• | Adobe achieved record quarterly revenue of $1.40 billion, representing year-over-year growth of 20 percent. |
• | Diluted earnings per share were $0.48 on a GAAP-basis, and $0.71 on a non-GAAP basis. |
• | Digital Media segment revenue grew by 26 percent year-over-year to a record $943 million, with Creative revenue growing 37 percent year-over-year to a record $755 million. |
• | Strong Creative Cloud and Document Cloud adoption drove Digital Media Annualized Recurring Revenue (“ARR”) to $3.41 billion exiting the quarter, a quarter-over-quarter increase of $285 million. |
• | Adobe Marketing Cloud achieved record revenue of $385 million that represents year-over-year growth of 18 percent. |
• | Year-over-year operating income grew 78 percent and net income grew 66 percent on a GAAP-basis; operating income grew 45 percent and net income grew 48 percent on a non-GAAP basis. |
• | Cash flow from operations was $489 million, and deferred revenue grew to $1.68 billion. |
• | The company repurchased approximately 2.2 million shares during the quarter, returning $205 million of cash to stockholders. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 3, 2016 | May 29, 2015 | June 3, 2016 | May 29, 2015 | ||||||||||||
Revenue: | |||||||||||||||
Subscription | $ | 1,083,708 | $ | 773,963 | $ | 2,153,958 | $ | 1,487,405 | |||||||
Product | 196,500 | 274,538 | 397,612 | 565,312 | |||||||||||
Services and support | 118,501 | 113,657 | 230,474 | 218,622 | |||||||||||
Total revenue | 1,398,709 | 1,162,158 | 2,782,044 | 2,271,339 | |||||||||||
Cost of revenue: | |||||||||||||||
Subscription | 115,399 | 103,694 | 222,674 | 199,221 | |||||||||||
Product | 15,756 | 21,467 | 36,055 | 41,170 | |||||||||||
Services and support | 70,924 | 60,012 | 141,922 | 111,580 | |||||||||||
Total cost of revenue | 202,079 | 185,173 | 400,651 | 351,971 | |||||||||||
Gross profit | 1,196,630 | 976,985 | 2,381,393 | 1,919,368 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 232,484 | 208,047 | 469,688 | 423,556 | |||||||||||
Sales and marketing | 462,789 | 426,998 | 937,680 | 819,739 | |||||||||||
General and administrative | 138,596 | 130,208 | 285,531 | 275,289 | |||||||||||
Restructuring and other charges | (466 | ) | 34 | (885 | ) | 1,789 | |||||||||
Amortization of purchased intangibles | 18,988 | 18,081 | 37,382 | 32,353 | |||||||||||
Total operating expenses | 852,391 | 783,368 | 1,729,396 | 1,552,726 | |||||||||||
Operating income | 344,239 | 193,617 | 651,997 | 366,642 | |||||||||||
Non-operating income (expense): | |||||||||||||||
Interest and other income (expense), net | 6,083 | 3,739 | 10,270 | 7,077 | |||||||||||
Interest expense | (17,174 | ) | (16,605 | ) | (35,643 | ) | (31,150 | ) | |||||||
Investment gains (losses), net | (3,318 | ) | 223 | (4,487 | ) | 1,653 | |||||||||
Total non-operating income (expense), net | (14,409 | ) | (12,643 | ) | (29,860 | ) | (22,420 | ) | |||||||
Income before income taxes | 329,830 | 180,974 | 622,137 | 344,222 | |||||||||||
Provision for income taxes | 85,756 | 33,481 | 123,756 | 111,841 | |||||||||||
Net income | $ | 244,074 | $ | 147,493 | $ | 498,381 | $ | 232,381 | |||||||
Basic net income per share | $ | 0.49 | $ | 0.30 | $ | 1.00 | $ | 0.47 | |||||||
Shares used to compute basic net income per share | 499,974 | 499,290 | 499,534 | 499,022 | |||||||||||
Diluted net income per share | $ | 0.48 | $ | 0.29 | $ | 0.99 | $ | 0.46 | |||||||
Shares used to compute diluted net income per share | 504,725 | 505,582 | 505,666 | 507,061 |
June 3, 2016 | November 27, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 886,379 | $ | 876,560 | |||
Short-term investments | 3,432,029 | 3,111,524 | |||||
Trade receivables, net of allowances for doubtful accounts of $5,723 and $7,293, respectively | 666,736 | 672,006 | |||||
Prepaid expenses and other current assets | 253,420 | 161,802 | |||||
Total current assets | 5,238,564 | 4,821,892 | |||||
Property and equipment, net | 796,077 | 787,421 | |||||
Goodwill | 5,444,556 | 5,366,881 | |||||
Purchased and other intangibles, net | 494,193 | 510,007 | |||||
Investment in lease receivable | 80,439 | 80,439 | |||||
Other assets | 162,954 | 159,832 | |||||
Total assets | $ | 12,216,783 | $ | 11,726,472 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Trade payables | $ | 75,582 | $ | 93,307 | |||
Accrued expenses | 661,013 | 679,884 | |||||
Income taxes payable | 15,774 | 6,165 | |||||
Deferred revenue | 1,633,221 | 1,434,200 | |||||
Total current liabilities | 2,385,590 | 2,213,556 | |||||
Long-term liabilities: | |||||||
Debt | 1,918,389 | 1,907,231 | |||||
Deferred revenue | 48,411 | 51,094 | |||||
Income taxes payable | 273,221 | 256,129 | |||||
Deferred income taxes | 245,611 | 208,209 | |||||
Other liabilities | 96,950 | 88,673 | |||||
Total liabilities | 4,968,172 | 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 | 4,428,270 | 4,184,883 | |||||
Retained earnings | 7,444,115 | 7,253,431 | |||||
Accumulated other comprehensive income (loss) | (133,047 | ) | (169,080 | ) | |||
Treasury stock, at cost (101,862 and 103,025 shares, respectively), net of reissuances | (4,490,788 | ) | (4,267,715 | ) | |||
Total stockholders' equity | 7,248,611 | 7,001,580 | |||||
Total liabilities and stockholders' equity | $ | 12,216,783 | $ | 11,726,472 |
Three Months Ended | |||||||
June 3, 2016 | May 29, 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 244,074 | $ | 147,493 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, amortization and accretion | 84,461 | 85,929 | |||||
Stock-based compensation expense | 85,570 | 84,649 | |||||
Unrealized investment losses (gains), net | 3,340 | (276 | ) | ||||
Changes in deferred revenue | 68,356 | 44,772 | |||||
Changes in other operating assets and liabilities | 2,914 | 108,917 | |||||
Net cash provided by operating activities | 488,715 | 471,484 | |||||
Cash flows from investing activities: | |||||||
Purchases, sales and maturities of short-term investments, net | (148,797 | ) | 3,541 | ||||
Purchases of property and equipment | (53,759 | ) | (35,730 | ) | |||
Purchases and sales of long-term investments, intangibles and other assets, net | (522 | ) | (1,083 | ) | |||
Acquisitions, net of cash | (48,427 | ) | (5,637 | ) | |||
Net cash used for investing activities | (251,505 | ) | (38,909 | ) | |||
Cash flows from financing activities: | |||||||
Purchases of treasury stock | (225,000 | ) | (200,000 | ) | |||
Proceeds from (cost of) issuance of treasury stock, net | (6,297 | ) | 2,911 | ||||
Repayment of capital lease obligations | (21 | ) | — | ||||
Debt issuance costs | — | (153 | ) | ||||
Excess tax benefits from stock-based compensation | 50,430 | 11,140 | |||||
Net cash used for financing activities | (180,888 | ) | (186,102 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (639 | ) | (3,210 | ) | |||
Net increase in cash and cash equivalents | 55,683 | 243,263 | |||||
Cash and cash equivalents at beginning of period | 830,696 | 712,884 | |||||
Cash and cash equivalents at end of period | $ | 886,379 | $ | 956,147 |
Three Months Ended | |||||||||||
June 3, 2016 | May 29, 2015 | March 4, 2016 | |||||||||
Operating income: | |||||||||||
GAAP operating income | $ | 344,239 | $ | 193,617 | $ | 307,758 | |||||
Stock-based and deferred compensation expense | 87,209 | 85,374 | 91,690 | ||||||||
Restructuring and other charges | (466 | ) | 34 | (419 | ) | ||||||
Amortization of purchased intangibles and technology license arrangements | 32,567 | 40,080 | 36,264 | ||||||||
Non-GAAP operating income | $ | 463,549 | $ | 319,105 | $ | 435,293 | |||||
Net income: | |||||||||||
GAAP net income | $ | 244,074 | $ | 147,493 | $ | 254,307 | |||||
Stock-based and deferred compensation expense | 87,209 | 85,374 | 91,690 | ||||||||
Restructuring and other charges | (466 | ) | 34 | (419 | ) | ||||||
Amortization of purchased intangibles and technology license arrangements | 32,567 | 40,080 | 36,264 | ||||||||
Investment (gains) losses, net | 3,318 | (223 | ) | 1,169 | |||||||
Income tax adjustments | (9,260 | ) | (30,829 | ) | (50,403 | ) | |||||
Non-GAAP net income | $ | 357,442 | $ | 241,929 | $ | 332,608 | |||||
Diluted net income per share: | |||||||||||
GAAP diluted net income per share | $ | 0.48 | $ | 0.29 | $ | 0.50 | |||||
Stock-based and deferred compensation expense | 0.17 | 0.17 | 0.18 | ||||||||
Amortization of purchased intangibles and technology license arrangements | 0.06 | 0.08 | 0.07 | ||||||||
Investment (gains) losses | 0.01 | — | — | ||||||||
Income tax adjustments | (0.01 | ) | (0.06 | ) | (0.09 | ) | |||||
Non-GAAP diluted net income per share | $ | 0.71 | $ | 0.48 | $ | 0.66 | |||||
Shares used in computing diluted net income per share | 504,725 | 505,582 | 505,676 |
Three Months Ended | ||
June 3, 2016 | ||
Effective income tax rate: | ||
GAAP effective income tax rate | 26.0 | % |
Stock-based and deferred compensation expense | (3.6 | ) |
Amortization of purchased intangibles | (1.4 | ) |
Non-GAAP effective income tax rate | 21.0 | % |