Adobe reported financial results for its fourth quarter and fiscal year 2018 ended Nov. 30, 2018. In its fourth quarter of fiscal year 2018, Adobe achieved record quarterly revenue of $2.46 billion, which represents 23 percent year-over-year growth. In fiscal year 2018, Adobe achieved record annual revenue of $9.03 billion, which represents 24 percent year-over-year growth.
"Adobe achieved record revenue of greater than $9 billion and delivered outstanding earnings performance in fiscal 2018," said Shantanu Narayen, president and CEO, Adobe. "In 2018 we made significant investments across our product portfolio, entered new markets, and made strategic acquisitions which we believe will fuel continued top and bottom-line performance.”
“We finished the year strong with record results across the board, meeting or exceeding all of our annual and quarterly targets which did not include Marketo,” said John Murphy, executive vice president and CFO, Adobe. “We’re excited to add Marketo and the expanded market opportunity it provides. We look forward to delivering strong revenue growth, accelerating earnings growth and healthy margin expansion during fiscal 2019.”
Adobe acquired Marketo, Inc. on Oct. 31, 2018, which added approximately $21 million of revenue in the fourth quarter. This press release provides key financial information with and without the impact of the Marketo transaction to enable evaluation of the Company’s performance based on financial targets provided before the acquisition.-
Fourth Quarter Fiscal Year 2018 Financial Results
|
| Q4 FY2018 Targets |
| Q4 FY2018 Results |
| Q4 FY2018 Results |
Total revenue |
| $2.42 billion |
| $2.44 billion |
| $2.46 billion |
GAAP EPS |
| $1.42 |
| $1.48 |
| $1.37 |
Non-GAAP EPS2 |
| $1.87 |
| $1.90 |
| $1.83 |
Digital Media segment revenue |
| ~22 percent y/y growth |
| 23 percent y/y growth |
| 23 percent y/y growth |
Digital Experience segment revenue |
| ~20 percent y/y growth |
| 22 percent y/y growth |
| 25 percent y/y growth |
Net new Digital Media Annualized Recurring Revenue (“ARR”) |
| ~$385 million |
| $430 million |
| $430 million |
1 Adobe provided Q4 FY2018 targets on Sept. 13, 2018 and reaffirmed them on Oct. 15, 2018, both of which preceded its acquisition of Marketo on Oct. 31, 2018 | ||||||
2 A reconciliation between GAAP and non-GAAP results is provided at the end of this press release and on Adobe’s website | ||||||
Other financial highlights in the fourth quarter of fiscal 2018 include:
Fiscal Year 2018 Financial Results
|
| FY2018 Targets |
| FY2018 Results |
Total revenue |
| $8.725 billion |
| $9.03 billion |
Digital Media segment revenue |
| ~23 percent y/y growth |
| 26 percent y/y growth |
Digital Experience segment revenue |
| ~15 percent y/y growth |
| 20 percent y/y growth |
Adobe Experience Cloud subscription revenue2 |
| ~20 percent y/y growth |
| 26 percent y/y growth |
Net new Digital Media Annualized Recurring Revenue (“ARR”) |
| ~$1.1 billion |
| $1.45 billion |
GAAP EPS |
| $4.40 |
| $5.20 |
Non-GAAP EPS3 |
| $5.50 |
| $6.76 |
1 Adobe provided annual FY2018 targets on Dec. 14, 2017 | ||||
2 Includes revenue from SaaS, managed service and term offerings for Analytics Cloud, Marketing Cloud and Magento Commerce Cloud, as well as total revenue for Adobe Advertising Cloud | ||||
3 A reconciliation between GAAP and non-GAAP results is provided at the end of this press release and on Adobe’s website | ||||
|
Other financial highlights in fiscal year 2018 include:
ASC 606 Update
Adobe will report its financial results based on Accounting Standards Coding Topic 606 (“ASC 606”) in its fiscal year 2019, beginning in March 2019 with its first quarter earnings report. The financial targets Adobe is providing today remain based on ASC 605 as the Company integrates its acquisition of Marketo into its financial systems. Adobe continues to believe that moving to 606 in fiscal year 2019 reporting will not materially impact its revenue. However, the Company now expects there will be a slight improvement to earnings through fiscal year 2019 due to benefits from capitalization of sales commissions.
Adobe Updates Financial Targets for Fiscal Year 2019 to Include Marketo
Adobe provided preliminary fiscal year 2019 financial targets at its Financial Analyst Meeting on Oct. 15, 2018, before it had closed its acquisition of Marketo. The Company today is updating those targets and providing earnings per share targets to reflect the impact of:
The following table and subsequent commentary summarizes Adobe’s annual fiscal year 2019 targets:
Adobe total fiscal year 2019 revenue |
| ~$11.150 billion | ||
Digital Media segment revenue |
| ~20 percent year-over-year growth | ||
Digital Experience segment revenue |
| ~34 percent year-over-year growth | ||
Digital Media annualized recurring revenue (“ARR”) |
| ~$1.450 billion of net new ARR | ||
Digital Experience annual subscription bookings1 |
| ~25 percent year-over-year growth | ||
Tax rate |
| GAAP: ~10 percent |
| Non-GAAP: ~11 percent |
Earnings per share |
| GAAP: ~$5.54 |
| Non-GAAP: ~$7.75 |
1 Includes annualized subscription value of SaaS, managed service and term offerings under contract for Analytics Cloud, Marketing Cloud and Magento Commerce Cloud | ||||
|
During fiscal year 2019, after the first quarter Adobe expects revenue in each quarter to grow by approximately the same year-over-year growth percentage implied in its targeted revenue for the year. In addition, the Company expects net new Digital Media ARR in each quarter to be sequentially similar as that achieved in past fiscal years from quarter to quarter – with typical summer seasonality which can lead to sequentially lower net new ARR in the third quarter, as well as normal year-end sequential strength in fourth quarter net new ARR.
As the financial impact of lost deferred revenue from recent acquisitions due to purchase accounting tapers off during fiscal year 2019, after the first quarter Adobe expects quarterly operating margins and quarterly earnings per share growth rates to increase sequentially during the year.
A reconciliation between GAAP and non-GAAP targets is provided at the end of this press release and on Adobe’s website.
Adobe Provides First Quarter Fiscal Year 2019 Financial Targets
The following table summarizes Adobe’s first quarter fiscal year 2019 targets:
Adobe total Q1 fiscal year 2019 revenue |
| ~$2.540 billion | ||
Digital Media segment revenue |
| ~20% year-over-year growth | ||
Digital Experience segment revenue |
| ~31% year-over-year growth | ||
Net non-operating other expense |
| ~$39 million | ||
Tax rate |
| GAAP: ~3% |
| Non-GAAP: ~11% |
Share count |
| ~495 million shares | ||
Earnings per share |
| GAAP: ~$1.14 |
| Non-GAAP: ~$1.60 |
Net new Digital Media annualized recurring revenue (“ARR”) |
| ~$330 million | ||
|
A reconciliation between GAAP and non-GAAP targets is provided at the end of this press release and on Adobe’s website.
Adobe to Webcast Earnings Conference Call
Adobe will webcast its fourth quarter and fiscal year 2018 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, our market opportunity, revenue, operating margin, the impact of new accounting standards, subscription bookings, seasonality, annualized recurring revenue, non-operating other expense, tax rate on a 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, risks associated with cyber-attacks, potential interruptions or delays in hosted services provided by us or third parties, information security and privacy, 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, 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 2017 ended Dec. 1, 2017, and Adobe's Quarterly Reports on Form 10-Q issued in fiscal year 2018.
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, 2018, which Adobe expects to file in Jan. 2019.
Adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements.