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Adobe Systems Incorporated (Nasdaq:ADBE) today reported financial
results for its fourth quarter and fiscal year ended Nov. 30, 2012.
Adobe achieved revenue in Q4 FY2012 of $1.153 billion, exceeding its
targeted range of $1.075 billion to $1.125 billion. During the quarter,
the Company continued to accelerate adoption of Adobe® Creative Cloud™
as it migrates to a subscription model. Adobe also achieved record Adobe
Marketing Cloud and Document Services revenue during the fourth quarter.
For fiscal year 2012, Adobe achieved record revenue of $4.4 billion.
Fourth Quarter Financial Highlights
Diluted earnings per share were $0.44 on a GAAP-basis, and $0.61 on a
non-GAAP basis.
Operating income was $307.8 million and net income was $222.3 million
on a GAAP basis. Operating income was $414.7 million and net income
was $307.9 million on a non-GAAP basis.
Cash flow from operations was $473.7 million.
Deferred revenue grew by $59.3 million to a record $619.6 million.
Adobe added approximately 10,000 Creative Cloud subscriptions per week
during the quarter, versus the addition of 8,000 subscriptions per
week in the third quarter.
In Document Services, which includes the Adobe Acrobat® product
family, Adobe also achieved record revenue of $210.2 million during
the quarter.
Adobe Marketing Cloud achieved record quarterly revenue of $220.4
million, which represents 32 percent year-over-year growth.
A reconciliation between GAAP and non-GAAP results is provided at the
end of this press release.
Fiscal Year 2012 Financial Highlights
Adobe achieved record revenue of $4.404 billion. Annual GAAP diluted
earnings per share for fiscal 2012 were $1.66, and annual non-GAAP
diluted earnings per share were $2.35.
Annual operating income was $1.180 billion and net income was $833
million on a GAAP basis. Annual operating income was $1.597 billion
and net income was $1.183 billion on a non-GAAP basis.
Adobe generated $1.5 billion in cash flow during the year.
Creative Cloud paid subscriptions grew to 326,000 as of the end of the
year, with exiting annualized recurring revenue of $153 million for
the Creative business.
Document Services achieved record annual revenue of $786 million.
Adobe Marketing Cloud achieved a record $777 million in reported
annual revenue, representing 35 percent year-over-year growth.
The company repurchased 11.5 million shares during the year, returning
approximately $372 million of cash to stockholders.
Executive Quotes
“We beat our Creative Cloud subscription goals and established Adobe
Marketing Cloud as the leader in the exploding category of Digital
Marketing during fiscal 2012,” said Shantanu Narayen, president and
chief executive officer, Adobe. “In fiscal 2013 we intend to accelerate
our pace of innovation, and drive integration between Creative Cloud and
Adobe Marketing Cloud.”
“We're driving migration to a subscription model in our Creative
business faster than we predicted a year ago, and we are confident
fiscal 2013 will be the pivotal year for the transition,” said Mark
Garrett, executive vice president and chief financial officer, Adobe.
“This will yield a stronger, more predictable recurring revenue model
with higher long-term revenue growth.”
Adobe to Webcast Earnings Conference Call
Adobe will webcast its fourth quarter and fiscal year 2012 earnings
conference call today at 2:00 p.m. Pacific Time from its investor
relations website: www.adobe.com/ADBE.
The company will discuss financial targets for the first quarter of
fiscal 2013 as well as fiscal year 2013 on its Q4 and FY2012 earnings
call. A copy of Adobe management’s prepared remarks, including financial
targets and conference call slides, has been posted to Adobe’s investor
relations website in advance of the conference call for reference.
A reconciliation between GAAP and non-GAAP financial targets is also
provided on the website.
Forward-Looking Statements Disclosure
This press release contains forward-looking statements, including those
related to the transition of our business as we migrate to a
subscription model, increases in recurring revenue, long-term revenue
growth and our ability to continue to innovate and execute against our
strategy in our key growth areas and drive integration between those
areas, 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, including our increased emphasis on a cloud and
subscription strategy, fluctuations in subscription renewal or upgrade
rates, continued uncertainty in economic conditions and the financial
markets, difficulty in predicting revenue from new businesses and the
potential impact on our financial results from changes in our business
models, 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 the fiscal year ended
December 2, 2011 and its Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 2, 2012, June 1, 2012 and Aug. 31, 2012.
The financial information set forth in this press release reflects
estimates based on information available at this time. These amounts
could differ from actual reported amounts stated in Adobe’s Annual
Report on Form 10-K for our year ended Nov. 30, 2012, which Adobe
expects to file in Jan. 2013.
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.
Shares used to compute diluted net income per share
502,154
496,288
502,721
503,921
Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
November 30, 2012
December 2, 2011
ASSETS
Current assets:
Cash and cash equivalents
$
1,425,052
$
989,500
Short-term investments
2,113,301
1,922,192
Trade receivables, net of allowances for doubtful accounts of
$12,643 and $15,080, respectively
617,233
634,373
Deferred income taxes
59,537
91,963
Prepaid expenses and other current assets
116,237
133,423
Total current assets
4,331,360
3,771,451
Property and equipment, net
664,302
527,828
Goodwill
4,133,259
3,849,217
Purchased and other intangibles, net
545,036
545,526
Investment in lease receivable
207,239
207,239
Other assets
93,327
89,922
Total assets
$
9,974,523
$
8,991,183
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables
$
49,759
$
86,660
Accrued expenses
590,140
554,941
Capital lease obligations
11,217
9,212
Accrued restructuring
9,287
80,930
Income taxes payable
49,886
42,634
Deferred revenue
561,463
476,402
Total current liabilities
1,271,752
1,250,779
Long-term liabilities:
Debt and capital lease obligations
1,496,938
1,505,096
Deferred revenue
58,102
55,303
Accrued restructuring
12,263
7,449
Income taxes payable
155,096
156,958
Deferred income taxes
265,106
181,602
Other liabilities
50,084
50,883
Total liabilities
3,309,341
3,208,070
Stockholders' equity:
Preferred stock, $0.0001 par value; 2,000 shares authorized
—
—
Common stock, $0.0001 par value
61
61
Additional paid-in-capital
3,038,665
2,753,896
Retained earnings
7,003,003
6,528,735
Accumulated other comprehensive income
30,712
29,950
Treasury stock, at cost (106,702 and 109,294 shares, respectively),
net of reissuances
(3,407,259
)
(3,529,529
)
Total stockholders' equity
6,665,182
5,783,113
Total liabilities and stockholders' equity
$
9,974,523
$
8,991,183
Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
Three Months Ended
November 30, 2012
December 2, 2011
Cash flows from operating activities:
Net income
$
222,333
$
173,719
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion
78,621
73,290
Stock-based compensation expense
73,535
72,527
Unrealized investment gains
(281
)
(5,811
)
Changes in deferred revenue
59,232
47,399
Changes in other operating assets and liabilities
40,219
135,629
Net cash provided by operating activities
473,659
496,753
Cash flows from investing activities:
Purchases, sales and maturities of short-term investments, net
(33,250
)
18,826
Purchases of property and equipment
(81,789
)
(74,897
)
Purchases of long-term investments, intangibles and other assets,
net of sales
(14,436
)
(51,684
)
Acquisitions, net of cash
—
(151,925
)
Net cash used for investing activities
(129,475
)
(259,680
)
Cash flows from financing activities:
Purchases of treasury stock
(100,000
)
—
Reissuance of treasury stock
19,089
1,191
Repayment of debt and capital lease obligations
(2,985
)
(2,243
)
Excess tax benefits from stock-based compensation
3,477
853
Net cash used for financing activities
(80,419
)
(199
)
Effect of exchange rate changes on cash and cash equivalents
(1,093
)
(16,586
)
Net increase in cash and cash equivalents
262,672
220,288
Cash and cash equivalents at beginning of period
1,162,380
769,212
Cash and cash equivalents at end of period
$
1,425,052
$
989,500
Non-GAAP Results
(In thousands, except per share data)
The following tables show Adobe's GAAP results reconciled to
non-GAAP results included in this release.
Three Months Ended
Year Ended
November 30, 2012
December 2, 2011
August 31, 2012
November 30, 2012
December 2, 2011
Operating income:
GAAP operating income
$
307,765
$
246,131
$
278,304
$
1,180,191
$
1,099,299
Stock-based and deferred compensation expense
76,248
75,450
80,682
300,277
286,048
Restructuring and other related charges
(275
)
94,502
2,374
(2,917
)
97,773
Amortization of purchased intangibles
30,912
28,444
30,410
119,890
104,005
Non-GAAP operating income
$
414,650
$
444,527
$
391,770
$
1,597,441
$
1,587,125
Net income:
GAAP net income
$
222,333
$
173,719
$
201,357
$
832,775
$
832,847
Stock-based and deferred compensation expense
76,248
75,450
80,682
300,277
286,048
Restructuring and other related charges
(275
)
94,502
2,374
(2,917
)
97,773
Amortization of purchased intangibles
30,912
28,444
30,410
119,890
104,005
Investment (gains) losses
(351
)
(5,174
)
(944
)
(9,504
)
(5,857
)
Income tax adjustments
(20,962
)
(34,347
)
(22,685
)
(57,290
)
(131,400
)
Non-GAAP net income
$
307,905
$
332,594
$
291,194
$
1,183,231
$
1,183,416
Diluted net income per share:
GAAP diluted net income per share
$
0.44
$
0.35
$
0.40
$
1.66
$
1.65
Stock-based and deferred compensation expense
0.15
0.15
0.16
0.60
0.57
Restructuring and other related charges
—
0.19
—
(0.01
)
0.19
Amortization of purchased intangibles
0.06
0.06
0.06
0.24
0.21
Investment (gains) losses
—
(0.01
)
—
(0.02
)
(0.01
)
Income tax adjustments
(0.04
)
(0.07
)
(0.04
)
(0.12
)
(0.26
)
Non-GAAP diluted net income per share
$
0.61
$
0.67
$
0.58
$
2.35
$
2.35
Shares used in computing diluted net income per share
502,154
496,288
499,757
502,721
503,921
Operating expenses:
GAAP operating expenses
$
720,685
$
789,651
$
682,655
$
2,739,704
$
2,679,086
Stock-based and deferred compensation expense
(70,658
)
(71,435
)
(75,762
)
(280,746
)
(270,268
)
Restructuring and other related charges
275
(94,502
)
(2,374
)
2,917
(97,773
)
Amortization of purchased intangibles
(12,283
)
(11,830
)
(12,331
)
(48,657
)
(42,833
)
Non-GAAP operating expenses
$
638,019
$
611,884
$
592,188
$
2,413,218
$
2,268,212
Three Months Ended
November 30, 2012
Effective income tax rate:
GAAP effective income tax rate
23.5
%
Stock-based and deferred compensation expense
(0.7
)
Amortization of purchased intangibles
(0.3
)
Non-GAAP effective income tax rate
22.5
%
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. Accordingly, 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 in a manner that
focuses on what Adobe believes to be its ongoing business operations.
Adobe's management believes it is useful for itself and investors to
review, as applicable, both GAAP information that includes the
stock-based and deferred compensation expenses, restructuring charges,
amortization of purchased intangibles, 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.
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SYS-CON Events announced today that OpenStack will exhibit at SYS-CON's 12th International Cloud Expo, which will take place on June 10–13, 2013, at the Javits Center in New York City, New York. OpenStack software controls large pools of compute, storage, and networking resources thro...
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Cloud computing must have been brushing up on its bedside manner.
HIPAA requirements now stipulate everyone in the health-care industry must begin migrating patient records and other data to cloud computing. By 2015, all medical professionals with access to patient records must utiliz...
Looking to hang with the cool kids, Yahoo CEO Marissa Mayer, swearing “not to screw it up,” is buying Tumblr for a cool $1.1 billion, a big chunk of her $5.4 billion pocketbook since it’s “substantially all” in cash.
The New York-based acquisition will remain a separate business with...
Daryl Taft’s article in eWeek reminded me that next month, on June 6th. IBM’s DB2 RDBMS product will celebrate its 30th. anniversary. This has a personal significance for me. I was part of the DB2 planning team then and on … 
“Open source has always provided a number of benefits, including easing adoption costs, propagating a better understanding of the technology, and allowing for faster evolution and commercialization of products and services based on it,” noted Terry Woloszyn, Founder & CEO, Leeward Secu...
