Company Achieves 22 Percent Year-Over-Year Annual Revenue
Growth in Fiscal 2016
Adobe (Nasdaq:ADBE) today reported financial results for its
fourth quarter and fiscal year 2016 ended Dec. 2, 2016.
In its fourth quarter of fiscal year 2016, Adobe achieved record
quarterly revenue of $1.61 billion, representing year-over-year
growth of 23 percent. In fiscal year 2016, Adobe achieved record
annual revenue of $5.85 billion, representing year-over-year growth
of 22 percent. The company also achieved record quarterly net
income, cash flow and deferred revenue during its fourth
quarter.
“Adobe’s market-leading digital media and digital marketing
solutions are revolutionizing how customers design and deliver
exceptional digital experiences,” said Shantanu Narayen, president
and chief executive officer of Adobe. “We enter 2017 with
significant market momentum and strong technology tailwinds.”
“Across our business, Adobe had a strong 2016 as we met or
exceeded all of our key financial targets for the year,” said Mark
Garrett, Adobe executive vice president and chief financial
officer. “We are uniquely positioned as a cloud provider to deliver
both top line and bottom line growth.”
Fourth Quarter Financial Highlights
- Adobe achieved record quarterly revenue
of $1.61 billion in its fourth quarter of fiscal year 2016,
representing 23 percent year-over-year growth.
- Diluted earnings per share were $0.80
on a GAAP-basis, and $0.90 on a non-GAAP basis.
- Digital Media segment revenue was $1.08
billion, with Creative revenue growing 33 percent year-over-year to
$886 million.
- Strong Creative Cloud and Document
Cloud adoption drove Digital Media Annualized Recurring Revenue
(“ARR”) to $4.01 billion exiting the quarter, a
quarter-over-quarter increase of $316 million.
- Adobe Marketing Cloud achieved record
revenue of $465 million, representing 32 percent year-over-year
growth.
- Year-over-year operating income grew 63
percent and net income grew 79 percent on a GAAP-basis; operating
income grew 44 percent and net income grew 45 percent on a non-GAAP
basis.
- Cash flow from operations was a record
$696 million.
- The company repurchased approximately
3.2 million shares during the quarter, returning $331 million of
cash to stockholders.
Fiscal Year 2016 Financial Highlights
- Adobe achieved record annual revenue of
$5.85 billion in fiscal year 2016, representing 22 percent
year-over-year growth.
- The company reported annual GAAP
diluted earnings per share of $2.32 and non-GAAP diluted earnings
per share of $3.01.
- Adobe grew Digital Media ARR by $1.13
billion during the year and exited the year with $4.01
billion.
- Adobe Marketing Cloud achieved $1.63
billion in annual revenue, representing 20 percent year-over-year
growth.
- Adobe generated $2.2 billion in
operating cash flow during the year.
- Deferred revenue grew to an all-time
high of $2.01 billion, and unbilled backlog grew to approximately
$3.42 billion.
- The company repurchased 10.4 million
shares during the year, returning $1.01 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 2016
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 product and technology innovation,
business momentum, the impact of our products and services to our
customers, revenue, annualized recurring revenue, bookings,
earnings per share and operating cash flow, 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 offer products and services that meet customer
requirements, introduction of new products, services and business
models by competitors, failure to successfully manage transitions
to new business models and markets, uncertainty in economic
conditions and the financial markets, fluctuations in subscription
renewal rates, complex and unpredictable sales cycles for some
enterprise offerings, risks associated with cyber-attacks and
information security, potential interruptions or delays in hosted
services provided by us or third parties, changes in accounting
principles, 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 2015 ended Nov. 27, 2015, and Adobe's
Quarterly Reports on Form 10-Q issued in fiscal year 2016.
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. 2, 2016,
which Adobe expects to file in January 2017.
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.
© 2016 Adobe Systems Incorporated. All rights reserved. Adobe
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
2, November 27, December 2,
November 27, 2016 2015 2016
2015 Revenue: Subscription $ 1,262,273 $ 907,434 $ 4,584,833
$ 3,223,904 Product 221,926 284,496 800,498 1,125,146 Services and
support 124,220 114,474 469,099 446,461
Total revenue 1,608,419 1,306,404 5,854,430
4,795,511 Cost of revenue: Subscription 122,196
106,368 461,860 409,194 Product 17,427 24,320 68,917 90,035
Services and support 76,933 70,673 289,131
245,088
Total cost of revenue
216,556 201,361 819,908 744,317
Gross profit 1,391,863 1,105,043 5,034,522 4,051,194
Operating expenses: Research and development 257,849 220,514
975,987 862,730 Sales and marketing 495,042 441,472 1,910,197
1,683,242 General and administrative 148,477 134,052 577,710
531,919 Restructuring and other charges (285 ) 521 (1,508 ) 1,559
Amortization of purchased intangibles 18,500 18,050
78,534 68,649 Total operating expenses 919,583
814,609 3,540,920 3,148,099 Operating
income 472,280 290,434 1,493,602 903,095 Non-operating
income (expense): Interest and other income (expense), net 553
22,399 13,548 33,909 Interest expense (17,518 ) (16,515 ) (70,442 )
(64,184 ) Investment gains (losses), net 1,385 622
(1,570 ) 961 Total non-operating income (expense), net
(15,580 ) 6,506 (58,464 ) (29,314 ) Income before income
taxes 456,700 296,940 1,435,138 873,781 Provision for income taxes
57,087 74,235 266,356 244,230 Net
income $ 399,613 $ 222,705 $ 1,168,782 $
629,551 Basic net income per share $ 0.81 $ 0.45
$ 2.35 $ 1.26 Shares used to compute basic net
income per share 495,641 498,384 498,345
498,764 Diluted net income per share $ 0.80 $ 0.44
$ 2.32 $ 1.24 Shares used to compute diluted
net income per share 501,176 506,012 504,299
507,164
Condensed
Consolidated Balance Sheets
(In thousands, except par value;
unaudited)
December 2, 2016 November 27,
2015 ASSETS Current assets: Cash and cash equivalents
$ 1,011,315 $ 876,560 Short-term investments 3,749,985 3,111,524
Trade receivables, net of allowances for doubtful accounts of
$6,214 and $7,293, respectively 833,033 672,006 Prepaid expenses
and other current assets 245,441 161,802 Total
current assets 5,839,774 4,821,892 Property and equipment,
net 816,264 787,421 Goodwill 5,406,474 5,366,881 Purchased and
other intangibles, net 414,405 510,007 Investment in lease
receivable 80,439 80,439 Other assets 149,758 159,832
Total assets $ 12,707,114 $ 11,726,472
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Trade payables $ 88,024 $ 93,307 Accrued expenses 739,630 679,884
Income taxes payable 38,362 6,165 Deferred revenue 1,945,619
1,434,200 Total current liabilities 2,811,635 2,213,556
Long-term liabilities: Debt 1,902,068 1,907,231 Deferred
revenue 69,131 51,094 Income taxes payable 184,381 256,129 Deferred
income taxes 217,660 208,209 Other liabilities 97,404 88,673
Total liabilities 5,282,279 4,724,892 Stockholders'
equity: Preferred stock, $0.0001 par value; 2,000 shares authorized
— — Common stock, $0.0001 par value 61 61 Additional
paid-in-capital 4,616,331 4,184,883 Retained earnings 8,114,517
7,253,431 Accumulated other comprehensive income (loss) (173,602 )
(169,080 ) Treasury stock, at cost (106,580 and 103,025 shares,
respectively), net of reissuances (5,132,472 ) (4,267,715 ) Total
stockholders' equity 7,424,835 7,001,580 Total
liabilities and stockholders' equity $ 12,707,114 $
11,726,472
Condensed Consolidated
Statements of Cash Flows
(In thousands; unaudited)
Three Months Ended December 2, 2016
November 27, 2015 Cash flows from
operating activities: Net income $ 399,613 $ 222,705 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 81,860 86,359 Stock-based
compensation expense 87,530 81,022 Gain on sale of property —
(21,415 ) Unrealized investment gains, net (771 ) (662 ) Changes in
deferred revenue 216,765 179,265 Changes in other operating assets
and liabilities (89,396 ) (92,759 ) Net cash provided by operating
activities 695,601 454,515 Cash flows from
investing activities: Purchases, sales and maturities of short-term
investments, net (97,891 ) (277,566 ) Purchases of property and
equipment (48,633 ) (64,676 ) Proceeds from the sale of property —
57,779 Purchases and sales of long-term investments, intangibles
and other assets, net 3,426 (1,524 ) Net cash used for
investing activities (143,098 ) (285,987 ) Cash flows from
financing activities: Purchases of treasury stock (300,000 )
(125,000 ) Proceeds from (costs of) issuance of treasury stock, net
(6,283 ) 42 Repayment of capital lease obligations (22 ) — Excess
tax benefits from stock-based compensation 5,836 9,808
Net cash used for financing activities
(300,469 ) (115,150 ) Effect of exchange rate changes on cash and
cash equivalents (8,391 ) (6,110 ) Net increase in cash and cash
equivalents 243,643 47,268 Cash and cash equivalents at beginning
of period 767,672 829,292 Cash and cash equivalents
at end of period $ 1,011,315 $ 876,560
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
2, 2016 November 27, 2015
September 2, 2016 December 2,
2016 November 27, 2015 Operating
income: GAAP operating income $ 472,280 $ 290,434 $ 369,325
$ 1,493,602 $ 903,095 Stock-based and deferred compensation expense
86,584 81,705 86,070 351,553 338,047 Restructuring and other
charges (285 ) 521 (338 ) (1,508 ) 1,559 Amortization of purchased
intangibles 31,143 37,678 36,082 136,056 152,590 Loss contingency
reversal — — — — (10,000 ) Non-GAAP
operating income $ 589,722 $ 410,338 $ 491,139
$ 1,979,703 $ 1,385,291 Net income:
GAAP net income $ 399,613 $ 222,705 $ 270,788 $ 1,168,782 $ 629,551
Stock-based and deferred compensation expense 86,584 81,705 86,070
351,553 338,047 Restructuring and other charges (285 ) 521 (338 )
(1,508 ) 1,559 Amortization of purchased intangibles 31,143 37,678
36,082 136,056 152,590 Investment (gains) losses, net (1,385 ) (622
) (1,532 ) 1,570 (961 ) Gain on sale of property assets — (21,415 )
— — (21,415 ) Loss contingency reversal — — — — (10,000 ) Income
tax adjustments (63,118 ) (8,674 ) (14,569 ) (137,350 ) (35,826 )
Non-GAAP net income $ 452,552 $ 311,898 $ 376,501
$ 1,519,103 $ 1,053,545 Diluted net
income per share: GAAP diluted net income per share $ 0.80 $
0.44 $ 0.54 $ 2.32 $ 1.24 Stock-based and deferred compensation
expense 0.17 0.16 0.17 0.70 0.67 Amortization of purchased
intangibles 0.06 0.07 0.07 0.27 0.30 Gain on sale of property
assets — (0.04 ) — — (0.04 ) Loss contingency reversal — — — —
(0.02 ) Income tax adjustments (0.13 ) (0.01 ) (0.03 ) (0.28 )
(0.07 ) Non-GAAP diluted net income per share $ 0.90 $ 0.62
$ 0.75 $ 3.01 $ 2.08 Shares used
in computing diluted net income per share 501,176 506,012 503,669
504,299 507,164
Three
MonthsEnded December 2, 2016 Effective
income tax rate: GAAP effective income tax rate 12.5 %
Resolution of income tax examinations 10.5 Stock-based and deferred
compensation expense (1.5 ) Amortization of purchased intangibles
(0.5 ) 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 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/20161215006277/en/
Investor Relations ContactAdobeMike Saviage,
408-536-4416ir@adobe.comorPublic Relations ContactAdobeDan
Berthiaume, 408-536-2584dberthia@adobe.com
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