Welcome!

News Feed Item

Adobe’s Cloud Solutions Fuel Strong Financial Results

Adobe (Nasdaq:ADBE) today reported financial results for its second quarter of fiscal year 2014 ended May 30, 2014.

Second Quarter Financial Highlights

  • Adobe achieved revenue of $1.07 billion, above the high end of its targeted range of $1.00 billion to $1.05 billion.
  • Adobe exited Q2 with 2 million 308 thousand paid Creative Cloud subscriptions, an increase of 464 thousand when compared to the number of subscriptions as of the end of Q1 fiscal year 2014.
  • Creative Annualized Recurring Revenue (“ARR”) grew to $1.20 billion, and total Digital Media ARR grew to $1.38 billion.
  • Adobe Marketing Cloud quarterly revenue was $283 million, representing 23 percent year-over-year growth.
  • Diluted earnings per share were $0.17 on a GAAP-basis, and $0.37 on a non-GAAP basis.
  • Cash flow from operations was $368 million and deferred revenue grew to a record $929 million.
  • 53 percent of Adobe’s Q2 revenue was from recurring sources such as Creative Cloud and Adobe Marketing Cloud.
  • The company repurchased approximately 2.6 million shares during the quarter, returning approximately $166 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’s first-half upside was driven by accelerated adoption of Creative Cloud and Adobe Marketing Cloud,” said Shantanu Narayen, president and chief executive officer, Adobe. “We’re excited about our upcoming product pipeline and expect a strong second half of the year.”

“Our earnings performance in Q2 reflects the financial leverage we have in our model,” said Mark Garrett, executive vice president and chief financial officer, Adobe. “With Adobe’s Creative Cloud transformation behind us, our focus moving forward is to drive strong revenue and earnings growth with our market-leading cloud offerings.”

Adobe to Webcast Earnings Conference Call

Adobe will webcast its second quarter fiscal year 2014 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 future product releases, business momentum, the strength of our cloud business and growth of our revenue and earnings, 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, uncertainty in economic conditions and the financial markets, and failure to realize the anticipated benefits of past or future acquisitions.

For a discussion of these and other risks and uncertainties, please refer to Adobe’s Annual Report on Form 10-K for our fiscal year 2013 ended Nov. 29, 2013 and Adobe’s Quarterly Reports on Form 10-Q issued in fiscal year 2014.

The financial information set forth in this press release reflects estimates based on information available at this time. These amounts could differ from actual reported amounts stated in Adobe’s Quarterly Report on Form 10-Q for our quarter ended May 30, 2014, which Adobe expects to file in June 2014.

Adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements.

About Adobe Systems Incorporated

Adobe is changing the world through digital experiences. For more information, visit www.adobe.com.

© 2014 Adobe Systems Incorporated. All rights reserved. Adobe, the Adobe logo, Creative Cloud and Adobe Marketing Cloud are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners.

Condensed Consolidated Statements of Income

(In thousands, except per share data; unaudited)

 
  Three Months Ended   Six Months Ended
May 30,
2014
  May 31,
2013
May 30,
2014
  May 31,
2013
Revenue:
Products $ 479,247 $ 644,899 $ 950,701 $ 1,320,688
Subscription 476,694 254,521 900,257 478,787
Services and support 112,267   111,129   217,370   218,947  
Total revenue 1,068,208   1,010,549   2,068,328   2,018,422  
 
Cost of revenue:
Products 24,499 26,805 51,997 78,787
Subscription 84,147 66,527 160,879 129,107
Services and support 46,258   41,949   90,537   84,071  
Total cost of revenue 154,904   135,281   303,413   291,965  
 
Gross profit 913,304 875,268 1,764,915 1,726,457
 
Operating expenses:
Research and development 209,092 203,097 418,617 412,735
Sales and marketing 426,830 402,208 836,971 800,241
General and administrative 129,138 120,870 268,122 253,723
Restructuring and other charges (366 ) 24,992 297 24,994
Amortization of purchased intangibles 13,352   12,792   26,904   25,231  
Total operating expenses 778,046   763,959   1,550,911   1,516,924  
 
Operating income 135,258 111,309 214,004 209,533
 
Non-operating income (expense):
Interest and other income (expense), net 2,563 1,268 5,708 2,514
Interest expense (17,103 ) (17,205 ) (33,693 ) (34,039 )
Investment gains (losses), net 553   (4,245 ) 144   (3,397 )
Total non-operating income (expense), net (13,987 ) (20,182 ) (27,841 ) (34,922 )
Income before income taxes 121,271 91,127 186,163 174,611
Provision for income taxes 32,744   14,581   50,590   32,948  
Net income $ 88,527   $ 76,546   $ 135,573   $ 141,663  
Basic net income per share $ 0.18   $ 0.15   $ 0.27   $ 0.28  
Shares used to compute basic net income per share 497,931   503,384   497,439   500,996  
Diluted net income per share $ 0.17   $ 0.15   $ 0.27   $ 0.28  
Shares used to compute diluted net income per share 506,687   512,446   508,227   511,535  
 

Condensed Consolidated Balance Sheets

(In thousands, except par value; unaudited)

 
  May 30,
2014
  November 29,
2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 817,020 $ 834,556
Short-term investments 2,513,191 2,339,196
Trade receivables, net of allowances for doubtful accounts of $7,929 and $10,228, respectively 531,557 599,820
Deferred income taxes 72,489 102,247
Prepaid expenses and other current assets 180,086   170,110  
Total current assets 4,114,343 4,045,929
 
Property and equipment, net 642,450 659,774
Goodwill 4,773,798 4,771,981
Purchased and other intangibles, net 532,317 605,254
Investment in lease receivable 207,239 207,239
Other assets 102,052   90,121  
Total assets $ 10,372,199   $ 10,380,298  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Trade payables $ 54,858 $ 62,096
Accrued expenses 656,940 656,939
Debt and capital lease obligations 609,742 14,676
Accrued restructuring 3,627 6,171
Income taxes payable 13,696 10,222
Deferred revenue 879,109   775,544  
Total current liabilities 2,217,972 1,525,648
 
Long-term liabilities:
Debt and capital lease obligations 896,551 1,499,297
Deferred revenue 49,495 53,268
Accrued restructuring 6,099 7,717
Income taxes payable 139,870 132,545
Deferred income taxes 351,612 375,634
Other liabilities 73,712   61,555  
Total liabilities 3,735,311 3,655,664
 
Stockholders' equity:
Preferred stock, $0.0001 par value; 2,000 shares authorized
Common stock, $0.0001 par value 61 61
Additional paid-in-capital 3,562,682 3,392,696
Retained earnings 6,806,104 6,928,964
Accumulated other comprehensive income 46,642 46,103
Treasury stock, at cost (103,587 and 104,573 shares, respectively), net of reissuances (3,778,601 ) (3,643,190 )
Total stockholders' equity 6,636,888   6,724,634  
Total liabilities and stockholders' equity $ 10,372,199   $ 10,380,298  
 

Condensed Consolidated Statements of Cash Flows

(In thousands; unaudited)

 
  Three Months Ended
May 30,
2014
  May 31,
2013
Cash flows from operating activities:
Net income $ 88,527 $ 76,546
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 77,653 80,950
Stock-based compensation expense 83,005 73,528
Asset impairment losses 23,838
Unrealized investment (gains) losses, net (352 ) 4,312
Changes in deferred revenue 47,517 (8,770 )
Changes in other operating assets and liabilities 71,186   48,744  
Net cash provided by operating activities 367,536   299,148  
 
Cash flows from investing activities:
Purchases, sales and maturities of short-term investments, net (117,967 ) (275,455 )
Purchases of property and equipment (27,198 ) (46,249 )
Purchases and sales of long-term investments, intangibles and other assets, net (2,767 ) (12,735 )
Net cash used for investing activities (147,932 ) (334,439 )
 
Cash flows from financing activities:
Purchases of treasury stock (150,000 ) (200,000 )
Proceeds from reissuance of treasury stock, net 12,824 184,655
Repayment of debt and capital lease obligations (3,626 ) (7,297 )
Excess tax benefits from stock-based compensation 4,875    
Net cash used for financing activities (135,927 ) (22,642 )
Effect of exchange rate changes on cash and cash equivalents (573 ) (2,039 )
Net increase (decrease) in cash and cash equivalents 83,104 (59,972 )
Cash and cash equivalents at beginning of period 733,916   1,306,382  
Cash and cash equivalents at end of period $ 817,020   $ 1,246,410  
 

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
May 30,
2014
  May 31,
2013
  February 28,
2014
Operating income:
 
GAAP operating income $ 135,258 $ 111,309 $ 78,746
Stock-based and deferred compensation expense 83,600 79,624 83,549
Restructuring and other charges (366 ) 24,992 663
Amortization of purchased intangibles 31,835 31,359 32,054
Loss contingency     10,000  
Non-GAAP operating income $ 250,327   $ 247,284   $ 205,012  
 
Net income:
 
GAAP net income $ 88,527 $ 76,546 $ 47,046
Stock-based and deferred compensation expense 83,600 79,624 83,549
Restructuring and other charges (366 ) 24,992 663
Amortization of purchased intangibles 31,835 31,359 32,054
Investment (gains) losses (553 ) 4,245 409
Loss contingency 10,000
Income tax adjustments (16,771 ) (33,915 ) (22,383 )
Non-GAAP net income $ 186,272   $ 182,851   $ 151,338  
 
Diluted net income per share:
 
GAAP diluted net income per share $ 0.17 $ 0.15 $ 0.09
Stock-based and deferred compensation expense 0.16 0.16 0.16
Restructuring and other charges 0.05
Amortization of purchased intangibles 0.06 0.06 0.06
Investment (gains) losses 0.01
Loss contingency 0.02
Income tax adjustments (0.02 ) (0.07 ) (0.03 )
Non-GAAP diluted net income per share $ 0.37   $ 0.36   $ 0.30  
 
Shares used in computing diluted net income per share 506,687 512,446 508,340
 
  Three Months

Ended

May 30,
2014
Effective income tax rate:
 
GAAP effective income tax rate 27.0 %
Stock-based and deferred compensation expense (3.2 )
Amortization of purchased intangibles (1.3 )
Income tax adjustments (1.5 )
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, loss contingencies 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.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
WebRTC is bringing significant change to the communications landscape that will bridge the worlds of web and telephony, making the Internet the new standard for communications. Cloud9 took the road less traveled and used WebRTC to create a downloadable enterprise-grade communications platform that is changing the communication dynamic in the financial sector. In his session at @ThingsExpo, Leo Papadopoulos, CTO of Cloud9, discussed the importance of WebRTC and how it enables companies to focus...
With an estimated 50 billion devices connected to the Internet by 2020, several industries will begin to expand their capabilities for retaining end point data at the edge to better utilize the range of data types and sheer volume of M2M data generated by the Internet of Things. In his session at @ThingsExpo, Don DeLoach, CEO and President of Infobright, discussed the infrastructures businesses will need to implement to handle this explosion of data by providing specific use cases for filterin...
IoT generates lots of temporal data. But how do you unlock its value? You need to discover patterns that are repeatable in vast quantities of data, understand their meaning, and implement scalable monitoring across multiple data streams in order to monetize the discoveries and insights. Motif discovery and deep learning platforms are emerging to visualize sensor data, to search for patterns and to build application that can monitor real time streams efficiently. In his session at @ThingsExpo, ...
Enterprise networks are complex. Moreover, they were designed and deployed to meet a specific set of business requirements at a specific point in time. But, the adoption of cloud services, new business applications and intensifying security policies, among other factors, require IT organizations to continuously deploy configuration changes. Therefore, enterprises are looking for better ways to automate the management of their networks while still leveraging existing capabilities, optimizing perf...
Early adopters of IoT viewed it mainly as a different term for machine-to-machine connectivity or M2M. This is understandable since a prerequisite for any IoT solution is the ability to collect and aggregate device data, which is most often presented in a dashboard. The problem is that viewing data in a dashboard requires a human to interpret the results and take manual action, which doesn’t scale to the needs of IoT.
When building large, cloud-based applications that operate at a high scale, it’s important to maintain a high availability and resilience to failures. In order to do that, you must be tolerant of failures, even in light of failures in other areas of your application. “Fly two mistakes high” is an old adage in the radio control airplane hobby. It means, fly high enough so that if you make a mistake, you can continue flying with room to still make mistakes. In his session at 18th Cloud Expo, Lee...
Internet of @ThingsExpo has announced today that Chris Matthieu has been named tech chair of Internet of @ThingsExpo 2016 Silicon Valley. The 6thInternet of @ThingsExpo will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
Continuous testing helps bridge the gap between developing quickly and maintaining high quality products. But to implement continuous testing, CTOs must take a strategic approach to building a testing infrastructure and toolset that empowers their team to move fast. Download our guide to laying the groundwork for a scalable continuous testing strategy.
What does it look like when you have access to cloud infrastructure and platform under the same roof? Let’s talk about the different layers of Technology as a Service: who cares, what runs where, and how does it all fit together. In his session at 18th Cloud Expo, Phil Jackson, Lead Technology Evangelist at SoftLayer, an IBM company, spoke about the picture being painted by IBM Cloud and how the tools being crafted can help fill the gaps in your IT infrastructure.
CenturyLink has announced that application server solutions from GENBAND are now available as part of CenturyLink’s Networx contracts. The General Services Administration (GSA)’s Networx program includes the largest telecommunications contract vehicles ever awarded by the federal government. CenturyLink recently secured an extension through spring 2020 of its offerings available to federal government agencies via GSA’s Networx Universal and Enterprise contracts. GENBAND’s EXPERiUS™ Application...
Much of IT terminology is often misused and misapplied. Modernization and transformation are two such terms. They are often used interchangeably even though they mean different things and have very different connotations. Indeed, it is somewhat safe to assume that in IT any transformative effort is likely to also have a modernizing effect, and thus, we can see these as levels of improvement efforts. However, many businesses are being led to believe if they don’t transform now they risk becoming ...
"We provide DevOps solutions. We also partner with some key players in the DevOps space and we use the technology that we partner with to engineer custom solutions for different organizations," stated Himanshu Chhetri, CTO of Addteq, in this SYS-CON.tv interview at DevOps at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
SYS-CON Events announced today the Enterprise IoT Bootcamp, being held November 1-2, 2016, in conjunction with 19th Cloud Expo | @ThingsExpo at the Santa Clara Convention Center in Santa Clara, CA. Combined with real-world scenarios and use cases, the Enterprise IoT Bootcamp is not just based on presentations but with hands-on demos and detailed walkthroughs. We will introduce you to a variety of real world use cases prototyped using Arduino, Raspberry Pi, BeagleBone, Spark, and Intel Edison. Y...
Using new techniques of information modeling, indexing, and processing, new cloud-based systems can support cloud-based workloads previously not possible for high-throughput insurance, banking, and case-based applications. In his session at 18th Cloud Expo, John Newton, CTO, Founder and Chairman of Alfresco, described how to scale cloud-based content management repositories to store, manage, and retrieve billions of documents and related information with fast and linear scalability. He addres...
DevOps at Cloud Expo – being held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA – announces that its Call for Papers is open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's largest enterprises – and delivering real results. Am...