Adobe (ADBE) 10-K risk factor changes: FY2019 vs FY2018

[removed: Our] [added: Our] competitive position and results of operations could be harmed if we do not compete [removed: effectively.][added: effectively.]

Furthermore, some of our competitors and potential competitors enjoy competitive advantages such as greater financial, technical, sales, marketing and other resources, broader brand [removed: awareness,] [added: awareness] and access to larger customer bases.

[removed: [For] [added: [*For] additional information regarding our competition and the risks arising out of the competitive environment in which we operate, see the section entitled “Competition” contained in Part I.

Item 1 of this [removed: report.](#s71A7DEA623555BED9B250E4CBFD6C1A3)][added: report.*](#sAB22ECD1F1DC5F9FA7B43EA4457C9ABC)]

[removed: If] [added: If] we cannot continue to develop, acquire, market and offer new products and services or enhancements to existing products and services that meet customer requirements, our operating results could [removed: suffer.][added: suffer.]

[removed: Introduction] [added: Introduction] of new technology could harm our business and results of [removed: operations.][added: operations.]

We use these cookies to help our customers more effectively advertise, gauge the performance of their [removed: advertisements,] [added: advertisements] and detect and prevent fraudulent activity.

[removed: Security] [added: Security] breaches in data centers we manage, or third parties manage on our behalf, may compromise the confidentiality, integrity, or availability of employee and customer data, which could expose us to liability and adversely affect our reputation and [removed: business.][added: business.]

We process and store significant amounts of employee and customer data, [removed: most] [added: a large volume] of which is hosted by third-party service providers.

Unauthorized access to or loss or disclosure of data stored by Adobe or our service providers may occur through [added: physical] break-ins, breaches of a secure network by an unauthorized party, software vulnerabilities or coding errors, employee theft or misuse or other misconduct.

It is also possible that unauthorized access to or disclosure of [added: employee or] customer data may be obtained through inadequate use of security controls by customers or employees.

Accounts created with weak or recycled passwords could allow cyber-attackers to gain access to [added: employee or] customer data.

Additionally, failure by [added: Adobe or our] customers to remove [added: the] accounts of their own employees, or the granting of accounts [removed: by the customer] in an uncontrolled manner, may allow for access by former or unauthorized [removed: customer representatives.][added: individuals.]

If there were an inadvertent disclosure of customer data, or [removed: if a third party were to gain] unauthorized access to the data we possess on behalf of our customers, our operations could be disrupted, our reputation could be damaged and we could be subject to claims or other liabilities, regulatory investigations, or fines.

In addition, such perceived or actual unauthorized loss or disclosure of the information we [removed: collect] [added: collect, process,] or [added: store or] breach of our security could damage our reputation, result in the loss of customers and harm our business.

[removed: We] [added: We] rely on data centers managed both by Adobe and third parties to host and deliver our services, as well as access, collect, [added: process,] use, [removed: transmit,] [added: transmit] and store data, and any interruptions or delays in these hosted services, or failures in data collection or transmission could expose us to liability and harm our business and [removed: reputation.][added: reputation.]

Much of our business relies on hardware and services that are hosted, [removed: managed,] [added: managed] and controlled directly by Adobe or third-party service providers, including our online store at adobe.com, Creative Cloud, Document [removed: Cloud,] [added: Cloud] and Experience Cloud solutions.

If our business relationship with a third-party provider of hosting or content delivery services is negatively affected, or if one of our content delivery suppliers were to terminate its agreement with us, without adequate notice, we might not be able to deliver the corresponding hosted offerings to our customers, which could subject us to reputational harm, costly and [removed: time intensive] [added: time-intensive] notification requirements, and cause us to lose customers and future business.

In addition, computer viruses, worms, or other malware may harm our systems, causing us to lose data, and the transmission of computer viruses or other malware could expose us to litigation or regulatory investigation, and costly and [removed: time intensive] [added: time-intensive] notification requirements.

Such a strain on our infrastructure capacity could subject us to regulatory [added: and customer] notification requirements, violations of service level agreement commitments, financial liabilities, result in customer dissatisfaction, or harm our business.

[removed: Increasing] [added: Increasing] regulatory focus on privacy [added: and security] issues and expanding laws could impact our business models and expose us to increased [removed: liability.][added: liability.]

As a global company, Adobe is subject to global [added: data] privacy and [removed: data] security laws, [removed: regulations,] [added: regulations] and codes of conduct that apply to our various business units.

Government [added: officials and] regulators, privacy advocates and class action attorneys [removed: are]

[added: are] increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data.

Globally, new and emerging laws, such as the General Data Protection Regulation (“GDPR”) [added: and the Network and Information Systems Directive (“NISD”)] in Europe, state laws in the U.S. on privacy, data and related technologies, such as the California Consumer Privacy Act, as well as industry self-regulatory codes create new compliance obligations and expand the scope of potential liability, either jointly or severally with our customers and suppliers.

While we have invested in readiness to comply with applicable requirements, these new and emerging laws, regulations and codes may affect our ability (and our enterprise customers’ ability) to reach current and prospective customers, to respond to both enterprise and individual customer requests under the laws (such as individual rights of access, [removed: correction,] [added: correction] and deletion of their personal information), and to implement our business models effectively.

The mechanisms that we and many other companies rely upon for European data transfers [removed: (e.g.] [added: (e.g.,] Privacy Shield and Model Clauses) are being contested in the European court system.

We are closely monitoring developments related to requirements for transferring personal data outside the [removed: EU] [added: European Union] and other countries that have similar trans-border data flow requirements.

These requirements may result in an increase in the obligations required to provide our services in the [removed: EU] [added: European Union] or in sanctions and fines for non-compliance.

Other countries, such as India, are considering requirements for data localization [removed: (e.g.] [added: (e.g.,] where personal data must remain in the country).

If the mechanisms for transferring personal information from certain countries or areas, including Europe to the United [removed: States] [added: States,] should be found invalid or if other countries implement more restrictive regulations for cross-border data transfers (or not permit data to leave the country of origin), such developments could harm our business, financial condition and results of operations.

[removed: Security] [added: Security] vulnerabilities in our products and [removed: systems] [added: systems, or in our supply chain,] could lead to reduced revenue or to liability [removed: claims.][added: claims.]

Maintaining the security of our [removed: products, computers] [added: products] and [removed: networks] [added: services] is a critical issue for us and our customers.

[removed: Security researchers, criminal hackers and other third parties regularly develop new techniques to penetrate computer and network security measures and,] [added: And,] as we have previously disclosed, certain [added: unauthorized] parties have in the past managed to [removed: breach] [added: gain access to] and misuse some of our systems and software in order to access our end users’ [removed: authentication and] [added: authentication,] payment [added: and personal] information.

In addition, cyber-attackers also develop and deploy viruses, worms, credential stuffing attack [removed: tools,] [added: tools] and other malicious software programs, some of which may be specifically designed to attack our products, [removed: systems, computers] [added: services, information systems] or networks.

[removed: Sophisticated hardware] [added: Hardware, software] and operating system applications that we develop or procure from third parties may contain defects in design or manufacture, including bugs, vulnerabilities and other problems that could unexpectedly compromise the security of the system or impair a customer’s ability to operate or use our products.

The costs to prevent, eliminate, [removed: notify affected parties of,] [added: mitigate,] or alleviate cyber- or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities are significant, and our efforts to address these [removed: problems] [added: problems, including notifying affected parties,] may not be successful or may be delayed and could result in interruptions, delays, cessation of service and loss of existing or potential customers.

Outside parties have in the past and may in the future attempt to fraudulently induce our employees or users of our products or services to disclose [removed: sensitive] [added: sensitive, personal, or confidential] information via illegal electronic spamming, phishing or other tactics.

This may result in litigation and liability or fines, our compliance with costly and [removed: time intensive] [added: time-intensive] notice requirements, governmental inquiry or oversight or a loss of customer confidence, any of which could harm our business or damage our brand and reputation, possibly impeding our present and future success in retaining and attracting new customers and thereby requiring time and resources to repair our brand and reputation.

These risks will likely increase as we expand our hosted offerings, integrate our products and [removed: services,] [added: services] and store and process more data, including personal information.

Security threats to our information systems, end points and networks have the potential to impact our customers as well.

Security researchers, criminal hackers and other third parties regularly develop new techniques to penetrate our end points, information systems and network security measures.

Moreover, under certain

The Tax Cuts and Jobs Act, enacted into law on December 22, 2017, changed existing U.S. tax law applicable to us and included certain international provisions effective for us starting in fiscal 2019.

The applicability and impact of these new tax provisions, and of other international tax law changes effective for fiscal 2020 and beyond, will likely require us to respond by making change(s) to our international trading structure.

The net impact of such change(s) is uncertain but is anticipated to adversely affect our effective income tax rate and cash flows in years beyond fiscal 2020.

If our products or platforms are used to create or disseminate objectionable content, particularly misleading content intended to manipulate public opinion, our brand reputation may be damaged, and our business and financial results may be harmed.

We believe that our brands have significantly contributed to the success of our business.

Maintaining and enhancing the brands within Adobe increases our ability to enter new categories and launch new and innovative products that better serve the needs of our customers.

We also believe that maintaining and enhancing our brands is critical to expanding our base of customers.

Our brands may be negatively affected by the use of our products or services to create or disseminate newsworthy content that is deemed to be misleading, deceptive, or intended to manipulate public opinion (e.g. “DeepFakes”), by the use of our products or

services for illicit, objectionable, or illegal ends, or by our failure to respond appropriately and expeditiously to such uses of our products and services.

Such uses of our products and services may also cause us to face claims related to defamation, rights of publicity and privacy, illegal content, misinformation and personal injury torts.

Maintaining and enhancing our brands may require us to make substantial investments and these investments may not be successful.

If we fail to appropriately respond to objectionable content created using our products or services or shared on our platforms, our users may lose confidence in our brands and our business and financial results may be adversely affected.

judgment of the appropriate trade-offs among risk, opportunity and expense.

of contracts, payment of fines, and suspension or debarment from future government business, as well as harm to our reputation and financial results.

Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel, immigration, or the availability of work visas.

For example, in California, increasing intensity of drought throughout the state and annual periods of wildfire danger increase the probability of planned power outages in the communities where we work and live.

While

this danger has a low-assessed risk of disrupting normal business operations, it has the potential impact on employees’ abilities to commute to work and to stay connected.

Climate-related events, including the increasing frequency of extreme weather events and their impact on U.S., India and other major regions’ critical infrastructure, have the potential to disrupt our business, our third-party suppliers, and/or the business of our customers, and may cause us to experience higher attrition, losses, and additional costs to maintain or resume operations.

applications and services and those of our third-party service providers.

The Tax Act, enacted into law on December 22, 2017, changes existing U.S. tax law applicable to us and includes adoption of a territorial tax system requiring us to incur a transition tax on previously untaxed earnings and profits of our foreign subsidiaries.

As part of the adoption of a territorial

tax system, the Tax Act also provides an exemption from federal income taxes for distributions from foreign subsidiaries made after December 31, 2017 that were not subject to the one-time transition tax.

In addition, certain international provisions introduced in the Tax Act will be effective for us in fiscal 2019.

These provisions and changes that we may make to our corporate tax structure could adversely affect our tax rate and cash flow in future years.

collection may fail to grow as anticipated or our marketing efforts may be unsuccessful, any of which may adversely affect our results of operations.

support providers, our reputation may be harmed, our ability to sell our offerings could be adversely affected, and we could lose customers and associated revenue.

In the event of a natural disaster that disrupts business due to limited access to these resources, we have the potential to experience losses to our business, and added costs to resume operations.

cannot predict future market conditions, market liquidity or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.

[removed: The] [added: *The] following discussion should be read in conjunction with our Consolidated Financial Statements and Notes thereto.

[removed: ACQUISITIONS][added: ACQUISITIONS]

During fiscal 2018, we completed our acquisitions of Marketo, a privately held marketing cloud platform company, for [removed: $4.74] [added: $4.73] billion and Magento, a privately held commerce platform company, for $1.64 [removed: billion.][added: billion, and integrated them into our Digital Experience reportable segment.]

During fiscal 2017, we completed our acquisition of TubeMogul, a publicly held video advertising platform company, for $560.8 [removed: million.][added: million, and integrated it into our Digital Experience reportable segment.]

[removed: See] [added: [*See] Note 2 of our Notes to Consolidated Financial Statements for [removed: pro forma financial] information [removed: related to] [added: regarding adoption of] the [removed: Marketo acquisition.][added: new revenue standard.*](#s80FD33E1AADB525984016D9E277DCDDB)]

[added: [See Note 3 of our Notes to Consolidated Financial Statements for further information regarding these acquisitions, including pro forma financial information related to the Marketo acquisition.](#s6C70149DB4C35AD0B3B726EAC4ED2923)] Pro forma information has not been presented for our other acquisitions during the fiscal years presented as the impact to our Consolidated Financial Statements was not material.

[removed: Subsequent to November 30, 2018,] [added: During fiscal 2019,] we acquired the remaining interest in Allegorithmic SAS (“Allegorithmic”), a privately held 3D editing and authoring software company for gaming and entertainment, for approximately [removed: $105.0] [added: $106.2] million in cash [removed: consideration.][added: consideration, and integrated it into our Digital Media reportable segment.]

[removed: [See] [added: [*See] Note [removed: 2] [added: 3] of our Notes to Consolidated Financial Statements for [removed: further] [added: more detailed] information regarding [removed: these acquisitions.](#sC55E54323A95587EA00C1CFB7E976EA5)][added: our acquisitions.*](#s6C70149DB4C35AD0B3B726EAC4ED2923)]

[removed: CRITICAL] [added: CRITICAL] ACCOUNTING POLICIES AND [removed: ESTIMATES][added: ESTIMATES]

We believe that the assumptions, judgments and estimates involved in the accounting for [added: revenue recognition,] business combinations and income taxes have the greatest potential impact on our Consolidated Financial Statements.

These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates, [removed: so] [added: and consequently,] we consider these to be our critical accounting policies.

[removed: Business Combinations][added: Business Combinations]

We allocate the purchase price of acquired companies to [removed: the] tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date.

[removed: Accounting] [added: Accounting] for Income [removed: Taxes][added: Taxes]

[removed: Recent] [added: Recent] Accounting [removed: Pronouncements][added: Pronouncements]

[removed: [See] [added: [*See] Note 1 of our Notes to Consolidated Financial Statements for information regarding recent accounting pronouncements that are of significance, or potential significance to [removed: us.](#s09C3B44EC3285E739EE4C94B332D08C4)][added: us.*](#s9DF0F31FE6B758A883F8146A178AF438)]

[removed: RESULTS] [added: RESULTS] OF [removed: OPERATIONS][added: OPERATIONS]

For fiscal [removed: 2018,] [added: 2019,] we reported strong financial results consistent with the continued execution of our long-term plans for our two strategic growth areas, Digital Media and Digital [removed: Experience (formerly Digital Marketing),] [added: Experience,] while continuing to market and license a broad portfolio of products and solutions.

Creative Cloud delivers value with deep, cross-product integration, frequent product updates and feature enhancements, [removed: cloud-based] [added: cloud-enabled] services including storage and syncing of files across users’ machines, [added: machine learning and artificial intelligence,] access to marketplace, social and community-based features with our Adobe Stock and Behance services, app creation capabilities, tools which assist with enterprise deployments and team collaboration, and affordable pricing for cost-sensitive customers.

We expect Creative Cloud will drive sustained long-term revenue growth through a continued expansion of our customer base by acquiring new users [removed: on account] [added: as a result] of low cost of entry and delivery of additional features and value to Creative Cloud, as well as keeping existing customers current on our latest release.

[added: Document] Cloud, which we believe enhances the way people manage critical documents at home, in the office and across devices, includes Adobe Acrobat DC and Adobe Sign, and a set of integrated services enabling users to create, review, approve, sign and track documents whether on a desktop or mobile device.

ARR should be viewed independently of revenue, deferred [removed: revenue and] [added: revenue,] unbilled [removed: deferred revenue] [added: backlog and remaining performance obligation] as ARR is a performance metric and is not intended to be combined with any of these items.

Our reported ARR results in [added: the current] fiscal [removed: 2018] [added: year] are based on currency rates set at the [removed: start] [added: beginning] of [removed: fiscal 2018] [added: the year] and held constant throughout the year.

| Creative ARR | Annual Value of Creative Cloud Subscriptions and Services + Annual [removed: Digital Publishing Suite Contract Value + Annual] Creative ETLA Contract Value | |

Creative ARR exiting fiscal [removed: 2018] [added: 2019] was [removed: $6.03] [added: $7.31] billion, up from [removed: $4.77] [added: $5.92] billion at the end of fiscal [removed: 2017.][added: 2018.]

Document Cloud ARR exiting fiscal [removed: 2018] [added: 2019] was [removed: $801 million,] [added: $1.09 billion,] up from [removed: $614] [added: $791] million at the end of fiscal [removed: 2017.][added: 2018.]

Total Digital Media ARR grew to [removed: $6.83] [added: $8.40] billion at the end of fiscal [removed: 2018,] [added: 2019,] up from [removed: $5.39] [added: $6.71] billion at the end of fiscal [removed: 2017.][added: 2018.]

Revaluing our ending ARR for fiscal [removed: 2018] [added: 2019] using currency rates at the beginning of fiscal 2019, our Digital Media ARR at the end of fiscal [removed: 2018] [added: 2019] would be [removed: $6.71] [added: $8.33] billion or approximately [removed: $123] [added: $66] million lower than the ARR reported above.

Creative revenue in fiscal [removed: 2018] [added: 2019] was [removed: $5.34] [added: $6.48] billion, up from [removed: $4.17] [added: $5.34] billion in fiscal [removed: 2017] [added: 2018] and representing [removed: 28%] [added: 21%] year-over-year growth.

Document Cloud revenue in fiscal [removed: 2018] [added: 2019] was [removed: $981.8 million,] [added: $1.22 billion,] up from [removed: $836.7] [added: $981.8] million in fiscal [removed: 2017] [added: 2018] and representing [removed: 17%] [added: 25%] year-over-year revenue [removed: growth as we continue to transition Document Cloud to a subscription-based model.][added: growth.]

Total Digital Media segment revenue grew to [removed: $6.33] [added: $7.71] billion in fiscal [removed: 2018,] [added: 2019,] up from [removed: $5.01] [added: $6.33] billion in fiscal [removed: 2017] [added: 2018] and representing [removed: 26%] [added: 22%] year-over-year growth.

Our Digital Experience business provides comprehensive solutions that include analytics, [removed: social marketing,] targeting, media optimization, digital experience management, cross-channel campaign management, marketing automation, audience management, commerce, premium video delivery and monetization.

[removed: Our] [added: During fiscal 2019, our] hierarchy of solutions in the Digital Experience [removed: segment, available in our Adobe Experience Cloud, consists] [added: segment consisted] of the following cloud offerings:

| • | Adobe Analytics Cloud—enables businesses to move from insights to actions in real time by uniquely integrating audiences as the core system of intelligence for the enterprise; makes data available across all Adobe clouds through the [added: capture, aggregation, rationalization and understanding of vast amounts of disparate data and then translating that data into singular customer profiles; includes Adobe Analytics and Adobe Audience Manager.] |

| • | Adobe Marketing Cloud—provides an integrated set of solutions to help marketers differentiate their brands and engage their customers, helping businesses manage, personalize, and orchestrate campaigns and customer journeys; includes Adobe Experience Manager (“AEM”), Adobe Campaign, Adobe Target, Marketo [removed: Engagement Platform] [added: Engage] and Adobe Primetime. |

| • | [removed: Magento] [added: Adobe] Commerce Cloud—provides digital commerce, order management and predictive intelligence based on a unified commerce platform enabling shopping experiences across a wide array of [removed: industries. This cloud offering was integrated into the Adobe Experience Cloud after our acquisition of privately held] [added: industries; includes] Magento [removed: in June 2018.] [added: Commerce.] |

In addition to chief marketing officers, chief revenue officers and digital marketers, users of our [removed: Adobe] [added: Digital] Experience [removed: Cloud] solutions include advertisers, campaign managers, [removed: digital marketers,] publishers, data analysts, content managers, social [removed: marketers and] [added: marketers,] marketing [added: executives and information management and technology] executives.

We utilize a direct sales force to market and license our [removed: Adobe] [added: Digital] Experience [removed: Cloud] solutions, as well as an extensive ecosystem of partners, including marketing agencies, systems integrators and independent software vendors that help license and deploy our solutions to their customers.

We achieved record [removed: Adobe] [added: Digital] Experience [removed: Cloud] revenue of [removed: $2.44] [added: $3.21] billion in fiscal [removed: 2018,] [added: 2019,] up from [removed: $2.03] [added: $2.44] billion in fiscal [removed: 2017] [added: 2018] which represents [removed: 20%] [added: 31%] year-over-year growth.

Driving [removed: the] [added: this] increase [removed: in Adobe Experience Cloud revenue] was the increase in subscription revenue across our offerings which grew to [removed: $1.95] [added: $2.67] billion in fiscal [removed: 2018] [added: 2019] from [removed: $1.55] [added: $1.95] billion in fiscal [removed: 2017,] [added: 2018,] representing [removed: 26%] [added: 37%] year-over-year growth.

Discussion regarding our financial condition and results of operations for fiscal* *2018* *as compared to fiscal* *2017* *is included in Item 7 of our Annual Report on Form 10-K for the fiscal year ended* *November 30, 2018, filed with the SEC on* *January 25,2019.*

Revenue Recognition

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.

Cloud-based features that are integral to our Creative Cloud and Document Cloud offerings and that work together with the on-premise/on-device software include, but are not limited to: Creative Cloud Libraries, which enable customers to access their work, settings, preferences, and other assets seamlessly across desktop and mobile devices and collaborate across teams in real time; shared reviews which enable simultaneous editing and commenting of PDFs across desktop, mobile, and web; automatic cloud rendering of a design which enables it to be worked on in multiple mediums; and Sensei, Adobe’s cloud-hosted artificial intelligence and machine learning framework, which enables features such as automated photo-editing, photograph content-awareness, natural language processing, optical character recognition, and automated document tagging.

Overview of 2019

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, and began to report our financial results under the new revenue standard.

The impact of the adoption was not significant to our results of operations.

Our financial results for fiscal 2019 are presented in accordance with the new revenue standard that was adopted under the modified retrospective method at the beginning of fiscal 2019.

Prior period results have not been restated which limits the comparability of our results of operations for fiscal 2019 when compared to the year-ago period.

| • | Digital Experience revenue of $3.21 billion increased by $762.4 million, or 31%, during fiscal 2019, from $2.44 billion in fiscal 2018. The increase was primarily due to the increase in subscription revenue driven by the addition of Marketo and Magento, which we acquired in the later part of fiscal 2018. |

| • | Net cash flow from operations of $4.42 billion during fiscal 2019 increased by $392.5 million, or 10%, from $4.03 billion during fiscal 2018 primarily due to higher net income adjusted for the net effect of non-cash items. This increase was offset in part by comparatively lower increases in income taxes payable and higher increases in prepaid expenses and other assets. |

Revenue

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*Subscription Revenue by Segment*

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Our product revenue is primarily comprised of revenue from distinct on-premise software licenses recognized at a point in time and certain of our OEM and royalty agreements.

| • | *Digital Experience*—Our Digital Experience segment provides products, services and solutions for creating, managing, executing, measuring, monetizing and optimizing customer experiences from advertising to commerce. Our customers include marketers, advertisers, agencies, publishers, merchandisers, merchants, web analysts, data scientists, developers, marketing executives, information management and technology executives, product development executives, and sales and support executives. |

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Largely contributing to the subscription revenue increases were revenue associated with Marketo Engage, which we acquired in the fourth quarter of fiscal 2018, and revenue associated with our Magento Commerce offerings.

Also contributing to the subscription revenue growth were increases in our AEM and Campaign offerings.

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| *(in millions)* | 2019 | | | | 2018 | | |

| Australian Dollar | (27.2 | | ) | | (0.7 | | ) |

| Other currencies | (12.9 | | ) | | 2.6 | | |

Adoption of the new revenue standard resulted in changes to our measurement of unbilled backlog starting in fiscal 2019 such that orders with a right of termination and unbilled amounts recognized as revenue under the new revenue standard are not included in our unbilled backlog, consistent with our measurement of remaining performance obligations.

As of November 29, 2019, we had unbilled backlog of $6.38 billion, which excludes amounts cancellable without substantive penalty.

Approximately $2.61 billion of our unbilled backlog is not reasonably expected to be recognized during fiscal

As of the end of fiscal 2018, we are continuing to integrate Marketo and Magento into our Digital Experience reportable segment.

As of the end of fiscal 2018, we have integrated TubeMogul into our Digital Experience reportable segment.

Allegorithmic will be integrated into our Digital Media reportable segment for financial reporting purposes in the first quarter of fiscal 2019.

Overview of 2018

Document

capture, aggregation, rationalization and understanding of vast amounts of disparate data and then translating that data into singular customer profiles; includes Adobe Analytics and Adobe Audience Manager.

In October 2018, we acquired privately held marketing cloud platform company Marketo.

We began integrating Magento, as discussed above, and Marketo into our Digital Experience business in the second half of fiscal 2018.

| • | Net cash flow from operations of $4.03 billion during fiscal 2018 increased by $1.12 billion, or 38%, from $2.91 billion during fiscal 2017 primarily due to higher net income. |

Revenue (dollars in millions)

Revenue for fiscal 2016 benefited from an extra week in the first quarter of fiscal 2016 due to our 52/53-week financial calendar whereby fiscal 2016 was a 53-week year compared with fiscal 2018 and 2017, which were 52-week years.

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| | | Fiscal 2018 | | | | Fiscal 2017 | | | | Fiscal 2016 | | | | % Change 2018-2017 | | | % Change 2017-2016 | |

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| | | Fiscal 2018 | | | | Fiscal 2017 | | | | Fiscal 2016 | | | | % Change 2018-2017 | | | % Change 2017-2016 | |

In fiscal 2018, we moved our legacy enterprise offerings from our Digital Experience segment into Publishing.

Prior year information in the table above has been reclassified to reflect this change.

See below for additional details.

| • | Digital Experience—Our Digital Experience segment provides solutions and services for how digital advertising and marketing are created, managed, executed, measured and optimized. Our customers include digital marketers, advertisers, publishers, merchandisers, web analysts, chief marketing officers, chief information officers and chief revenue officers. This segment also includes our Marketo marketing cloud platform offerings and Magento commerce platform offerings, both acquired in fiscal 2018. |

In fiscal 2018, we moved our legacy enterprise offerings—Adobe Connect web conferencing platform and Adobe LiveCycle, an enterprise document and forms platform—from our Digital Experience segment into Publishing, in order to more closely align our Digital Experience business with the strategic growth opportunity.

Prior year information in the tables below have been reclassified to reflect this change.

| | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | |

| | | Fiscal 2018 | | | | Fiscal 2017 | | | | Fiscal 2016 | | | | % Change 2018-2017 | | | % Change 2017-2016 | |

Fiscal 2018 Revenue Compared to Fiscal 2017 Revenue

Revenue from Digital Experience increased $413.4 million during fiscal 2018, as compared to fiscal 2017 primarily due to subscription revenue growth associated with our Adobe Experience Cloud offerings.

The increase in subscription revenue was primarily driven by continued adoption of our AEM offerings which is part of our Marketing Cloud and growth in revenue associated with our Analytics Cloud.

Fiscal 2017 Revenue Compared to Fiscal 2016 Revenue

Digital Media

Revenue from Digital Media increased $1.07 billion during fiscal 2017 as compared to fiscal 2016, primarily driven by increases in revenue associated with our creative offerings.

Revenue associated with our Creative offerings, which includes our Creative Cloud, perpetually licensed Creative and stock photography offerings, increased during fiscal 2017 as compared to fiscal 2016.

The increase was primarily due to an increase in subscription revenue associated with our Creative Cloud offerings driven by increases in individual, team and enterprise subscriptions.

Also contributing to the increase in revenue was revenue growth associated with our Creative Cloud Photography Plan subscription offering.

Document Cloud revenue, which includes our Acrobat product family and Adobe Sign service, increased during fiscal 2017 as compared to fiscal 2016 primarily due to increases in Document Cloud subscription revenue, offset in part by expected declines in revenue associated with our perpetually licensed Acrobat offering.

Also contributing to the increase in Document Cloud revenue was an increase in Adobe Sign revenue.

[removed: Foreign] [added: Foreign] Currency [removed: Risk][added: Risk]

[removed: Foreign] [added: *Foreign] Currency Exposures and Hedging [removed: Instruments][added: Instruments*]

Additionally, we hedge our net recognized foreign currency [added: monetary] assets and liabilities with foreign exchange forward contracts.

Our significant foreign currency revenue exposures for fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] were as follows [removed: (in millions, except Japanese Yen):][added: :]

| Euro | € | [removed: 1,309.9] [added: 1,603.2] | | | € | [removed: 1,044.7] [added: 1,309.9] | | | € | [removed: 825.6] [added: 1,044.7] | |

| Japanese Yen (in billions) | ¥ | [removed: 60.8] [added: 73.2] | | | ¥ | [removed: 51.0] [added: 60.8] | | | ¥ | [removed: 38.7] [added: 51.0] | |

| British Pounds | £ | [removed: 423.1] [added: 503.3] | | | £ | [removed: 338.4] [added: 423.1] | | | £ | [removed: 263.5] [added: 338.4] | |

As of November [removed: 30, 2018,] [added: 29, 2019,] the total absolute value of all outstanding foreign exchange contracts, including options and forwards, was [removed: $1.55] [added: $1.90] billion, which included the notional equivalent of [removed: $805.0] [added: $927.0] million in Euros, [removed: $275.3] [added: $431.0] million in British Pounds, [removed: $331.8] [added: $341.3] million in Japanese Yen and [removed: $140.3] [added: $201.8] million in other foreign currencies.

As of November [removed: 30, 2018,] [added: 29, 2019,] all contracts were set to expire at various dates through June [removed: 2019.][added: 2020.]

[removed: The bank counterparties in these contracts could expose us to credit-related losses that would be largely mitigated with] [added: In addition, we enter into] collateral security agreements that provide for collateral to be received or posted when the net fair value of these contracts fluctuates from contractually established thresholds.

[removed: In addition, we enter into master netting arrangements that have the ability] [added: The bank counterparties in these contracts could expose us] to [removed: further limit] credit-related losses [added: that would be largely mitigated] with [added: master netting arrangements with] the same counterparty by permitting net settlement [removed: transactions.]

A sensitivity analysis was performed on all of our foreign exchange derivatives as of November [removed: 30, 2018.][added: 29, 2019.]

A 10% increase in the value of the U.S. Dollar and a corresponding decrease in the value of the hedged foreign currency asset would lead to an increase in the fair value of our financial hedging instruments by [removed: $48.2] [added: $113.6] million.

Conversely, a 10% decrease in the value of the U.S. Dollar would result in a decrease in the fair value of these financial instruments by [removed: $60.7] [added: $33.4] million.

[added: As of November 29, 2019 and November 30, 2018, this long-term investment exposure] totaled an absolute notional equivalent of [removed: $292.3] [added: $385.2] million and [removed: $190.5] [added: $292.3] million, respectively, with the year-over-year increase primarily driven by earnings growth.

[removed: Cash] [added: *Cash] Flow [removed: Hedging—Hedges] [added: Hedges] of Forecasted Foreign Currency [removed: Revenue][added: Revenue*]

We record changes in [removed: the intrinsic] [added: fair] value of these cash flow hedges [added: of foreign currency denominated revenue] in accumulated other comprehensive income (loss) until the forecasted transaction occurs.

When the forecasted transaction [removed: occurs,] [added: affects earnings,] 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 [removed: interest and other income, net on our Consolidated Statements of Income at that time.][added: revenue.]

For the fiscal year ended November [removed: 30, 2018,] [added: 29, 2019,] there were no net gains or losses recognized in [removed: other income] [added: revenue] relating to hedges of forecasted transactions that did not occur.

[removed: Balance Sheet Hedging—Hedging] [added: *Non-Designated Hedges] of Foreign Currency Assets and [removed: Liabilities][added: Liabilities*]

[removed: We hedge exposures related to our net recognized] [added: Our derivatives not designated as hedging instruments consist of] foreign currency [added: forward contracts that we primarily use to hedge monetary] assets and liabilities [removed: with foreign exchange forward contracts] [added: denominated in non-functional currencies] to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates.

These foreign exchange contracts are carried at fair value with changes in [removed: the] fair value [added: of these contracts] recorded [removed: as] [added: to] interest and other [removed: income, net.][added: income (expense), net in our Consolidated Statements of Income.]

At November [removed: 30, 2018,] [added: 29, 2019,] the outstanding balance sheet hedging derivatives had maturities of 180 days or less.

[removed: [See] [added: [*See] Note [removed: 5] [added: 6] of our Notes to Consolidated Financial Statements for information regarding our [removed: hedging activities.](#s3E6C43B3DFF65409B670E105CD639B4D)][added: derivative financial instruments.*](#s48D05FC2E657524EB1075099749F78E7)]

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

[removed: Short-Term] [added: *Short-Term] Investments and Fixed Income [removed: Securities][added: Securities*]

At November [removed: 30, 2018,] [added: 29, 2019,] we had debt securities classified as short-term investments of [removed: $1.59] [added: $1.53] billion.

A sensitivity analysis was performed on our investment portfolio as of November [removed: 30, 2018.][added: 29, 2019.]

The analysis is shown as of November [removed: 30, 2018] [added: 29, 2019] and [removed: December 1, 2017 (dollars in millions):][added: November 30, 2018:]

| \-150 BPS | | | | \-100 BPS | | | | \-50 BPS | | | | Fair Value [removed: 12/1/17] [added: 11/29/19] | | | | +50 BPS | | | | +100 BPS | | | | +150 BPS | | |

[removed: Term Loan][added: *Term Loan*]

As of November [removed: 30, 2018,] [added: 29, 2019,] our Term Loan’s carrying value was $2.25 billion.

[removed: Senior Notes][added: *Senior Notes*]

As of November [removed: 30, 2018,] [added: 29, 2019,] the amount outstanding under our Notes was $1.9 billion.

As of November [removed: 30, 2018,] [added: 29, 2019,] the total carrying amount of the Notes was [removed: $1.88] [added: $1.89] billion and the related fair value based on observable market prices in less active markets was [removed: $1.89] [added: $1.96] billion.

| *(in millions, except Japanese Yen)* | 2019 | | | | 2018 | | | | 2017 | | |

transactions.

These contracts reduce the impact of currency exchange rate movements on our assets and liabilities.

| *(dollars in millions)* | | | | | | | | | | | | | | | | | | | | | | | | | | |

| $ | 1,544.8 | | | $ | 1,538.8 | | | $ | 1,532.8 | | | $ | 1,526.8 | | | $ | 1,520.7 | | | $ | 1,514.7 | | | $ | 1,508.7 | |

*Cash Flow Hedges of Interest Rate Risk*

In June 2019, in anticipation of refinancing our $2.25 billion Term Loan due April 30, 2020 and $900 million notes payable due February 1, 2020, we entered into Treasury lock agreements with large financial institutions which fixed benchmark U.S. Treasury rates for an aggregate notional amount of $1 billion of our future debt issuance.

These derivative instruments hedge the impact of changes in the benchmark interest rate to future interest payments and will be terminated upon closing of our anticipated refinancing.

We record changes in the fair value of these cash flow hedges of interest rate risk in accumulated other comprehensive income (loss) until the anticipated refinancing.

Upon refinancing and termination of the derivative instruments, their fair value will be amortized over the term of our new debt to interest expense.

| | Fiscal 2018 | | | | Fiscal 2017 | | | | Fiscal 2016 | | |

As of November 30, 2018 and December 1, 2017, this long-term investment exposure

These foreign exchange contracts do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these contracts are intended to offset gains and losses on the assets and liabilities being hedged.

The following table separates these investments, based on stated maturities, to show the approximate exposure to interest rates (in millions):

| | | | |

| --- | --- | --- | --- |

| | | | |

| Due within one year | $ | 612.1 | |

| Due between one and two years | 564.2 | | |

| Due between two and three years | 282.2 | | |

| Due after three years | 127.7 | | |

| Total | $ | 1,586.2 | |

| $ | 3,595.2 | | | $ | 3,568.1 | | | $ | 3,540.9 | | | $ | 3,513.7 | | | $ | 3,486.5 | | | $ | 3,459.3 | | | $ | 3,432.1 | |

Other Market Risk

Privately Held Long-Term Investments

The privately held companies in which we invest can still be considered in the start-up or development stages which are inherently risky.

The technologies or products these companies have under development are typically in the early stages and may never materialize, which could result in a loss of a substantial part of our initial investment in these companies.

The evaluation of privately held companies is based on information that we request from these companies, which is not subject to the same disclosure regulations as U.S. publicly traded companies, and as such, the basis for these evaluations is subject to the timing and accuracy of the data received from these companies.

We have immaterial exposure on our long-term investments in privately held companies as these investments were not significant as of November 30, 2018 and December 1, 2017.

Founded in 1982, Adobe Inc. [removed: (formerly Adobe Systems Incorporated)] is one of the largest and most diversified software companies in the world.

[removed: BUSINESS OVERVIEW][added: BUSINESS OVERVIEW]

For over 35 years, Adobe’s innovations have transformed how individuals, teams, businesses and governments [removed: interact.][added: engage and interact with their constituents in print and online.]

While we continue to offer a broad portfolio of products, [removed: services,] [added: services] and solutions, we focus our investments in two strategic growth areas:

Digital [removed: Media—providing] [added: Media – providing] products, services and solutions that enable individuals, teams and enterprises to create, publish and promote their content anywhere.

This is the core of what we have delivered for [removed: over 25 years,] [added: decades,] and we have evolved our business model to provide our customers with a range of flexible solutions that allow them to reach their full creative potential anytime, anywhere, on any device on projects of all types.

Our customers include marketers, advertisers, agencies, publishers, merchandisers, merchants, web analysts, data scientists, developers, marketing executives, information management [added: and technology] executives, product development [removed: executives,] [added: executives] and sales and support executives.

[removed: Our robust] [added: Underpinning] Adobe Experience [removed: Platform] [added: Cloud is our Adobe Experience Platform, which] provides [removed: enterprises] [added: businesses] and brands [removed: a profile] [added: with an open and extensible platform for customer experience management with real-time customer profiles] that [removed: enables] [added: enable] deep customer insights and [added: the delivery of] personalized digital experiences [removed: delivered with our Adobe Experience Cloud solutions.][added: in milliseconds.]

In addition, our ability to deliver innovation and productivity improvements across customer workflows involving the creation, management, delivery, measurement and optimization of engaging content favorably positions Adobe as our customers continue [removed: investing] [added: to invest] in [removed: engaging their constituents digitally.][added: delivering digital experiences.]

[removed: SEGMENTS][added: SEGMENTS]

Our business is organized into three reportable segments: Digital Media, Digital [removed: Experience,] [added: Experience] and Publishing.

[removed: MARKET OVERVIEW][added: MARKET OVERVIEW]

This overview provides an explanation of our markets and a discussion of strategic opportunities in fiscal [removed: 2019] [added: 2020] and beyond for each of our segments.

[removed: [See] [added: *See] “Results of Operations” within Part II, Item 7 titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” [added: and Note 2 of Part II, Item 8 titled “Notes to Consolidated Financial Statements”] for further segment [removed: information.](#s59CF148659F152CB9A35C9DB508EA37B)][added: information.*]

[removed: Digital Media][added: Digital Media]

[removed: Digital] [added: *Digital] Media [removed: Opportunity][added: Opportunity*]

In today’s world where the velocity of creation and consumption of digital content is [removed: ever increasing,] [added: constantly growing, design and creativity have never been more relevant and] customers are looking for a way to meet demand with engaging online experiences.

Adobe is in a strong position to capitalize on this opportunity [removed: by driving modernization and] [added: with] innovation that will accelerate the creative process across all platforms and devices, deepen engagement with [removed: communities,] [added: communities] and accelerate long-term revenue growth by focusing on cloud-based offerings, which are licensed on a subscription basis.

The flagship of our Digital Media business is Adobe Creative [removed: Cloud—a] [added: Cloud — a] subscription service that allows members to use Adobe’s creative products integrated with cloud-delivered services across desktop, web and mobile devices.

Creative Cloud members can download and access the latest versions of our creative products such as Photoshop, Illustrator, Premiere Pro, [removed: Lightroom CC,] [added: Lightroom,] InDesign, Adobe XD and many more creative applications.

To expand our reach and improve the way we serve the needs of our customers, we create different combinations of these services, including our [removed: launch of a mobile photography offering] [added: applications with free and paid tiers such as Adobe Lightroom Mobile] that [removed: has] [added: have] brought new customers into our franchise and [removed: grown the amount of] [added: increased] our [removed: photography subscriptions.][added: footprint on mobile devices.]

In addition, members can access built-in templates [added: and presets created by the Adobe user community] to jumpstart designs and step-by-step [added: interactive] tutorials to sharpen [added: their] skills and get up to speed quickly.

Through Creative Cloud, members can access online services to sync, [removed: store,] [added: store] and share files across users’ [removed: machines,] [added: devices,] access marketplace, social and community-based features within our Adobe Stock and Behance services, and create apps and websites, all at affordable subscription [removed: pricing for cost-sensitive customers.][added: pricing.]

[removed: A core] [added: One] part of our strategy is Adobe Sensei, a proprietary framework and set of intelligent services for dramatically improving the design and delivery of digital experiences.

Adobe Sensei leverages Adobe’s massive content and data assets, as well as its deep domain expertise in the creative, marketing and document segments, within a unified artificial intelligence (“AI”) and machine learning framework to help customers discover hidden opportunities, reduce tedious [removed: processes,] [added: processes] and offer relevant experiences to every customer.

Adobe Creative Cloud addresses the needs of creative professionals such as artists, designers, developers, students and [removed: administrators.][added: administrators, as well as knowledge workers, marketers, educators, hobbyists and consumers, who also use our products to create and deliver content.]

[removed: They] [added: Our customers] rely on our products for [removed: publishing, web design and development,] [added: content creation, design,] video and animation production, mobile [added: app and gaming development and document creation and collaboration.]

End users of our creative products work in businesses [added: of all sizes] ranging from large publishers, media companies and global enterprises, to smaller design [removed: agencies,] [added: agencies] and individual freelancers.

We have introduced new products, features and services to address emerging categories of content [removed: creation,] [added: creation across devices and platforms,] such as voice-based prototyping, refined content creation tools, 3D, augmented reality, virtual reality and user experience design.

Acrobat provides essential electronic document capabilities and services [added: across desktop, mobile devices and the web] to help knowledge workers accomplish a wide variety of tasks ranging from simple publications and forms to mission-critical engineering documentation and architectural plans.

With our Acrobat product and its innovative cloud services, we have extended the capabilities of our [removed: solutions.][added: document solutions, from view and create, to edit, secure, scan, review, embed, share and sign.]

Users can [added: create a PDF with just the camera on their phone with Adobe Scan, edit PDFs on the go with Acrobat on iOS and Android, and] turn slow, manual signing processes into automated experiences and collect signatures with Adobe [removed: Scan and Adobe] Sign.

[removed: Digital] [added: *Digital] Media [removed: Strategy][added: Strategy*]

Our goal is to be the leading platform for creativity where we offer a range of products and services that allow individuals, teams and enterprises, [added: and] both professionals and enthusiasts, to design and deliver amazing digital content.

We will continue to deepen our relationship with existing users through meeting their needs holistically and delivering additional features and [added: increased] value, including [added: through] data-driven customer engagement, AI and machine learning through Adobe Sensei, and [added: offering a true “multi-surface platform” that provides our customers with the ability to use our tools for creation wherever inspiration strikes, by enabling them to seamlessly access their assets in the cloud and work across mobile, tablet and desktop with] new [removed: design categories.][added: applications like Adobe Fresco and Photoshop for iPad.]

Overall, our strategy with Creative Cloud is designed to enable us to increase our revenue with users, attract more new [removed: customers,] [added: customers] and grow a recurring and predictable revenue stream that is recognized ratably.

As part of our Adobe Creative Cloud strategy, we utilize a data-driven operating model and our Adobe Experience Cloud solutions to drive [added: and optimize] customer [removed: awareness] [added: awareness, engagement] and licensing of our creative products and services [added: at every stop of the customer journey] through our website and across other channels.

We also offer a range of other creative tools and services, including our hobbyist products such as Photoshop Elements and Premiere Elements, Adobe Fonts [removed: (formerly Typekit)] and mobile apps such as Photoshop [removed: Mix,] [added: Express,] Photoshop Sketch, [removed: Photoshop Fix,] Adobe Capture, [added: Premiere Rush] and Adobe Spark.

[removed: We plan to build out] [added: As with our Adobe Creative Cloud strategy, we utilize] a [removed: data driven] [added: data-driven] operating model to market [removed: the benefits of] our Document Cloud [removed: solutions, combined with the low entry point of subscription-based pricing,] [added: solutions] to [added: and optimize our subscription-based pricing for] individuals as well as small and medium-sized businesses, large enterprises and government institutions around the world.

Our Adobe Sign service [added: also] provides a green alternative to costly paper-based solutions, and is a more modern and convenient way for customers to digitally manage their documents, [removed: processes,] [added: processes] and contract workflows.

Our customers include creative professionals like photographers, video editors, graphic and experience designers, and application and game developers; communicators like content creators, students, marketers and knowledge workers who create, collaborate on and distribute documents and creative content; and consumers.

Digital Experience – providing a comprehensive and integrated platform and set of applications and services through Adobe Experience Cloud that enables businesses and brands to create, manage, execute, measure, monetize and optimize customer

experiences that span from advertising to commerce.

Everyone has a story to tell — from creative professionals, to students and knowledge workers, to immersive content and experience designers — and they need to tell those stories on an ever-increasing number of canvasses.

New projects announced and solutions offered include: Substance, a suite of applications for creating, mixing and applying textures and materials for 3D creations; Adobe Fresco, a mobile drawing and painting application, featuring live brushes that mimic natural media like oil paint and watercolors in amazingly lifelike ways; Adobe Aero, a free iOS application for viewing, building and sharing immersive and interactive augmented reality experiences; Photoshop Camera, an AI-driven mobile camera application launching in 2020 powered by Adobe Sensei featuring unique Photoshop lenses and camera effects right inside the camera; and both Illustrator on iPad, which will be available in 2020, and Photoshop on iPad to enable a seamless content creation experience across devices and attract a new, mobile-centric audience.

Across industries and across the world, business processes from contracting to invoicing to employee onboarding are making the change from paper to electronic documents.

Cloud services and mobile devices are reshaping how we work in ways that are more ad hoc, collaborative, unstructured and on the go.

We believe there is significant opportunity for growth across all customer segments and expect Adobe Creative Cloud will drive sustained long-term revenue growth through a continued expansion of our customer base by using our products to enable everyone to create and tell their stories, expanding into new categories and technologies like immersive 3D and augmented reality, making the creative process more productive with cloud-enabled collaboration and workflows, delivering intelligent, time-saving features with Adobe Sensei’s artificial intelligence and machine learning capabilities, and acquiring new users by engaging with the creative community.

We are embracing new frontiers in technology and creativity such as immersive 3D and augmented reality (“AR”) experiences with Adobe Aero and our Substance suite of products.

We are pursuing new ways to help our customers develop creative skills such as allowing creators to live-stream their creative process on Behance and allowing users to learn with step-by-step, in-app, interactive tutorials from experienced creators.

Trillions of PDF documents are created every year and we believe there remain hundreds of millions of users in industries that engage with PDF files on a daily basis like legal, financial services or publishing, as well as a broader array of communicators, knowledge workers and Acrobat Reader users, who need the capabilities provided by our Acrobat applications and the document services platform found in Document Cloud.

We expect to drive sustained long-term revenue growth in Adobe Document Cloud through a continued expansion of our customer base by delivering the best PDF experience on every platform and across platforms, expanding the number of actions and features in Acrobat, using Adobe Sensei to make both new and legacy documents more intelligent and responsive, and investing in embedded document services such as integrating Adobe Sign in third-party applications.

Our Document Cloud customers increasingly expect business processes to be seamless across desktop, web and mobile devices.

We are delivering PDF document services on the web, such as allowing users to create, convert and compress PDFs on Adobe.com.

Digital transformation is a macro trend that affects every business, government and educational institution today - making every business a digital business.

Business customers are consumers too, and they increasingly have the same expectations, which are driving business-to-business (“B2B”) companies to deliver business-to-consumer (“B2C”) experiences with a “business-to-everyone” (“B2E”) strategy.

For the past decade, Adobe Experience Cloud has helped businesses provide exceptional experiences to their customers via a comprehensive suite of solutions.

Our Adobe Experience Cloud business targets this large and growing opportunity to help companies deliver the most engaging customer experiences by providing an integrated, comprehensive set of solutions for customer experience management.

Together, our applications, services and platforms provide real-time data and insights, deliver content and personalization, enable customer journey management and provide platforms for commerce and advertising management.

The Adobe Experience Cloud applications, services and platform are designed to manage customer journeys, enable shoppable experiences and deliver intelligence for businesses of any size in any industry.

Our differentiation and competitive advantage is strengthened by our ability to use the Adobe Experience Platform to connect our comprehensive set of solutions.

Adobe Experience Cloud delivers the following sets of solutions for our customers:

| • | *Data and insights*. Our solutions deliver real-time customer profiles and intelligence across the customer journey. Adobe Analytics provides an experience system of intelligence for real-time cross-channel data, insights and activations across every channel. Adobe Audience Manager, our data management platform, helps digital publishers build unique audience profiles to identify the most valuable segments and use them across any digital channel. Adobe Experience Platform ingests, processes and stitches data across sources, channels and customer interactions in real time to create unified customer profiles. Adobe’s Real-time Customer Data Platform service, built on Adobe Experience Platform, enables brands to bring together known and unknown customer data, to activate customer profiles across channels and leverage intelligent decision-making throughout the customer journey. Our Customer Journey Analytics service brings a powerful set of analytics tools to omnichannel data in Adobe Experience Platform, providing brands viewing data across channels an easy, interactive way to dig deeper and uncover new insights, while making analytics more accessible across their organization. |

| • | *Content and commerce*. We offer solutions to help customers manage, deliver, test, target and optimize content delivery and enable shopping experiences that scale from mid-market to enterprise businesses. Our leading digital experience management solution, Adobe Experience Manager, helps customers organize, create, manage and deliver creative assets and other content across digital marketing channels, including web, mobile, email, communities and video, enabling customers to improve their market and brand perception and provide a personalized experience to their consumers. Adobe Target is a personalization engine that lets our customers test, target and optimize content using machine learning across multiple apps and the web. Magento Commerce, which integrates with Adobe Experience Manager, enables our customers to create content and promotions for storefronts on every platform and provides a highly customizable and scalable end-to-end platform to manage, personalize and optimize the commerce experience across every touchpoint by bringing together digital commerce, order management and predictive intelligence to enable engaging shopping experiences. |

| • | *Customer journey management*. Our solutions help businesses manage, personalize and orchestrate campaigns and customer journeys across B2E use cases. Adobe Campaign enables marketers to manage the B2C customer journey and use rich customer data to create, coordinate and deliver dynamic, personalized experiences that are synchronized across multiple channels and determined by each consumer’s behaviors and preferences. Marketo Engage is a complete customer experience management solution optimized for B2B, cross-channel campaigns requiring lead management, account-based marketing and revenue attribution technology by bringing together planning, engagement and measurement capabilities into an integrated marketing platform. Our Journey Orchestration service, built on Adobe |

Experience Platform, enables businesses to design, orchestrate and measure event-driven, customer-led journeys across the entire customer lifecycle at the individual level to intelligently anticipate every individual’s needs across their personal journey.

Adobe Experience Cloud offers domain-specific AI services powered by Adobe Sensei that work with Adobe Experience Platform to augment existing Experience Cloud product offerings.

These AI services help provide domain-specific intelligence in areas such as attribution and automated insights, customer journey management, lead management, sentiment analysis, one-click personalization, enhanced anomaly detection and more.

Adobe Experience Cloud also offers an open platform and ecosystem through its multi-cloud foundation, the Adobe Experience Platform, AI services powered by Adobe Sensei, and developer services through Adobe I/O.

Adobe Experience Platform standardizes data into an easily sharable format consumable by Adobe Sensei and provides an open and extensible cloud infrastructure for Adobe Experience Cloud that allows data to flow freely within the Adobe Experience Platform and between Adobe Experience Cloud solutions and third-party software.

This open architecture offers scalability with a wide variety of supporting products and services, empowers users to quickly develop innovative applications to interact with consumers, and enables a broad industry ecosystem through our Open Data Initiative, an open alliance among Adobe, Microsoft, SAP and others.

To drive growth of Adobe Experience Cloud, we are focused on delivering the best customer experience management solutions for B2E, enterprise and mid-market through our applications, services and platform.

We are expanding our customers to include Chief Information Officers and continuing to invest in Adobe Experience Platform integrations with Adobe Analytics and Adobe Audience Manager, as well as new services such as Customer Journey Analytics and our Real-time Customer Data Platform, to create a truly comprehensive customer data and insights offering.

To give our customers increased flexibility and expand our reach, we are also delivering new functionality through additional services delivered on the Adobe Experience Platform such as Journey Orchestration.

Applications and tools for experience and interface design and prototyping are still emerging and evolving as adoption of these tools by designers, design teams and larger organizations grows.

Competitors to Adobe XD include Figma, Invision and Sketch.

The universe of applications for 3D texturing and material authoring as well as other applications and tools in the areas of 3D, augmented reality and immersive design are still developing and advancing as adoption grows and new use cases emerge.

Adobe’s Substance suite of applications and Adobe Aero face competition from both hardware and software players in these nascent fields and competitors include Autodesk, Foundry, Quixel and Unity.

Illustrator will also be available on iPad starting in 2020.

*Adobe Fresco*

Our customers include content creators, web designers, app developers, enthusiasts, and digital media professionals, as well as management in marketing departments and agencies, companies and publishers.

Our customers also include knowledge workers who create, collaborate on and distribute documents.

Digital Experience—providing enterprises and brands a comprehensive and integrated suite of products, services and solutions for creating, managing, executing, measuring and optimizing customer experiences that span from advertising to

commerce.

app and gaming development, and document creation and collaboration.

Knowledge workers, educators, hobbyists and consumers also use our products to create and deliver content.

New projects announced and solutions offered include Project Gemini, a mobile drawing and painting application, featuring live brushes that mimic natural media like oil paint and watercolors in amazingly lifelike ways; Adobe Premiere Rush, an easy-to-use video editing app that simplifies video creation and sharing on platforms including YouTube and Instagram, while delivering professional quality video results for social media marketers, video bloggers and video enthusiasts; and Photoshop on iPad to enable a seamless experience across devices, and attract a new, mobile-centric audience.

In addition, we have mobile apps such as Adobe Scan that allows any user to create a PDF with the camera on their phone.

We believe there is significant opportunity for growth across all customer segments and expect Adobe Creative Cloud will drive sustained long-term revenue growth through a continued expansion of our customer base by acquiring new users in North America and international markets, especially in emerging markets where there is an opportunity to target new creative professionals and enthusiasts entering the market, and drive conversion of non-genuine Adobe users.

Enabling students to create and tell their stories is another opportunity where Adobe Spark uniquely positions us to deliver on the needs of educators and students in and outside of classrooms.

We believe there remain tens of millions of users - both individuals and enterprises - who need the capabilities provided by Acrobat and the service capabilities found in Document Cloud.

We intend to continue promoting the capabilities of our cloud-based document solutions and Adobe Sensei features to millions of Acrobat users and hundreds of millions of Acrobat Reader users.

We believe there is a significant opportunity to address these challenges and help customers transform their businesses.

Our integrated cloud-based solutions enable enterprises to build personalized campaigns, offer shoppable experiences, manage advertising, and gain deep intelligence about their customers.

Our content and data platform provides differentiation and competitive advantage.

Adobe Experience Cloud consists of the following cloud offerings:

| • | Adobe Analytics Cloud—enables businesses to move from insights to actions in real time by uniquely integrating audiences as the core system of intelligence for the enterprise; makes data available across all Adobe clouds through the capture, aggregation, rationalization and understanding of vast amounts of disparate data and then translating that data into singular customer profiles; includes Adobe Analytics and Adobe Audience Manager. |

| • | Adobe Marketing Cloud—provides an integrated set of solutions to help marketers differentiate their brands and engage their customers, helping businesses manage, personalize, and orchestrate campaigns and customer journeys across business-to-business (“B2B”) and business-to-consumer (“B2C”) use cases; includes Adobe Experience Manager (“AEM”), Adobe Campaign, Adobe Target, Marketo Engagement Platform, and Adobe Primetime. |

Adobe acquired Magento on June 18, 2018 and integrated it into the Adobe Experience Cloud as the Magento Commerce Cloud.

Adobe acquired Marketo on October 31, 2018 and began integrating it into the Adobe Marketing Cloud as the Marketo Engagement Platform.

Marketo Engagement Platform is a cloud platform for global business-to-business marketers driving new business growth by personalizing complex buyer journeys and empowering go-to-market teams to optimize the enterprise buyer experience.

As part of the Adobe Marketing Cloud, the Marketo Engagement Platform simplifies how companies plan, orchestrate and measure engagement with prospects and customers at every stage of their experience through both lead and account-based marketing strategies, while uniquely aligning marketing and sales teams across every channel through a single, enterprise-grade platform.

We are also investing in the Adobe Experience Platform, which is powered by Adobe Sensei to help users weave all their data together so they can better understand customer behavior and deliver the best experiences in real time.

Our Open Data Initiative is an open alliance among Adobe, Microsoft and SAP, that enables a seamless flow of customer data within the Adobe Experience Platform.

are becoming a direct means to post, edit and share images, bypassing the step of using image editing and sharing software.

E-signatures have quickly become a core element of digital documents and are inherently part of a company’s digital document transformation efforts.

Competitors to Adobe Sign include DocuSign.

Adobe XD

It contains intuitive tools that deliver precision and performance using timesaving features like Repeat Grid and flexible artboards to create

everything from low-fidelity wireframes to fully interactive prototypes for any screen in minutes.

Adobe XD also makes it easy to share prototypes with teammates via the web and show colleagues how multiscreen experiences look, feel and work with a single click.

As part of Adobe Creative Cloud, Premiere Pro and Premiere Rush tightly integrates with other Adobe creative applications.

Users can composite 2D and 3D assets to build product shots, scene visualizations, and abstract art.

A free version is also still available to attract new users.

Adobe Document Cloud modernizes document experiences by offering a complete portfolio of secure digital document solutions that speed business transactions through streamlined digital workflows.

Adobe Acrobat Reader is also available as a free mobile app that allows users to view, annotate, and scan documents.

Acrobat Reader is our free software for reliable viewing, searching, reviewing and printing of Adobe PDF documents on a variety of hardware and operating system platforms.

Adobe Experience Cloud includes our Advertising Cloud, Analytics Cloud, Marketing Cloud, and Magento Commerce Cloud offerings, which are each described below.

Adobe Advertising Cloud

Adobe Advertising Cloud includes Adobe Advertising Cloud Demand Side Platform, Adobe Advertising Cloud Search, Adobe Advertising Cloud TV, and Adobe Advertising Cloud Creative offerings described below.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: (Mark One)][added: (Mark One)]

| [removed: x] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended November 30, 2018][added: ended November 29, 2019]

| [removed: o] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the transition period [removed: from to][added: from to]

[removed: Commission] [added: Commission] File [removed: Number: 0-15175][added: Number: 0-15175]

[removed: Adobe Inc.][added: ADOBE INC.]

| [removed: Delaware] (State or other jurisdiction of incorporation or organization) | [removed: 77-0019522] (I.R.S. Employer Identification No.) |

[removed: 345] [added: 345] Park [removed: Avenue, San Jose, California 95110-2704][added: Avenue, San Jose, California 95110-2704]

[removed: (408) 536-6000][added: (408) 536-6000]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of Each [removed: Class] [added: Class] | [removed: Name] [added: Trading Symbol | Name] of Each Exchange on Which [removed: Registered] [added: Registered] |

| Common Stock, $0.0001 par value per share | [removed: The] [added: ADBE |] NASDAQ [removed: Stock Market LLC (NASDAQ Global Select Market)] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

Yes [removed: x] [added: ☒] No [removed: o][added: ☐]

Yes [removed: o] [added: ☐] No [removed: x][added: ☒]

Yes [removed: x] [added: ☒] No [removed: o][added: ☐]

Yes [removed: x] [added: ☒] No [removed: o][added: ☐]

| Large accelerated filer [removed: x] | [added: ☒ | |] Accelerated filer [removed: o] | [added: ☐ | |] Non-accelerated filer [removed: o] | [added: ☐ | |] Smaller reporting company [removed: o] | [added: ☐ | |] Emerging growth company [removed: o] | [added: ☐ |]

Yes [removed: o] [added: ☐] No [removed: x][added: ☒]

The aggregate market value of the registrant’s common stock, $0.0001 par value per share, held by non-affiliates of the registrant on [removed: June 1, 2018,] [added: May 31, 2019,] the last business day of the registrant’s most recently completed second fiscal quarter, was [removed: $96,776,869,889] [added: $102.25 billion] (based on the closing sales price of the registrant’s common stock on that date).

As of January [removed: 18, 2019, 487,725,915] [added: 10, 2020, 482,130,975] shares of the registrant’s common stock, $0.0001 par value per share, were issued and outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the Proxy Statement for the registrant’s [removed: 2019] [added: 2020] Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days of the end of the fiscal year ended November [removed: 30, 2018,] [added: 29, 2019,] are incorporated by reference in Part III hereof.

[removed: ADOBE INC.][added: ADOBE INC.]

[removed: FORM 10-K][added: FORM 10-K]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| | | [removed: Page No.] [added: Page No.] |

| [removed: PART I] [added: PART I] | | |

| Item 1. | [removed: [Business](#sE98E7E2DE2C454169BC5291FF6C9E1C6)] [added: [Business](#sE45DA874AF3A5E41A6B8C5CF7FF0E2A5)] | [removed: [3](#sE98E7E2DE2C454169BC5291FF6C9E1C6)] [added: [3](#sE45DA874AF3A5E41A6B8C5CF7FF0E2A5)] |

| Item 1A. | [Risk [removed: Factors](#sDCC1589862DD5EF595737CA34A7A4220)] [added: Factors](#sECBD039767435874B10088C5736A9648)] | [removed: [20](#sDCC1589862DD5EF595737CA34A7A4220)] [added: [22](#sECBD039767435874B10088C5736A9648)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#sF0C98B189DF95F83983B217D57824BAA)] [added: Comments](#s3ED32455B90F5AF0A3AF635F2B6910B4)] | [removed: [32](#sF0C98B189DF95F83983B217D57824BAA)] [added: [34](#s3ED32455B90F5AF0A3AF635F2B6910B4)] |

| Item 2. | [removed: [Properties](#s1689813291CE5B32B29924991FCC4552)] [added: [Properties](#sA43D2A1FC2AC512FAC5247B16964B800)] | [removed: [32](#s1689813291CE5B32B29924991FCC4552)] [added: [34](#sA43D2A1FC2AC512FAC5247B16964B800)] |

| Item 3. | [Legal [removed: Proceedings](#s108334EB103F5510A01389D1AE199B4F)] [added: Proceedings](#sBDF642018A1C5B228C4F156504AFBEED)] | [removed: [33](#s108334EB103F5510A01389D1AE199B4F)] [added: [35](#sBDF642018A1C5B228C4F156504AFBEED)] |

| Item 4. | [Mine Safety [removed: Disclosures](#sDD679F8E4D4A522CBB971855E8DF2E5F)] [added: Disclosures](#s51D0710CB29F571A84D0CE49046F4617)] | [removed: [33](#sDD679F8E4D4A522CBB971855E8DF2E5F)] [added: [35](#s51D0710CB29F571A84D0CE49046F4617)] |

| [removed: PART II] [added: PART II] | | |

or

| Delaware | 77-0019522 |

| | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | |

| --- | --- | --- |

| | | |

| | | |

| [Signatures](#s6C8B2B7E987A506B85C4453309DB99B7) | | [111](#s6C8B2B7E987A506B85C4453309DB99B7) |

| [Summary of Trademarks](#sCCDABE66E956569F89740478A673DA71) | | [113](#sCCDABE66E956569F89740478A673DA71) |

10-K 1 adbe10kfy18.htm 10-K

| | |

| --- | --- |

| | |

or

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

| [Signatures](#sD321B1437C56558C9208E75B7FCA7D79) | | [110](#sD321B1437C56558C9208E75B7FCA7D79) |

| [Summary of Trademarks](#sD6CADA539994505E9560851E13D5B0B6) | | [112](#sD6CADA539994505E9560851E13D5B0B6) |

The following table sets forth the location, approximate square footage and use of our [removed: principal] [added: material] properties during fiscal [removed: 2018:][added: 2019:]

| [removed: Location] [added: Location] | [removed: Owned] [added: Owned] / [removed: Leased] [added: Leased] | [removed: Approximate] [added: Approximate] Square [removed: Footage] [added: Footage] | | | [removed: Use] [added: Use] |

| [removed: Americas:] [added: *Americas:*] | | | | | |

| San Francisco, California | Owned & leased | [removed: 549,000] [added: 657,000] | | (2) | Research, product development, sales, marketing and administration |

| [removed: Lehi, Utah] [added: Bangalore, India] | Owned & leased | [removed: 282,000] [added: 422,000] | | (3) | Research, product development, [removed: sales, marketing] [added: sales] and administration |

| [removed: APAC:] [added: *APAC:*] | | | | | |

| [removed: Bangalore,] [added: Noida,] India | Owned & leased | [removed: 422,000] [added: 554,000] | | (4) | Research, product development, sales and administration |

| [removed: Japan] [added: Greater London Area, United Kingdom] | Leased | [removed: 64,000] [added: 92,000] | | | [removed: Research, product] [added: Product] development, [removed: sales] [added: sales, marketing] and administration |

| [removed: EMEA:] [added: *EMEA:*] | | | | | |

| (2) | We own approximately 346,000 square feet of our San Francisco [removed: properties.] [added: properties] |

| (3) | We own approximately [removed: 257,000] [added: 250,000] square feet of our [removed: Lehi] [added: Bangalore] properties. |

| [removed: (5)] [added: (4)] | We own our Noida properties except for a land lease for one of our buildings. The term for the land lease is until 2091. |

In general, all facilities are in good condition, suitable for the conduct of our business and are operating at an average capacity of approximately [removed: 91%.][added: 95%.]

| Hillsboro, Oregon | Owned | 85,000 | | | Data center |

| Noida, India | Owned & leased | 554,000 | | (5) | Research, product development, sales and administration |

| Bucharest, Romania | Leased | 97,000 | | | Research and product development |

| Dublin, Ireland | Leased | 42,000 | | | Administration |

| Maidenhead, United Kingdom | Leased | 49,000 | | | Product development, sales, marketing and administration |

| | |

| --- | --- |

| (4) | We own approximately 250,000 square feet of our Bangalore properties. |

[removed: PART II][added: PART II]

[removed: Market] [added: *Market] Information for Common [removed: Stock][added: Stock*]

[removed: Stockholders][added: *Stockholders*]

According to the records of our transfer agent, there were [removed: 1,030] [added: 993] holders of record of our common stock on January [removed: 18, 2019.][added: 10, 2020.]

[removed: Dividends][added: *Dividends*]

[removed: Issuer] [added: Issuer] Purchases of Equity [removed: Securities][added: Securities]

Below is a summary of stock repurchases for the three months ended November [removed: 30, 2018.][added: 29, 2019.]

[removed: [See] [added: [*See] Note [removed: 12] [added: 14] of our Notes to Consolidated Financial Statements for information regarding our stock repurchase [removed: programs.](#sEAAA5C3628075260A228077BB47F1739)][added: programs.*](#sC0E9A77D12685B118BFADE23B956A302)]

| [removed: Period] [added: Period] | | [removed: Total] [added: Total] Number of [removed: Shares Repurchased] [added: Shares Repurchased] | | | [removed: Average Price Per Share] [added: Average Price Paid Per Share] | | | | [removed: Total Number of Shares Purchased as] [added: Total Number of Shares Purchased as] Part [removed: of Publicly Announced Plans] [added: of Publicly Announced Plans] | | | [removed: Approximate Dollar Value that May Yet be Purchased Under the Plan] [added: Approximate Dollar Value that May Yet be Purchased Under the Plan(1)] | | | |

| Beginning repurchase authority [removed: (1)] | | | | | | | | | | | | $ | [removed: 8,397,282] [added: 6,100,054] | | |

| October [removed: 27] [added: 26] — November [removed: 30, 2018] [added: 29, 2019] | | | | | | | | | | | | | | | |

| (1) | In [removed: January 2017, the Board of Directors granted authority to repurchase up to $2.5 billion in common stock through the end of fiscal 2019. In] May 2018, the Board of Directors [removed: approved another] [added: granted] authority to repurchase up to [removed: $8.0] [added: $8] billion in common stock through the end of fiscal 2021. [removed: As of November 30, 2018, there is no remaining balance under our January 2017 authority.] |

| (2) | In [removed: October 2018,] [added: September 2019,] we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of [removed: $300] [added: $750] million. As of November [removed: 30, 2018,] [added: 29, 2019,] approximately [removed: $150.0] [added: $229.2] million of the prepayment remained under this agreement. |

| August 31 — September 27, 2019 | | | | | | | | | | | | | | | |

| Shares repurchased | | 885 | | | $ | 282.43 | | | 885 | | | $ | (250,054 | ) | |

| September 28 — October 25, 2019 | | | | | | | | | | | | | | | |

| Shares repurchased | | 927 | | | $ | 274.12 | | | 927 | | | $ | (254,032 | ) | (2) |

| Shares repurchased | | 954 | | | $ | 279.52 | | | 954 | | | $ | (266,779 | ) | (2) |

| Total | | 2,766 | | | | | | | 2,766 | | | $ | 5,329,189 | | |

| September 1 — September 28, 2018 | | | | | | | | | | | | | | | |

| Shares repurchased | | 945 | | | $ | 261.72 | | | 945 | | | $ | (247,282 | ) | |

| Shares repurchased | | 616 | | | $ | 243.52 | | | 616 | | | $ | (150,000 | ) | (2) |

| Total | | 1,561 | | | | | | | 1,561 | | | $ | 8,000,000 | | |

The following selected consolidated financial data [removed: (presented in thousands, except per share amounts and employee data)] is derived from our Consolidated Financial Statements.

| | [removed: 2018] [added: 2019(1)] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016(3)] | | | | [removed: 2014] [added: 2015] | | |

| [removed: Revenue] [added: Revenue:] | $ | [removed: 9,030,008] [added: 11,171,297] | | | $ | [removed: 7,301,505] [added: 9,030,008] | | | $ | [removed: 5,854,430] [added: 7,301,505] | | | $ | [removed: 4,795,511] [added: 5,854,430] | | | $ | [removed: 4,147,065] [added: 4,795,511] | |

| Gross profit | $ | [removed: 7,835,009] [added: 9,498,577] | | | $ | [removed: 6,291,014] [added: 7,835,009] | | | $ | [removed: 5,034,522] [added: 6,291,014] | | | $ | [removed: 4,051,194] [added: 5,034,522] | | | $ | [removed: 3,524,985] [added: 4,051,194] | |

| Income before income taxes | $ | [removed: 2,793,876] [added: 3,204,741] | | | $ | [removed: 2,137,641] [added: 2,793,876] | | | $ | [removed: 1,435,138] [added: 2,137,641] | | | $ | [removed: 873,781] [added: 1,435,138] | | | $ | [removed: 361,376] [added: 873,781] | |

| Net income | $ | [removed: 2,590,774] [added: 2,951,458] | | | $ | [removed: 1,693,954] [added: 2,590,774] | | | $ | [removed: 1,168,782] [added: 1,693,954] | | | $ | [removed: 629,551] [added: 1,168,782] | | | $ | [removed: 268,395] [added: 629,551] | |

| Basic | $ | [removed: 5.28] [added: 6.07] | | | $ | [removed: 3.43] [added: 5.28] | | | $ | [removed: 2.35] [added: 3.43] | | | $ | [removed: 1.26] [added: 2.35] | | | $ | [removed: 0.54] [added: 1.26] | |

| Diluted | $ | [removed: 5.20] [added: 6.00] | | | $ | [removed: 3.38] [added: 5.20] | | | $ | [removed: 2.32] [added: 3.38] | | | $ | [removed: 1.24] [added: 2.32] | | | $ | [removed: 0.53] [added: 1.24] | |

| Shares used to compute basic net income per share | [removed: 490,564] [added: 486,291] | | | | [removed: 493,632] [added: 490,564] | | | | [removed: 498,345] [added: 493,632] | | | | [removed: 498,764] [added: 498,345] | | | | [removed: 497,867] [added: 498,764] | | |

| Shares used to compute diluted net income per share | [removed: 497,843] [added: 491,572] | | | | [removed: 501,123] [added: 497,843] | | | | [removed: 504,299] [added: 501,123] | | | | [removed: 507,164] [added: 504,299] | | | | [removed: 508,480] [added: 507,164] | | |

| Financial [removed: position:(1)] [added: position:] | | | | | | | | | | | | | | | | | | | |

| Cash, cash equivalents and short-term investments | $ | [removed: 3,228,962] [added: 4,176,976] | | | $ | [removed: 5,819,774] [added: 3,228,962] | | | $ | [removed: 4,761,300] [added: 5,819,774] | | | $ | [removed: 3,988,084] [added: 4,761,300] | | | $ | [removed: 3,739,491] [added: 3,988,084] | |

| Working capital(2) | $ | [removed: 555,913] [added: (1,696,013] | [added: )] | | $ | [removed: 3,720,356] [added: 555,913] | | | $ | [removed: 3,028,139] [added: 3,720,356] | | | $ | [removed: 2,608,336] [added: 3,028,139] | | | $ | [removed: 2,107,893] [added: 2,608,336] | |

| Total assets | $ | [removed: 18,768,682] [added: 20,762,400] | | | $ | [removed: 14,535,556] [added: 18,768,682] | | | $ | [removed: 12,697,246] [added: 14,535,556] | | | $ | [removed: 11,714,500] [added: 12,697,246] | | | $ | [removed: 10,781,991] [added: 11,714,500] | |

| Debt, non-current | $ | [removed: 4,124,800] [added: 988,924] | | | $ | [removed: 1,881,421] [added: 4,124,800] | | | $ | [removed: 1,892,200] [added: 1,881,421] | | | $ | [removed: 1,895,259] [added: 1,892,200] | | | $ | [removed: 907,248] [added: 1,895,259] | |

| Stockholders’ equity | $ | [removed: 9,362,114] [added: 10,530,155] | | | $ | [removed: 8,459,869] [added: 9,362,114] | | | $ | [removed: 7,424,835] [added: 8,459,869] | | | $ | [removed: 7,001,580] [added: 7,424,835] | | | $ | [removed: 6,775,905] [added: 7,001,580] | |

| Worldwide employees | [removed: 21,357] [added: 22,634] | | | | [removed: 17,973] [added: 21,357] | | | | [removed: 15,706] [added: 17,973] | | | | [removed: 13,893] [added: 15,706] | | | | [removed: 12,499] [added: 13,893] | | |

| *(in thousands, except per share amounts and employee data)* | Fiscal Years | | | | | | | | | | | | | | | | | | |

| Debt, current | $ | 3,149,343 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |

| (1) | On December 1, 2018, the beginning of our fiscal year 2019, we adopted the requirements of the Financial Accounting Standards Board’s Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, Topic 606, 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. |

| (2) | As of November 29, 2019, working capital was in a deficit primarily due to the reclassification of our $2.25 billion term loan due April 30, 2020 and $900 million 4.75% senior notes due February 1, 2020 to current liabilities. We intend to refinance our Term Loan and 2020 Notes on or before the due dates. |

| | |

| --- | --- |

| (3) | Our fiscal year is a 52- or 53-week year that ends on the Friday closest to November 30. Fiscal 2016 was a 53-week fiscal year compared with the other periods presented which were 52-week fiscal years. |

| | Fiscal Years | | | | | | | | | | | | | | | | | | |

| (1) | Information associated with our financial position is as of the Friday closest to November 30 for the five fiscal periods through 2018. |

| (2) | For fiscal 2014, our working capital did not include the effects of the adoption of ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which required all deferred tax assets and liabilities and any related valuation allowance to be classified as non-current on our Consolidated Balance Sheets. The new standard was adopted prospectively starting fiscal 2015. |

[removed: INDEX] [added: INDEX] TO CONSOLIDATED FINANCIAL [removed: STATEMENTS][added: STATEMENTS]

| | [removed: Page No.] [added: Page No.] |

[removed: | [Consolidated Balance Sheets](#s397F2FF33FE651FD9CC7ABC125B4C859) | [57](#s397F2FF33FE651FD9CC7ABC125B4C859) |][added: CONSOLIDATED BALANCE SHEETS]

[removed: | [Consolidated Statements of Income](#sFB00C0D6A6D05CC4855895936ECBDD67) | [58](#sFB00C0D6A6D05CC4855895936ECBDD67) |][added: CONSOLIDATED STATEMENTS OF INCOME]

[removed: | [Consolidated Statements of Comprehensive Income](#sCA42287AA9275E26A7722111BA4BAA9F) | [59](#sCA42287AA9275E26A7722111BA4BAA9F) |][added: CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME]

[removed: | [Consolidated Statements of Stockholders' Equity](#sE85B1E533CA855D4B75153C81FC67B45) | [60](#sE85B1E533CA855D4B75153C81FC67B45) |][added: CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY]

[removed: | [Consolidated Statements of Cash Flows](#s1F63A90674845A629E5B0C4547B2636F) | [61](#s1F63A90674845A629E5B0C4547B2636F) |][added: CONSOLIDATED STATEMENTS OF CASH FLOWS]

[removed: | [Notes to Consolidated Financial Statements](#sA3CA5FC0DD1A589BA133FFFEEB520E1E) | [62](#sA3CA5FC0DD1A589BA133FFFEEB520E1E) |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

| [Report of KPMG LLP, Independent Registered Public Accounting [removed: Firm](#s2EF3EF133E2C5FC78C9EB8ED0E14D64D)] [added: Firm](#s3B0DEAAB9D8E596CB7B84D4A7A5153CB)] | [removed: [101](#s2EF3EF133E2C5FC78C9EB8ED0E14D64D)] [added: [104](#s3B0DEAAB9D8E596CB7B84D4A7A5153CB)] |

[removed: ADOBE INC.][added: ADOBE INC.]

[removed: CONSOLIDATED BALANCE SHEETS][added: | [Consolidated Balance Sheets](#sA4F2365FA4425EC38C47A305B5089DE4) | [57](#sA4F2365FA4425EC38C47A305B5089DE4) |]

[removed: (In] [added: (In] thousands, except par [removed: value)][added: value)]

| | [removed: November] [added: November 29, 2019 | | | | November] 30, [removed: 2018] [added: 2018] | | | | [removed: December] [added: December] 1, [removed: 2017] [added: 2017] | | |

| [removed: ASSETS] [added: ASSETS] | | | | | | | |

| Cash and cash equivalents [removed: | $] [added: at beginning of year] | 1,642,775 | | | [removed: $] | 2,306,072 | | [added: | | 1,011,315 | | |]

| Short-term investments | [removed: 1,586,187] [added: 1,526,755] | | | | [removed: 3,513,702] [added: 1,586,187] | | |

| Trade receivables, net of allowances for doubtful accounts of [removed: $14,981] [added: $9,650] and [removed: $9,151,] [added: of $14,981,] respectively | [removed: 1,315,578] [added: 1,534,809] | | | | [removed: 1,217,968] [added: 1,315,578] | | |

| Prepaid expenses and other current assets | [removed: 312,499] [added: 783,140] | | | | [removed: 210,071] [added: 312,499] | | |

| Total current assets | [removed: 4,857,039] [added: 6,494,925] | | | | [removed: 7,247,813] [added: 4,857,039] | | |

| Property and equipment, net | [removed: 1,075,072] [added: 1,293,015] | | | | [removed: 936,976] [added: 1,075,072] | | |

| Goodwill | [removed: 10,581,048] [added: 10,691,199] | | | | [removed: 5,821,561] [added: 10,581,048] | | |

| [removed: Purchased and other] [added: Other] intangibles, net | [removed: 2,069,001] [added: 1,720,565] | | | | [removed: 385,658] [added: 2,069,001] | | |

| Other assets | [removed: 186,522] [added: 562,696] | | | | [removed: 143,548] [added: 186,522] | | |

| Total assets | $ | [removed: 18,768,682] [added: 20,762,400] | | | $ | [removed: 14,535,556] [added: 18,768,682] | |

| [removed: LIABILITIES] [added: LIABILITIES] AND STOCKHOLDERS’ [removed: EQUITY] [added: EQUITY] | | | | | | | |

| Trade payables | $ | [removed: 186,258] [added: 209,499] | | | $ | [removed: 113,538] [added: 186,258] | |

| Accrued expenses | [removed: 1,163,185] [added: 1,398,548] | | | | [removed: 993,773] [added: 1,163,185] | | |

| Income taxes payable | [removed: 35,709] [added: 55,562] | | | | [removed: 14,196] [added: 35,709] | | |

| Deferred revenue | [removed: 2,915,974] [added: 3,377,986] | | | | [removed: 2,405,950] [added: 2,915,974] | | |

| Total current liabilities | [removed: 4,301,126] [added: 8,190,938] | | | | [removed: 3,527,457] [added: 4,301,126] | | |

| Debt | [removed: 4,124,800] [added: 988,924] | | | | [removed: 1,881,421] [added: 4,124,800] | | |

| Deferred revenue | [removed: 137,630] [added: 122,727] | | | | [removed: 88,592] [added: 137,630] | | |

| Income taxes payable | [removed: 644,101] [added: 616,102] | | | | [removed: 173,088] [added: 644,101] | | |

| Deferred income taxes | [removed: 46,702] [added: 140,498] | | | | [removed: 279,941] [added: 46,702] | | |

| Other liabilities | [removed: 152,209] [added: 173,056] | | | | [removed: 125,188] [added: 152,209] | | |

| Total liabilities | [removed: 9,406,568] [added: 10,232,245] | | | | [removed: 6,075,687] [added: 9,406,568] | | |

| Common stock, $0.0001 par value; 900,000 shares authorized; 600,834 shares issued; [removed: 487,663] [added: 482,339] and [removed: 491,262] [added: 487,663] shares outstanding, respectively | 61 | | | | 61 | | |

| Additional paid-in-capital | [removed: 5,685,337] [added: 6,504,800] | | | | [removed: 5,082,195] [added: 5,685,337] | | |

| Retained earnings | [removed: 11,815,597] [added: 14,828,562] | | | | [removed: 9,573,870] [added: 11,815,597] | | |

| Accumulated other comprehensive income (loss) | [removed: (148,130] [added: (188,034] | | ) | | [removed: (111,821] [added: (148,130] | | ) |

| | November 29, 2019 | | | | November 30, 2018 | | |

| Cash and cash equivalents | $ | 2,650,221 | | | $ | 1,642,775 | |

| Debt | 3,149,343 | | | | — | | |

| Impacts of adoption of the new revenue standard | | — | | | — | | | | — | | | | 442,319 | | | | — | | | | — | | | — | | | | 442,319 | | |

| Net income | | — | | | — | | | | — | | | | 2,951,458 | | | | — | | | | — | | | — | | | | 2,951,458 | | |

| Re-issuance of treasury stock under stock compensation plans | | — | | | — | | | | 48,686 | | | | (380,812 | | ) | | — | | | | 4,559 | | | 125,074 | | | | (207,052 | | ) |

| Balances at November 29, 2019 | | 600,834 | | | $ | 61 | | | $ | 6,504,800 | | | $ | 14,828,562 | | | $ | (188,034 | ) | | (118,495 | ) | | $ | (10,615,234 | ) | | $ | 10,530,155 | |

| Other financing activities, net | 11,008 | | | | (1,707 | | ) | | (1,960 | | ) |

We market our products and services directly to enterprise customers through our sales force and local field offices.

Fiscal years 2019, 2018 and 2017 were 52-week years.

Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the capitalization of incremental costs to obtain a contract with a customer.

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:

| *(in thousands)* | As of November 30, 2018 | | | | Topic 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 | | |

| 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 (included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion), 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: an increase in unbilled receivables (included in trade receivables, net) of $24.8 million, an 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 Consolidated Statements of Income for the year ended November 29, 2019 as follows:

| *(in thousands, except per share amounts)* | As reported | | | | Adjustments | | | | Balances without Topic 606 adoption impact | | |

| Subscription | $ | 9,994,463 | | | $ | 1,440 | | | $ | 9,995,903 | |

| Product | 647,788 | | | | (101,981 | | ) | | 545,807 | | |

| Services and support | 529,046 | | | | (7,431 | | ) | | 521,615 | | |

| Total revenue | 11,171,297 | | | | (107,972 | | ) | | 11,063,325 | | |

| Operating expenses | | | | | | | | | | | |

| Sales and marketing | 3,244,347 | | | | 11,987 | | | | 3,256,334 | | |

| General and administrative | 880,637 | | | | (7,646 | | ) | | 872,991 | | |

| Provision for income taxes | 253,283 | | | | (6,517 | | ) | | 246,766 | | |

| | |

| --- | --- |

| Balances at November 27, 2015 | | 600,834 | | | $ | 61 | | | $ | 4,184,883 | | | $ | 7,253,431 | | | $ | (169,080 | ) | | (103,025 | ) | | $ | (4,267,715 | ) | | $ | 7,001,580 | |

| Net income | | — | | | — | | | | — | | | | 1,168,782 | | | | — | | | | — | | | — | | | | 1,168,782 | | |

| Re-issuance of treasury stock under stock compensation plans | | — | | | — | | | | 7,365 | | | | (307,696 | | ) | | — | | | | 6,872 | | | 209,628 | | | | (90,703 | | ) |

| Tax benefit from employee stock plans | | — | | | — | | | | 75,102 | | | | — | | | | — | | | | — | | | — | | | | 75,102 | | |

| | November 30, 2018 | | | | December 1, 2017 | | | | December 2, 2016 | | |

| Excess tax benefits from stock-based compensation | — | | | | — | | | | (75,105 | | ) |

| Excess tax benefits from stock-based compensation | — | | | | — | | | | 75,105 | | |

| Repayment of capital lease obligations | (1,707 | | ) | | (1,960 | | ) | | (108 | | ) |

| Cash and cash equivalents at beginning of year | 2,306,072 | | | | 1,011,315 | | | | 876,560 | | |

Our financial results for fiscal 2016 benefited from an extra week in the first quarter of fiscal 2016 due to our 52/53-week financial calendar whereby fiscal 2016 was a 53-week fiscal year compared with fiscal 2018 and 2017 which were 52-week fiscal years.

Most of our enterprise customer arrangements are complex, involving multiple solutions and various license rights, bundled with post-contract customer support and other meaningful rights that together provide a complete end-to-end solution to the customer.

We recognize revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists, we have delivered the product or performed the service, the fee is fixed or determinable and collection is probable.

Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue we report.

Multiple Element Arrangements

For our software and software-related multiple element arrangements, we must: (1) determine whether and when each element has been delivered; (2) determine whether undelivered products or services are essential to the functionality of the delivered products and services; (3) determine the fair value of each undelivered element using vendor-specific objective evidence (“VSOE”); and (4) allocate the total price among the various elements.

VSOE of fair value is used to allocate a portion of the price to the undelivered elements and the residual method is used to allocate the remaining portion to the delivered elements.

Absent VSOE, revenue is deferred until the earlier of the point at which VSOE of fair value exists for any undelivered element or until all elements of the arrangement have been delivered.

However, if the only undelivered element is maintenance and support, the entire arrangement fee is recognized ratably over the performance period.

Changes in assumptions or judgments or changes to the elements in a software arrangement could cause a material increase or decrease in the amount of revenue that we report in a particular period.

We determine VSOE for each element based on historical stand-alone sales to third parties or from the stated renewal rate for the elements contained in the initial arrangement.

In determining VSOE, we require that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range.

We have established VSOE for our software maintenance and support services, custom software development services, consulting services and training, when such services are sold optionally with software licenses.

For multiple-element arrangements containing our non-software services, we must: (1) determine whether and when each element has been delivered; (2) determine the fair value of each element using the selling price hierarchy of VSOE of selling price, third-party evidence (“TPE”) of selling price or best-estimated selling price (“BESP”), as applicable; and (3) allocate the total price among the various elements based on the relative selling price method.

For multiple-element arrangements that contain both software and non-software elements, we allocate revenue to software or software-related elements as a group and any non-software elements separately based on the selling price hierarchy.

We determine the selling price for each deliverable using VSOE of selling price, if it exists, or TPE of selling price.

If neither VSOE nor TPE of selling price exist for a deliverable, we use BESP.

Once revenue is allocated to software or software-related elements as a group, we recognize revenue in conformance with software revenue accounting guidance.

Revenue is recognized when revenue recognition criteria are met for each element.

We are generally unable to establish VSOE or TPE for non-software elements and as such, we use BESP.

BESP is generally used for offerings that are not typically sold on a stand-alone basis or for new or highly customized offerings.

We determine BESP for a product or service by considering multiple factors including, but not limited to major product groupings, geographies, market conditions, competitive landscape, internal costs, gross margin objectives and pricing practices.

Pricing practices taken into consideration include historic contractually stated prices, volume discounts where applicable and our price lists.

We must estimate certain royalty revenue amounts due to the timing of securing information from our customers.

While we believe we can make reliable estimates regarding these matters, these estimates are inherently subjective.

Accordingly, our assumptions and judgments regarding future products and services as well as our estimates of royalty revenue could differ from actual events, thus materially impacting our financial position and results of operations.

We record amounts that have been invoiced in accounts receivable and in deferred revenue or revenue, depending on whether all revenue recognition criteria have been met.

Our consulting revenue is recognized using a time and materials basis and is measured monthly based on input measures, such as hours incurred to date, with consideration given to output measures, such as contract milestones when applicable.

Our maintenance and support offerings, which entitle customers to receive product upgrades and enhancements on a when and if available basis or technical support, depending on the offering, are recognized ratably over the performance period of the arrangement.

[removed: Disclosure] [added: Disclosure] Controls and [removed: Procedures][added: Procedures]

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of November [removed: 30, 2018.][added: 29, 2019.]

Based on their evaluation as of November [removed: 30, 2018,] [added: 29, 2019,] our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Annual Report on Form 10-K was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

[removed: Management’s] [added: Management’s] Annual Report on Internal [removed: Control] [added: Controls] over Financial [removed: Reporting][added: Reporting]

Our management is responsible for establishing and maintaining adequate internal [removed: control] [added: controls] over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended).

Our management assessed the effectiveness of our internal [removed: control] [added: controls] over financial reporting as of November [removed: 30, 2018.][added: 29, 2019.]

In making this assessment, our management used the criteria established in Internal Control - Integrated Framework (2013) issued by the [removed: COSO.][added: Committee of Sponsoring Organizations of the Treadway Commission.]

Our management has concluded that, as of November [removed: 30, 2018,] [added: 29, 2019,] our internal [removed: control] [added: controls] over financial reporting is effective based on these criteria.

KPMG LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on Form 10-K, has issued an attestation report on our internal [removed: control] [added: controls] over financial reporting, which is included herein.

[removed: Changes] [added: Changes] in Internal [removed: Control] [added: Controls] over Financial [removed: Reporting][added: Reporting]

There were no changes in our internal [removed: control] [added: controls] over financial reporting during the quarter ended November [removed: 30, 2018] [added: 29, 2019] that have materially affected, or are reasonably likely to materially [removed: affect,] [added: affect] our internal [removed: control] [added: controls] over financial reporting.

On December 1, 2018, we implemented new and modified existing internal controls based on the adoption of the new revenue standard.

This resulted in changes to our processes related to revenue recognition and underlying control activities, including our information systems.

We acquired Magento on June 18, 2018 and Marketo on October 31, 2018, as discussed in Note 2 to the Consolidated Financial Statements.

As permitted by the SEC staff’s Frequently Asked Question 3 on Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports (revised September 24, 2007), our management excluded from our assessment of internal control over financial reporting effectiveness as of November 30, 2018, Magento and Marketo’s internal control over financial reporting associated with consolidated total assets of approximately 1.1%, and consolidated total revenues of approximately 1.0%, included in our Consolidated Financial Statements as of and for the year ended November 30, 2018.

We will include Magento and Marketo in our assessment of the effectiveness of internal control over financial reporting starting fiscal 2019.

[removed: PART III][added: PART III]

The information required by this Item 10 of Form 10-K that is found in our [removed: 2019] [added: 2020] Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for the Company’s [removed: 2019] [added: 2020] Annual Meeting of Stockholders [removed: (“2019] [added: (“2020] Proxy Statement”) is incorporated herein by reference to our [removed: 2019] [added: 2020] Proxy Statement.

The [removed: 2019] [added: 2020] Proxy Statement will be filed with the SEC within 120 [added: days after the end of the fiscal year to which this report relates.]

For information with respect to our executive officers, [see “Executive Officers” at the end of Part I, Item [removed: 1](#s1B1CF42899E456C29EAD08188C2771B7)] [added: 1](#s3C5AF6398F545346A49D87A37A805BDA)] of this report.

days after the end of the fiscal year to which this report relates.

The information required by this Item 11 of Form 10-K is incorporated herein by reference to our [removed: 2019] [added: 2020] Proxy Statement.

The information required by this Item 12 of Form 10-K is incorporated herein by reference to our [removed: 2019] [added: 2020] Proxy Statement.

The information required by this [removed: Item13] [added: Item 13] of Form 10-K is incorporated herein by reference to our [removed: 2019] [added: 2020] Proxy Statement.

The information required by this Item 14 of Form 10-K is incorporated herein by reference to our [removed: 2019] [added: 2020] Proxy Statement.

[removed: PART IV][added: PART IV]