Exhibit 99.1
graphica03a01a01a18.jpg
Investor Relations Contact
Mike Saviage
Adobe
408-536-4416
ir@adobe.com
Public Relations Contact
Colleen Rodriguez
Adobe
408-536-6803
corodrig@adobe.com


FOR IMMEDIATE RELEASE

Adobe Surpasses $11 Billion in Annual Revenue
Record Fourth Quarter Contributes to 24 Percent Year-Over-Year Annual Growth

SAN JOSE, Calif. - Dec. 12, 2019 - Adobe (Nasdaq:ADBE) today reported financial results for its fourth quarter and fiscal year 2019 ended Nov. 29, 2019.

In its fourth quarter of fiscal year 2019, Adobe achieved record quarterly revenue of $2.99 billion, which represents 21 percent year-over-year growth. In fiscal year 2019, Adobe achieved record annual revenue of $11.17 billion, which represents 24 percent year-over-year growth.

“Adobe’s phenomenal performance in Q4 capped a record fiscal 2019 with revenue exceeding $11 billion,” said Shantanu Narayen, president and CEO, Adobe. “Adobe’s vision, category leadership, continuous product innovation and large and loyal customer base position us well for 2020 and beyond.”

“Adobe delivered another year of strong revenue growth and expanding profitability resulting in record earnings,” said John Murphy, executive vice president and CFO, Adobe. “We are bullish about our opportunities and our ability to continue to deliver strong top- and bottom-line growth.”

Fourth Quarter Fiscal Year 2019 Financial Highlights
•
Adobe achieved record quarterly revenue of $2.99 billion in its fourth quarter of fiscal year 2019, which represents 21 percent year-over-year growth. Diluted earnings per share was $1.74 on a GAAP-basis, and $2.29 on a non-GAAP basis.
•
Digital Media segment revenue was $2.08 billion, which represents 22 percent year-over-year growth. Creative revenue grew to $1.74 billion and Document Cloud revenue was $339 million. Digital Media Annualized Recurring Revenue (“ARR”) grew to $8.40 billion exiting the quarter, a quarter-over-quarter increase of $539 million. Creative ARR grew to $7.31 billion, and Document Cloud ARR grew to $1.09 billion.
•
Digital Experience segment revenue was $859 million, representing 24 percent year-over-year growth.
•
GAAP operating income in the fourth quarter was $970 million, and non-GAAP operating income was $1.27 billion. GAAP net income was $852 million, and non-GAAP net income was $1.12 billion.
•
Cash flow from operations was a record $1.38 billion.
•
Remaining Performance Obligation was $9.82 billion, a quarter-over-quarter increase of $1.05 billion.
•
Adobe repurchased approximately 2.8 million shares during the quarter.


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Fiscal Year 2019 Financial Highlights
•
Adobe achieved record annual revenue of $11.17 billion in fiscal year 2019, representing 24 percent year-over-year growth.
•
The company reported annual GAAP diluted earnings per share of $6.00 and non-GAAP diluted earnings per share of $7.87.
•
Digital Media segment revenue was $7.71 billion, with Creative and Document Cloud achieving record annual revenue of $6.48 billion and $1.22 billion, respectively. Digital Media ARR grew by $1.69 billion during the year.
•
Digital Experience segment revenue was $3.21 billion, representing 31 percent year-over-year growth, and subscription bookings grew by more than 20 percent during the year.
•
Operating income grew 15 percent and net income grew 14 percent year-over-year on a GAAP-basis; operating income grew 23 percent and net income grew 15 percent year-over-year on a non-GAAP basis.
•
Adobe generated a record $4.42 billion in operating cash flow during the year.
•
The company repurchased 9.9 million shares during the year, returning $2.7 billion of cash to stockholders.
A reconciliation between GAAP and non-GAAP results is provided at the end of this press release and on Adobe’s website.

Adobe Provides Fiscal Year and First Quarter 2020 Financial Targets

The following table summarizes Adobe’s fiscal year 2020 targets.
Adobe fiscal year 2020 revenue
~$13.15 billion
Digital Media segment revenue
~19 percent year-over-year growth
Digital Media annualized recurring revenue (ARR)
~$1.55 billion of net new ARR
Digital Experience segment revenue
~16 percent year-over-year growth
Digital Experience subscription revenue1
~18 percent year-over-year growth
Digital Experience subscription bookings2
>20 percent year-over-year growth
Tax rate
GAAP: ~11%
Non-GAAP: ~11%
Share count
~486 million shares
Earnings per share
GAAP: ~$7.40
Non-GAAP: ~$9.75
1 Includes revenue from SaaS, managed service, ratable term, usage based, and subscription service offerings for Digital Experience
2 Includes annualized subscription value of SaaS, managed service, term and subscription service offerings under contract for
Data & Insights, Content & Commerce and Customer Journey Management solutions

The following table summarizes Adobe’s first quarter fiscal year 2020 targets.
Adobe Q1 fiscal year 2020 revenue
~$3.04 billion
Digital Media segment revenue
~19 percent year-over-year growth
Digital Media annualized recurring revenue (ARR)
~$360 million of net new ARR
Digital Experience segment revenue
~15 percent year-over-year growth
Tax rate
GAAP: ~5%
Non-GAAP: ~11%
Share count
~489 million shares
Earnings per share
GAAP: ~$1.76
Non-GAAP: ~$2.23

A reconciliation between GAAP and non-GAAP targets is provided at the end of this press release.

Adobe to Webcast Earnings Conference Call
Adobe will webcast its fourth quarter and fiscal year 2019 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 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, our market opportunity, market trends, customer success, revenue, operating margin, seasonality, annualized recurring revenue, non-operating other expense, tax rate on a

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GAAP and non-GAAP basis, earnings per share on a GAAP and non-GAAP basis, and share count, 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 compete effectively, failure to develop, acquire, market and offer products and services that meet customer requirements, introduction of new technology, information security and privacy, potential interruptions or delays in hosted services provided by us or third parties, risks associated with cyber-attacks, complex sales cycles, risks related to the timing of revenue recognition from our subscription offerings, fluctuations in subscription renewal rates, failure to realize the anticipated benefits of past or future acquisitions, failure to effectively manage critical strategic third-party business relationships, changes in accounting principles and tax regulations, uncertainty in the financial markets and economic conditions in the countries where we operate, and other various risks associated with being a multinational corporation. 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 2018 ended Nov. 30, 2018, and Adobe's Quarterly Reports on Form 10-Q issued in fiscal year 2019.

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. 29, 2019, which Adobe expects to file in Jan. 2020. Adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements.

About Adobe

Adobe is changing the world through digital experiences. For more information, visit www.adobe.com.
###
©2019 Adobe Inc. All rights reserved. Adobe and the Adobe logo are either registered trademarks or trademarks of Adobe Inc. (or one of its subsidiaries) in the United States and/or other countries. All other trademarks are the property of their respective owners.











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Condensed Consolidated Statements of Income
(In thousands, except per share data; unaudited)
 
Three Months Ended
 
Year Ended
 
November 29, 2019 (*)
 
November 30, 2018
 
November 29, 2019 (*)
 
November 30, 2018
Revenue:
 
 
 
 
 
 
 
Subscription
$
2,686,829

 
$
2,184,158

 
$
9,994,463

 
$
7,922,152

Product
167,097

 
150,425

 
647,788

 
622,153

Services and support
138,018

 
130,042

 
529,046

 
485,703

Total revenue
2,991,944

 
2,464,625

 
11,171,297

 
9,030,008

 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
Subscription
334,129

 
257,024

 
1,222,520

 
807,221

Product
9,029

 
10,899

 
39,625

 
46,009

Services and support
108,825

 
91,338

 
410,575

 
341,769

Total cost of revenue
451,983

 
359,261

 
1,672,720

 
1,194,999

 
 
 
 
 
 
 
 
Gross profit
2,539,961

 
2,105,364

 
9,498,577

 
7,835,009

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Research and development
499,806

 
415,958

 
1,930,228

 
1,537,812

Sales and marketing
801,588

 
723,573

 
3,244,347

 
2,620,829

General and administrative
225,938

 
212,355

 
880,637

 
744,898

Amortization of intangibles
42,698

 
32,932

 
175,244

 
91,101

Total operating expenses
1,570,030

 
1,384,818

 
6,230,456

 
4,994,640

 
 
 
 
 
 
 
 
Operating income
969,931

 
720,546

 
3,268,121

 
2,840,369

 
 
 
 
 
 
 
 
Non-operating income (expense):
 
 
 
 
 
 
 
Interest and other income (expense), net
18,879

 
9,657

 
42,255

 
39,536

Interest expense
(36,515
)
 
(27,873
)
 
(157,214
)
 
(89,242
)
Investment gains (losses), net
4,852

 
(3,113
)
 
51,579

 
3,213

Total non-operating income (expense), net
(12,784
)
 
(21,329
)
 
(63,380
)
 
(46,493
)
Income before income taxes
957,147

 
699,217

 
3,204,741

 
2,793,876

Provision for income taxes
105,286

 
20,977

 
253,283

 
203,102

Net income
$
851,861

 
$
678,240

 
$
2,951,458

 
$
2,590,774

Basic net income per share
$
1.76

 
$
1.39

 
$
6.07

 
$
5.28

Shares used to compute basic net income per share
483,731

 
488,246

 
486,291

 
490,564

Diluted net income per share
$
1.74

 
$
1.37

 
$
6.00

 
$
5.20

Shares used to compute diluted net income per share
488,851

 
495,118

 
491,572

 
497,843

_________________________________________ 
* 
Adobe adopted ASU No. 2014-09, Revenue from Contracts with Customers, using the modified retrospective method during the first quarter of fiscal 2019. Prior period results have not been restated to reflect this change in accounting standards. Refer to our Form 10-K for fiscal year 2019 for additional information.

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Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
 
November 29, 2019 (*)
 
November 30, 2018
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
2,650,221

 
$
1,642,775

Short-term investments
1,526,755

 
1,586,187

Trade receivables, net of allowances for doubtful accounts of $9,650 and $14,981, respectively
1,534,809

 
1,315,578

Prepaid expenses and other current assets
783,140

 
312,499

Total current assets
6,494,925

 
4,857,039

 
 
 
 
Property and equipment, net
1,293,015

 
1,075,072

Goodwill
10,691,199

 
10,581,048

Other intangibles, net
1,720,565

 
2,069,001

Other assets
562,696

 
186,522

Total assets
$
20,762,400

 
$
18,768,682

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
Trade payables
$
209,499

 
$
186,258

Accrued expenses
1,398,548

 
1,163,185

Debt
3,149,343

 
—

Deferred revenue
3,377,986

 
2,915,974

Income taxes payable
55,562

 
35,709

Total current liabilities
8,190,938

 
4,301,126

 
 
 
 
Long-term liabilities:
 
 
 
Debt
988,924

 
4,124,800

Deferred revenue
122,727

 
137,630

Income taxes payable
616,102

 
644,101

Deferred income taxes
140,498

 
46,702

Other liabilities
173,056

 
152,209

Total liabilities
10,232,245

 
9,406,568

 
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, $0.0001 par value; 2,000 shares authorized
—

 
—

Common stock, $0.0001 par value
61

 
61

Additional paid-in-capital
6,504,800

 
5,685,337

Retained earnings
14,828,562

 
11,815,597

Accumulated other comprehensive income (loss)
(188,034
)
 
(148,130
)
Treasury stock, at cost (118,495 and 113,171, respectively), net of re-issuances
(10,615,234
)
 
(7,990,751
)
Total stockholders’ equity
10,530,155

 
9,362,114

Total liabilities and stockholders’ equity
$
20,762,400

 
$
18,768,682


_________________________________________ 
* 
Adobe adopted ASU No. 2014-09, Revenue from Contracts with Customers, using the modified retrospective method during the first quarter of fiscal 2019. Prior period results have not been restated to reflect this change in accounting standards. Refer to our Form 10-K for fiscal year 2019 for additional information.


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Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
 
Three Months Ended
 
November 29, 2019
 
November 30, 2018
Cash flows from operating activities:
 
 
 
Net income
$
851,861

 
$
678,240

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion
183,692

 
106,720

Stock-based compensation
203,205

 
169,621

Unrealized losses (gains) on investments, net
(4,170
)
 
3,908

Changes in deferred revenue
244,777

 
271,443

Changes in other operating assets and liabilities
(102,965
)
 
(121,939
)
Net cash provided by operating activities
1,376,400

 
1,107,993

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases, sales and maturities of short-term investments, net
(85,462
)
 
1,606,237

Purchases of property and equipment
(94,096
)
 
(62,563
)
Purchases and sales of long-term investments, intangibles and other assets, net
12,036

 
(1,211
)
Acquisitions, net of cash acquired
(887
)
 
(4,681,341
)
Net cash used for investing activities
(168,409
)
 
(3,138,878
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Purchases of treasury stock
(750,000
)
 
(300,000
)
Taxes paid related to net share settlement of equity awards, net of proceeds from treasury stock re-issuances
(27,294
)
 
(23,036
)
Proceeds from debt issuance, net
—

 
2,248,342

Other financing activities, net
11,634

 
(575
)
Net cash provided by (used for) financing activities
(765,660
)
 
1,924,731

Effect of exchange rate changes on cash and cash equivalents
(1,157
)
 
1,785

Net increase (decrease) in cash and cash equivalents
441,174

 
(104,369
)
Cash and cash equivalents at beginning of period
2,209,047

 
1,747,144

Cash and cash equivalents at end of period
$
2,650,221

 
$
1,642,775





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Non-GAAP Results
(In thousands, except per share data)
The following table shows Adobe’s GAAP results reconciled to non-GAAP results included in this release.
 
Three Months Ended
 
Year Ended
 
November 29, 2019 (*)
 
November 30, 2018
 
August 30,
2019 (*)
 
November 29, 2019 (*)
 
November 30,
2018
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating income
$
969,931

 
$
720,546

 
$
853,812

 
$
3,268,121

 
$
2,840,369

Stock-based and deferred compensation expense
207,781

 
166,504

 
199,321

 
797,890

 
610,785

Amortization of intangibles
95,861

 
65,397

 
100,139

 
395,403

 
174,294

Non-GAAP operating income
$
1,273,573

 
$
952,447

 
$
1,153,272

 
$
4,461,414

 
$
3,625,448

 
 
 
 
 
 
 
 
 
 
Net income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income
$
851,861

 
$
678,240

 
$
792,763

 
$
2,951,458

 
$
2,590,774

Stock-based and deferred compensation expense
207,781

 
166,504

 
199,321

 
797,890

 
610,785

Amortization of intangibles
95,861

 
65,397

 
100,139

 
395,403

 
174,294

Investment (gains) losses, net
(4,852
)
 
3,113

 
(3,653
)
 
(51,579
)
 
(3,213
)
Income tax adjustments
(32,867
)
 
(7,051
)
 
(82,607
)
 
(224,827
)
 
(9,060
)
Non-GAAP net income
$
1,117,784

 
$
906,203

 
$
1,005,963

 
$
3,868,345

 
$
3,363,580

 
 
 
 
 
 
 
 
 
 
Diluted net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP diluted net income per share
$
1.74

 
$
1.37

 
$
1.61

 
$
6.00

 
$
5.20

Stock-based and deferred compensation expense
0.43

 
0.34

 
0.41

 
1.62

 
1.23

Amortization of intangibles
0.20

 
0.13

 
0.20

 
0.80

 
0.35

Investment (gains) losses, net
(0.01
)
 
0.01

 
(0.01
)
 
(0.10
)
 
(0.01
)
Income tax adjustments
(0.07
)
 
(0.02
)
 
(0.16
)
 
(0.45
)
 
(0.01
)
Non-GAAP diluted net income per share
$
2.29

 
$
1.83

 
$
2.05

 
$
7.87

 
$
6.76

 
 
 
 
 
 
 
 
 
 
Shares used in computing diluted net income per share
488,851

 
495,118

 
491,042

 
491,572

 
497,843


_________________________________________ 
* 
Adobe adopted ASU No. 2014-09, Revenue from Contracts with Customers, using the modified retrospective method during the first quarter of fiscal 2019. Prior period results have not been restated to reflect this change in accounting standards. Refer to our Form 10-K for fiscal year 2019 for additional information.












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Reconciliation of GAAP to Non-GAAP Financial Targets
(in millions, except per share data)

The following tables show Adobe's first quarter fiscal year 2020 financial targets reconciled to the non-GAAP financial targets included in this release.

 
First Quarter
Fiscal 2020
Diluted net income per share:
 
 
 
GAAP diluted net income per share
$
1.76

 
Stock-based and deferred compensation expense
 
0.46

 
Amortization of intangibles
 
0.19

 
Income tax adjustments
 
(0.18
)
 
Non-GAAP diluted net income per share
$
2.23

 
 
 
Shares used to compute diluted net income per share
489.0
 
 
 
First Quarter
Fiscal 2020
Effective income tax rate:
 
 
 
GAAP effective income tax rate
 
5.0

%
Stock-based and deferred compensation expense
 
(1.4
)
 
Amortization of intangibles
 
(0.6
)
 
Income tax adjustments
 
8.0

 
Non-GAAP effective income tax rate
 
11.0

%

The following table shows Adobe's annual fiscal year 2020 GAAP earnings per share target reconciled to the non-GAAP financial target included in this release.

 
Fiscal Year 2020
Diluted net income per share:
 
 
 
GAAP diluted net income per share
$
7.40

 
Stock-based and deferred compensation expense
 
1.99

 
Amortization of intangibles
 
0.74

 
Income tax adjustments
 
(0.38
)
 
Non-GAAP diluted net income per share
$
9.75

 
 
 
Shares used to compute diluted net income per share
486.0
 
 


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

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community and others to better understand and evaluate our operating results and future prospects in the same manner as management.

Adobe's management believes it is useful for itself and investors to review, as applicable, both GAAP information as well as non-GAAP measures, which may exclude items such as stock-based and deferred compensation expenses, restructuring and other charges, amortization of intangibles, investment gains and losses, the related tax impact of all of these items, income tax adjustments, and the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes. Adobe uses these non-GAAP measures in order to assess the performance of Adobe's business and for planning and forecasting in subsequent periods. Whenever such a non-GAAP measure is used, Adobe provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above.

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