01—Abstract
Summary
Summary of the 10-K filed January 25, 2019. Cited figures are marked; the original filing is the authoritative source.
Adobe Inc. (ADBE) demonstrated robust growth in fiscal year 2018, driven primarily by its subscription-based Digital Media and expanding Digital Experience segments.
The company reported total revenue of $9.03 billiona, a 24% increase year-over-year, with Digital Media revenue growing 26% to $6.33 billion and Digital Experience revenue up 20% to $2.44 billion. This growth was fueled by strong adoption of Creative Cloud and Document Cloud, alongside strategic acquisitions like Marketo and Magento, which significantly bolstered the Digital Experience offerings. Adobe continues its strategic shift towards a recurring revenue model, with subscription revenue making up 88% of total revenue.
Annualized Recurring Revenue (ARR) for Digital Media reached $6.83 billionb, showcasing a healthy pipeline of future revenue. The company also reported a substantial increase in net income to $2.59 billion, a 53% rise year-over-year, reflecting operational efficiencies and the impact of tax reforms. Adobe's strong cash flow from operations supports ongoing investments in product development and strategic acquisitions, positioning it well for continued growth in the digital content and experience markets.
02—Key points
Key Highlights
- Total revenue increased by 24% to $9.03 billion in fiscal year 2018.
- Digital Media segment revenue grew 26% to $6.33 billion, driven by Creative Cloud subscriptions.
- Digital Experience segment revenue increased by 20% to $2.44 billion, boosted by acquisitions of Marketo and Magento.
- Subscription revenue represented 88% of total revenue, indicating a strong recurring revenue model.
- Net income surged by 53% to $2.59 billion, demonstrating improved profitability.
- Net cash provided by operating activities increased by 38% to $4.03 billion.
- The company repurchased a significant amount of its stock, totaling $2.05 billion in structured repurchases during fiscal year 2018.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Adobe Inc. kept $0.29.
- Revenue$9.03B100.0%
- Cost of revenue−$1.20B13.2%
- Gross profit$7.83B86.8%
- Operating costs−$5.00B55.3%
- Operating income$2.84B31.5%
- Interest, other & tax−$249.0M2.8%
- Net income$2.59B28.7%
Where FY2018 revenue went
$9.03B- Operating costs: $5.00B, 55% of revenue
- Net income: $2.59B, 29% of revenue
- Cost of revenue: $1.20B, 13% of revenue
- Interest, other & tax: $249.0M, 2.8% of revenue
Kept 29% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed January 25, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $9.03B$7.30B | +23.7% |
| Cost of Revenue | $1.20B$1.01B | +18.3% |
| Gross Profit | $7.83B$6.29B | +24.5% |
| Operating Expenses | $5.00B$4.12B | +21.2% |
| Operating Income | $2.84B$2.17B | +31.0% |
| Interest Expense | $89.00M$74.40M | +19.6% |
| Net Income | $2.59B$1.69B | +53.0% |
| EPS (Basic) | $5.28$3.43 | +53.9% |
| EPS (Diluted) | $5.20$3.38 | +53.8% |
| Shares Outstanding (Basic) | 490.60M493.63M | −0.6% |
| Shares Outstanding (Diluted) | 497.80M501.12M | −0.7% |
05—Questions
Frequently Asked Questions
What were the key growth drivers for Adobe in fiscal year 2018?
Adobe's growth in fiscal year 2018 was primarily driven by its subscription-based Digital Media segment, specifically the continued strong adoption of Creative Cloud and Document Cloud offerings. Additionally, the strategic acquisitions of Marketo and Magento significantly expanded and strengthened its Digital Experience segment.
How is Adobe's revenue mix shifting?
Adobe is increasingly focused on a recurring revenue model. Subscription revenue accounted for 88% of total revenue in fiscal year 2018, up from 84% in fiscal year 2017, highlighting a successful transition to a Software-as-a-Service (SaaS) and subscription-based business.
What is the significance of the Marketo and Magento acquisitions?
The acquisitions of Marketo (completed October 2018) and Magento (completed June 2018) were strategic moves to bolster Adobe's Digital Experience segment. Marketo, a marketing cloud platform, and Magento, a commerce platform, enhance Adobe's ability to offer comprehensive solutions for digital marketing, advertising, and commerce, strengthening its competitive position in these rapidly growing markets.
How did the U.S. Tax Act impact Adobe's financial results?
The Tax Cuts and Jobs Act (Tax Act) enacted in December 2017 had a significant impact, primarily reducing Adobe's effective tax rate from 21% in fiscal 2017 to 7% in fiscal 2018. This reduction was due to the lower U.S. federal statutory tax rate and other provisions of the act, leading to a substantial decrease in the provision for income taxes.
06—Continue