Strong Results Include Record Adobe Document Cloud Performance; Company Increases Fiscal 2019 Targets

San Jose, Calif. – Adobe today reported financial results for its first quarter fiscal year 2019 ended March 1, 2019.

Adobe adopted revenue accounting standard Accounting Standards Codification (“ASC”) 606 for its fiscal year 2019. Financial targets provided by the company in Dec. 2018 were based on the prior revenue accounting standard ASC 605. This release reports results based on ASC 606, and where applicable results under the prior ASC 605 standard have been provided for comparison purposes against the company’s ASC 605-based targets.

Q1 FY2019 Financial Highlights Under ASC 606

• Adobe achieved quarterly revenue of $2.60 billion in its first quarter of fiscal year 2019. Diluted earnings per share was $1.36 on a GAAP-basis, and $1.71 on a non-GAAP basis.
• Digital Media segment revenue was $1.78 billion, with Creative revenue growing to $1.49 billion and Document Cloud achieving record revenue of $282 million. Digital Media Annualized Recurring Revenue (“ARR”) grew to $7.07 billion exiting the quarter, a quarter-over-quarter increase of $357 million. Creative ARR grew to $6.21 billion, and Document Cloud ARR grew to $856 million.
• Digital Experience segment revenue was a record $743 million.
• GAAP operating income in the first quarter was $695 million, and non-GAAP operating income was $985 million. GAAP net income was $674 million, and non-GAAP net income was $844 million.
• Cash flow from operations was $1.01 billion, and deferred revenue grew to $3.22 billion exiting the quarter.
• Adobe repurchased approximately 2.1 million shares during the quarter.

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 fueling the creative economy, driving the paper-to-digital revolution and enabling businesses to transform through our leadership in customer experience management,” said Shantanu Narayen, president and CEO, Adobe. "Our results in Q1 reflect continued momentum across Adobe Creative Cloud, Document Cloud and Experience Cloud."

“We’re off to a strong start in fiscal 2019, with record revenue, strong earnings and more than $1 billion of operating cash flow in our first quarter," said John Murphy, executive vice president and CFO, Adobe.

ASC 606 to ASC 605 Comparison

The following table summarizes Adobe’s financial results with a comparison to targets that Adobe previously provided based on ASC 605.

1 Adobe provided Q1 FY2019 targets on Dec. 13, 2018 based on ASC 605

Adobe Updates Fiscal Year 2019 Financial Targets Based on ASC 606

Adobe provided annual fiscal year 2019 financial targets on Dec. 13, 2018, based on ASC 605. The company is today updating these targets to be based on ASC 606, and to reflect first quarter reported results.

1 Includes annualized subscription value of SaaS, managed service and term offerings under contract for Analytics Cloud, Marketing Cloud and Magento Commerce Cloud

Adobe anticipates Q3 FY2019 and Q4 FY2019 year-over-year revenue growth rates to be similar to the growth rate implied in its Q2 FY2019 revenue target. As in prior years, the company expects summer seasonality which can lead to sequentially lower net new Digital Media ARR in Q3 FY2019, followed by typical year-end strength in Q4 FY2019. As the impact of lost deferred revenue due to purchase accounting from the acquisitions of Magento and Marketo tapers off during fiscal year 2019 and the business grows, Adobe expects quarterly operating margins to increase in the second half of 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 Second Quarter Fiscal Year 2019 Financial Targets

The following table summarizes Adobe’s second quarter fiscal year 2019 targets.

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 first quarter 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.