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 Adobe Reports Record Quarterly and Annual Revenue
   Thursday, December 10, 2015 4:05:02 PM ET

Adobe (ADBE ) today reported financial results for its fourth quarter and fiscal year 2015 ended Nov. 27, 2015.

This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20151210006456/en/

Fourth Quarter Financial Highlights

-- Adobe achieved record quarterly revenue of $1.31 billion, representing year-over-year growth of 22 percent.

-- Diluted earnings per share were $0.44 on a GAAP-basis, and $0.62 on a non-GAAP basis.

-- Digital Media Annualized Recurring Revenue ("ARR") grew to $2.99 billion exiting the quarter, an increase of $350 million. Creative ARR grew to $2.60 billion, an increase of $310 million driven by enterprise adoption and the addition of 833 thousand net new individual and team Creative Cloud subscriptions.

-- Adobe Marketing Cloud achieved revenue of $352 million with strong bookings growth and a stronger-than-expected shift in customer adoption to SaaS-based solutions.

-- Year-over-year operating income grew 133 percent and net income grew 153 percent on a GAAP-basis; operating income grew 58 percent and net income grew 59 percent on a non-GAAP basis.

-- Cash flow from operations was $455 million, and deferred revenue grew to a record $1.49 billion.

-- The company repurchased approximately 1.4 million shares during the quarter, returning $122 million of cash to stockholders.

Fiscal Year 2015 Financial Highlights

-- Adobe achieved record revenue of $4.80 billion in fiscal year 2015, representing year-over-year growth of 16 percent.

-- The company reported annual GAAP diluted earnings per share of $1.24 and non-GAAP diluted earnings per share of $2.08.

-- Adobe grew Digital Media ARR by approximately $1.12 billion during the year and exited the year with $2.99 billion. Net new Creative Cloud individual and team subscriptions grew by more than 2.71 million during fiscal year 2015 to 6.17 million.

-- Adobe Marketing Cloud achieved a record $1.36 billion in annual revenue and its goal of approximately 30 percent annual bookings growth.

-- Adobe generated $1.47 billion in operating cash flow during the year.

-- The company repurchased 8.1 million shares during the year, returning approximately $627 million 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.

Executive Quotes

"Adobe is driving digital experiences that are fundamental to the transformation of every global brand, government and educational institution," said Shantanu Narayen, president and chief executive officer, Adobe. "Our record revenue and strong momentum are a reflection of our industry-leading content and data solutions in Digital Media and Digital Marketing."

"Strong growth across key financial metrics reflect the amazing performance we’ve achieved in fiscal 2015," said Mark Garrett, executive vice president and chief financial officer, Adobe. "Our long-term financial targets, including a 20% revenue CAGR through fiscal 2018, show that the benefits of our move to the cloud are just beginning."

Adobe to Webcast Earnings Conference Call

Adobe will webcast its fourth quarter and fiscal year 2015 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 and innovation, 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 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 2014 ended Nov. 28, 2014, and Adobe’s Quarterly Reports on Form 10-Q issued in fiscal year 2015.

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. 27, 2015, which Adobe expects to file in Jan. 2016.

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.

(C) 2015 Adobe Systems Incorporated. All rights reserved. Adobe, the Adobe logo and Creative 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.

                                                                                                                                                
Condensed Consolidated Statements of Income
(In thousands, except per share data; unaudited)
                                                                                                                                                                                        
                                                                                                            Three Months Ended                                                                                                   Year Ended
                                                                         -----------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------
                                                                                    November 27,                        November 28,                                            November 27,                           November 28,
                                                                                        2015                                                   2014                                                    2015                                                      2014
                                                                         -------------------------------                        -------------------------------                        ---------------------------------                        -----------------------------------
Revenue:
   Subscription                                                             $ 907,434                                              $ 628,954                                              $ 3,223,904                                                $ 2,076,584
   Product                                                                    284,496                                                327,951                                                1,125,146                                                  1,627,803
   Services and support                                                       114,474                             116,423                               446,461                                 442,678  
                                                                         ---------------------------------                      ---------------------------------                      -----------------------------------                      -------------------------------------
      Total revenue                                                         1,306,404                           1,073,328                             4,795,511                               4,147,065  
                                                                         ---------------------------------                      ---------------------------------                      -----------------------------------                      -------------------------------------
                                                                                                                                                                                                                                                 
Cost of revenue:
   Subscription                                                               106,368                                                 87,883                                                  409,194                                                    335,432
   Product                                                                     24,320                                                 21,930                                                   90,035                                                     97,099
   Services and support                                                        70,673                              51,130                               245,088                                 189,549  
                                                                         ---------------------------------                      ---------------------------------                      -----------------------------------                      -------------------------------------
      Total cost of revenue                                                   201,361                             160,943                               744,317                                 622,080  
                                                                         ---------------------------------                      ---------------------------------                      -----------------------------------                      -------------------------------------
                                                                                                                                                                                                                                                 
Gross profit                                                                1,105,043                                                912,385                                                4,051,194                                                  3,524,985
                                                                                                                                                                                                                                                 
Operating expenses:
   Research and development                                                   220,514                                                213,687                                                  862,730                                                    844,353
   Sales and marketing                                                        441,472                                                408,862                                                1,683,242                                                  1,652,308
   General and administrative                                                 134,052                                                133,534                                                  531,919                                                    543,332
   Restructuring and other charges                                                521                                                 19,385                                                    1,559                                                     19,883
   Amortization of purchased intangibles                                       18,050                              12,412                                68,649                                  52,424  
                                                                         ---------------------------------                      ---------------------------------                      -----------------------------------                      -------------------------------------
      Total operating expenses                                                814,609                             787,880                             3,148,099                               3,112,300  
                                                                         ---------------------------------                      ---------------------------------                      -----------------------------------                      -------------------------------------
                                                                                                                                                                                                                                                 
Operating income                                                              290,434                                                124,505                                                  903,095                                                    412,685
                                                                                                                                                                                                                                                 
Non-operating income (expense):
   Interest and other income (expense), net                                    22,399                                                    105                                                   33,909                                                      7,267
   Interest expense                                                           (16,515 )                                              (12,678 )                                                (64,184 )                                                  (59,732 )
   Investment gains (losses), net                                                 622                                 343                                   961                                   1,156  
                                                                         ---------------------------------                      ---------------------------------                      -----------------------------------                      -------------------------------------
      Total non-operating income (expense), net                                 6,506                             (12,230 )                                                (29,314 )                                                  (51,309 )
                                                                         ---------------------------------                      ---------------------------------                      -----------------------------------                      -------------------------------------
Income before income taxes                                                    296,940                                                112,275                                                  873,781                                                    361,376
Provision for income taxes                                                     74,235                              24,139                               244,230                                  92,981  
                                                                         ---------------------------------                      ---------------------------------                      -----------------------------------                      -------------------------------------
Net income                                                                  $ 222,705                           $  88,136                           $   629,551                             $   268,395  
                                                                         ==== ======= ====================                      ==== ======= ====================                      ==== ========= ====================                      ====== ========= ====================
Basic net income per share                                                  $    0.45                           $    0.18                           $      1.26                             $      0.54  
                                                                         ==== ======= ====================                      ==== ======= ====================                      ==== ========= ====================                      ====== ========= ====================
Shares used to compute basic net income per share                             498,384                             498,124                               498,764                                 497,867  
                                                                         =================================                      =================================                      ===================================                      =====================================
Diluted net income per share                                                $    0.44                           $    0.17                           $      1.24                             $      0.53  
                                                                         ==== ======= ====================                      ==== ======= ====================                      ==== ========= ====================                      ====== ========= ====================
Shares used to compute diluted net income per share                           506,012                             507,451                               507,164                                 508,480  
                                                                         =================================                      =================================                      ===================================                      =====================================
                                                                                                                                                                                                                                                                  
                                                                                                                   
Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
                                                                                                                                                           
                                                                                                           November 27,                                                 November 28,
                                                                                                             2015 (*)                                                       2014
                                                                                             -------------------------------------                        -------------------------------------
                                 ASSETS
                                                                                                                                                           
Current assets:
   Cash and cash equivalents                                                                       $    876,560                                                 $  1,117,400
   Short-term investments                                                                             3,111,524                                                    2,622,091
   Trade receivables, net of allowances for doubtful accounts of $7,293                                 672,006                                                      591,800
   and $7,867, respectively
   Deferred income taxes                                                                         --                                                       95,279
   Prepaid expenses and other current assets                                                            161,802                                   175,758  
                                                                                             ---------------------------------------                      ---------------------------------------
      Total current assets                                                                            4,821,892                                                    4,602,328
                                                                                                                                                           
Property and equipment, net                                                                             787,421                                                      785,123
Goodwill                                                                                              5,366,881                                                    4,721,962
Purchased and other intangibles, net                                                                    510,007                                                      469,662
Investment in lease receivable                                                                           80,439                                                       80,439
Other assets                                                                                            159,832                                   126,315  
                                                                                             ---------------------------------------                      ---------------------------------------
      Total assets                                                                                 $ 11,726,472                              $ 10,785,829  
                                                                                             ======= ========== ====================                      ======= ========== ====================
                                                                                                                                                           
                  LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                                                                                                                           
Current liabilities:
   Trade payables                                                                                  $     93,307                                                 $     68,377
   Accrued expenses                                                                                     678,364                                                      683,866
   Debt and capital lease obligations                                                            --                                                      603,229
   Accrued restructuring                                                                                  1,520                                                       17,120
   Income taxes payable                                                                                   6,165                                                       23,920
   Deferred revenue                                                                                   1,434,200                                 1,097,923  
                                                                                             ---------------------------------------                      ---------------------------------------
                                                                                                      2,213,556                                                    2,494,435
      Total current liabilities
                                                                                                                                                           
Long-term liabilities:
   Debt                                                                                               1,907,231                                                      911,086
   Deferred revenue                                                                                      51,094                                                       57,401
   Accrued restructuring                                                                                  3,214                                                        5,194
   Income taxes payable                                                                                 256,129                                                      125,746
   Deferred income taxes                                                                                208,209                                                      342,315
   Other liabilities                                                                                     85,459                                    73,747  
                                                                                             ---------------------------------------                      ---------------------------------------
      Total liabilities                                                                               4,724,892                                                    4,009,924
                                                                                                                                                           
Stockholders’ equity:
   Preferred stock, $0.0001 par value; 2,000 shares authorized                                   --                                               --
   Common stock, $0.0001 par value                                                                           61                                                           61
   Additional paid-in-capital                                                                         4,184,883                                                    3,778,495
   Retained earnings                                                                                  7,253,431                                                    6,924,294
   Accumulated other comprehensive income (loss)                                                       (169,080 )                                                     (8,094 )
   Treasury stock, at cost (103,025 and 103,350 shares, respectively),                               (4,267,715 )                                                 (3,918,851 )
   net of reissuances
                                                                                             -----------------  --------------------                      -----------------  --------------------
      Total stockholders’ equity                                                                      7,001,580                                 6,775,905  
                                                                                             ---------------------------------------                      ---------------------------------------
      Total liabilities and stockholders’ equity                                                   $ 11,726,472                              $ 10,785,829  
                                                                                             ======= ========== ====================                      ======= ========== ====================
________________________

(*) During the fourth quarter of fiscal 2015, we early-adopted Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes. This standard requires that all deferred tax assets and liabilities, and any related valuation allowance, be classified as noncurrent on the balance sheets. As of November 27, 2015, our deferred tax assets were netted against non-current deferred income tax liabilities.

                                                                        
Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
                                                                                             
                                                                                                                                   Three Months Ended
                                                                                            -------------------------------------------------------------------------------------------------
                                                                                                        November 27,                            November 28,
                                                                                                            2015                                                       2014
                                                                                            ----------------------------------                        ------------------------------------
Cash flows from operating activities:
   Net income                                                                                     $ 222,705                                                 $    88,136
   Adjustments to reconcile net income to net cash provided by
   operating activities:
      Depreciation, amortization and accretion                                                       86,359                                                      78,147
      Stock-based compensation expense                                                               81,022                                                      84,950
      Gain on sale of property                                                                      (21,415 )                                            --
      Unrealized investment gains, net                                                                 (662 )                                                      (121 )
      Changes in deferred revenue                                                                   179,265                                                     158,712
      Changes in other operating assets and liabilities                                             (92,759 )                                                   (10,071 )
                                                                                            ------------------------------------                      --------------------------------------
         Net cash provided by operating activities                                                  454,515                                  399,753  
                                                                                            ------------------------------------                      --------------------------------------
                                                                                                                                                       
Cash flows from investing activities:
   Purchases, sales and maturities of short-term investments, net                                  (277,566 )                                                    (8,474 )
   Purchases of property and equipment                                                              (64,676 )                                                   (36,775 )
   Proceeds from the sale of property                                                                57,779                                              --
   Purchases and sales of long-term investments, intangibles and other                               (1,524 )                                                    (2,908 )
   assets, net
   Acquisitions, net of cash                                                                 --                                  (29,802 )
                                                                                            ------------------------------------                      --------------------------------------
         Net cash used for investing activities                                                    (285,987 )                                                   (77,959 )
                                                                                            ------------------------------------                      --------------------------------------
                                                                                                                                                       
Cash flows from financing activities:
   Purchases of treasury stock                                                                     (125,000 )                                                  (125,000 )
   Proceeds from reissuance of treasury stock, net                                                       42                                                       3,618
   Repayment of debt and capital lease obligations                                           --                                                      (3,253 )
   Excess tax benefits from stock-based compensation                                                  9,808                                   21,282  
                                                                                            ------------------------------------                      --------------------------------------
         Net cash used for financing activities                                                    (115,150 )                                                  (103,353 )
                                                                                            ------------------------------------                      --------------------------------------
Effect of exchange rate changes on cash and cash equivalents                                         (6,110 )                                                    (4,370 )
                                                                                            ------------------------------------                      --------------------------------------
Net increase in cash and cash equivalents                                                            47,268                                                     214,071
Cash and cash equivalents at beginning of period                                                    829,292                                  903,329  
                                                                                            ------------------------------------                      --------------------------------------
Cash and cash equivalents at end of period                                                        $ 876,560                              $ 1,117,400  
                                                                                            ======= ======= ====================                      ======= ========= ====================
                                                                                                                                                                         
                                                                                                                                                                                                                  
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 27,                           November 28,                            August 28,                                                November 27,                            November 28,
                                                                                           2015                                                      2014                                                      2015                                                       2015                                                       2014
                                                                           ----------------------------------                        ----------------------------------                        ----------------------------------                        ------------------------------------                        ----------------------------------
Operating income:
                                                                                                                                                                                                                                                                                                                      
GAAP operating income                                                            $ 290,434                                                 $ 124,505                                                 $ 246,019                                                 $   903,095                                                 $ 412,685
Stock-based and deferred compensation expense                                       81,705                                                    85,025                                                    84,371                                                     338,047                                                   335,856
Restructuring and other charges                                                        521                                                    19,385                                                      (751 )                                                     1,559                                                    19,883
Amortization of purchased intangibles                                               37,678                                                    31,331                                                    41,041                                                     152,590                                                   127,000
Loss contingency (reversal)                                                 --                         --                                (10,000 )                                                   (10,000 )                                                  10,000  
                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      --------------------------------------                      ------------------------------------
Non-GAAP operating income                                                        $ 410,338                              $ 260,246                              $ 360,680                              $ 1,385,291                              $ 905,424  
                                                                           ======= ======= ====================                      ======= ======= ====================                      ======= ======= ====================                      ======= ========= ====================                      ======= ======= ====================
                                                                                                                                                                                                                                                                                                                      
Net income:
                                                                                                                                                                                                                                                                                                                      
GAAP net income                                                                  $ 222,705                                                 $  88,136                                                 $ 174,465                                                 $   629,551                                                 $ 268,395
                                                                                                                                                                                                                                                                                                                                      
Stock-based and deferred compensation expense                                       81,705                                                    85,025                                                    84,371                                                     338,047                                                   335,856
Restructuring and other charges                                                        521                                                    19,385                                                      (751 )                                                     1,559                                                    19,883
Amortization of purchased intangibles                                               37,678                                                    31,331                                                    41,041                                                     152,590                                                   127,000
Investment (gains) losses                                                             (622 )                                                    (343 )                                                   1,314                                                        (961 )                                                  (1,156 )
Gain on sale of property assets                                                    (21,415 )                                          --                                            --                                                     (21,415 )                                          --
Loss contingency (reversal)                                                 --                                            --                                                   (10,000 )                                                   (10,000 )                                                  10,000
Income tax adjustments                                                              (8,674 )                                                 (27,872 )                                                 (15,051 )                                                   (35,826 )                                                 (86,140 )
                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      --------------------------------------                      ------------------------------------
Non-GAAP net income                                                              $ 311,898                              $ 195,662                              $ 275,389                              $ 1,053,545                              $ 673,838  
                                                                           ======= ======= ====================                      ======= ======= ====================                      ======= ======= ====================                      ======= ========= ====================                      ======= ======= ====================
                                                                                                                                                                                                                                                                                                                      
Diluted net income per share:
                                                                                                                                                                                                                                                                                                                      
GAAP diluted net income per share                                                $    0.44                                                 $    0.17                                                 $    0.34                                                 $      1.24                                                 $    0.53
Stock-based and deferred compensation expense                                         0.16                                                      0.17                                                      0.17                                                        0.67                                                      0.65
Restructuring and other charges                                             --                                                      0.04                                            --                                              --                                                      0.04
Amortization of purchased intangibles                                                 0.07                                                      0.06                                                      0.08                                                        0.30                                                      0.24
Gain on sale of property assets                                                      (0.04 )                                          --                                            --                                                       (0.04 )                                          --
Loss contingency (reversal)                                                 --                                            --                                                     (0.02 )                                                     (0.02 )                                                    0.02
Income tax adjustments                                                               (0.01 )                                                   (0.05 )                                                   (0.03 )                                                     (0.07 )                                                   (0.15 )
                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      --------------------------------------                      ------------------------------------
Non-GAAP diluted net income per share                                            $    0.62                              $    0.39                              $    0.54                              $      2.08                              $    1.33  
                                                                           ======= ======= ====================                      ======= ======= ====================                      ======= ======= ====================                      ======= ========= ====================                      ======= ======= ====================
                                                                                                                                                                                                                                                                                                                      
Shares used in computing diluted net income per share                              506,012                                                   507,451                                                   505,809                                                     507,164                                                   508,480
                                                                                                                                                                                                                                                                                                                                      
                                               
                                                                             Three Months
                                                                                 Ended
                                                                   ------------------------------
                                                                             November 27,
                                                                                 2015
                                                                   ------------------------------
Effective income tax rate:
                                                                    
GAAP effective income tax rate                                           25.0 %
Stock-based and deferred compensation expense                            (1.0 )
Amortization of purchased intangibles                                    (0.5 )
Income tax adjustments                                                   (2.5 )
                                                                   ---------- --------------------
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 that may include 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 and the related tax impact of all of these items, income tax adjustments, the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes, and the non-GAAP measures that exclude such information in order to assess the performance of Adobe’s business and for planning and forecasting in subsequent periods. Whenever Adobe uses such a non-GAAP financial measure, it 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.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20151210006456r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20151210006456/en/

SOURCE: Adobe

Investor Relations Contact 
Adobe 
Mike Saviage, 408-536-4416 
ir@adobe.com 
or 
Public Relations Contact 
Adobe 
Edie Kissko, 408-536-3034 
kissko@adobe.com


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