|
|
|
|
|
|
GAAP diluted net income per share
|
|
$
|
1.48
|
|
Stock-based and deferred compensation expense
|
|
0.34
|
|
Amortization of purchased intangibles
|
|
0.09
|
|
Investment (Gain)/Loss
|
|
0.01
|
|
Income tax adjustments
|
|
(0.02
|
)
|
Non-GAAP diluted net income per share
|
|
$
|
1.90
|
|
|
|
|
Shares used to compute diluted net income per share
|
|
495.0
|
|
|
|
|
|
The following table shows Adobe's annual fiscal year 2018 earnings per
share target reconciled to the non-GAAP financial target, which Adobe
provided on Dec. 14, 2017, included in this document.
|
|
Fiscal Year 2018
|
Diluted net income per share:
|
|
|
|
|
|
GAAP diluted net income per share
|
|
$
|
4.40
|
|
Stock-based and deferred compensation expense
|
|
1.21
|
|
Amortization of purchased intangibles
|
|
0.27
|
|
Income tax adjustments
|
|
(0.38
|
)
|
Non-GAAP diluted net income per share
|
|
$
|
5.50
|
|
|
|
|
Shares used to compute diluted net income per share
|
|
500.0
|
|
|
|
|
|
The following tables show Adobe's annual fiscal year 2019 GAAP earnings
per share target and GAAP tax rate reconciled to the non-GAAP financial
targets included in this document.
|
|
Fiscal Year 2019
|
Diluted net income per share:
|
|
|
|
|
|
GAAP diluted net income per share
|
|
$
|
5.54
|
|
Stock-based and deferred compensation expense
|
|
1.77
|
|
Amortization of purchased intangibles
|
|
0.78
|
|
Income tax adjustments
|
|
(0.34
|
)
|
Non-GAAP diluted net income per share
|
|
$
|
7.75
|
|
|
|
|
Shares used to compute diluted net income per share
|
|
493.0
|
|
|
|
|
|
|
|
Fiscal Year 2019
|
Effective income tax rate:
|
|
|
|
|
|
GAAP effective income tax rate
|
|
10.0
|
%
|
Stock-based and deferred compensation expense
|
|
(4.9
|
)
|
Amortization of purchased intangibles
|
|
(2.1
|
)
|
Income tax adjustments
|
|
8.0
|
|
Non-GAAP effective income tax rate
|
|
11.0
|
%
|
|
|
|
|
The following tables show Adobe's first quarter fiscal year 2019
financial targets reconciled to non-GAAP financial targets included in
this document.
|
|
First Quarter
Fiscal 2019
|
Diluted net income per share:
|
|
|
|
|
|
GAAP diluted net income per share
|
|
$
|
1.14
|
|
Stock-based and deferred compensation expense
|
|
0.42
|
|
Amortization of purchased intangibles
|
|
0.20
|
|
Income tax adjustments
|
|
(0.16
|
)
|
Non-GAAP diluted net income per share
|
|
$
|
1.60
|
|
|
|
|
Shares used to compute diluted net income per share
|
|
495.0
|
|
|
|
|
|
|
|
First Quarter
Fiscal 2019
|
Effective income tax rate:
|
|
|
|
|
|
GAAP effective income tax rate
|
|
3.0
|
%
|
Stock-based and deferred compensation expense
|
|
(3.4
|
)
|
Amortization of purchased intangibles
|
|
(1.6
|
)
|
Income tax adjustments
|
|
13.0
|
|
Non-GAAP effective income tax rate
|
|
11.0
|
%
|
|
|
|
|
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 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.
Investor Relations Contact
Mike Saviage
Adobe
408-536-4416
ir@adobe.com
Public Relations Contact
Dan Berthiaume
Adobe
408-536-2584
dberthia@adobe.com