Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 01, 2019 | Mar. 22, 2019 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ADOBE INC. | |
Entity Central Index Key | 0000796343 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 1, 2019 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --11-29 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 487,950,943 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 01, 2019 | Nov. 30, 2018 | [1] |
Assets: | |||
Cash and cash equivalents | $ 1,738,846 | $ 1,642,775 | |
Short-term investments | 1,487,411 | 1,586,187 | |
Trade receivables, net of allowances for doubtful accounts of $14,639 and $14,981, respectively | 1,342,343 | 1,315,578 | |
Prepaid expenses and other current assets | 565,115 | 312,499 | |
Total current assets | 5,133,715 | 4,857,039 | |
Property and equipment, net | 1,104,065 | 1,075,072 | |
Goodwill | 10,707,715 | 10,581,048 | |
Purchased and other intangibles, net | 2,017,103 | 2,069,001 | |
Other assets | 542,938 | 186,522 | |
Total assets | 19,505,536 | 18,768,682 | |
Current liabilities: | |||
Trade payables | 145,292 | 186,258 | |
Accrued expenses | 1,167,429 | 1,163,185 | |
Debt | 892,754 | 0 | |
Income taxes payable | 24,422 | 35,709 | |
Deferred revenue | 3,083,839 | 2,915,974 | |
Total current liabilities | 5,313,736 | 4,301,126 | |
Long-term liabilities: | |||
Debt | 3,236,833 | 4,124,800 | |
Deferred revenue | 134,353 | 137,630 | |
Income taxes payable | 655,036 | 644,101 | |
Deferred income taxes | 125,660 | 46,702 | |
Other liabilities | 168,433 | 152,209 | |
Total liabilities | 9,634,051 | 9,406,568 | |
Stockholders' equity: | |||
Preferred stock, $0.0001 par value; 2,000 shares authorized, none issued | 0 | 0 | |
Common stock, $0.0001 par value; 900,000 shares authorized; 600,834 shares issued; 488,504 and 487,663 shares outstanding, respectively | 61 | 61 | |
Additional paid-in-capital | 5,857,440 | 5,685,337 | |
Retained earnings | 12,579,311 | 11,815,597 | |
Accumulated other comprehensive income (loss) | (150,432) | (148,130) | |
Treasury stock, at cost (112,330 and 113,171 shares, respectively), net of reissuances | (8,414,895) | (7,990,751) | |
Total stockholders’ equity | 9,871,485 | 9,362,114 | |
Total liabilities and stockholders' equity | $ 19,505,536 | $ 18,768,682 | |
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Mar. 01, 2019 | Nov. 30, 2018 |
Current assets: | ||
Allowances for doubtful accounts | $ 14,639 | $ 14,981 |
Stockholders' equity: | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 2,000 | 2,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 900,000 | 900,000 |
Common stock, shares issued | 600,834 | 600,834 |
Common stock, shares outstanding | 488,504 | 487,663 |
Treasury stock, shares | 112,330 | 113,171 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Revenue: | ||
Subscription | $ 2,304,967 | $ 1,793,358 |
Product | 170,554 | 171,608 |
Services and support | 125,425 | 113,981 |
Total revenue | 2,600,946 | 2,078,947 |
Cost of revenue: | ||
Subscription | 288,031 | 164,685 |
Product | 12,105 | 12,877 |
Services and support | 97,150 | 81,340 |
Total cost of revenue | 397,286 | 258,902 |
Gross profit | 2,203,660 | 1,820,045 |
Operating expenses: | ||
Research and development | 464,637 | 348,769 |
Sales and marketing | 781,518 | 580,957 |
General and administrative | 216,109 | 170,440 |
Amortization of purchased intangibles | 46,566 | 17,146 |
Total operating expenses | 1,508,830 | 1,117,312 |
Operating income | 694,830 | 702,733 |
Non-operating income (expense): | ||
Interest and other income (expense), net | 4,266 | 16,672 |
Interest expense | (40,593) | (19,899) |
Investment gains (losses), net | 43,831 | 2,996 |
Total non-operating income (expense), net | 7,504 | (231) |
Income before income taxes | 702,334 | 702,502 |
Provision for income taxes | 28,093 | 119,426 |
Net income | $ 674,241 | $ 583,076 |
Basic net income per share | $ 1.38 | $ 1.18 |
Shares used to compute basic net income per share | 488,056 | 492,061 |
Diluted net income per share | $ 1.36 | $ 1.17 |
Shares used to compute diluted net income per share | 494,188 | 499,433 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 01, 2019 | Mar. 02, 2018 | ||
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 674,241 | $ 583,076 | |
Available-for-sale securities: | |||
Unrealized gains / losses on available-for-sale securities | (12,402) | 23,150 | |
Reclassification adjustment for recognized gains / losses on available-for-sale securities | 125 | [1] | 121 |
Net increase (decrease) from available-for-sale securities | 12,527 | (23,029) | |
Derivatives designated as hedging instruments: | |||
Unrealized gains / losses on derivative instruments | (8,457) | (1,336) | |
Reclassification adjustment for recognized gains / losses on derivative instruments | (8,197) | [2] | (2,139) |
Net increase (decrease) from derivatives designated as hedging instruments | (16,654) | (3,475) | |
Foreign currency translation adjustments | 1,825 | 28,386 | |
Other comprehensive income (loss), net of taxes | (2,302) | 1,882 | |
Total comprehensive income, net of taxes | $ 671,939 | $ 584,958 | |
[1] | Reclassification adjustments for gains / losses on available-for-sale securities are classified in interest and other income (expense), net. | ||
[2] | Reclassification adjustments for gains / losses on derivative instruments are classified in revenue. |
Condensed Consolidated Statem_3
Condensed Consolidated Statement of Stockholders' Equity Statement - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | |
Beginning balances at Dec. 01, 2017 | $ 8,459,869 | $ 61 | $ 5,082,195 | $ 9,573,870 | $ (111,821) | $ (6,084,436) | |
Beginning balances, shares at Dec. 01, 2017 | 600,834 | ||||||
Beginning Treasury stock, shares at Dec. 01, 2017 | (109,572) | ||||||
Net income | 583,076 | 583,076 | |||||
Other comprehensive income (losses), net of tax | 1,882 | 1,882 | |||||
Re-issuance of treasury stock under stock compensation plans | (240,969) | (9,133) | (326,229) | $ 94,393 | |||
Re-issuance of treasury stock under stock compensation plans, shares | 3,245 | ||||||
Purchase of treasury stock | $ (300,000) | $ (300,000) | |||||
Purchase of treasury stock, shares | (1,600) | (1,627) | |||||
Stock-based compensation | $ 135,526 | 135,526 | |||||
Value of shares in deferred compensation plan | (5,038) | $ (5,038) | |||||
Impact of the U.S. Tax Cut and Jobs Act | (318) | (318) | |||||
Ending balances at Mar. 02, 2018 | 8,634,028 | $ 61 | 5,208,588 | 9,830,399 | (109,939) | $ (6,295,081) | |
Ending balances, shares at Mar. 02, 2018 | 600,834 | ||||||
Ending Treasury stock, shares at Mar. 02, 2018 | (107,954) | ||||||
Beginning balances at Nov. 30, 2018 | 9,362,114 | [1] | $ 61 | 5,685,337 | 11,815,597 | (148,130) | $ (7,990,751) |
Beginning balances, shares at Nov. 30, 2018 | 600,834 | ||||||
Beginning Treasury stock, shares at Nov. 30, 2018 | (113,171) | ||||||
Impacts of ASC 606 adoption | 442,319 | 442,319 | |||||
Net income | 674,241 | 674,241 | |||||
Other comprehensive income (losses), net of tax | (2,302) | (2,302) | |||||
Re-issuance of treasury stock under stock compensation plans | (280,981) | (8,008) | (352,846) | $ 79,873 | |||
Re-issuance of treasury stock under stock compensation plans, shares | 2,911 | ||||||
Purchase of treasury stock | $ (500,000) | $ (500,000) | |||||
Purchase of treasury stock, shares | (2,100) | (2,070) | |||||
Stock-based compensation | $ 180,111 | 180,111 | |||||
Value of shares in deferred compensation plan | (4,017) | $ (4,017) | |||||
Ending balances at Mar. 01, 2019 | $ 9,871,485 | $ 61 | $ 5,857,440 | $ 12,579,311 | $ (150,432) | $ (8,414,895) | |
Ending balances, shares at Mar. 01, 2019 | 600,834 | ||||||
Ending Treasury stock, shares at Mar. 01, 2019 | (112,330) | ||||||
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 01, 2019 | Mar. 02, 2018 | ||
Cash flows from operating activities: | |||
Net income | $ 674,241 | $ 583,076 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation, amortization and accretion | 144,898 | 76,522 | |
Stock-based compensation | 184,688 | 135,526 | |
Deferred income taxes | (18,810) | (431,494) | |
Unrealized losses (gains) on investments, net | (41,678) | (929) | |
Other non-cash items | 1,344 | 1,457 | |
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: | |||
Trade receivables, net | 64,544 | 154,398 | |
Prepaid expenses and other assets | (107,423) | (64,953) | |
Trade payables | (41,078) | 17,552 | |
Accrued expenses | (19,503) | (70,508) | |
Income taxes payable | 5,995 | 511,292 | |
Deferred revenue | 166,230 | 77,662 | |
Net cash provided by operating activities | 1,013,448 | 989,601 | |
Cash flows from investing activities: | |||
Purchases of short-term investments | 0 | (332,105) | |
Maturities of short-term investments | 96,322 | 153,885 | |
Proceeds from sales of short-term investments | 13,948 | 186,114 | |
Acquisitions, net of cash acquired | (99,817) | 0 | |
Purchases of property and equipment | (65,268) | (95,142) | |
Purchases of long-term investments, intangibles and other assets | (77,561) | (9,391) | |
Proceeds from sale of long-term investments and other assets | 458 | 2,877 | |
Net cash used for investing activities | (131,918) | (93,762) | |
Cash flows from financing activities: | |||
Purchases of treasury stock | (500,000) | (300,000) | |
Proceeds from issuance of treasury stock | 71,594 | 64,384 | |
Taxes paid related to net share settlement of equity awards | (352,575) | (305,353) | |
Repayment of capital lease obligations | (2,931) | (304) | |
Net cash used for financing activities | (783,912) | (541,273) | |
Effect of foreign currency exchange rates on cash and cash equivalents | (1,547) | 6,343 | |
Net increase in cash and cash equivalents | 96,071 | 360,909 | |
Cash and cash equivalents at beginning of period | 1,642,775 | [1] | 2,306,072 |
Cash and cash equivalents at end of period | 1,738,846 | 2,666,981 | |
Supplemental disclosures: | |||
Cash paid for income taxes, net of refunds | 51,887 | 31,107 | |
Cash paid for interest | $ 50,828 | $ 26,410 | |
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 01, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Significant Accounting Policies | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended November 30, 2018 on file with the SEC (our “Annual Report”). Recently Adopted Accounting Guidance On May 28, 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, Topic 606, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new revenue standard replaces most existing revenue recognition guidance in GAAP and permits the use of either the full retrospective or modified retrospective transition method. On December 1, 2018, the beginning of our fiscal year 2019, we adopted the requirements of the new revenue standard utilizing the modified retrospective method of transition. Prior period information has not been restated and continues to be reported under the accounting standard in effect for those periods. We applied the new revenue standard to contracts that were not completed as of the adoption date, consistent with the transition guidance. Further, adoption of the new revenue standard resulted in changes to our accounting policies for revenue recognition and sales commissions as detailed below. We recognized the following cumulative effects of initially applying the new revenue standard as of December 1, 2018: As of November 30, 2018 ASC 606 Adoption Adjustments As of December 1, 2018 Assets Trade receivables, net of allowances for doubtful accounts $ 1,315,578 $ 43,028 $ 1,358,606 Prepaid expenses and other current assets 312,499 186,220 498,719 Other assets 186,522 273,421 459,943 Liabilities and Stockholders’ Equity Accrued expenses 1,163,185 30,358 1,193,543 Deferred revenue, current 2,915,974 (52,842 ) 2,863,132 Deferred income taxes 46,702 82,834 129,536 Retained earnings $ 11,815,597 $ 442,319 $ 12,257,916 Below is a summary of the adoption impacts of the new revenue standard: • We capitalized $413.2 million of contract acquisition costs comprised of sales and partner commission costs at adoption date, with a corresponding adjustment to retained earnings. We are amortizing these costs over their respective expected period of benefit. • Revenue for certain contracts that were previously deferred would have been recognized in periods prior to adoption under the new standard. Upon adoption, we recorded the following adjustments to our beginning balances to reflect the amount of revenue that will no longer be recognized in future periods for such contracts: increase in unbilled receivables (included in trade receivables, net) of $24.8 million , increase in contract assets (included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion) of $46.4 million and a decrease in deferred revenue of $52.8 million , with corresponding adjustments to retained earnings. • We recorded an increase to our opening deferred income tax liability of $82.8 million , with a corresponding adjustment to retained earnings, to record the tax effect of the above adjustments. • Further, we had other impacts to various accounts which resulted to an immaterial net reduction to our retained earnings. Adoption of the new revenue standard impacted our condensed consolidated statement of income for three months ended March 1, 2019 as follows (in thousands, except per share amounts): As reported Adjustments Balances without ASC 606 adoption impact Revenue Subscription $ 2,304,967 $ 2,207 $ 2,307,174 Product 170,554 (22,880 ) 147,674 Services and support 125,425 (771 ) 124,654 Total revenue 2,600,946 (21,444 ) 2,579,502 Operating expenses Sales and marketing 781,518 8,868 790,386 Provision for income taxes 28,093 (1,210 ) 26,883 Net income $ 674,241 $ (29,053 ) $ 645,188 Basic net income per share $ 1.38 $ (0.06 ) $ 1.32 Diluted net income per share $ 1.36 $ (0.05 ) $ 1.31 Adoption of the new revenue standard impacted our condensed consolidated balance sheets as of March 1, 2019 as follows (in thousands): As reported Adjustments Balances without ASC 606 adoption impact Assets Trade receivables, net of allowances for doubtful accounts $ 1,342,343 $ (48,662 ) $ 1,293,681 Prepaid expenses and other current assets 565,115 (195,006 ) 370,109 Other assets 542,938 (287,165 ) 255,773 Liabilities and Stockholders’ Equity Accrued expenses 1,167,429 (37,547 ) 1,129,882 Deferred revenue, current 3,083,839 68,206 3,152,045 Deferred revenue, long-term 134,353 (6,076 ) 128,277 Deferred income taxes 125,660 (84,044 ) 41,616 Retained earnings $ 12,579,311 $ (471,372 ) $ 12,107,939 There was no net impact to our condensed consolidated statements of comprehensive income and cash flows from operating, financing or investing activities on the condensed consolidated cash flows resulting from the adoption of the new revenue standard other than the impact to reported net income as presented above. The impact to our condensed consolidated statement of stockholders’ equity was only to retained earnings, as presented above. The most significant impact of the new revenue standard relates to our capitalization of certain incremental costs to acquire contracts and the requirement to amortize these amounts over the expected period of benefit. Under the previous standard, we expensed costs related to the acquisition of revenue-generating contracts as incurred. Additionally, there was impact from arrangements with our customers that include on-premise term-based software licenses bundled with maintenance and support. Under the previous standard, revenue attributable to these software licenses was recognized ratably over the term of the arrangement because vendor-specific objective evidence (“VSOE”) did not exist for the undelivered maintenance and support element as it is not sold separately. The requirement to have VSOE for undelivered elements to enable the separation of revenue recognition for delivered software licenses is eliminated under the new revenue standard. Accordingly, under the new revenue standard we recognize as revenue a portion of the arrangement fee upon delivery of the software licenses and classify that recognized revenue as product revenue instead of subscription revenue in our condensed consolidated statements of income. Other impacts to our policies and disclosures include earlier recognition of revenue for certain contracts due to the elimination of contingent revenue limitations, the requirement to estimate variable consideration for certain arrangements, increased allocation of revenue to and from professional services and other offerings and changes to our financial statement disclosures such as new disclosures related to our remaining performance obligations. However, the timing and pattern of revenue recognition related to our professional services and cloud-enabled offerings, including Creative Cloud and Document Cloud for enterprises, individuals and teams, remain substantially unchanged. When Creative Cloud and Document Cloud are sold with cloud-enabled services, the on-premise/on-device software licenses and cloud-enabled services are so highly interrelated and interdependent that they are not each separately identifiable within the context of the contract and therefore not distinct from each other. Revenue for these offerings continues to be recognized ratably over the subscription period for which the cloud-enabled services are provided. Significant Accounting Policies Revenue Recognition For revenue recognition policies under Accounting Standards Codification Topic 605, refer to Note 1. Basis of Presentation and Significant Accounting Policies in our Annual Report. Our revenue is derived from the sale of cloud-enabled software subscriptions, cloud-hosted offerings, term-based, royalty, and perpetual software licenses, associated software maintenance and support plans, consulting services, training and technical support. Most of our enterprise customer arrangements involve multiple promises to our customers. Revenue is recognized when a contract exists between us and a customer and upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which may be capable of being distinct and accounted for as separate performance obligations, or in the case of offerings such as Creative Cloud and Document Cloud, accounted for as a single performance obligation. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. Product, Subscription, and Services Offerings We enter into revenue arrangements in which a customer may purchase a combination of cloud-enabled subscriptions, cloud-hosted offerings, term-based, royalty, and perpetual software licenses, associated software maintenance and support plans, consulting services, training and technical support. Fully hosted subscription services (Software-as-a-Service) allow customers to access hosted software during the contractual term without taking possession of the software. Cloud-hosted subscription services may be sold on a fee-per-subscription period basis, or based on consumption or usage. We recognize revenue ratably over the contractual service term for hosted services that are priced based on a committed number of transactions where the delivery and consumption of the benefit of the services occur evenly over time, beginning on the date the services associated with the committed transactions are first made available to the customer and continuing through the end of the contractual service term. Over-usage fees and fees based on the actual number of transactions, are billed in accordance with contract terms as these fees are typically incurred and are included in the transaction price of an arrangement as variable consideration. Fees based on a number of transactions or impressions per month, where invoicing is aligned to the pattern of performance, customer benefit, and consumption, are typically accounted for utilizing the “as-invoiced” practical expedient. Revenue for subscriptions sold as a fee per period is recognized ratably over the contractual term as the customer simultaneously receives and consumes the benefit of the underlying service. When cloud-enabled services are highly integrated and interrelated with on-premise software, such as in our cloud-enabled Creative Cloud and Document Cloud offerings, the individual components are not considered distinct and revenue is recognized ratably over the subscription period for which the cloud-enabled services are provided. Licenses for on-premise software may be purchased on a perpetual basis, as a subscription for a fixed period of time or based on usage for certain of our OEM and royalty agreements. Revenue from distinct on-premise licenses is recognized at the point in time the software is available to the customer, provided all other revenue recognition criteria are met, and classified as product revenue on the condensed consolidated statements of income. Some of our enterprise license arrangements allow customers to commit non-cancellable funds. These non-cancellable committed funds are nonrefundable and provide our customers options to either renew monthly on-premise term-based licenses or use some or all funds to purchase other Adobe products or services. Revenue associated with these monthly term-based licenses is classified as subscription revenue. Our services and support revenue is composed of consulting, training, and maintenance and support, primarily related to our enterprise offerings. Our support revenue also includes technical support and developer support to partners and developer organizations related to our desktop products. We typically sell our consulting contracts on a time-and-materials basis and recognize the related revenue as services are rendered. We typically sell our maintenance and support contracts on a flat fee or percentage of associated license fees basis and recognize the related revenue ratably over the support term as the underlying service is a stand-ready performance obligation. We exclude from the transaction price sales and other taxes collected from customers on behalf of the relevant government authority. Most of our products are delivered electronically, however in instances where shipping and handling costs are incurred, we treat these amounts as costs to fulfill the contract and they are not considered a performance obligation and the associated fees are not included in the transaction price. Judgments Our contracts with customers may include multiple goods and services. For example, some of our offerings include both on-premise and/or on-device software licenses and cloud services. Determining whether the software licenses and the cloud services are distinct from each other, and therefore performance obligations to be accounted for separately, or not distinct from each other, and therefore part of a single performance obligation, may require significant judgment. We have concluded that the on-premise/on-device software licenses and cloud services provided in our Creative Cloud and Document Cloud subscription offerings are not distinct from each other such that revenue from each offering should be recognized ratably over the subscription period for which the cloud services are provided. In reaching this conclusion, we considered the nature of our promise to Creative Cloud and Document Cloud customers, which is to provide a complete end-to-end creative design or document workflow solution that operates seamlessly across multiple devices and teams. We fulfill this promise by providing access to a solution that integrates cloud-based and on-premise/on-device features that, together through their integration, provide functionalities, utility and workflow efficiencies that could not be obtained from either the on-premise/on-device software or cloud services on their own. Standalone selling price is established by maximizing the amount of observable inputs, primarily actual historical selling prices for performance obligations where available, and includes consideration of factors such as go-to-market model and geography. Individual products may have multiple values for standalone selling price depending on factors such as where they are sold and what channel they are sold through. Where standalone selling price may not be directly observable (e.g., the performance obligation is not sold separately), we maximize the use of observable inputs by using information that may include reviewing pricing practices, performance obligations with similar customers and selling models. Capitalized costs to obtain a contract are amortized over the expected period of benefit, which we have determined, based on analysis, to be 5 years . We evaluated qualitative and quantitative factors to determine the period of amortization, including contract length, renewals, customer life and the useful lives of our products and acquired products. When the expected period of benefit of an asset which would be capitalized is less than one year, we expense the amount as incurred, utilizing the practical expedient. We regularly evaluate whether there have been changes in the underlying assumptions and data used to determine the amortization period. We offer limited rights of return, rebates and price protection of our products under various policies and programs with our distributors, resellers and/or end-user customers. We estimate and record reserves for these programs as variable consideration when estimating transaction price. Returns, rebates and other offsets to transaction price are estimated at contract inception on a portfolio basis and assessed for reasonableness each reporting period when additional information becomes available. General Contract Provisions We maintain revenue reserves for rebates, rights of return, or other limited price adjustments. Distributors are allowed limited rights of return of products purchased during the previous quarter. In addition, distributors are allowed to return products that have reached the end of their lives, as defined by us, and for products that are being replaced by new versions. We offer rebates to our distributors, resellers and/or end user customers. Transaction price is reduced for these amounts based on actual performance against objectives set forth by us for a particular reporting period, such as volume and timely reporting. On a quarterly basis, the amount of revenue that is reserved is calculated based on our historical trends and data specific to each reporting period. The primary method of establishing these reserves is to review historical data from prior periods as a percent of revenue to determine a historical reserve rate. We then apply the historical rate to the current period revenue as a basis for estimating future returns. When necessary, we also provide a specific reserve in excess of portfolio-level estimated requirements. This estimate can be affected by the amount of a particular product in the channel, the rate of sell-through, product plans and other factors. Although our subscription contracts are generally non-cancellable, a limited number of customers have the right to cancel their contracts by providing prior written notice to us of their intent to cancel the remainder of the contract term and consumers have a period of time to terminate certain agreements without penalty. In the event a customer cancels their contract, they are generally not entitled to a refund for prior services we have provided to them. Contracts that include termination rights without substantive penalty are accounted for as contracts only for the committed period. Periods of time after the right of termination are accounted for as optional purchases when they do not represent material rights. For certain of our usage-based license agreements, typically in our royalty and OEM businesses, reporting may be received after the end of a fiscal period. In such instances, we estimate and accrue license revenue. We base our estimates on multiple factors, including historical sales information, seasonality and other business information which may impact our estimates. We do not estimate variable consideration for our sales and usage-based license royalty agreements, consistent with the associated practical expedient under the new revenue standard. Recent Accounting Pronouncements Not Yet Effective On February 24, 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases with a lease term of twelve months or less. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date of the new leases standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new leases standard is effective for us beginning in the first quarter of fiscal 2020, and we will not early adopt. The new leases standard must be adopted using a modified retrospective transition method and allows for the application of the new guidance at the beginning of the earliest comparative period presented or at the adoption date. In July 2018, the FASB issued ASU No. 2018-11, Leases - Targeted Improvements, providing an optional transition method that allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We intend to adopt the new leases standard using this optional transition method. While we are continuing to assess the potential impacts of the standard, we currently expect the most significant impact will be the recognition of right-of-use assets and lease liabilities on our balance sheet. We are implementing a new lease accounting system and are updating our processes in preparation for the adoption of the new leases standard. On August 28, 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging, requiring expanded hedge accounting for both non-financial and financial risk components and refining the measurement of hedge results to better reflect an entity’s hedging strategies. For example, adoption would result in reclassification of hedge costs from foreign currency hedges from interest and other income (expense), net to revenue in our statements of income. The updated standard also amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment recorded to opening retained earnings as of the initial adoption date. The updated standard is effective for us beginning in the first quarter of fiscal 2020, which is when we plan to adopt the standard. We are currently evaluating the effect that the updated standard will have on our condensed consolidated financial statements and related disclosures. With the exception of the new standards discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 1, 2019 |
Revenue (Notes)
Revenue (Notes) | 3 Months Ended |
Mar. 01, 2019 | |
Revenue [Abstract] | |
Revenue | REVENUE Revenue in the first quarter of fiscal 2019 presented below is in accordance with a new revenue standard that was adopted under the modified retrospective method. Prior period revenue has not been restated. Our segment results for the three months ended March 1, 2019 and March 2, 2018 were as follows (dollars in thousands): Digital Media Digital Experience Publishing Total Three months ended March 1, 2019 Revenue $ 1,776,643 $ 743,276 $ 81,027 $ 2,600,946 Cost of revenue 68,195 323,708 5,383 397,286 Gross profit $ 1,708,448 $ 419,568 $ 75,644 $ 2,203,660 Gross profit as a percentage of revenue 96 % 56 % 93 % 85 % Three months ended March 2, 2018 Revenue $ 1,460,561 $ 554,107 $ 64,279 $ 2,078,947 Cost of revenue 55,469 198,792 4,641 258,902 Gross profit $ 1,405,092 $ 355,315 $ 59,638 $ 1,820,045 Gross profit as a percentage of revenue 96 % 64 % 93 % 88 % Revenue by geographic area for the three months ended March 1, 2019 and March 2, 2018 is as follows (in thousands): 2019 2018 Americas $ 1,509,895 $ 1,170,681 EMEA 702,961 587,268 APAC 388,090 320,998 Total $ 2,600,946 $ 2,078,947 Revenue by major offerings in our Digital Media reportable segment for the three months ended March 1, 2019 and March 2, 2018 is as follows (in thousands): 2019 2018 Creative Cloud $ 1,494,888 $ 1,229,496 Document Cloud 281,755 231,065 Total $ 1,776,643 $ 1,460,561 Subscription revenue by segment for the three months ended March 1, 2019 and March 2, 2018 is as follows (in thousands): 2019 2018 Digital Media $ 1,663,639 $ 1,334,659 Digital Experience 611,928 430,867 Publishing 29,400 27,832 Total $ 2,304,967 $ 1,793,358 Contract Balances Trade Receivables A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is required before payment of consideration is due. Timing of revenue recognition may differ from the timing of invoicing to customers. Certain performance obligations may require payment before delivery of the license or service to the customer. Included in trade receivables on the condensed consolidated balance sheets are unbilled receivable balances which have not yet been invoiced, and are typically related to license revenue or services which are delivered prior to invoicing occurring. The opening balance of trade receivables, net of allowances for doubtful accounts, as of December 1, 2018 was $1.36 billion , inclusive of unbilled receivables of $105.8 million . As of March 1, 2019 , the balance of trade receivables, net of allowances for doubtful accounts, was $1.34 billion , inclusive of unbilled receivables of $93.4 million . Allowance for Doubtful Accounts We maintain an allowance for doubtful accounts which reflects our best estimate of potentially uncollectible trade receivables. The allowance is based on both specific and general reserves. We regularly review our trade receivables allowance by considering such factors as historical experience, credit-worthiness, the age of the trade receivable balances and current economic conditions that may affect a customer’s ability to pay and we specifically reserve for those deemed uncollectible. As of March 1, 2019 and December 1, 2018, allowance for doubtful accounts was $14.6 million and $15.0 million , respectively. Contract Assets A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract assets are typically related to subscription and hosted service contracts where the transaction price allocated to the satisfied performance obligations exceeds the value of billings to date. Contract assets are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion on the condensed consolidated balance sheets. The opening balance of contract assets as of December 1, 2018 was $46.4 million . As of March 1, 2019 , the balance of contract assets was $47.7 million . Deferred Revenue and Remaining Performance Obligations Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from subscription services, including non-cancellable and non-refundable committed funds and deposits. Deferred revenue is recognized as revenue when transfer of control to customers has occurred. Customers are typically invoiced for these agreements in regular installments and revenue is recognized ratably over the contractual subscription period. The deferred revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing, size and new business linearity within the quarter. Deferred revenue does not represent the total contract value of annual or multi-year non-cancellable subscription agreements. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, such as invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period, and not to receive financing from our customers. Any potential financing fees are considered insignificant in the context of our contracts. The adjusted opening balance of deferred revenue as of December 1, 2018 was $3.00 billion . As of March 1, 2019 , the balance of deferred revenue was $3.22 billion , inclusive of $602.3 million of non-cancellable and non-refundable committed funds and $73.0 million refundable customer deposits. Arrangements with non-cancellable and non-refundable committed funds provide our customers options to either renew monthly on-premise term-based licenses or use some or all funds to purchase other Adobe products or services. Refundable customer deposits represent arrangements in which the customer has a unilateral cancellation right for which we are obligated to refund amounts paid related to products or services not yet delivered or provided at the time of cancellation on a prorated basis. Significant movements in the deferred revenue balance during the period consisted of increases due to payments received prior to transfer of control of the underlying performance obligations to the customer and deferred revenue assumed through business combinations, which were offset by decreases due to revenue recognized in the period. During the three months ended March 1, 2019 , $1.36 billion of revenue was recognized that was included in the deferred revenue balance at the beginning of the period. Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price allocated to the remaining performance obligation is influenced by several factors, including the timing of renewals and average contract terms. We applied practical expedients to exclude amounts related to performance obligations that are billed and recognized as they are delivered, optional purchases that do not represent material rights, sales- and usage-based royalties not yet consumed and any estimated amounts of variable consideration that are subject to constraint in accordance with the new revenue standard. Remaining performance obligations were approximately $8.13 billion as of March 1, 2019 , which includes $602.3 million of non-cancellable committed funds related to some of our enterprise customer agreements. Approximately 73% of the remaining performance obligations, excluding the aforementioned enterprise customer agreements, are expected to be recognized over the next 12 months with the remainder recognized thereafter. Contract Acquisition Costs We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs meet the requirements to be capitalized. The costs capitalized under the new revenue standard are primarily sales commissions paid to our sales force personnel. Capitalized costs may also include portions of fringe benefits and payroll taxes associated with compensation for incremental costs to acquire customer contracts and incentive payments to partners. Capitalized costs to obtain a contract are amortized over the expected period of benefit, which we have determined, based on analysis, to be 5 years . Amortization of capitalized costs are included in our sales and marketing expense in our condensed consolidated statements of income. The opening balance of capitalized contract acquisition costs as of December 1, 2018 was $413.2 million . As of March 1, 2019 , the balance of capitalized contract acquisition costs was $434.4 million , of which $287.2 million was long-term and included in other assets in the condensed consolidated balance sheets. The remaining balance of the capitalized costs to obtain contracts were current and included in prepaid expenses and other current assets. Refund Liabilities As part of our revenue reserves, we record refund liabilities for amounts that may be subject to future refunds, which include sales returns reserves and customer rebates and credits. Refund liabilities are included in accrued expenses on the condensed consolidated balance sheets. The opening balance of refund liabilities as of December 1, 2018 was $75.3 million . As of March 1, 2019 , the balance of refund liabilities was $87.1 million |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 01, 2019 | |
Business Combinations [Abstract] | |
ACQUISITIONS | NOTE 3. ACQUISITIONS Allegorithmic On January 23, 2019 , we completed the acquisition of Allegorithmic, a privately held 3D editing and authoring software company for gaming and entertainment. Prior to the acquisition, we held an equity interest that was accounted for as an equity-method investment. We acquired the remaining equity interest for approximately $105.3 million in cash consideration. The total purchase price, inclusive of the acquisition-date fair-value of our pre-existing equity interest, was approximately $159.7 million . During the first quarter of fiscal 2019, we began integrating Allegorithmic into our Digital Media reportable segment. In conjunction with the acquisition, we separately recognized an investment gain of approximately $41.5 million , which represents the difference between the acquisition-date fair value of our pre-existing equity interest, $54.4 million , and our previous carrying amount. Under the acquisition method of accounting, the total purchase price was preliminarily allocated to Allegorithmic’s net tangible and intangible assets based upon their estimated fair values as of January 23, 2019 . The total purchase price for Allegorithmic was preliminarily allocated to goodwill that is non-deductible for tax purposes of $124.5 million and to identifiable intangible assets of $45.0 million , with the remaining amount representing net liabilities assumed. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of valuation analyses pertaining to intangible assets acquired and tax liabilities assumed including the calculation of deferred tax assets and liabilities. Pro forma financial information has not been presented for this acquisition as the impact to our condensed consolidated financial statements was not material. Marketo On October 31, 2018 , we completed the acquisition of Marketo, a privately held marketing cloud platform company, for approximately $4.73 billion of cash consideration. Adding Marketo’s engagement platform to Adobe Experience Cloud furthers our long-term plan for strategic growth in the Digital Experience segment and enables us to offer a comprehensive set of solutions to enable customers across industries and companies automate and orchestrate their marketing activities. Under the terms of the Share Purchase Agreement (“Purchase Agreement”), we acquired all of the issued and outstanding shares of capital stock of Milestone Topco, Inc., a Delaware corporation (“Topco”) and indirect parent company of Marketo, and other equity interests in Marketo. In connection with the acquisition, each Marketo equity award that was issued and outstanding was cancelled and extinguished in exchange for cash consideration. Also pursuant to the Purchase Agreement, upon closing of the transaction, cash was paid for the settlement of Marketo’s long-term incentive plan, the settlement of Marketo’s indebtedness and the acquisition of all remaining equity interests in Marketo K.K., a Japanese corporation and joint venture. In connection with the acquisition of Marketo, we entered into a credit agreement providing for a $2.25 billion senior unsecured term loan (“Term Loan”). The proceeds of the Term Loan were used to (i) fund a portion of the purchase price of the acquisition and (ii) to pay fees and expenses incurred in connection with the acquisition. The Term Loan funds were received on October 31, 2018 upon closing of the acquisition and will mature 18 months following the initial funding date. See Note 14 for further details regarding our debt. Following the closing, we began integrating Marketo into our Digital Experience reportable segment and have included the financial results of Marketo in our consolidated financial statements beginning on the acquisition date. The amounts of net revenue and net loss of Marketo included in our consolidated statements of income from the acquisition date through November 30, 2018 were not material. The direct transaction costs associated with the acquisition were also not material. Purchase Price Allocation Under the purchase accounting method, the total preliminary purchase price was allocated to Marketo’s net tangible and intangible assets based upon their estimated fair values as of the acquisition date. The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill. During the first quarter of fiscal 2019, we recorded immaterial purchase accounting adjustments based on changes to management’s estimates and assumptions in regards to total estimated purchase price, identifiable intangible assets, net liabilities assumed and their related impact to goodwill. The table below represents the preliminary purchase price allocation to the acquired net tangible and intangible assets of Marketo based on their estimated fair values as of the acquisition date and the associated estimated useful lives at that date. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of valuation analyses pertaining tax liabilities assumed including the calculation of deferred tax assets and liabilities. (in thousands) Amount Weighted Average Useful Life (years) Customer contracts and relationships $ 577,900 11 Purchased technology 444,500 7 Backlog 105,800 2 Non-competition agreements 12,100 2 Trademarks 328,500 9 Total identifiable intangible assets 1,468,800 Net liabilities assumed (194,588 ) N/A Goodwill (1) 3,458,556 N/A Total estimated purchase price $ 4,732,768 _________________________________________ (1) Non-deductible for tax-purposes. Identifiable intangible assets —Customer relationships consist of Marketo’s contractual relationships and customer loyalty related to their enterprise and commercial customers as well as technology partner relationships. The estimated fair value of the customer contracts and relationships was determined based on projected cash flows attributable to the asset. Purchased technology acquired primarily consists of Marketo’s cloud-based engagement marketing software platform. The estimated fair value of the purchased technology was determined based on the expected future cost savings resulting from ownership of the asset. Backlog relates to subscription contracts and professional services. Non-compete agreements include agreements with key Marketo employees that preclude them from competing against Marketo for a period of two years from the acquisition date. Trademarks include the Marketo trade name, which is well known in the marketing ecosystem. We amortize the fair value of these intangible assets on a straight-line basis over their respective estimated useful lives. Goodwill —Approximately $3.46 billion has been allocated to goodwill, and has been allocated in full to the Digital Experience reportable segment. Goodwill represents the excess of the purchase price over the fair value of the underlying acquired net tangible and intangible assets. The factors that contributed to the recognition of goodwill included securing buyer-specific synergies that increase revenue and profits and are not otherwise available to a marketplace participant, acquiring a talented workforce and cost savings opportunities. Net liabilities assumed —Marketo’s tangible assets and liabilities as of October 31, 2018 were reviewed and adjusted to their fair value as necessary. The net liabilities assumed included, among other items, $102.6 million in accrued expenses, $74.8 million in deferred revenue and $182.6 million in deferred tax liabilities, which were partially offset by $54.9 million in cash and cash equivalents and $71.6 million in trade receivables acquired. Deferred revenue —Included in net liabilities assumed is Marketo’s deferred revenue which represents advance payments from customers related to subscription contracts and professional services. We estimated our obligation related to the deferred revenue using the cost build-up approach. The cost build-up approach determines fair value by estimating the direct and indirect costs related to supporting the obligation plus an assumed operating margin. The sum of the costs and assumed operating profit approximates, in theory, the amount that Marketo would be required to pay a third party to assume the obligation. The estimated costs to fulfill the obligation were based on the near-term projected cost structure for subscription and professional services. As a result, we recorded an adjustment to reduce Marketo’s carrying value of deferred revenue to $74.8 million , which represents our estimate of the fair value of the contractual obligations assumed based on a preliminary valuation. Taxes —As part of our accounting for the Marketo acquisition, a portion of the overall purchase price was allocated to goodwill and acquired intangible assets. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Thus, approximately $348.8 million , included in the net liabilities assumed, was established as a deferred tax liability for the future amortization of the intangible assets, and was partially offset by other tax assets of $166.2 million , which primarily consist of net operating loss carryforwards. Any impairment charges made in the future associated with goodwill will not be tax deductible and will result in an increased effective income tax rate in the quarter the impairment is recorded. Magento On June 18, 2018 , we completed our acquisition of Magento Commerce (“Magento”), a privately-held commerce platform company. During the third quarter of fiscal 2018, we began integrating Magento into our Digital Experience reportable segment. The table below represents the preliminary purchase price allocation to the acquired net assets of Magento based on their estimated fair values as of June 18, 2018 and the associated estimated useful lives at that date. During the first quarter of fiscal 2019, we recorded immaterial purchase accounting adjustments based on changes to management’s estimates and assumptions in regards to net liabilities assumed and their related impact to goodwill. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of valuation analyses pertaining to tax liabilities assumed including the calculation of deferred tax assets and liabilities. (in thousands) Amount Weighted Average Useful Life (years) Customer contracts and relationships $ 208,000 8 Purchased technology 84,200 5 In-process research and development (1) 39,100 N/A Trademarks 21,100 3 Other intangibles 43,400 3 Total identifiable intangible assets 395,800 Net liabilities assumed (68,182 ) N/A Goodwill (2) 1,316,983 N/A Total estimated purchase price $ 1,644,601 _________________________________________ (1) Capitalized as purchased technology and are considered indefinite lived until the completion or abandonment of the associated research and development efforts. As of the reporting date, one of the associated in-process research and development efforts was completed and another one was abandoned. The respective related amortization and write-off were each immaterial. (2) |
Cash, Cash Equivalents and Shor
Cash, Cash Equivalents and Short-Term Investments | 3 Months Ended |
Mar. 01, 2019 | |
Cash, Cash Equivalents, and Short-term Investments [Abstract] | |
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. We classify all of our cash equivalents and short-term investments as “available-for-sale.” In general, these investments are free of trading restrictions. We carry these investments at fair value, based on quoted market prices or other readily available market information. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in our condensed consolidated balance sheets. Gains and losses are recognized when realized in our condensed consolidated statements of income. When we have determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in income. Gains and losses are determined using the specific identification method. Cash, cash equivalents and short-term investments consisted of the following as of March 1, 2019 (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 341,359 $ — $ — $ 341,359 Cash equivalents: Money market mutual funds 1,383,033 — — 1,383,033 Time deposits 14,454 — — 14,454 Total cash equivalents 1,397,487 — — 1,397,487 Total cash and cash equivalents 1,738,846 — — 1,738,846 Short-term fixed income securities: Asset-backed securities 33,623 — (185 ) 33,438 Corporate debt securities 1,445,943 129 (12,576 ) 1,433,496 Foreign government securities 2,399 — (13 ) 2,386 Municipal securities 18,248 — (157 ) 18,091 Total short-term investments 1,500,213 129 (12,931 ) 1,487,411 Total cash, cash equivalents and short-term investments $ 3,239,059 $ 129 $ (12,931 ) $ 3,226,257 Cash, cash equivalents and short-term investments consisted of the following as of November 30, 2018 (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 368,564 $ — $ — $ 368,564 Cash equivalents: Money market mutual funds 1,234,188 — — 1,234,188 Time deposits 40,023 — — 40,023 Total cash equivalents 1,274,211 — — 1,274,211 Total cash and cash equivalents 1,642,775 — — 1,642,775 Short-term fixed income securities: Asset-backed securities 41,875 — (367 ) 41,508 Corporate debt securities 1,546,860 44 (24,696 ) 1,522,208 Foreign government securities 4,179 — (24 ) 4,155 Municipal securities 18,601 1 (286 ) 18,316 Total short-term investments 1,611,515 45 (25,373 ) 1,586,187 Total cash, cash equivalents and short-term investments $ 3,254,290 $ 45 $ (25,373 ) $ 3,228,962 See Note 5 for further information regarding the fair value of our financial instruments. The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in an unrealized loss position for less than twelve months, as of March 1, 2019 and November 30, 2018 (in thousands): 2019 2018 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate debt securities $ 67,201 $ (137 ) $ 538,109 $ (7,966 ) Asset-backed securities 36 — 6,696 (54 ) Municipal securities 1,854 (6 ) 6,599 (81 ) Total $ 69,091 $ (143 ) $ 551,404 $ (8,101 ) There were 45 securities and 369 securities in an unrealized loss position for less than twelve months at March 1, 2019 and at November 30, 2018 , respectively. The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that were in a continuous unrealized loss position for more than twelve months, as of March 1, 2019 and November 30, 2018 (in thousands): 2019 2018 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate debt securities $ 1,318,108 $ (12,439 ) $ 969,701 $ (16,730 ) Asset-backed securities 30,209 (185 ) 34,812 (313 ) Municipal securities 16,053 (151 ) 11,532 (205 ) Foreign government securities 2,385 (13 ) 4,154 (24 ) Total $ 1,366,755 $ (12,788 ) $ 1,020,199 $ (17,272 ) There were 818 securities and 577 securities in an unrealized loss position for more than twelve months at March 1, 2019 and at November 30, 2018 , respectively. The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated effective maturities as of March 1, 2019 (in thousands): Amortized Cost Estimated Fair Value Due within one year $ 642,860 $ 640,549 Due between one and two years 562,585 556,764 Due between two and three years 190,095 187,312 Due after three years 104,673 102,786 Total $ 1,500,213 $ 1,487,411 We review our debt securities classified as short-term investments on a regular basis to evaluate whether or not any security has experienced an other-than-temporary decline in fair value. We consider factors such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer and our intent to sell, or whether it is more likely than not we will be required to sell the investment before recovery of the investment’s amortized cost basis. If we believe that an other-than-temporary decline exists in one of these securities, we write down these investments to fair value. The portion of the write-down related to credit loss would be recorded to interest and other income, net in our condensed consolidated statements of income. Any portion not related to credit loss would be recorded to accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in our condensed consolidated balance sheets. During the three months ended March 1, 2019 and March 2, 2018 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 01, 2019 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis We measure certain financial assets and liabilities at fair value on a recurring basis. There have been no transfers between fair value measurement levels during the three months ended March 1, 2019 . The fair value of our financial assets and liabilities at March 1, 2019 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Cash equivalents: Money market mutual funds $ 1,383,033 $ 1,383,033 $ — $ — Time deposits 14,454 14,454 — — Short-term investments: Asset-backed securities 33,438 — 33,438 — Corporate debt securities 1,433,496 — 1,433,496 — Foreign government securities 2,386 — 2,386 — Municipal securities 18,091 — 18,091 — Prepaid expenses and other current assets: Foreign currency derivatives 24,477 — 24,477 — Other assets: Deferred compensation plan assets 80,817 3,287 77,530 — Total assets $ 2,990,192 $ 1,400,774 $ 1,589,418 $ — Liabilities: Accrued expenses: Foreign currency derivatives $ 1,075 $ — $ 1,075 $ — Other liabilities: Interest rate swap derivatives 6,278 — 6,278 — Total liabilities $ 7,353 $ — $ 7,353 $ — The fair value of our financial assets and liabilities at November 30, 2018 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Cash equivalents: Money market mutual funds $ 1,234,188 $ 1,234,188 $ — $ — Time deposits 40,023 40,023 — — Short-term investments: Asset-backed securities 41,508 — 41,508 — Corporate debt securities 1,522,208 — 1,522,208 — Foreign government securities 4,155 — 4,155 — Municipal securities 18,316 — 18,316 — Prepaid expenses and other current assets: Foreign currency derivatives 44,259 — 44,259 — Other assets: Deferred compensation plan assets 68,988 3,895 65,093 — Total assets $ 2,973,645 $ 1,278,106 $ 1,695,539 $ — Liabilities: Accrued expenses: Foreign currency derivatives $ 816 $ — $ 816 $ — Other liabilities: Interest rate swap derivatives 9,744 — 9,744 — Total liabilities $ 10,560 $ — $ 10,560 $ — See Note 4 for further information regarding the fair value of our financial instruments. Our fixed income available-for-sale debt securities consist of high quality, investment grade securities from diverse issuers with a weighted average credit rating of A. We value these securities based on pricing from independent pricing vendors who use matrix pricing valuation techniques including market approach methodologies that model information generated by market transactions involving identical or comparable assets, as well as discounted cash flow methodologies. Inputs include quoted prices in active markets for identical assets or inputs other than quoted prices that are observable either directly or indirectly in determining fair value, including benchmark yields, issuer spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. We therefore classify all of our fixed income available-for-sale securities as Level 2. We perform routine procedures such as comparing prices obtained from multiple independent sources to ensure that appropriate fair values are recorded. The fair values of our money market mutual funds and time deposits are based on the closing price of these assets as of the reporting date. We classify our money market mutual funds and time deposits as Level 1. Our Level 2 over-the-counter foreign currency and interest rate swap derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange and interest rate data at the measurement date. Our deferred compensation plan assets consist of money market mutual funds and other mutual funds. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis We also have direct investments in privately held companies accounted for under the cost method, which are periodically assessed for other-than-temporary impairment. If we determine that an other-than-temporary impairment has occurred, we write down the investment to its fair value. We estimate fair value of our investments considering available information such as pricing in recent rounds of financing, current cash positions, earnings and cash flow forecasts, recent operational performance and any other readily available market data. For the three months ended March 1, 2019 and March 2, 2018 , we determined there were no other-than-temporary impairments of our cost method investments. The fair value of our senior notes was $1.92 billion as of March 1, 2019 , based on observable market prices in less active markets and categorized as Level 2. |
Derivatives and Hedging Activit
Derivatives and Hedging Activities | 3 Months Ended |
Mar. 01, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVES AND HEDGING ACTIVITIES | DERIVATIVES AND HEDGING ACTIVITIES Hedge Accounting and Hedging Programs We recognize derivative instruments and hedging activities as either assets or liabilities in our condensed consolidated balance sheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. We evaluate hedge effectiveness at the inception of the hedge prospectively as well as retrospectively, and record any ineffective portion of the hedging instruments in interest and other income (expense), net on our condensed consolidated statements of income. The net gain (loss) recognized in interest and other income (expense), net for cash flow hedges due to hedge ineffectiveness was insignificant for all fiscal years presented. The time value of purchased contracts is recorded in interest and other income (expense), net in our condensed consolidated statements of income. The bank counterparties to these contracts expose us to credit-related losses in the event of their nonperformance which are largely mitigated with collateral security agreements that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds. In addition, we enter into master netting arrangements which have the ability to further limit credit-related losses with the same counterparty by permitting net settlement of transactions. Balance Sheet Hedging — Hedges of Foreign Currency Assets and Liabilities We also hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These contracts hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded to interest and other income (expense), net in our condensed consolidated statements of income. These contracts do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. Cash Flow Hedging—Hedges of Forecasted Foreign Currency Revenue In countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities of up to twelve months . We enter into these foreign exchange contracts to hedge a portion of our forecasted foreign currency denominated revenue in the normal course of business and accordingly, they are not speculative in nature. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive income (loss) in our condensed consolidated balance sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain or loss on the cash flow hedge to revenue. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive income (loss) to interest and other income (expense), net in our condensed consolidated statements of income at that time. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from period to period are recorded in interest and other income (expense), net in our condensed consolidated statements of income. Fair Value Hedging - Hedges of Interest Rate Risk In fiscal 2014, we entered into interest rate swaps designated as fair value hedges related to our $900 million of 4.75% fixed interest rate senior notes due February 1, 2020 (“2020 Notes”). In effect, the interest rate swaps convert the fixed interest rate on the 2020 Notes to a floating interest rate based on the London Interbank Offered Rate (“LIBOR”). Under the terms of the swaps, we will pay monthly interest at the one-month LIBOR rate plus a fixed number of basis points on the $900 million notional amount through February 1, 2020. In exchange, we will receive 4.75% fixed rate interest from the swap counterparties. See Note 14 for further details regarding our debt. The interest rate swaps are accounted for as fair value hedges and substantially offset the changes in fair value of the hedged portion of the underlying debt that are attributable to the changes in market risk. Therefore, the gains and losses related to changes in the fair value of the interest rate swaps are included in interest and other income (expense), net in our condensed consolidated statements of income. As of March 1, 2019, the fair value of the interest rate swaps was added to the carrying value of current debt in our condensed consolidated balance sheets. The fair value of derivative instruments on our condensed consolidated balance sheets as of March 1, 2019 and November 30, 2018 were as follows (in thousands): 2019 2018 Fair Value Asset Derivatives Fair Value Liability Derivatives Fair Value Asset Derivatives Fair Value Liability Derivatives Derivatives designated as hedging instruments: Foreign exchange option contracts (1) (2) $ 23,179 $ — $ 40,191 $ — Interest rate swap (3) — 6,278 — 9,744 Derivatives not designated as hedging instruments: Foreign exchange forward contracts (1) 1,298 1,075 4,068 816 Total derivatives $ 24,477 $ 7,353 $ 44,259 $ 10,560 _________________________________________ (1) Fair value asset derivatives included in prepaid expenses and other current assets and fair value liability derivatives included in accrued expenses on our consolidated balance sheets. (2) Hedging effectiveness expected to be recognized into income within the next twelve months. (3) Included in other liabilities on our condensed consolidated balance sheets. The effect of foreign currency derivative instruments designated as cash flow hedges and of foreign currency derivative instruments not designated as hedges in our condensed consolidated statements of income for the three months ended March 1, 2019 and March 2, 2018 was as follows (in thousands): 2019 2018 Foreign Foreign Foreign Foreign Derivatives in cash flow hedging relationships: Net gain (loss) recognized in OCI, net of tax (1) $ 8,457 $ — $ (1,336 ) $ — Net gain (loss) reclassified from accumulated OCI into income, net of tax (2) $ 8,501 $ — $ 1,022 $ — Net gain (loss) recognized in income (3) $ (12,142 ) $ — $ (10,326 ) $ — Derivatives not designated as hedging relationships: Net gain (loss) recognized in income (4) $ — $ (1,519 ) $ — $ (3,661 ) _________________________________________ (1) Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”). (2) Effective portion classified as revenue. (3) Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net. (4) |
Goodwill and Purchased and Othe
Goodwill and Purchased and Other Intangibles | 3 Months Ended |
Mar. 01, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND PURCHASED AND OTHER INTANGIBLES | GOODWILL AND PURCHASED AND OTHER INTANGIBLES Goodwill as of March 1, 2019 and November 30, 2018 was $10.71 billion and $10.58 billion , respectively. The increase was primarily due to our acquisition of Allegorithmic in the first quarter of fiscal 2019. Purchased and other intangible assets subject to amortization as of March 1, 2019 and November 30, 2018 were as follows (in thousands): 2019 2018 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Purchased technology $ 775,474 $ (139,200 ) $ 636,274 $ 750,286 $ (118,812 ) $ 631,474 Customer contracts and relationships $ 1,248,258 $ (364,095 ) $ 884,163 $ 1,329,432 $ (416,176 ) $ 913,256 Trademarks 384,855 (38,004 ) 346,851 384,855 (25,968 ) 358,887 Acquired rights to use technology 59,906 (45,015 ) 14,891 58,966 (48,770 ) 10,196 Backlog 147,300 (29,982 ) 117,318 147,300 (13,299 ) 134,001 Other intangibles 23,780 (6,174 ) 17,606 51,096 (29,909 ) 21,187 Total other intangible assets $ 1,864,099 $ (483,270 ) $ 1,380,829 $ 1,971,649 $ (534,122 ) $ 1,437,527 Purchased and other intangible assets, net $ 2,639,573 $ (622,470 ) $ 2,017,103 $ 2,721,935 $ (652,934 ) $ 2,069,001 Amortization expense related to purchased and other intangible assets was $104.6 million and $33.9 million for the three months ended March 1, 2019 and March 2, 2018 , respectively. Of these amounts, $58.0 million and $16.7 million were included in cost of sales for the three months ended March 1, 2019 and March 2, 2018 , respectively. See Note 3 for details regarding our acquisitions. As of March 1, 2019 , we expect amortization expense in future periods to be as follows (in thousands): Fiscal Year Purchased Technology Other Intangible Assets Remainder of 2019 $ 95,761 $ 201,156 2020 126,123 235,431 2021 103,796 148,935 2022 86,921 134,472 2023 76,921 134,330 Thereafter 146,752 526,505 Total expected amortization expense $ 636,274 $ 1,380,829 |
Accrued Expenses
Accrued Expenses | 3 Months Ended |
Mar. 01, 2019 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES | ACCRUED EXPENSES Accrued expenses as of March 1, 2019 and November 30, 2018 consisted of the following (in thousands): 2019 2018 Accrued compensation and benefits $ 362,347 $ 313,874 Accrued bonuses 79,249 216,007 Accrued media costs 80,520 124,849 Sales and marketing allowances 49,617 44,968 Accrued corporate marketing 72,660 66,186 Accrued building rent 70,118 61,544 Taxes payable 57,173 57,525 Royalties payable 51,919 51,529 Accrued interest expense 7,284 29,481 Other 336,542 197,222 Accrued expenses $ 1,167,429 $ 1,163,185 |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 01, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Stock Plan As of March 1, 2019 , we had reserved 200.7 million shares of common stock for issuance under our 2003 Equity Incentive Plan and had 45.4 million shares available for grant. Summary of Restricted Stock Units Restricted stock unit activity for the three months ended March 1, 2019 and the fiscal year ended November 30, 2018 was as follows (in thousands): 2019 2018 Beginning outstanding balance 8,668 9,304 Awarded 3,361 4,012 Released (2,947 ) (3,988 ) Forfeited (148 ) (660 ) Ending outstanding balance 8,934 8,668 Beginning January 2019, restricted stock units granted as part of our annual review process or for promotions will vest over four years. Restricted stock units granted as part of our annual review process or for promotions with grant dates prior to January 2019 continue to vest over three years. Information regarding restricted stock units outstanding at March 1, 2019 and March 2, 2018 is summarized below: Number of Shares (thousands) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (*) (millions) 2019 Restricted stock units outstanding 8,934 1.61 $ 2,358.7 Restricted stock units vested and expected to vest 7,979 1.55 $ 2,106.6 2018 Restricted stock units outstanding 9,195 1.52 $ 1,928.9 Restricted stock units vested and expected to vest 8,259 1.47 $ 1,732.6 _________________________________________ (*) The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2019 and March 2, 2018 were $264.01 and $209.79 , respectively. Summary of Performance Shares Our Performance Share Programs aim to help focus key employees on building stockholder value, provide significant award potential for achieving outstanding Company performance and enhance the ability of the Company to attract and retain highly talented and competent individuals. The Executive Compensation Committee of our Board of Directors approves the terms of each of our Performance Share Programs, including the award calculation methodology, under the terms of our 2003 Equity Incentive Plan. Shares may be earned based on the achievement of an objective relative total stockholder return measured over a three-year performance period. Performance share awards will be awarded and fully vest upon the Executive Compensation Committee’s certification of the level of achievement following the three-year anniversary of each grant date. Program participants generally have the ability to receive up to 200% of the target number of shares originally granted. In the first quarter of fiscal 2019, the Executive Compensation Committee approved the 2019 Performance Share Program. In the first quarter of fiscal 2019, the Executive Compensation Committee also certified the actual performance achievement of participants in the 2016 Performance Share Program. Actual performance resulted in participants achieving 200% of target or approximately 0.8 million shares. The shares granted and achieved under the 2016 Performance Share Program fully vested on the three-year anniversary of the grant on January 25, 2019, if not forfeited. In the first quarter of fiscal 2018, the Executive Compensation Committee certified the actual performance achievement of participants in the 2015 Performance Share Program. Actual performance resulted in participants achieving 200% of target or approximately 1.0 million shares. The shares granted and achieved under the 2015 Performance Share Program fully vested on the three-year anniversary of the grant on January 24, 2018, if not forfeited. As of March 1, 2019 , the shares awarded under our 2019, 2018, and 2017 Performance Share Programs are yet to be achieved. The following table sets forth the summary of performance share activity under our Performance Share Programs for the three months ended March 1, 2019 and the fiscal year ended November 30, 2018 (in thousands): 2019 2018 Shares Granted Maximum Shares Eligible to Receive Shares Granted Maximum Shares Eligible to Receive Beginning outstanding balance 1,148 2,296 1,534 3,068 Awarded 722 (1) 614 837 (2) 628 Achieved (830 ) (3) (830 ) (1,050 ) (3) (1,053 ) Forfeited (11 ) (22 ) (173 ) (347 ) Ending outstanding balance 1,029 2,058 1,148 2,296 _________________________________________ (1) Included in the 0.7 million shares awarded during the three months ended March 1, 2019 were 0.4 million shares awarded for the final achievement of the 2016 Performance Share program. The remaining awarded shares were for the 2019 Performance Share Program. (2) Included in the 0.8 million shares awarded during the fiscal year ended November 30, 2018 were 0.5 million shares awarded for the final achievement of the 2015 Performance Share program. The remaining awarded shares were for the 2018 Performance Share Program. (3) Shares achieved under our 2016 and 2015 Performance Share programs which resulted from 200% achievement of target. Summary of Employee Stock Purchase Plan Shares The expected life of the ESPP shares is the average of the remaining purchase periods under each offering period. The assumptions used to value employee stock purchase rights during the three months ended March 1, 2019 and March 2, 2018 were as follows: Three Months 2019 2018 Expected life (in years) 0.5 - 2.0 0.5 - 2.0 Volatility 35% - 37% 26% - 27% Risk free interest rate 2.47% - 2.63% 1.54% - 1.89% Employees purchased 0.5 million shares at an average price of $129.23 and 0.7 million shares at an average price of $91.74 for the three months ended March 1, 2019 and March 2, 2018 , respectively. The intrinsic value of shares purchased during the three months ended March 1, 2019 and March 2, 2018 was $51.2 million and $54.3 million , respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares. Summary of Stock Options The Executive Compensation Committee of Adobe’s Board of Directors eliminated the use of stock option grants for all employees and the Board of Directors effective fiscal 2012 and fiscal 2014, respectively. However, we may assume the stock option plans of certain companies we acquire. As of March 1, 2019 and November 30, 2018 , we had 0.2 million and 0.3 million stock options outstanding, respectively. Compensation Costs As of March 1, 2019 , there was $1.64 billion of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based awards which will be recognized over a weighted average period of 2.6 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. Total stock-based compensation costs included in our condensed consolidated statements of income for the three months ended March 1, 2019 and March 2, 2018 were as follows (in thousands): 2019 2018 Income Statement Classifications Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Cost of revenue—subscription $ 1,390 $ 5,182 $ 768 $ 3,944 Cost of revenue—services and support 1,998 3,817 2,016 2,986 Research and development 8,445 75,820 5,349 54,072 Sales and marketing 10,353 52,247 5,320 38,848 General and administrative 3,281 22,155 1,480 20,742 Total $ 25,467 $ 159,221 $ 14,933 $ 120,592 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 3 Months Ended |
Mar. 01, 2019 | |
Stockholders' Equity Note [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The components of accumulated other comprehensive income (loss) and activity, net of related taxes, as of March 1, 2019 were as follows (in thousands): November 30, Increase / Decrease Reclassification Adjustments March 1, Net unrealized gains / losses on available-for-sale securities: Unrealized gains on available-for-sale securities $ 44 $ 88 $ (3 ) $ 129 Unrealized losses on available-for-sale securities (25,374 ) 12,314 128 (12,932 ) Total net unrealized gains / losses on available-for-sale securities (25,330 ) 12,402 125 (1) (12,803 ) Net unrealized gains / losses on derivative instruments designated as hedging instruments 21,732 (8,457 ) (8,197 ) (2) 5,078 Cumulative foreign currency translation adjustments (144,532 ) 1,825 — (142,707 ) Total accumulated other comprehensive income (loss), net of taxes $ (148,130 ) $ 5,770 $ (8,072 ) $ (150,432 ) _________________________________________ (1) Reclassification adjustments for gains / losses on available-for-sale securities are classified in interest and other income (expense), net. (2) Reclassification adjustments for gains / losses on derivative instruments are classified in revenue. The following table sets forth the taxes related to each component of other comprehensive income for the three months ended March 1, 2019 and March 2, 2018 (in thousands): Three Months 2019 2018 Derivatives designated as hedging instruments: Reclassification adjustments on derivative instruments $ (95 ) $ (1,526 ) Subtotal derivatives designated as hedging instruments (95 ) (1,526 ) Foreign currency translation adjustments — (1,742 ) Total taxes, other comprehensive income $ (95 ) $ (3,268 ) |
Stock Repurchase Program (Notes
Stock Repurchase Program (Notes) | 3 Months Ended |
Mar. 01, 2019 | |
Share Repurchase Program [Abstract] | |
SHARE REPURCHASE PROGRAM | STOCK REPURCHASE PROGRAM To facilitate our stock repurchase program, designed to return value to our stockholders and minimize dilution from stock issuances, we may repurchase shares in the open market or enter into structured repurchase agreements with third parties. In May 2018, our Board of Directors granted us another authority to repurchase up to $8 billion in common stock through the end of fiscal 2021. During the three months ended March 1, 2019 and March 2, 2018 , we entered into several structured stock repurchase agreements with large financial institutions, whereupon we provided them with prepayments totaling $500 million and $300 million , respectively. We enter into these agreements in order to take advantage of repurchasing shares at a guaranteed discount to the Volume Weighted Average Price (“VWAP”) of our common stock over a specified period of time. We only enter into such transactions when the discount that we receive is higher than the foregone return on our cash prepayments to the financial institutions. There were no explicit commissions or fees on these structured repurchases. Under the terms of the agreements, there is no requirement for the financial institutions to return any portion of the prepayment to us. The financial institutions agree to deliver shares to us at monthly intervals during the contract term. The parameters used to calculate the number of shares deliverable are: the total notional amount of the contract, the number of trading days in the contract, the number of trading days in the interval and the average VWAP of our stock during the interval less the agreed upon discount. During the three months ended March 1, 2019 , we repurchased approximately 2.1 million shares at an average price of $237.13 through structured repurchase agreements entered into during fiscal 2018 and the three months ended March 1, 2019. During the three months ended March 2, 2018 we repurchased approximately 1.6 million shares at an average price of $185.13 through structured repurchase agreements entered into during fiscal 2017 and the three months ended March 2, 2018. For the three months ended March 1, 2019 , the prepayments were classified as treasury stock on our condensed consolidated balance sheets at the payment date, though only shares physically delivered to us by March 1, 2019 were excluded from the computation of earnings per share. As of March 1, 2019 , $159.1 million of prepayment remained under this agreement. Subsequent to March 1, 2019 , as part of the May 2018 stock repurchase authority, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $750 million . Upon completion of the $750 million stock repurchase agreement, $6.60 billion |
Net Income Per Share
Net Income Per Share | 3 Months Ended |
Mar. 01, 2019 | |
Earnings Per Share [Abstract] | |
NET INCOME PER SHARE | NET INCOME PER SHARE The following table sets forth the computation of basic and diluted net income per share for the three months ended March 1, 2019 and March 2, 2018 (in thousands, except per share data): Three Months 2019 2018 Net income $ 674,241 $ 583,076 Shares used to compute basic net income per share 488,056 492,061 Dilutive potential common shares: Unvested restricted stock units and performance share awards 5,721 7,191 ESPP and stock options 411 181 Shares used to compute diluted net income per share 494,188 499,433 Basic net income per share $ 1.38 $ 1.18 Diluted net income per share $ 1.36 $ 1.17 For the three months ended March 1, 2019 and March 2, 2018 , there were 0.3 million and 1.3 million |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 01, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Royalties We have royalty commitments associated with the licensing of certain offerings. Royalty expense is generally based on a dollar amount per unit sold or a percentage of the underlying revenue. Indemnifications In the ordinary course of business, we provide indemnifications of varying scope to customers and channel partners against claims of intellectual property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations. To the extent permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal. Legal Proceedings In connection with disputes relating to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be very costly and can be disruptive to our business operations by diverting the attention and energies of management and key technical personnel. Although we have successfully defended or resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes. Third-party intellectual property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our sale of products or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification commitments with our customers including contractual provisions under various license arrangements and service agreements. In addition to intellectual property disputes, we are subject to legal proceedings, claims and investigations in the ordinary course of business, including claims relating to commercial, employment and other matters. Some of these disputes and legal proceedings may include speculative claims for substantial or indeterminate amounts of damages. We consider all claims on a quarterly basis in accordance with GAAP and based on known facts assess whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, we then evaluate disclosure requirements and whether to accrue for such claims in our financial statements. This determination is then reviewed and discussed with our Audit Committee and our independent registered public accounting firm. We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Unless otherwise specifically disclosed in this note, we have determined that no provision for liability nor disclosure is required related to any claim against us because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial. All legal costs associated with litigation are expensed as incurred. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our consolidated financial position, cash flows or results of operations could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations. |
Debt
Debt | 3 Months Ended |
Mar. 01, 2019 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Term Loan Credit Agreement In October 2018, we entered into a credit agreement providing for an up to $2.25 billion senior unsecured term loan for the purpose of partially funding the purchase price for our acquisition of Marketo and the related fees and expenses incurred in connection with the acquisition. The Term Loan funds were received on October 31, 2018 upon closing of the acquisition and will mature 18 months following the initial funding date. In addition, we incurred issuance costs of $0.7 million which are amortized to interest expense over the term using the straight-line method. The Term Loan ranks equally with our other unsecured and unsubordinated indebtedness. There are no scheduled principal amortization payments prior to maturity and the term loan may be prepaid and terminated at our election at any time without penalty or premium. At our election, the Term Loan will bear interest at either (i) LIBOR plus a margin, based on our debt ratings, ranging from 0.500% to 1.000% or (ii) a base rate plus a margin, based on our debt ratings, ranging from 0.040% to 0.110% . Interest is payable periodically, in arrears, at the end of each interest period we elect. The Term Loan credit agreement contains customary representations, warranties, affirmative and negative covenants, events of default and indemnification provisions in favor of the lenders similar to those contained in the Revolving Credit Agreement, including the financial covenant. As of March 1, 2019 , we were in compliance with all covenants. As of March 1, 2019 , there were $2.25 billion outstanding borrowings under the Term Loan, which is included in long-term liabilities on our condensed consolidated balance sheets with a carrying value of $2.25 billion , net of debt issuance costs. For the three months ended March 1, 2019 , we made interest payments of approximately $18.0 million . Senior Notes In February 2010, we issued $900 million of 4.75% senior notes due February 1, 2020 (“2020 Notes”). Our proceeds were $900 million and were net of an issuance discount of $5.5 million . In addition, we incurred issuance costs of $6.4 million . Both the discount and issuance costs are being amortized to interest expense over the term of the 2020 Notes using the effective interest method. The effective interest rate including the discount and issuance costs is 4.92% . Interest is payable semi-annually, in arrears, on February 1 and August 1, and commenced on August 1, 2010 . In June 2014, we entered into interest rate swaps with a total notional amount of $900 million designated as a fair value hedge related to our 2020 Notes. The interest rate swaps effectively convert the fixed interest rate on our 2020 Notes to a floating interest rate based on LIBOR. Under the terms of the swap, we will pay monthly interest at the one-month LIBOR interest rate plus a fixed number of basis points on the $900 million notional amount. In exchange, we will receive 4.75% fixed rate interest from the swap counterparties. As of March 1, 2019, the fair value of the interest rate swaps was added to the carrying value of current debt in our condensed consolidated balance sheets. See Note 6 for further details regarding our interest rate swap derivatives. In January 2015, we issued $1 billion of 3.25% senior notes due February 1, 2025 (“2025 Notes”). Our proceeds were approximately $989.3 million which is net of an issuance discount of $10.7 million . In addition, we incurred issuance costs of $7.9 million . Both the discount and issuance costs are being amortized to interest expense over the term of the 2025 Notes using the effective interest method. The effective interest rate including the discount, issuance costs and interest rate agreement is 3.67% . Interest is payable semi-annually, in arrears on February 1 and August 1, and commenced on August 1, 2015 . As of March 1, 2019 , our outstanding notes payable consist of the 2020 Notes and 2025 Notes (“Notes”) with a total carrying value of $1.88 billion which includes the fair value of the interest rate swap and is net of debt issuance costs. Based on quoted prices in inactive markets, the total fair value of the Notes was $1.92 billion as of March 1, 2019 and excludes the effect of the fair value hedge of the 2020 Notes for which we entered into interest rate swaps as described above. The Notes rank equally with our other unsecured and unsubordinated indebtedness. We may redeem the Notes at any time, subject to a make-whole premium. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The Notes also include covenants that limit our ability to grant liens on assets and to enter into sale and leaseback transactions, subject to significant allowances. As of March 1, 2019 , we were in compliance with all of the covenants. In February 2019, we made semi-annual interest payments on our 2020 and 2025 Notes totaling $37.6 million . During the first quarter of fiscal 2019, we reclassified $898.7 million as current debt on our condensed consolidated balance sheets, which represents the 2020 Notes, net of unamortized original issuance discount. We intend to refinance the current portion of our debt on or before the due date. Revolving Credit Agreement On October 17, 2018, we entered into a credit agreement (“Revolving Credit Agreement”), providing for a five-year $1 billion senior unsecured revolving credit facility, which replaced our previous five-year $1 billion senior unsecured revolving credit agreement dated as of March 2, 2012 (as amended, the “Prior Revolving Credit Agreement”). In addition, we incurred issuance costs of $0.8 million which is amortized to interest expense over the term using the straight-line method. The Revolving Credit Agreement provides for loans to Adobe and certain of its subsidiaries that may be designated from time to time as additional borrowers. Pursuant to the terms of the Revolving Credit Agreement, we may, subject to the agreement of lenders to provide additional commitments, obtain up to an additional $500 million in commitments, for a maximum aggregate commitment of $1.5 billion . At our election, loans under the Revolving Credit Agreement will bear interest at either (i) LIBOR plus a margin, based on our debt ratings, ranging from 0.585% to 1.015% or (ii) a base rate, which is defined as the highest of (a) the agent’s prime rate, (b) the federal funds effective rate plus 0.500% or (c) LIBOR plus 1.00% plus a margin, based on our debt ratings, ranging from 0.000% to 0.015% . In addition, facility fees determined according to our debt ratings are payable on the aggregate commitments, regardless of usage, quarterly in an amount ranging from 0.04% to 0.11% per annum. We are permitted to permanently reduce the aggregate commitment under the Revolving Credit Agreement at any time. Subject to certain conditions stated in the Revolving Credit Agreement, Adobe and any of its subsidiaries designated as additional borrowers may borrow, prepay and re-borrow amounts at any time during the term of the Revolving Credit Agreement. The Revolving Credit Agreement contains customary representations, warranties, affirmative and negative covenants, including a financial covenant, events of default and indemnification provisions in favor of the lenders. The negative covenants include restrictions regarding the incurrence of liens and indebtedness, certain merger and acquisition transactions, dispositions and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires us not to exceed a maximum leverage ratio. The facility will terminate and all amounts owing thereunder will be due and payable on the maturity date unless (a) the commitments are terminated earlier upon the occurrence of certain events, including an event of default, or (b) the maturity date is further extended upon our request, subject to the agreement of the lenders. As of March 1, 2019 , there were no |
Non-Operating Income (Expense)
Non-Operating Income (Expense) | 3 Months Ended |
Mar. 01, 2019 | |
Other Income and Expenses [Abstract] | |
NON-OPERATING INCOME (EXPENSE) | NON-OPERATING INCOME (EXPENSE) Non-operating income (expense) for the three months ended March 1, 2019 and March 2, 2018 included the following (in thousands): Three Months 2019 2018 Interest and other income (expense), net: Interest income $ 16,071 $ 22,630 Foreign exchange gains (losses) (11,857 ) (5,889 ) Realized gains on fixed income investment 3 184 Realized losses on fixed income investment (128 ) (305 ) Other 177 52 Interest and other income (expense), net $ 4,266 $ 16,672 Interest expense $ (40,593 ) $ (19,899 ) Investment gains (losses), net: Realized investment gains $ 43,657 $ 3,994 Unrealized investment gains 174 — Unrealized investment losses — (998 ) Investment gains (losses), net $ 43,831 $ 2,996 Non-operating income (expense), net $ 7,504 $ (231 ) |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 01, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended November 30, 2018 |
New Accounting Pronouncements and Changes in Accounting Principles | Recently Adopted Accounting Guidance On May 28, 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, Topic 606, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new revenue standard replaces most existing revenue recognition guidance in GAAP and permits the use of either the full retrospective or modified retrospective transition method. On December 1, 2018, the beginning of our fiscal year 2019, we adopted the requirements of the new revenue standard utilizing the modified retrospective method of transition. Prior period information has not been restated and continues to be reported under the accounting standard in effect for those periods. We applied the new revenue standard to contracts that were not completed as of the adoption date, consistent with the transition guidance. Further, adoption of the new revenue standard resulted in changes to our accounting policies for revenue recognition and sales commissions as detailed below. We recognized the following cumulative effects of initially applying the new revenue standard as of December 1, 2018: As of November 30, 2018 ASC 606 Adoption Adjustments As of December 1, 2018 Assets Trade receivables, net of allowances for doubtful accounts $ 1,315,578 $ 43,028 $ 1,358,606 Prepaid expenses and other current assets 312,499 186,220 498,719 Other assets 186,522 273,421 459,943 Liabilities and Stockholders’ Equity Accrued expenses 1,163,185 30,358 1,193,543 Deferred revenue, current 2,915,974 (52,842 ) 2,863,132 Deferred income taxes 46,702 82,834 129,536 Retained earnings $ 11,815,597 $ 442,319 $ 12,257,916 Below is a summary of the adoption impacts of the new revenue standard: • We capitalized $413.2 million of contract acquisition costs comprised of sales and partner commission costs at adoption date, with a corresponding adjustment to retained earnings. We are amortizing these costs over their respective expected period of benefit. • Revenue for certain contracts that were previously deferred would have been recognized in periods prior to adoption under the new standard. Upon adoption, we recorded the following adjustments to our beginning balances to reflect the amount of revenue that will no longer be recognized in future periods for such contracts: increase in unbilled receivables (included in trade receivables, net) of $24.8 million , increase in contract assets (included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion) of $46.4 million and a decrease in deferred revenue of $52.8 million , with corresponding adjustments to retained earnings. • We recorded an increase to our opening deferred income tax liability of $82.8 million , with a corresponding adjustment to retained earnings, to record the tax effect of the above adjustments. • Further, we had other impacts to various accounts which resulted to an immaterial net reduction to our retained earnings. Adoption of the new revenue standard impacted our condensed consolidated statement of income for three months ended March 1, 2019 as follows (in thousands, except per share amounts): As reported Adjustments Balances without ASC 606 adoption impact Revenue Subscription $ 2,304,967 $ 2,207 $ 2,307,174 Product 170,554 (22,880 ) 147,674 Services and support 125,425 (771 ) 124,654 Total revenue 2,600,946 (21,444 ) 2,579,502 Operating expenses Sales and marketing 781,518 8,868 790,386 Provision for income taxes 28,093 (1,210 ) 26,883 Net income $ 674,241 $ (29,053 ) $ 645,188 Basic net income per share $ 1.38 $ (0.06 ) $ 1.32 Diluted net income per share $ 1.36 $ (0.05 ) $ 1.31 Adoption of the new revenue standard impacted our condensed consolidated balance sheets as of March 1, 2019 as follows (in thousands): As reported Adjustments Balances without ASC 606 adoption impact Assets Trade receivables, net of allowances for doubtful accounts $ 1,342,343 $ (48,662 ) $ 1,293,681 Prepaid expenses and other current assets 565,115 (195,006 ) 370,109 Other assets 542,938 (287,165 ) 255,773 Liabilities and Stockholders’ Equity Accrued expenses 1,167,429 (37,547 ) 1,129,882 Deferred revenue, current 3,083,839 68,206 3,152,045 Deferred revenue, long-term 134,353 (6,076 ) 128,277 Deferred income taxes 125,660 (84,044 ) 41,616 Retained earnings $ 12,579,311 $ (471,372 ) $ 12,107,939 There was no net impact to our condensed consolidated statements of comprehensive income and cash flows from operating, financing or investing activities on the condensed consolidated cash flows resulting from the adoption of the new revenue standard other than the impact to reported net income as presented above. The impact to our condensed consolidated statement of stockholders’ equity was only to retained earnings, as presented above. The most significant impact of the new revenue standard relates to our capitalization of certain incremental costs to acquire contracts and the requirement to amortize these amounts over the expected period of benefit. Under the previous standard, we expensed costs related to the acquisition of revenue-generating contracts as incurred. Additionally, there was impact from arrangements with our customers that include on-premise term-based software licenses bundled with maintenance and support. Under the previous standard, revenue attributable to these software licenses was recognized ratably over the term of the arrangement because vendor-specific objective evidence (“VSOE”) did not exist for the undelivered maintenance and support element as it is not sold separately. The requirement to have VSOE for undelivered elements to enable the separation of revenue recognition for delivered software licenses is eliminated under the new revenue standard. Accordingly, under the new revenue standard we recognize as revenue a portion of the arrangement fee upon delivery of the software licenses and classify that recognized revenue as product revenue instead of subscription revenue in our condensed consolidated statements of income. |
Revenue from Contract with Customer | Revenue Recognition For revenue recognition policies under Accounting Standards Codification Topic 605, refer to Note 1. Basis of Presentation and Significant Accounting Policies in our Annual Report. Our revenue is derived from the sale of cloud-enabled software subscriptions, cloud-hosted offerings, term-based, royalty, and perpetual software licenses, associated software maintenance and support plans, consulting services, training and technical support. Most of our enterprise customer arrangements involve multiple promises to our customers. Revenue is recognized when a contract exists between us and a customer and upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which may be capable of being distinct and accounted for as separate performance obligations, or in the case of offerings such as Creative Cloud and Document Cloud, accounted for as a single performance obligation. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. Product, Subscription, and Services Offerings We enter into revenue arrangements in which a customer may purchase a combination of cloud-enabled subscriptions, cloud-hosted offerings, term-based, royalty, and perpetual software licenses, associated software maintenance and support plans, consulting services, training and technical support. Fully hosted subscription services (Software-as-a-Service) allow customers to access hosted software during the contractual term without taking possession of the software. Cloud-hosted subscription services may be sold on a fee-per-subscription period basis, or based on consumption or usage. We recognize revenue ratably over the contractual service term for hosted services that are priced based on a committed number of transactions where the delivery and consumption of the benefit of the services occur evenly over time, beginning on the date the services associated with the committed transactions are first made available to the customer and continuing through the end of the contractual service term. Over-usage fees and fees based on the actual number of transactions, are billed in accordance with contract terms as these fees are typically incurred and are included in the transaction price of an arrangement as variable consideration. Fees based on a number of transactions or impressions per month, where invoicing is aligned to the pattern of performance, customer benefit, and consumption, are typically accounted for utilizing the “as-invoiced” practical expedient. Revenue for subscriptions sold as a fee per period is recognized ratably over the contractual term as the customer simultaneously receives and consumes the benefit of the underlying service. When cloud-enabled services are highly integrated and interrelated with on-premise software, such as in our cloud-enabled Creative Cloud and Document Cloud offerings, the individual components are not considered distinct and revenue is recognized ratably over the subscription period for which the cloud-enabled services are provided. Licenses for on-premise software may be purchased on a perpetual basis, as a subscription for a fixed period of time or based on usage for certain of our OEM and royalty agreements. Revenue from distinct on-premise licenses is recognized at the point in time the software is available to the customer, provided all other revenue recognition criteria are met, and classified as product revenue on the condensed consolidated statements of income. Some of our enterprise license arrangements allow customers to commit non-cancellable funds. These non-cancellable committed funds are nonrefundable and provide our customers options to either renew monthly on-premise term-based licenses or use some or all funds to purchase other Adobe products or services. Revenue associated with these monthly term-based licenses is classified as subscription revenue. Our services and support revenue is composed of consulting, training, and maintenance and support, primarily related to our enterprise offerings. Our support revenue also includes technical support and developer support to partners and developer organizations related to our desktop products. We typically sell our consulting contracts on a time-and-materials basis and recognize the related revenue as services are rendered. We typically sell our maintenance and support contracts on a flat fee or percentage of associated license fees basis and recognize the related revenue ratably over the support term as the underlying service is a stand-ready performance obligation. We exclude from the transaction price sales and other taxes collected from customers on behalf of the relevant government authority. Most of our products are delivered electronically, however in instances where shipping and handling costs are incurred, we treat these amounts as costs to fulfill the contract and they are not considered a performance obligation and the associated fees are not included in the transaction price. Judgments Our contracts with customers may include multiple goods and services. For example, some of our offerings include both on-premise and/or on-device software licenses and cloud services. Determining whether the software licenses and the cloud services are distinct from each other, and therefore performance obligations to be accounted for separately, or not distinct from each other, and therefore part of a single performance obligation, may require significant judgment. We have concluded that the on-premise/on-device software licenses and cloud services provided in our Creative Cloud and Document Cloud subscription offerings are not distinct from each other such that revenue from each offering should be recognized ratably over the subscription period for which the cloud services are provided. In reaching this conclusion, we considered the nature of our promise to Creative Cloud and Document Cloud customers, which is to provide a complete end-to-end creative design or document workflow solution that operates seamlessly across multiple devices and teams. We fulfill this promise by providing access to a solution that integrates cloud-based and on-premise/on-device features that, together through their integration, provide functionalities, utility and workflow efficiencies that could not be obtained from either the on-premise/on-device software or cloud services on their own. Standalone selling price is established by maximizing the amount of observable inputs, primarily actual historical selling prices for performance obligations where available, and includes consideration of factors such as go-to-market model and geography. Individual products may have multiple values for standalone selling price depending on factors such as where they are sold and what channel they are sold through. Where standalone selling price may not be directly observable (e.g., the performance obligation is not sold separately), we maximize the use of observable inputs by using information that may include reviewing pricing practices, performance obligations with similar customers and selling models. Capitalized costs to obtain a contract are amortized over the expected period of benefit, which we have determined, based on analysis, to be 5 years . We evaluated qualitative and quantitative factors to determine the period of amortization, including contract length, renewals, customer life and the useful lives of our products and acquired products. When the expected period of benefit of an asset which would be capitalized is less than one year, we expense the amount as incurred, utilizing the practical expedient. We regularly evaluate whether there have been changes in the underlying assumptions and data used to determine the amortization period. We offer limited rights of return, rebates and price protection of our products under various policies and programs with our distributors, resellers and/or end-user customers. We estimate and record reserves for these programs as variable consideration when estimating transaction price. Returns, rebates and other offsets to transaction price are estimated at contract inception on a portfolio basis and assessed for reasonableness each reporting period when additional information becomes available. General Contract Provisions We maintain revenue reserves for rebates, rights of return, or other limited price adjustments. Distributors are allowed limited rights of return of products purchased during the previous quarter. In addition, distributors are allowed to return products that have reached the end of their lives, as defined by us, and for products that are being replaced by new versions. We offer rebates to our distributors, resellers and/or end user customers. Transaction price is reduced for these amounts based on actual performance against objectives set forth by us for a particular reporting period, such as volume and timely reporting. On a quarterly basis, the amount of revenue that is reserved is calculated based on our historical trends and data specific to each reporting period. The primary method of establishing these reserves is to review historical data from prior periods as a percent of revenue to determine a historical reserve rate. We then apply the historical rate to the current period revenue as a basis for estimating future returns. When necessary, we also provide a specific reserve in excess of portfolio-level estimated requirements. This estimate can be affected by the amount of a particular product in the channel, the rate of sell-through, product plans and other factors. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Not Yet Effective On February 24, 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases with a lease term of twelve months or less. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date of the new leases standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new leases standard is effective for us beginning in the first quarter of fiscal 2020, and we will not early adopt. The new leases standard must be adopted using a modified retrospective transition method and allows for the application of the new guidance at the beginning of the earliest comparative period presented or at the adoption date. In July 2018, the FASB issued ASU No. 2018-11, Leases - Targeted Improvements, providing an optional transition method that allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We intend to adopt the new leases standard using this optional transition method. While we are continuing to assess the potential impacts of the standard, we currently expect the most significant impact will be the recognition of right-of-use assets and lease liabilities on our balance sheet. We are implementing a new lease accounting system and are updating our processes in preparation for the adoption of the new leases standard. On August 28, 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging, requiring expanded hedge accounting for both non-financial and financial risk components and refining the measurement of hedge results to better reflect an entity’s hedging strategies. For example, adoption would result in reclassification of hedge costs from foreign currency hedges from interest and other income (expense), net to revenue in our statements of income. The updated standard also amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment recorded to opening retained earnings as of the initial adoption date. The updated standard is effective for us beginning in the first quarter of fiscal 2020, which is when we plan to adopt the standard. We are currently evaluating the effect that the updated standard will have on our condensed consolidated financial statements and related disclosures. With the exception of the new standards discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 1, 2019 |
Derivatives and Hedging Activ_2
Derivatives and Hedging Activities Derivatives Policy (Policies) | 3 Months Ended |
Mar. 01, 2019 | |
Accounting Policies [Abstract] | |
Derivatives, Policy | Hedge Accounting and Hedging Programs We recognize derivative instruments and hedging activities as either assets or liabilities in our condensed consolidated balance sheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. We evaluate hedge effectiveness at the inception of the hedge prospectively as well as retrospectively, and record any ineffective portion of the hedging instruments in interest and other income (expense), net on our condensed consolidated statements of income. The net gain (loss) recognized in interest and other income (expense), net for cash flow hedges due to hedge ineffectiveness was insignificant for all fiscal years presented. The time value of purchased contracts is recorded in interest and other income (expense), net in our condensed consolidated statements of income. The bank counterparties to these contracts expose us to credit-related losses in the event of their nonperformance which are largely mitigated with collateral security agreements that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds. In addition, we enter into master netting arrangements which have the ability to further limit credit-related losses with the same counterparty by permitting net settlement of transactions. Balance Sheet Hedging — Hedges of Foreign Currency Assets and Liabilities We also hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These contracts hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded to interest and other income (expense), net in our condensed consolidated statements of income. These contracts do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. Cash Flow Hedging—Hedges of Forecasted Foreign Currency Revenue In countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities of up to twelve months . We enter into these foreign exchange contracts to hedge a portion of our forecasted foreign currency denominated revenue in the normal course of business and accordingly, they are not speculative in nature. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive income (loss) in our condensed consolidated balance sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain or loss on the cash flow hedge to revenue. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive income (loss) to interest and other income (expense), net in our condensed consolidated statements of income at that time. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from period to period are recorded in interest and other income (expense), net in our condensed consolidated statements of income. Fair Value Hedging - Hedges of Interest Rate Risk In fiscal 2014, we entered into interest rate swaps designated as fair value hedges related to our $900 million of 4.75% fixed interest rate senior notes due February 1, 2020 (“2020 Notes”). In effect, the interest rate swaps convert the fixed interest rate on the 2020 Notes to a floating interest rate based on the London Interbank Offered Rate (“LIBOR”). Under the terms of the swaps, we will pay monthly interest at the one-month LIBOR rate plus a fixed number of basis points on the $900 million notional amount through February 1, 2020. In exchange, we will receive 4.75% fixed rate interest from the swap counterparties. See Note 14 for further details regarding our debt. |
Basis of Presentation and Sum_3
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Impact of ASC 606 Adoption on Opening Balance Sheets | We recognized the following cumulative effects of initially applying the new revenue standard as of December 1, 2018: As of November 30, 2018 ASC 606 Adoption Adjustments As of December 1, 2018 Assets Trade receivables, net of allowances for doubtful accounts $ 1,315,578 $ 43,028 $ 1,358,606 Prepaid expenses and other current assets 312,499 186,220 498,719 Other assets 186,522 273,421 459,943 Liabilities and Stockholders’ Equity Accrued expenses 1,163,185 30,358 1,193,543 Deferred revenue, current 2,915,974 (52,842 ) 2,863,132 Deferred income taxes 46,702 82,834 129,536 Retained earnings $ 11,815,597 $ 442,319 $ 12,257,916 |
Accounting Standards Update 2014-09 [Member] | |
Impact of ASC 606 Adoption on Condensed Statement of Income | Adoption of the new revenue standard impacted our condensed consolidated statement of income for three months ended March 1, 2019 as follows (in thousands, except per share amounts): As reported Adjustments Balances without ASC 606 adoption impact Revenue Subscription $ 2,304,967 $ 2,207 $ 2,307,174 Product 170,554 (22,880 ) 147,674 Services and support 125,425 (771 ) 124,654 Total revenue 2,600,946 (21,444 ) 2,579,502 Operating expenses Sales and marketing 781,518 8,868 790,386 Provision for income taxes 28,093 (1,210 ) 26,883 Net income $ 674,241 $ (29,053 ) $ 645,188 Basic net income per share $ 1.38 $ (0.06 ) $ 1.32 Diluted net income per share $ 1.36 $ (0.05 ) $ 1.31 |
Impact of ASC 606 Adoption on Condensed Balance Sheets | Adoption of the new revenue standard impacted our condensed consolidated balance sheets as of March 1, 2019 as follows (in thousands): As reported Adjustments Balances without ASC 606 adoption impact Assets Trade receivables, net of allowances for doubtful accounts $ 1,342,343 $ (48,662 ) $ 1,293,681 Prepaid expenses and other current assets 565,115 (195,006 ) 370,109 Other assets 542,938 (287,165 ) 255,773 Liabilities and Stockholders’ Equity Accrued expenses 1,167,429 (37,547 ) 1,129,882 Deferred revenue, current 3,083,839 68,206 3,152,045 Deferred revenue, long-term 134,353 (6,076 ) 128,277 Deferred income taxes 125,660 (84,044 ) 41,616 Retained earnings $ 12,579,311 $ (471,372 ) $ 12,107,939 |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Revenue [Abstract] | |
Disaggregation of Revenue | Revenue in the first quarter of fiscal 2019 presented below is in accordance with a new revenue standard that was adopted under the modified retrospective method. Prior period revenue has not been restated. Our segment results for the three months ended March 1, 2019 and March 2, 2018 were as follows (dollars in thousands): Digital Media Digital Experience Publishing Total Three months ended March 1, 2019 Revenue $ 1,776,643 $ 743,276 $ 81,027 $ 2,600,946 Cost of revenue 68,195 323,708 5,383 397,286 Gross profit $ 1,708,448 $ 419,568 $ 75,644 $ 2,203,660 Gross profit as a percentage of revenue 96 % 56 % 93 % 85 % Three months ended March 2, 2018 Revenue $ 1,460,561 $ 554,107 $ 64,279 $ 2,078,947 Cost of revenue 55,469 198,792 4,641 258,902 Gross profit $ 1,405,092 $ 355,315 $ 59,638 $ 1,820,045 Gross profit as a percentage of revenue 96 % 64 % 93 % 88 % Revenue by geographic area for the three months ended March 1, 2019 and March 2, 2018 is as follows (in thousands): 2019 2018 Americas $ 1,509,895 $ 1,170,681 EMEA 702,961 587,268 APAC 388,090 320,998 Total $ 2,600,946 $ 2,078,947 Revenue by major offerings in our Digital Media reportable segment for the three months ended March 1, 2019 and March 2, 2018 is as follows (in thousands): 2019 2018 Creative Cloud $ 1,494,888 $ 1,229,496 Document Cloud 281,755 231,065 Total $ 1,776,643 $ 1,460,561 Subscription revenue by segment for the three months ended March 1, 2019 and March 2, 2018 is as follows (in thousands): 2019 2018 Digital Media $ 1,663,639 $ 1,334,659 Digital Experience 611,928 430,867 Publishing 29,400 27,832 Total $ 2,304,967 $ 1,793,358 |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Marketo | |
Schedule of acquired assets and liabilities [Line Items] | |
Schedule of acquired assets and liabilities | The table below represents the preliminary purchase price allocation to the acquired net tangible and intangible assets of Marketo based on their estimated fair values as of the acquisition date and the associated estimated useful lives at that date. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of valuation analyses pertaining tax liabilities assumed including the calculation of deferred tax assets and liabilities. (in thousands) Amount Weighted Average Useful Life (years) Customer contracts and relationships $ 577,900 11 Purchased technology 444,500 7 Backlog 105,800 2 Non-competition agreements 12,100 2 Trademarks 328,500 9 Total identifiable intangible assets 1,468,800 Net liabilities assumed (194,588 ) N/A Goodwill (1) 3,458,556 N/A Total estimated purchase price $ 4,732,768 _________________________________________ (1) Non-deductible for tax-purposes. |
Magento | |
Schedule of acquired assets and liabilities [Line Items] | |
Schedule of acquired assets and liabilities | The table below represents the preliminary purchase price allocation to the acquired net assets of Magento based on their estimated fair values as of June 18, 2018 and the associated estimated useful lives at that date. During the first quarter of fiscal 2019, we recorded immaterial purchase accounting adjustments based on changes to management’s estimates and assumptions in regards to net liabilities assumed and their related impact to goodwill. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of valuation analyses pertaining to tax liabilities assumed including the calculation of deferred tax assets and liabilities. (in thousands) Amount Weighted Average Useful Life (years) Customer contracts and relationships $ 208,000 8 Purchased technology 84,200 5 In-process research and development (1) 39,100 N/A Trademarks 21,100 3 Other intangibles 43,400 3 Total identifiable intangible assets 395,800 Net liabilities assumed (68,182 ) N/A Goodwill (2) 1,316,983 N/A Total estimated purchase price $ 1,644,601 _________________________________________ (1) Capitalized as purchased technology and are considered indefinite lived until the completion or abandonment of the associated research and development efforts. As of the reporting date, one of the associated in-process research and development efforts was completed and another one was abandoned. The respective related amortization and write-off were each immaterial. (2) |
Cash, Cash Equivalents and Sh_2
Cash, Cash Equivalents and Short-Term Investments (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Cash, Cash Equivalents, and Short-term Investments [Abstract] | |
Cash Cash Equivalents and Short term Investments | Cash, cash equivalents and short-term investments consisted of the following as of March 1, 2019 (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 341,359 $ — $ — $ 341,359 Cash equivalents: Money market mutual funds 1,383,033 — — 1,383,033 Time deposits 14,454 — — 14,454 Total cash equivalents 1,397,487 — — 1,397,487 Total cash and cash equivalents 1,738,846 — — 1,738,846 Short-term fixed income securities: Asset-backed securities 33,623 — (185 ) 33,438 Corporate debt securities 1,445,943 129 (12,576 ) 1,433,496 Foreign government securities 2,399 — (13 ) 2,386 Municipal securities 18,248 — (157 ) 18,091 Total short-term investments 1,500,213 129 (12,931 ) 1,487,411 Total cash, cash equivalents and short-term investments $ 3,239,059 $ 129 $ (12,931 ) $ 3,226,257 Cash, cash equivalents and short-term investments consisted of the following as of November 30, 2018 (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 368,564 $ — $ — $ 368,564 Cash equivalents: Money market mutual funds 1,234,188 — — 1,234,188 Time deposits 40,023 — — 40,023 Total cash equivalents 1,274,211 — — 1,274,211 Total cash and cash equivalents 1,642,775 — — 1,642,775 Short-term fixed income securities: Asset-backed securities 41,875 — (367 ) 41,508 Corporate debt securities 1,546,860 44 (24,696 ) 1,522,208 Foreign government securities 4,179 — (24 ) 4,155 Municipal securities 18,601 1 (286 ) 18,316 Total short-term investments 1,611,515 45 (25,373 ) 1,586,187 Total cash, cash equivalents and short-term investments $ 3,254,290 $ 45 $ (25,373 ) $ 3,228,962 |
Continuous Unrealized Loss Position Less Than Twelve Months Related to Available-for-Sale Securities | The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in an unrealized loss position for less than twelve months, as of March 1, 2019 and November 30, 2018 (in thousands): 2019 2018 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate debt securities $ 67,201 $ (137 ) $ 538,109 $ (7,966 ) Asset-backed securities 36 — 6,696 (54 ) Municipal securities 1,854 (6 ) 6,599 (81 ) Total $ 69,091 $ (143 ) $ 551,404 $ (8,101 ) There were 45 securities and 369 securities in an unrealized loss position for less than twelve months at March 1, 2019 and at November 30, 2018 |
Continuous Unrealized Loss Position Twelve Months or Longer Related to Available-for-Sale-Securities | The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that were in a continuous unrealized loss position for more than twelve months, as of March 1, 2019 and November 30, 2018 (in thousands): 2019 2018 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate debt securities $ 1,318,108 $ (12,439 ) $ 969,701 $ (16,730 ) Asset-backed securities 30,209 (185 ) 34,812 (313 ) Municipal securities 16,053 (151 ) 11,532 (205 ) Foreign government securities 2,385 (13 ) 4,154 (24 ) Total $ 1,366,755 $ (12,788 ) $ 1,020,199 $ (17,272 ) There were 818 securities and 577 securities in an unrealized loss position for more than twelve months at March 1, 2019 and at November 30, 2018 |
Cost and Estimated Fair Value of Debt Securities | The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated effective maturities as of March 1, 2019 (in thousands): Amortized Cost Estimated Fair Value Due within one year $ 642,860 $ 640,549 Due between one and two years 562,585 556,764 Due between two and three years 190,095 187,312 Due after three years 104,673 102,786 Total $ 1,500,213 $ 1,487,411 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Fair Value Disclosures [Abstract] | |
Financial assets and liabilities at fair value on a recurring basis | The fair value of our financial assets and liabilities at March 1, 2019 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Cash equivalents: Money market mutual funds $ 1,383,033 $ 1,383,033 $ — $ — Time deposits 14,454 14,454 — — Short-term investments: Asset-backed securities 33,438 — 33,438 — Corporate debt securities 1,433,496 — 1,433,496 — Foreign government securities 2,386 — 2,386 — Municipal securities 18,091 — 18,091 — Prepaid expenses and other current assets: Foreign currency derivatives 24,477 — 24,477 — Other assets: Deferred compensation plan assets 80,817 3,287 77,530 — Total assets $ 2,990,192 $ 1,400,774 $ 1,589,418 $ — Liabilities: Accrued expenses: Foreign currency derivatives $ 1,075 $ — $ 1,075 $ — Other liabilities: Interest rate swap derivatives 6,278 — 6,278 — Total liabilities $ 7,353 $ — $ 7,353 $ — The fair value of our financial assets and liabilities at November 30, 2018 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Cash equivalents: Money market mutual funds $ 1,234,188 $ 1,234,188 $ — $ — Time deposits 40,023 40,023 — — Short-term investments: Asset-backed securities 41,508 — 41,508 — Corporate debt securities 1,522,208 — 1,522,208 — Foreign government securities 4,155 — 4,155 — Municipal securities 18,316 — 18,316 — Prepaid expenses and other current assets: Foreign currency derivatives 44,259 — 44,259 — Other assets: Deferred compensation plan assets 68,988 3,895 65,093 — Total assets $ 2,973,645 $ 1,278,106 $ 1,695,539 $ — Liabilities: Accrued expenses: Foreign currency derivatives $ 816 $ — $ 816 $ — Other liabilities: Interest rate swap derivatives 9,744 — 9,744 — Total liabilities $ 10,560 $ — $ 10,560 $ — |
Derivatives and Hedging Activ_3
Derivatives and Hedging Activities (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Fair Value of Derivative Instruments | The fair value of derivative instruments on our condensed consolidated balance sheets as of March 1, 2019 and November 30, 2018 were as follows (in thousands): 2019 2018 Fair Value Asset Derivatives Fair Value Liability Derivatives Fair Value Asset Derivatives Fair Value Liability Derivatives Derivatives designated as hedging instruments: Foreign exchange option contracts (1) (2) $ 23,179 $ — $ 40,191 $ — Interest rate swap (3) — 6,278 — 9,744 Derivatives not designated as hedging instruments: Foreign exchange forward contracts (1) 1,298 1,075 4,068 816 Total derivatives $ 24,477 $ 7,353 $ 44,259 $ 10,560 _________________________________________ (1) Fair value asset derivatives included in prepaid expenses and other current assets and fair value liability derivatives included in accrued expenses on our consolidated balance sheets. (2) Hedging effectiveness expected to be recognized into income within the next twelve months. (3) |
Effect of Derivative Instruments as Designated Cash Flow Hedges and Not Designated as Hedges | The effect of foreign currency derivative instruments designated as cash flow hedges and of foreign currency derivative instruments not designated as hedges in our condensed consolidated statements of income for the three months ended March 1, 2019 and March 2, 2018 was as follows (in thousands): 2019 2018 Foreign Foreign Foreign Foreign Derivatives in cash flow hedging relationships: Net gain (loss) recognized in OCI, net of tax (1) $ 8,457 $ — $ (1,336 ) $ — Net gain (loss) reclassified from accumulated OCI into income, net of tax (2) $ 8,501 $ — $ 1,022 $ — Net gain (loss) recognized in income (3) $ (12,142 ) $ — $ (10,326 ) $ — Derivatives not designated as hedging relationships: Net gain (loss) recognized in income (4) $ — $ (1,519 ) $ — $ (3,661 ) _________________________________________ (1) Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”). (2) Effective portion classified as revenue. (3) Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net. (4) |
Goodwill and Purchased and Ot_2
Goodwill and Purchased and Other Intangibles (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Purchased and other intangible assets | Purchased and other intangible assets subject to amortization as of March 1, 2019 and November 30, 2018 were as follows (in thousands): 2019 2018 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Purchased technology $ 775,474 $ (139,200 ) $ 636,274 $ 750,286 $ (118,812 ) $ 631,474 Customer contracts and relationships $ 1,248,258 $ (364,095 ) $ 884,163 $ 1,329,432 $ (416,176 ) $ 913,256 Trademarks 384,855 (38,004 ) 346,851 384,855 (25,968 ) 358,887 Acquired rights to use technology 59,906 (45,015 ) 14,891 58,966 (48,770 ) 10,196 Backlog 147,300 (29,982 ) 117,318 147,300 (13,299 ) 134,001 Other intangibles 23,780 (6,174 ) 17,606 51,096 (29,909 ) 21,187 Total other intangible assets $ 1,864,099 $ (483,270 ) $ 1,380,829 $ 1,971,649 $ (534,122 ) $ 1,437,527 Purchased and other intangible assets, net $ 2,639,573 $ (622,470 ) $ 2,017,103 $ 2,721,935 $ (652,934 ) $ 2,069,001 |
Amortization expense in future periods | As of March 1, 2019 , we expect amortization expense in future periods to be as follows (in thousands): Fiscal Year Purchased Technology Other Intangible Assets Remainder of 2019 $ 95,761 $ 201,156 2020 126,123 235,431 2021 103,796 148,935 2022 86,921 134,472 2023 76,921 134,330 Thereafter 146,752 526,505 Total expected amortization expense $ 636,274 $ 1,380,829 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued expenses as of March 1, 2019 and November 30, 2018 consisted of the following (in thousands): 2019 2018 Accrued compensation and benefits $ 362,347 $ 313,874 Accrued bonuses 79,249 216,007 Accrued media costs 80,520 124,849 Sales and marketing allowances 49,617 44,968 Accrued corporate marketing 72,660 66,186 Accrued building rent 70,118 61,544 Taxes payable 57,173 57,525 Royalties payable 51,919 51,529 Accrued interest expense 7,284 29,481 Other 336,542 197,222 Accrued expenses $ 1,167,429 $ 1,163,185 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Restricted Stock Unit Activity | Restricted stock unit activity for the three months ended March 1, 2019 and the fiscal year ended November 30, 2018 was as follows (in thousands): 2019 2018 Beginning outstanding balance 8,668 9,304 Awarded 3,361 4,012 Released (2,947 ) (3,988 ) Forfeited (148 ) (660 ) Ending outstanding balance 8,934 8,668 |
Restricted Stock Units Outstanding | Information regarding restricted stock units outstanding at March 1, 2019 and March 2, 2018 is summarized below: Number of Shares (thousands) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (*) (millions) 2019 Restricted stock units outstanding 8,934 1.61 $ 2,358.7 Restricted stock units vested and expected to vest 7,979 1.55 $ 2,106.6 2018 Restricted stock units outstanding 9,195 1.52 $ 1,928.9 Restricted stock units vested and expected to vest 8,259 1.47 $ 1,732.6 _________________________________________ (*) The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2019 and March 2, 2018 were $264.01 and $209.79 |
Performance Share Activity | The following table sets forth the summary of performance share activity under our Performance Share Programs for the three months ended March 1, 2019 and the fiscal year ended November 30, 2018 (in thousands): 2019 2018 Shares Granted Maximum Shares Eligible to Receive Shares Granted Maximum Shares Eligible to Receive Beginning outstanding balance 1,148 2,296 1,534 3,068 Awarded 722 (1) 614 837 (2) 628 Achieved (830 ) (3) (830 ) (1,050 ) (3) (1,053 ) Forfeited (11 ) (22 ) (173 ) (347 ) Ending outstanding balance 1,029 2,058 1,148 2,296 _________________________________________ (1) Included in the 0.7 million shares awarded during the three months ended March 1, 2019 were 0.4 million shares awarded for the final achievement of the 2016 Performance Share program. The remaining awarded shares were for the 2019 Performance Share Program. (2) Included in the 0.8 million shares awarded during the fiscal year ended November 30, 2018 were 0.5 million shares awarded for the final achievement of the 2015 Performance Share program. The remaining awarded shares were for the 2018 Performance Share Program. (3) Shares achieved under our 2016 and 2015 Performance Share programs which resulted from 200% |
Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions | The expected life of the ESPP shares is the average of the remaining purchase periods under each offering period. The assumptions used to value employee stock purchase rights during the three months ended March 1, 2019 and March 2, 2018 were as follows: Three Months 2019 2018 Expected life (in years) 0.5 - 2.0 0.5 - 2.0 Volatility 35% - 37% 26% - 27% Risk free interest rate 2.47% - 2.63% 1.54% - 1.89% |
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | Total stock-based compensation costs included in our condensed consolidated statements of income for the three months ended March 1, 2019 and March 2, 2018 were as follows (in thousands): 2019 2018 Income Statement Classifications Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Cost of revenue—subscription $ 1,390 $ 5,182 $ 768 $ 3,944 Cost of revenue—services and support 1,998 3,817 2,016 2,986 Research and development 8,445 75,820 5,349 54,072 Sales and marketing 10,353 52,247 5,320 38,848 General and administrative 3,281 22,155 1,480 20,742 Total $ 25,467 $ 159,221 $ 14,933 $ 120,592 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Stockholders' Equity Note [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | The components of accumulated other comprehensive income (loss) and activity, net of related taxes, as of March 1, 2019 were as follows (in thousands): November 30, Increase / Decrease Reclassification Adjustments March 1, Net unrealized gains / losses on available-for-sale securities: Unrealized gains on available-for-sale securities $ 44 $ 88 $ (3 ) $ 129 Unrealized losses on available-for-sale securities (25,374 ) 12,314 128 (12,932 ) Total net unrealized gains / losses on available-for-sale securities (25,330 ) 12,402 125 (1) (12,803 ) Net unrealized gains / losses on derivative instruments designated as hedging instruments 21,732 (8,457 ) (8,197 ) (2) 5,078 Cumulative foreign currency translation adjustments (144,532 ) 1,825 — (142,707 ) Total accumulated other comprehensive income (loss), net of taxes $ (148,130 ) $ 5,770 $ (8,072 ) $ (150,432 ) _________________________________________ (1) Reclassification adjustments for gains / losses on available-for-sale securities are classified in interest and other income (expense), net. (2) Reclassification adjustments for gains / losses on derivative instruments are classified in revenue. |
Other Comprehensive Income, Tax | The following table sets forth the taxes related to each component of other comprehensive income for the three months ended March 1, 2019 and March 2, 2018 (in thousands): Three Months 2019 2018 Derivatives designated as hedging instruments: Reclassification adjustments on derivative instruments $ (95 ) $ (1,526 ) Subtotal derivatives designated as hedging instruments (95 ) (1,526 ) Foreign currency translation adjustments — (1,742 ) Total taxes, other comprehensive income $ (95 ) $ (3,268 ) |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Earnings Per Share [Abstract] | |
Net Income Per Share | The following table sets forth the computation of basic and diluted net income per share for the three months ended March 1, 2019 and March 2, 2018 (in thousands, except per share data): Three Months 2019 2018 Net income $ 674,241 $ 583,076 Shares used to compute basic net income per share 488,056 492,061 Dilutive potential common shares: Unvested restricted stock units and performance share awards 5,721 7,191 ESPP and stock options 411 181 Shares used to compute diluted net income per share 494,188 499,433 Basic net income per share $ 1.38 $ 1.18 Diluted net income per share $ 1.36 $ 1.17 |
Non-Operating Income (Expense)
Non-Operating Income (Expense) (Tables) | 3 Months Ended |
Mar. 01, 2019 | |
Other Income and Expenses [Abstract] | |
Non-Operating Income (Expense) | Non-operating income (expense) for the three months ended March 1, 2019 and March 2, 2018 included the following (in thousands): Three Months 2019 2018 Interest and other income (expense), net: Interest income $ 16,071 $ 22,630 Foreign exchange gains (losses) (11,857 ) (5,889 ) Realized gains on fixed income investment 3 184 Realized losses on fixed income investment (128 ) (305 ) Other 177 52 Interest and other income (expense), net $ 4,266 $ 16,672 Interest expense $ (40,593 ) $ (19,899 ) Investment gains (losses), net: Realized investment gains $ 43,657 $ 3,994 Unrealized investment gains 174 — Unrealized investment losses — (998 ) Investment gains (losses), net $ 43,831 $ 2,996 Non-operating income (expense), net $ 7,504 $ (231 ) |
Basis of Presentation and Sum_4
Basis of Presentation and Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | Mar. 01, 2019 | Dec. 01, 2018 | Nov. 30, 2018 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Trade receivables, net of allowances for doubtful accounts | $ 1,342,343 | $ 1,358,606 | $ 1,315,578 | [1] |
Prepaid expenses and other current assets | 565,115 | 498,719 | 312,499 | [1] |
Other assets | 542,938 | 459,943 | 186,522 | [1] |
Accrued expenses | 1,167,429 | 1,193,543 | 1,163,185 | [1] |
Deferred revenue | 3,083,839 | 2,863,132 | 2,915,974 | [1] |
Deferred income taxes | 125,660 | 129,536 | 46,702 | [1] |
Retained earnings | 12,579,311 | 12,257,916 | 11,815,597 | [1] |
Calculated under Revenue Guidance in Effect before Topic 606 [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Trade receivables, net of allowances for doubtful accounts | 1,293,681 | 1,315,578 | ||
Prepaid expenses and other current assets | 370,109 | 312,499 | ||
Other assets | 255,773 | 186,522 | ||
Accrued expenses | 1,129,882 | 1,163,185 | ||
Deferred revenue | 3,152,045 | 2,915,974 | ||
Deferred income taxes | 41,616 | 46,702 | ||
Retained earnings | 12,107,939 | $ 11,815,597 | ||
Accounting Standards Update 2014-09 [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Trade receivables, net of allowances for doubtful accounts | (48,662) | 43,028 | ||
Prepaid expenses and other current assets | (195,006) | 186,220 | ||
Other assets | (287,165) | 273,421 | ||
Accrued expenses | (37,547) | 30,358 | ||
Deferred revenue | 68,206 | (52,842) | ||
Deferred income taxes | (84,044) | 82,834 | ||
Retained earnings | $ (471,372) | $ 442,319 | ||
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Basis of Presentation and Sum_5
Basis of Presentation and Summary of Significant Accounting Policies (Details 1) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Condensed Income Statements, Captions [Line Items] | ||
Subscription and Circulation Revenue | $ 2,304,967 | $ 1,793,358 |
Product | 170,554 | 171,608 |
Services and support | 125,425 | 113,981 |
Total revenue | 2,600,946 | 2,078,947 |
Selling and Marketing Expense | 781,518 | 580,957 |
Other Nonoperating Income | 4,266 | 16,672 |
Provision for income taxes | 28,093 | 119,426 |
Net income | $ 674,241 | $ 583,076 |
Basic net income per share | $ 1.38 | $ 1.18 |
Diluted net income per share | $ 1.36 | $ 1.17 |
Calculated under Revenue Guidance in Effect before Topic 606 [Member] | ||
Condensed Income Statements, Captions [Line Items] | ||
Subscription and Circulation Revenue | $ 2,307,174 | |
Product | 147,674 | |
Services and support | 124,654 | |
Total revenue | 2,579,502 | |
Selling and Marketing Expense | 790,386 | |
Provision for income taxes | 26,883 | |
Net income | $ 645,188 | |
Basic net income per share | $ 1.32 | |
Diluted net income per share | $ 1.31 | |
Accounting Standards Update 2014-09 [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ||
Condensed Income Statements, Captions [Line Items] | ||
Subscription and Circulation Revenue | $ 2,207 | |
Product | (22,880) | |
Services and support | (771) | |
Total revenue | (21,444) | |
Selling and Marketing Expense | 8,868 | |
Provision for income taxes | (1,210) | |
Net income | $ (29,053) | |
Basic net income per share | $ (0.06) | |
Diluted net income per share | $ (0.05) |
Basis of Presentation and Sum_6
Basis of Presentation and Summary of Significant Accounting Policies (Details 2) - USD ($) $ in Thousands | Mar. 01, 2019 | Dec. 01, 2018 | Nov. 30, 2018 | |
Condensed Balance Sheets, Captions [Line Items] | ||||
Trade receivables, net of allowances for doubtful accounts | $ 1,342,343 | $ 1,358,606 | $ 1,315,578 | [1] |
Prepaid expenses and other current assets | 565,115 | 498,719 | 312,499 | [1] |
Other assets | 542,938 | 459,943 | 186,522 | [1] |
Accrued expenses | 1,167,429 | 1,193,543 | 1,163,185 | [1] |
Deferred revenue, current | 3,083,839 | 2,863,132 | 2,915,974 | [1] |
Deferred revenue, noncurrent | 134,353 | 137,630 | [1] | |
Deferred income taxes | 125,660 | 129,536 | 46,702 | [1] |
Retained earnings | 12,579,311 | 12,257,916 | 11,815,597 | [1] |
Calculated under Revenue Guidance in Effect before Topic 606 [Member] | ||||
Condensed Balance Sheets, Captions [Line Items] | ||||
Trade receivables, net of allowances for doubtful accounts | 1,293,681 | 1,315,578 | ||
Prepaid expenses and other current assets | 370,109 | 312,499 | ||
Other assets | 255,773 | 186,522 | ||
Accrued expenses | 1,129,882 | 1,163,185 | ||
Deferred revenue, current | 3,152,045 | 2,915,974 | ||
Deferred revenue, noncurrent | 128,277 | |||
Deferred income taxes | 41,616 | 46,702 | ||
Retained earnings | 12,107,939 | $ 11,815,597 | ||
Accounting Standards Update 2014-09 [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ||||
Condensed Balance Sheets, Captions [Line Items] | ||||
Trade receivables, net of allowances for doubtful accounts | (48,662) | 43,028 | ||
Prepaid expenses and other current assets | (195,006) | 186,220 | ||
Other assets | (287,165) | 273,421 | ||
Accrued expenses | (37,547) | 30,358 | ||
Deferred revenue, current | 68,206 | (52,842) | ||
Deferred revenue, noncurrent | (6,076) | |||
Deferred income taxes | (84,044) | 82,834 | ||
Retained earnings | $ (471,372) | $ 442,319 | ||
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Basis of Presentation and Sum_7
Basis of Presentation and Summary of Significant Accounting Policies (Details Numeric) - USD ($) $ in Thousands | Mar. 01, 2019 | Dec. 01, 2018 | Nov. 30, 2018 | [1] |
Capitalized contract acquisition costs | $ 434,400 | $ 413,200 | ||
Unbilled receivables | 93,400 | 105,800 | ||
Contract assets | 47,700 | 46,400 | ||
Deferred revenue, current | 3,083,839 | 2,863,132 | $ 2,915,974 | |
Deferred income taxes | $ 125,660 | 129,536 | $ 46,702 | |
Capitalized contract acquisition costs, Amortization period | 5 years | |||
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | ||||
Capitalized contract acquisition costs | 413,200 | |||
Unbilled receivables | 24,800 | |||
Contract assets | 46,400 | |||
Deferred revenue, current | $ 68,206 | (52,842) | ||
Deferred income taxes | $ (84,044) | $ 82,834 | ||
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Revenue (Details 1)
Revenue (Details 1) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 2,600,946 | $ 2,078,947 |
Cost of revenue | 397,286 | 258,902 |
Gross profit | $ 2,203,660 | $ 1,820,045 |
Gross profit as a percentage of revenue | 85.00% | 88.00% |
Digital Media [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | $ 1,776,643 | $ 1,460,561 |
Cost of revenue | 68,195 | 55,469 |
Gross profit | $ 1,708,448 | $ 1,405,092 |
Gross profit as a percentage of revenue | 96.00% | 96.00% |
Digital Experience [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | $ 743,276 | $ 554,107 |
Cost of revenue | 323,708 | 198,792 |
Gross profit | $ 419,568 | $ 355,315 |
Gross profit as a percentage of revenue | 56.00% | 64.00% |
Publishing [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | $ 81,027 | $ 64,279 |
Cost of revenue | 5,383 | 4,641 |
Gross profit | $ 75,644 | $ 59,638 |
Gross profit as a percentage of revenue | 93.00% | 93.00% |
Revenue (Details 2)
Revenue (Details 2) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | $ 2,600,946 | $ 2,078,947 |
Americas [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 1,509,895 | 1,170,681 |
EMEA [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 702,961 | 587,268 |
Asia [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | $ 388,090 | $ 320,998 |
Revenue (Details 3)
Revenue (Details 3) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Revenue from External Customer [Line Items] | ||
Revenues | $ 2,600,946 | $ 2,078,947 |
Digital Media [Member] | ||
Revenue from External Customer [Line Items] | ||
Creative Cloud | 1,494,888 | 1,229,496 |
Document Cloud | 281,755 | 231,065 |
Revenues | $ 1,776,643 | $ 1,460,561 |
Revenue (Details 4)
Revenue (Details 4) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Disaggregation of Revenue [Line Items] | ||
Subscription and Circulation Revenue | $ 2,304,967 | $ 1,793,358 |
Digital Media [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Subscription and Circulation Revenue | 1,663,639 | 1,334,659 |
Digital Experience [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Subscription and Circulation Revenue | 611,928 | 430,867 |
Publishing [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Subscription and Circulation Revenue | $ 29,400 | $ 27,832 |
Revenue (Details Numeric)
Revenue (Details Numeric) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 01, 2019 | Dec. 01, 2018 | Nov. 30, 2018 | ||
Trade receivables, net of allowances for doubtful accounts | $ 1,342,343 | $ 1,358,606 | $ 1,315,578 | [1] |
Unbilled receivables | 93,400 | 105,800 | ||
Allowances for doubtful accounts | 14,639 | 15,000 | $ 14,981 | |
Contract assets | 47,700 | 46,400 | ||
Deferred revenue | 3,220,000 | 3,000,000 | ||
Deferred revenue recognized that was included in the beginning balance | 1,360,000 | |||
Remaining performance obligations | $ 8,130,000 | |||
Percent of Remaining performance obligations expected to be recognized in next 12 months | 73.00% | |||
Capitalized contract acquisition costs, Amortization period | 5 years | |||
Capitalized contract acquisition costs | $ 434,400 | 413,200 | ||
Capitalized contract acquisition costs, Non-current | 287,200 | |||
Refund liabilities | 87,100 | $ 75,300 | ||
Non-cancellable Committed Funds [Member] | ||||
Deferred revenue | 602,300 | |||
Refundable Customer Deposits [Member] | ||||
Deferred revenue | $ 73,000 | |||
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Acquisitions (Details 1)
Acquisitions (Details 1) - Marketo - USD ($) $ in Thousands | 12 Months Ended | ||
Nov. 30, 2018 | Oct. 31, 2018 | ||
Schedule of acquired assets and liabilities [Line Items] | |||
Customer contracts and relationships | $ 577,900 | ||
Purchased technology | 444,500 | ||
Backlog | 105,800 | ||
Non-competition agreements | 12,100 | ||
Trademarks | 328,500 | ||
Total identifiable intangible assets acquired | 1,468,800 | ||
Net assets acquired or liabilities assumed | (194,588) | ||
Goodwill, Acquired during period | [1] | $ 3,458,556 | |
Total estimated purchase price | $ 4,732,768 | ||
Customer Contracts and Relationships | |||
Schedule of acquired assets and liabilities [Line Items] | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 11 years | ||
Purchased technology | |||
Schedule of acquired assets and liabilities [Line Items] | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 7 years | ||
Backlog [Member] | |||
Schedule of acquired assets and liabilities [Line Items] | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 2 years | ||
Noncompete Agreements [Member] | |||
Schedule of acquired assets and liabilities [Line Items] | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 2 years | ||
Trademarks | |||
Schedule of acquired assets and liabilities [Line Items] | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 9 years | ||
[1] | Non-deductible for tax-purposes. |
Acquisitions (Details 2)
Acquisitions (Details 2) - Magento - USD ($) $ in Thousands | 12 Months Ended | ||
Nov. 30, 2018 | Jun. 18, 2018 | ||
Business Acquisition | |||
Customer contracts and relationships | $ 208,000 | ||
Purchased technology | 84,200 | ||
In-process research and development | [1] | 39,100 | |
Trademarks | 21,100 | ||
Other intangibles | 43,400 | ||
Total identifiable intangible assets acquired | 395,800 | ||
Net assets acquired or liabilities assumed | (68,182) | ||
Goodwill, Acquired during period | [2] | $ 1,316,983 | |
Total estimated purchase price | $ 1,644,601 | ||
Customer Contracts and Relationships | |||
Business Acquisition | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 8 years | ||
Purchased technology | |||
Business Acquisition | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | ||
Trademarks | |||
Business Acquisition | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years | ||
Other intangibles | |||
Business Acquisition | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years | ||
[1] | Capitalized as purchased technology and are considered indefinite lived until the completion or abandonment of the associated research and development efforts. As of the reporting date, one of the associated in-process research and development efforts was completed and another one was abandoned. The respective related amortization and write-off were each immaterial. | ||
[2] | Non-deductible for tax-purposes |
Acquisitions (Details Numeric)
Acquisitions (Details Numeric) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||
Mar. 01, 2019 | Nov. 30, 2018 | Jan. 23, 2019 | Oct. 31, 2018 | Oct. 17, 2018 | Jun. 18, 2018 | ||
Allegorithmic | |||||||
Business Acquisition | |||||||
Business Combination, Purchase Price for Remaining Interest | $ 105,300 | ||||||
Total estimated purchase price | 159,700 | ||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain (Loss), Net | $ 41,500 | ||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Fair Value | 54,400 | ||||||
Goodwill, Acquired during period | 124,500 | ||||||
Total identifiable intangible assets acquired | $ 45,000 | ||||||
Marketo | |||||||
Business Acquisition | |||||||
Total estimated purchase price | $ 4,732,768 | ||||||
Goodwill, Acquired during period | [1] | $ 3,458,556 | |||||
Cash and cash equivalents assumed | 54,900 | ||||||
Trade receivables acquired | 71,600 | ||||||
Accrued expenses assumed | 102,600 | ||||||
Deferred Revenue Assumed | 74,800 | ||||||
Deferred Tax Liabilities assumed, net | 182,600 | ||||||
Deferred Tax Liabilities Assumed for Future Amortization of Intangible Assets | 348,800 | ||||||
Deferred Tax Assets Acquired | 166,200 | ||||||
Total identifiable intangible assets acquired | 1,468,800 | ||||||
Net assets acquired or liabilities assumed | $ (194,588) | ||||||
Magento | |||||||
Business Acquisition | |||||||
Total estimated purchase price | $ 1,644,601 | ||||||
Goodwill, Acquired during period | [2] | $ 1,316,983 | |||||
Total identifiable intangible assets acquired | 395,800 | ||||||
Net assets acquired or liabilities assumed | $ (68,182) | ||||||
Term Loan | Marketo | |||||||
Business Acquisition | |||||||
Term Loan, Amount Outstanding | $ 2,250,000 | $ 2,250,000 | |||||
[1] | Non-deductible for tax-purposes. | ||||||
[2] | Non-deductible for tax-purposes |
Cash, Cash Equivalents and Sh_3
Cash, Cash Equivalents and Short-Term Investments (Details) - USD ($) $ in Thousands | Mar. 01, 2019 | Nov. 30, 2018 |
Schedule of Available-for-sale Securities | ||
Amortized Cost | $ 3,239,059 | $ 3,254,290 |
Unrealized Gains | 129 | 45 |
Unrealized Losses | (12,931) | (25,373) |
Estimated Fair Value, Total cash, cash equivalents and short-term investments | 3,226,257 | 3,228,962 |
Cash and cash equivalents | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 1,738,846 | 1,642,775 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 1,738,846 | 1,642,775 |
Cash | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 341,359 | 368,564 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 341,359 | 368,564 |
Cash equivalents | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 1,397,487 | 1,274,211 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 1,397,487 | 1,274,211 |
Cash equivalents | Money Market Mutual Funds | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 1,383,033 | 1,234,188 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 1,383,033 | 1,234,188 |
Cash equivalents | Time deposits | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 14,454 | 40,023 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 14,454 | 40,023 |
Short-term fixed income securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 1,500,213 | 1,611,515 |
Unrealized Gains | 129 | 45 |
Unrealized Losses | (12,931) | (25,373) |
Estimated Fair Value, short-term investments | 1,487,411 | 1,586,187 |
Short-term fixed income securities | Asset-backed Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 33,623 | 41,875 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | (185) | (367) |
Estimated Fair Value, short-term investments | 33,438 | 41,508 |
Short-term fixed income securities | Corporate Debt Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 1,445,943 | 1,546,860 |
Unrealized Gains | 129 | 44 |
Unrealized Losses | (12,576) | (24,696) |
Estimated Fair Value, short-term investments | 1,433,496 | 1,522,208 |
Short-term fixed income securities | Foreign Government Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 2,399 | 4,179 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | (13) | (24) |
Estimated Fair Value, short-term investments | 2,386 | 4,155 |
Short-term fixed income securities | Municipal Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 18,248 | 18,601 |
Unrealized Gains | 0 | 1 |
Unrealized Losses | (157) | (286) |
Estimated Fair Value, short-term investments | $ 18,091 | $ 18,316 |
Cash, Cash Equivalents and Sh_4
Cash, Cash Equivalents and Short-Term Investments (Details 1) $ in Thousands | Mar. 01, 2019USD ($)securities | Nov. 30, 2018USD ($)securities |
Schedule of Available-for-sale Securities | ||
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value | $ 69,091 | $ 551,404 |
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 1,366,755 | 1,020,199 |
Available-for-sale securities, continuous unrealized loss position, less than 12 months, accumulated loss | (143) | (8,101) |
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, accumulated loss | $ (12,788) | $ (17,272) |
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities | ||
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | securities | 45 | 369 |
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | securities | 818 | 577 |
Asset-backed Securities | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value | $ 36 | $ 6,696 |
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 30,209 | 34,812 |
Available-for-sale securities, continuous unrealized loss position, less than 12 months, accumulated loss | 0 | (54) |
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, accumulated loss | (185) | (313) |
Corporate Debt Securities | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value | 67,201 | 538,109 |
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 1,318,108 | 969,701 |
Available-for-sale securities, continuous unrealized loss position, less than 12 months, accumulated loss | (137) | (7,966) |
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, accumulated loss | (12,439) | (16,730) |
Municipal Securities | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale securities, continuous unrealized loss position, less than twelve months, fair value | 1,854 | 6,599 |
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 16,053 | 11,532 |
Available-for-sale securities, continuous unrealized loss position, less than 12 months, accumulated loss | (6) | (81) |
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, accumulated loss | (151) | (205) |
Foreign Government Securities | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 2,385 | 4,154 |
Available-for-sale securities, continuous unrealized loss position, 12 months or longer, accumulated loss | $ (13) | $ (24) |
Cash, Cash Equivalents and Sh_5
Cash, Cash Equivalents and Short-Term Investments (Details 2) $ in Thousands | Mar. 01, 2019USD ($) |
Amortized cost of short-term fixed income securities | |
Due within one year, Amortized Cost | $ 642,860 |
Due between one and two years, Amortized Cost | 562,585 |
Due between two and three years, Amortized Cost | 190,095 |
Due after three years, Amortized Cost | 104,673 |
Total, Amortized Cost | 1,500,213 |
Estimated fair value of short-term fixed income securities | |
Due within one year, Estimated Fair value | 640,549 |
Due between one and two years, Estimated Fair value | 556,764 |
Due between two and three years, Estimated Fair value | 187,312 |
Due after three years, Estimated Fair value | 102,786 |
Total, Estimated Fair value | $ 1,487,411 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) $ in Millions | Mar. 01, 2019USD ($) |
Notes 2020 and 2025 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions | |
Debt Instrument, Fair Value Disclosure | $ 1,920 |
Fair Value Measurements (Deta_2
Fair Value Measurements (Details 1) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands | Mar. 01, 2019 | Nov. 30, 2018 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Foreign Currency Contracts, Asset, Fair Value Disclosure | $ 24,477 | $ 44,259 |
Deferred Compensation Plan Assets | 80,817 | 68,988 |
Assets, Fair Value Disclosure | 2,990,192 | 2,973,645 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 1,075 | 816 |
Interest Rate Derivative Liabilities, at Fair Value | 6,278 | 9,744 |
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 7,353 | 10,560 |
Asset-backed Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 33,438 | 41,508 |
Corporate Debt Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 1,433,496 | 1,522,208 |
Foreign Government Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 2,386 | 4,155 |
Money Market Mutual Funds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 1,383,033 | 1,234,188 |
Time deposits | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 14,454 | 40,023 |
Municipal Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 18,091 | 18,316 |
Fair Value, Inputs, Level 1 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Foreign Currency Contracts, Asset, Fair Value Disclosure | 0 | 0 |
Deferred Compensation Plan Assets | 3,287 | 3,895 |
Assets, Fair Value Disclosure | 1,400,774 | 1,278,106 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 0 | 0 |
Interest Rate Derivative Liabilities, at Fair Value | 0 | 0 |
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 1 | Asset-backed Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 1 | Corporate Debt Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 1 | Foreign Government Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 1 | Money Market Mutual Funds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 1,383,033 | 1,234,188 |
Fair Value, Inputs, Level 1 | Time deposits | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 14,454 | 40,023 |
Fair Value, Inputs, Level 1 | Municipal Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Foreign Currency Contracts, Asset, Fair Value Disclosure | 24,477 | 44,259 |
Deferred Compensation Plan Assets | 77,530 | 65,093 |
Assets, Fair Value Disclosure | 1,589,418 | 1,695,539 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 1,075 | 816 |
Interest Rate Derivative Liabilities, at Fair Value | 6,278 | 9,744 |
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 7,353 | 10,560 |
Fair Value, Inputs, Level 2 | Asset-backed Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 33,438 | 41,508 |
Fair Value, Inputs, Level 2 | Corporate Debt Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 1,433,496 | 1,522,208 |
Fair Value, Inputs, Level 2 | Foreign Government Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 2,386 | 4,155 |
Fair Value, Inputs, Level 2 | Money Market Mutual Funds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 2 | Time deposits | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 2 | Municipal Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 18,091 | 18,316 |
Fair Value, Inputs, Level 3 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Foreign Currency Contracts, Asset, Fair Value Disclosure | 0 | 0 |
Deferred Compensation Plan Assets | 0 | 0 |
Assets, Fair Value Disclosure | 0 | 0 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 0 | 0 |
Interest Rate Derivative Liabilities, at Fair Value | 0 | 0 |
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 3 | Asset-backed Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 3 | Corporate Debt Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 3 | Foreign Government Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 3 | Money Market Mutual Funds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 3 | Time deposits | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 3 | Municipal Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | $ 0 | $ 0 |
Derivatives and Hedging Activ_4
Derivatives and Hedging Activities (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
Mar. 01, 2019 | Nov. 30, 2018 | Jun. 13, 2014 | Feb. 28, 2010 | ||
Derivative, Fair Value, Net [Abstract] | |||||
Fair value asset derivatives | $ 24,477 | $ 44,259 | |||
Fair value liability derivatives | 7,353 | 10,560 | |||
Derivatives designated as hedging instruments | Foreign Exchange Option Contracts | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Fair value asset derivatives | [1],[2] | 23,179 | 40,191 | ||
Fair value liability derivatives | [1],[2] | 0 | 0 | ||
Derivatives designated as hedging instruments | Interest Rate Swap | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Fair value asset derivatives | [3] | 0 | 0 | ||
Fair value liability derivatives | [3] | 6,278 | 9,744 | ||
Derivatives not designated as hedging instruments | Foreign Exchange Forward Contracts | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Fair value asset derivatives | [1] | 1,298 | 4,068 | ||
Fair value liability derivatives | [1] | $ 1,075 | $ 816 | ||
Notes 2020 | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | ||||
Debt Instrument, Face Amount | $ 900,000 | ||||
Cash Flow Hedging | Foreign Exchange Contract | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Maximum Remaining Maturity of Foreign Currency Derivatives | 12 months | ||||
Fair Value Hedging | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Derivative, Notional Amount | $ 900,000 | ||||
Derivative, Fixed Interest Rate | 4.75% | ||||
[1] | Fair value asset derivatives included in prepaid expenses and other current assets and fair value liability derivatives included in accrued expenses on our consolidated balance sheets. | ||||
[2] | Hedging effectiveness expected to be recognized into income within the next twelve months. | ||||
[3] | Included in other liabilities on our condensed consolidated balance sheets. |
Derivatives and Hedging Activ_5
Derivatives and Hedging Activities (Details 1) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 01, 2019 | Mar. 02, 2018 | ||
Foreign Exchange Option Contracts | |||
Derivative Instruments, Gain (Loss) | |||
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net | [1] | $ 0 | $ 0 |
Foreign Exchange Forward Contracts | |||
Derivative Instruments, Gain (Loss) | |||
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net | [1] | (1,519) | (3,661) |
Cash Flow Hedging | Foreign Exchange Option Contracts | |||
Derivative Instruments, Gain (Loss) | |||
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, before Tax | [2] | 8,457 | (1,336) |
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net | [3] | 8,501 | 1,022 |
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net | [4] | (12,142) | (10,326) |
Cash Flow Hedging | Foreign Exchange Forward Contracts | |||
Derivative Instruments, Gain (Loss) | |||
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, before Tax | [2] | 0 | 0 |
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net | [3] | 0 | 0 |
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net | [4] | $ 0 | $ 0 |
[1] | Classified in interest and other income (expense), net. | ||
[2] | Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”). | ||
[3] | Effective portion classified as revenue. | ||
[4] | Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net. |
Goodwill and Purchased and Ot_3
Goodwill and Purchased and Other Intangibles (Details) - USD ($) $ in Thousands | Mar. 01, 2019 | Nov. 30, 2018 | |
Finite-Lived Intangible Assets | |||
Cost | $ 2,639,573 | $ 2,721,935 | |
Accumulated Amortization | (622,470) | (652,934) | |
Net | 2,017,103 | 2,069,001 | [1] |
Purchased technology | |||
Finite-Lived Intangible Assets | |||
Cost | 775,474 | 750,286 | |
Accumulated Amortization | (139,200) | (118,812) | |
Net | 636,274 | 631,474 | |
Total other intangible assets | |||
Finite-Lived Intangible Assets | |||
Cost | 1,864,099 | 1,971,649 | |
Accumulated Amortization | (483,270) | (534,122) | |
Net | 1,380,829 | 1,437,527 | |
Customer contracts and relationships | |||
Finite-Lived Intangible Assets | |||
Cost | 1,248,258 | 1,329,432 | |
Accumulated Amortization | (364,095) | (416,176) | |
Net | 884,163 | 913,256 | |
Trademarks | |||
Finite-Lived Intangible Assets | |||
Cost | 384,855 | 384,855 | |
Accumulated Amortization | (38,004) | (25,968) | |
Net | 346,851 | 358,887 | |
Acquired rights to use technology | |||
Finite-Lived Intangible Assets | |||
Cost | 59,906 | 58,966 | |
Accumulated Amortization | (45,015) | (48,770) | |
Net | 14,891 | 10,196 | |
Backlog | |||
Finite-Lived Intangible Assets | |||
Cost | 147,300 | 147,300 | |
Accumulated Amortization | (29,982) | (13,299) | |
Net | 117,318 | 134,001 | |
Other intangibles | |||
Finite-Lived Intangible Assets | |||
Cost | 23,780 | 51,096 | |
Accumulated Amortization | (6,174) | (29,909) | |
Net | $ 17,606 | $ 21,187 | |
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Goodwill and Purchased and Ot_4
Goodwill and Purchased and Other Intangibles (Details 1) $ in Thousands | Mar. 01, 2019USD ($) |
Purchased technology | |
Amortization Expense in Future Periods | |
Remainder of 2019 | $ 95,761 |
2020 | 126,123 |
2021 | 103,796 |
2022 | 86,921 |
2023 | 76,921 |
Thereafter | 146,752 |
Total expected amortization expense | 636,274 |
Other intangibles | |
Amortization Expense in Future Periods | |
Remainder of 2019 | 201,156 |
2020 | 235,431 |
2021 | 148,935 |
2022 | 134,472 |
2023 | 134,330 |
Thereafter | 526,505 |
Total expected amortization expense | $ 1,380,829 |
Goodwill and Purchased and Ot_5
Goodwill and Purchased and Other Intangibles (Details Numeric) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 01, 2019 | Mar. 02, 2018 | Nov. 30, 2018 | [1] | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Goodwill | $ 10,707,715 | $ 10,581,048 | ||
Finite-Lived Intangible Assets | ||||
Amortization of purchased and other intangible assets | 104,600 | $ 33,900 | ||
Cost, Amortization | $ 58,000 | $ 16,700 | ||
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Mar. 01, 2019 | Dec. 01, 2018 | Nov. 30, 2018 | |
Accrued Expense | ||||
Accrued compensation and benefits | $ 362,347 | $ 313,874 | ||
Accrued bonuses | 79,249 | 216,007 | ||
Accrued media costs | 80,520 | 124,849 | ||
Sales and marketing allowances | 49,617 | 44,968 | ||
Accrued corporate marketing | 72,660 | 66,186 | ||
Accrued building rent | 70,118 | 61,544 | ||
Taxes payable | 57,173 | 57,525 | ||
Royalties payable | 51,919 | 51,529 | ||
Accrued interest expense | 7,284 | 29,481 | ||
Other | 336,542 | 197,222 | ||
Accrued expenses | $ 1,167,429 | $ 1,193,543 | $ 1,163,185 | [1] |
[1] | The condensed consolidated balance sheet as of November 30, 2018 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - Restricted Stock Units (RSUs) - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 01, 2019 | Mar. 02, 2018 | Nov. 30, 2018 | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Outstanding weighted average remaining contractual life (in years) | 1 year 7 months 9 days | 1 year 6 months 7 days | ||
Shares outstanding aggregate intrinsic value | [1] | $ 2,358.7 | $ 1,928.9 | |
Vested And Expected To Vest Shares | 7,979 | 8,259 | ||
Weighted Average Remaining Contractual Life Vested And Expected To Vest | 1 year 6 months 18 days | 1 year 5 months 19 days | ||
Vested And Expected To Vest Intrinsic Value | [1] | $ 2,106.6 | $ 1,732.6 | |
Shares Activity | ||||
Beginning outstanding balance | 8,668 | 9,304 | 9,304 | |
Awarded, Shares | 3,361 | 4,012 | ||
Released, Shares | (2,947) | (3,988) | ||
Forfeited, Shares | (148) | (660) | ||
Ending outstanding balance | 8,934 | 9,195 | 8,668 | |
[1] | The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of March 1, 2019 and March 2, 2018 were $264.01 and $209.79 |
Stock-Based Compensation (Det_2
Stock-Based Compensation (Details 1) - Performance Shares - shares shares in Thousands | 3 Months Ended | 12 Months Ended | ||||
Mar. 01, 2019 | Mar. 02, 2018 | Nov. 30, 2018 | ||||
Shares Granted | ||||||
Shares Activity | ||||||
Beginning outstanding balance | 1,148 | 1,534 | 1,534 | |||
Awarded, Shares | 722 | [1] | 837 | [2] | ||
Achieved | [3] | (830) | (1,050) | |||
Forfeited, Shares | (11) | (173) | ||||
Ending outstanding balance | 1,029 | 1,148 | ||||
Maximum Shares Eligible to Receive | ||||||
Shares Activity | ||||||
Beginning outstanding balance | 2,296 | 3,068 | 3,068 | |||
Awarded, Shares | 614 | 628 | ||||
Achieved | (830) | (1,053) | ||||
Forfeited, Shares | (22) | (347) | ||||
Ending outstanding balance | 2,058 | 2,296 | ||||
Program 2015 | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Actual Percentage Achieved | 200.00% | |||||
Actual Shares Achieved | 1,000 | |||||
Shares Activity | ||||||
Awarded, Shares | 500 | |||||
Program 2016 | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Actual Percentage Achieved | 200.00% | |||||
Actual Shares Achieved | 800 | |||||
Shares Activity | ||||||
Awarded, Shares | 400 | |||||
[1] | Included in the 0.7 million shares awarded during the three months ended March 1, 2019 were 0.4 million | |||||
[2] | Included in the 0.8 million shares awarded during the fiscal year ended November 30, 2018 were 0.5 million | |||||
[3] | Shares achieved under our 2016 and 2015 Performance Share programs which resulted from 200% |
Stock-Based Compensation (Det_3
Stock-Based Compensation (Details 2) - Employee Stock Purchase Plan | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Valuation Assumptions Volatility Range | ||
From | 35.00% | 26.00% |
To | 37.00% | 27.00% |
Valuation Assumptions Risk Free Interest Rate Range | ||
From | 2.47% | 1.54% |
To | 2.63% | 1.89% |
From | ||
Valuation Assumptions Expected Life (In Years) | ||
Expected life (in years) | 6 months | 6 months |
To | ||
Valuation Assumptions Expected Life (In Years) | ||
Expected life (in years) | 2 years | 2 years |
Stock-Based Compensation (Det_4
Stock-Based Compensation (Details 3) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Option Grants and Stock Purchase Rights | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | $ 25,467 | $ 14,933 |
Restricted Stock Units and Performance Share Awards | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 159,221 | 120,592 |
Cost of Subscription Revenue | Option Grants and Stock Purchase Rights | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 1,390 | 768 |
Cost of Subscription Revenue | Restricted Stock Units and Performance Share Awards | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 5,182 | 3,944 |
Cost of Service and Support Revenue | Option Grants and Stock Purchase Rights | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 1,998 | 2,016 |
Cost of Service and Support Revenue | Restricted Stock Units and Performance Share Awards | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 3,817 | 2,986 |
Research and Development Expense | Option Grants and Stock Purchase Rights | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 8,445 | 5,349 |
Research and Development Expense | Restricted Stock Units and Performance Share Awards | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 75,820 | 54,072 |
Sales and Marketing | Option Grants and Stock Purchase Rights | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 10,353 | 5,320 |
Sales and Marketing | Restricted Stock Units and Performance Share Awards | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 52,247 | 38,848 |
General and Administrative | Option Grants and Stock Purchase Rights | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | 3,281 | 1,480 |
General and Administrative | Restricted Stock Units and Performance Share Awards | ||
Total stock-based compensation costs | ||
Stock-based compensation costs | $ 22,155 | $ 20,742 |
Stock-Based Compensation (Det_5
Stock-Based Compensation (Details Numeric) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | ||
Mar. 01, 2019 | Mar. 02, 2018 | Nov. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award | |||
Share Price | $ 264.01 | $ 209.79 | |
Stock Based Compensation (Numeric) | |||
Unrecognized compensation cost, non-vested awards | $ 1,640 | ||
Period for recognition, unrecognized compensation cost | 2 years 7 months 6 days | ||
Performance Shares | |||
Stock Based Compensation (Numeric) | |||
Maximum Target Percentage Allowed Under Program | 200.00% | ||
Stock Options | |||
Stock Based Compensation (Numeric) | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 0.2 | 0.3 | |
Employee Stock Purchase Plan | |||
Stock Based Compensation (Numeric) | |||
Shares Purchased, ESPP | 0.5 | 0.7 | |
Average purchase price of shares, ESPP | $ 129.23 | $ 91.74 | |
Total Intrinsic Value Of Shares Purchased | $ 51.2 | $ 54.3 | |
2003 Equity Incentive Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Common Stock, Capital Shares Reserved for Future Issuance | 200.7 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | 45.4 | ||
Program 2016 | Performance Shares | |||
Stock Based Compensation (Numeric) | |||
Actual Percentage Achieved | 200.00% | ||
Actual Shares Achieved | 0.8 | ||
Program 2015 | Performance Shares | |||
Stock Based Compensation (Numeric) | |||
Actual Percentage Achieved | 200.00% | ||
Actual Shares Achieved | 1 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) (Details 1) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 01, 2019 | Mar. 02, 2018 | |||
Gross unrealized gains, available-for-sale securities | ||||
Beginning balance, unrealized gains on available-for-sale securities | $ 44 | |||
Gross unrealized gains on available for sale securities, increase or decrease | 88 | |||
Gross unrealized gains on available for sale securities, reclassification adjustments, Net of Tax | (3) | |||
Ending balance, unrealized gains on available-for-sale securities | 129 | |||
Beginning balance, unrealized losses on available-for-sale securities | (25,374) | |||
Gross unrealized losses on available for sale securities increase or decrease, Net of Tax | 12,314 | |||
Gross unrealized losses on available for sale securities, reclassification adjustments, Net of Tax | 128 | |||
Ending balance, unrealized losses on available-for-sale securities | (12,932) | |||
Net unrealized gains on available-for-sale securities | ||||
Beginning Balance, net unrealized gains on available-for-sale securities | (25,330) | |||
Net unrealized gains on available for sale securities, increase or decrease | 12,402 | $ (23,150) | ||
Net unrealized gains on available for sale securities, reclassification adjustments | 125 | [1] | 121 | |
Ending Balance, net unrealized gains on available-for-sale securities | (12,803) | |||
Net unrealized gains on derivatives designated as hedging instruments | ||||
Beginning balance, net unrealized gains on derivative instruments designated as hedging instruments | 21,732 | |||
Net unrealized gains on derivative instruments designated as hedging instruments, increase or decrease | (8,457) | (1,336) | ||
Net unrealized gains on derivative instruments designated as hedging instruments, reclassification adjustments | (8,197) | [2] | (2,139) | |
Ending balance, net unrealized gains on derivative instruments designated as hedging instruments | 5,078 | |||
Cumulative foreign currency translation adjustments | ||||
Beginning balance, cumulative foreign currency translation adjustments | (144,532) | |||
Cumulative foreign currency translation adjustment, increase or decrease | 1,825 | $ 28,386 | ||
Cumulative foreign currency translation adjustment, reclassification adjustments | 0 | |||
Ending balance, cumulative foreign currency translation adjustments | (142,707) | |||
Accumulated other comprehensive income totals | ||||
Beginning balance, total accumulated other comprehensive income, net of taxes | [3] | (148,130) | ||
Accumulated other comprehensive income, increase or decrease | 5,770 | |||
Accumulated other comprehensive income, reclassification adjustments | (8,072) | |||
Ending balance, total accumulated other comprehensive income, net of taxes | $ (150,432) | |||
[1] | Reclassification adjustments for gains / losses on available-for-sale securities are classified in interest and other income (expense), net. | |||
[2] | Reclassification adjustments for gains / losses on derivative instruments are classified in revenue. | |||
[3] | The condensed consolidated balance sheet as of November 30, 2018 |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Income (Loss) (Details 2) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Tax, Derivatives Designated as Hedging Instruments | ||
Reclassification adjustments on derivative instruments | $ (95) | $ (1,526) |
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax | (95) | (1,526) |
Foreign currency translation adjustments | 0 | (1,742) |
Total taxes, other comprehensive income | $ (95) | $ (3,268) |
Stock Repurchase Program (Detai
Stock Repurchase Program (Details Numeric) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions | 1 Months Ended | 3 Months Ended | ||
Mar. 27, 2019 | Mar. 01, 2019 | Mar. 02, 2018 | May 21, 2018 | |
Stock Repurchase Program, Authorized Amount | $ 8,000,000 | |||
Payments for Repurchase of Common Stock | $ 500,000 | $ 300,000 | ||
Treasury Stock, Shares, Acquired | 2.1 | 1.6 | ||
Treasury Stock Acquired, Average Cost Per Share | $ 237.13 | $ 185.13 | ||
Up Front Payments Treasury Stock Remaining Balance | $ 159,100 | |||
Subsequent Event [Member] | ||||
Payments for Repurchase of Common Stock | $ 750,000 | |||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 6,600,000 |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Earnings Per Share [Abstract] | ||
Net income | $ 674,241 | $ 583,076 |
Shares used to compute basic net income per share | 488,056 | 492,061 |
Dilutive potential common shares: | ||
Unvested restricted stock and performance share awards | 5,721 | 7,191 |
ESPP and stock options | 411 | 181 |
Shares used to compute diluted net income per share | 494,188 | 499,433 |
Basic net income per share | $ 1.38 | $ 1.18 |
Diluted net income per share | $ 1.36 | $ 1.17 |
Net Income Per Share (Details N
Net Income Per Share (Details Numeric) - shares shares in Millions | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Earnings Per Share [Abstract] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | 0.3 | 1.3 |
Debt (Details Numeric 1)
Debt (Details Numeric 1) - Term Loan - USD ($) $ in Millions | 3 Months Ended | |
Mar. 01, 2019 | Oct. 17, 2018 | |
Debt Instrument [Line Items] | ||
Term Loan, Carrying Value | $ 2,250 | |
Unamortized Debt Issuance Expense | $ 0.7 | |
Debt Instrument, Periodic Payment, Interest | 18 | |
Marketo | ||
Debt Instrument [Line Items] | ||
Term Loan, Amount Outstanding | $ 2,250 | $ 2,250 |
Long-term Debt, Term | 18 months | |
Scenarioi [Member] | Minimum [Member] | ||
Debt Instrument [Line Items] | ||
Margin Added to LIBOR to Determine Interest Rate | 0.50% | |
Scenarioi [Member] | Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Margin Added to LIBOR to Determine Interest Rate | 1.00% | |
Scenarioii [Member] | Minimum [Member] | ||
Debt Instrument [Line Items] | ||
Margin Added to Base Rate to Determine Interest Rate | 0.04% | |
Scenarioii [Member] | Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Margin Added to Base Rate to Determine Interest Rate | 0.11% |
Debt (Details Numeric 2)
Debt (Details Numeric 2) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | ||||
Jan. 21, 2015 | Mar. 01, 2019 | Oct. 17, 2018 | Jun. 13, 2014 | Mar. 02, 2012 | Feb. 28, 2010 | |
Notes 2020 | ||||||
Debt Instrument [Line Items] | ||||||
Debt Instrument, Face Amount | $ 900 | |||||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | |||||
Debt Instrument, Unamortized Discount | $ 5.5 | |||||
Unamortized Debt Issuance Expense | $ 6.4 | |||||
Debt Instrument, Interest Rate, Effective Percentage | 4.92% | |||||
Notes 2025 | ||||||
Debt Instrument [Line Items] | ||||||
Debt Instrument, Face Amount | $ 1,000 | |||||
Debt Instrument, Interest Rate, Stated Percentage | 3.25% | |||||
Proceeds from Issuance of Debt | $ 989.3 | |||||
Debt Instrument, Unamortized Discount | 10.7 | |||||
Unamortized Debt Issuance Expense | $ 7.9 | |||||
Debt Instrument, Interest Rate, Effective Percentage | 3.67% | |||||
Notes 2020 and 2025 | ||||||
Debt Instrument [Line Items] | ||||||
Senior Notes, Carrying Value | $ 1,880 | |||||
Debt Instrument, Periodic Payment, Interest | 37.6 | |||||
Repurchase notes at price of their principal amount plus accrued and unpaid interest | 101.00% | |||||
Debt Instrument, Fair Value Disclosure | 1,920 | |||||
Revolving Credit Facility [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Unamortized Debt Issuance Expense | $ 0.8 | |||||
Line of Credit Facility, Current Borrowing Capacity | $ 1,000 | $ 1,000 | ||||
Fair Value Hedging | ||||||
Debt Instrument [Line Items] | ||||||
Derivative, Notional Amount | $ 900 | |||||
Derivative, Fixed Interest Rate | 4.75% | |||||
Notes 2020 | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, face value, reclass long-term to short-term debt, amount | $ 898.7 |
Debt (Details Numeric 3)
Debt (Details Numeric 3) - Revolving Credit Facility [Member] - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 01, 2019 | Oct. 17, 2018 | Mar. 02, 2012 | |
Debt Instrument [Line Items] | |||
Revolving Credit Agreement, Borrowing Capacity | $ 1,000 | $ 1,000 | |
Unamortized Debt Issuance Expense | 0.8 | ||
Option To Request Additional Commitments On Credit Facility | 500 | ||
Revolving Credit Agreement, Maximum Borrowing Capacity | $ 1,500 | ||
Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Commitment Fee Percentage | 0.04% | ||
Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Commitment Fee Percentage | 0.11% | ||
Scenarioi [Member] | Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Margin Added to LIBOR to Determine Interest Rate | 0.585% | ||
Scenarioi [Member] | Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Margin Added to LIBOR to Determine Interest Rate | 1.015% | ||
Scenarioii [Member] | |||
Debt Instrument [Line Items] | |||
Percentage Added to Effective Funds Rate in Determining Interest Rate | 0.50% | ||
Percentage Added to LIBOR in Determining Interest Rate | 1.00% | ||
Scenarioii [Member] | Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Margin Added to LIBOR to Determine Interest Rate | 0.00% | ||
Scenarioii [Member] | Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Margin Added to LIBOR to Determine Interest Rate | 0.015% |
Non-Operating Income (Expense_2
Non-Operating Income (Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 01, 2019 | Mar. 02, 2018 | |
Interest and other income (expense), net: | ||
Interest income | $ 16,071 | $ 22,630 |
Foreign exchange gains (losses) | (11,857) | (5,889) |
Realized gains on fixed income investment | 3 | 184 |
Realized losses on fixed income investment | (128) | (305) |
Other | 177 | 52 |
Interest and other income (expense), net | 4,266 | 16,672 |
Interest expense | (40,593) | (19,899) |
Investment gains (losses), net: | ||
Realized investment gains | 43,657 | 3,994 |
Unrealized investment gains | 174 | 0 |
Unrealized investment losses | 0 | (998) |
Investment gains (losses), net | 43,831 | 2,996 |
Non-operating income (expense), net | $ 7,504 | $ (231) |