ADBE
$510.63
Adobe Systems
($4.23)
(.82%)
Earnings Details
1st Quarter February 2021
Tuesday, March 23, 2021 4:05:00 PM
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Summary

Adobe Systems Beats

Adobe Systems (ADBE) reported 1st Quarter February 2021 earnings of $3.12 per share on revenue of $3.9 billion. The consensus earnings estimate was $2.79 per share on revenue of $3.8 billion. The Earnings Whisper number was $2.85 per share. Revenue grew 26.3% on a year-over-year basis.

The company said it expects second quarter non-GAAP earnings of approximately $2.81 per share on revenue of approximately $3.72 billion. The current consensus earnings estimate is $2.70 per share on revenue of $3.70 billion for the quarter ending May 31, 2021. The company also said it now expects fiscal 2021 earnings of approximately $11.85 per share on revenue of approximately $15.45 billion. The company's previous guidance was earnings of approximately $11.20 per share on revenue of approximately $15.15 billion and the current consensus earnings estimate is $11.26 per share on revenue of $15.20 billion for the year ending November 30, 2021.

Adobe Systems Inc offers a line of software and services used by creative professionals, marketers, developers, enterprises and consumers for creating, managing, delivering, measuring, optimizing and engaging with compelling operating systems.

Results
Reported Earnings
$3.12
Earnings Whisper
$2.85
Consensus Estimate
$2.79
Reported Revenue
$3.91 Bil
Revenue Estimate
$3.76 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Adobe Raises Annual Targets on Strong Q1 Results

Company Achieves Record Quarterly Revenue Across Creative Cloud, Document Cloud and Experience Cloud

SAN JOSE, Calif.--(BUSINESS WIRE)--Adobe (Nasdaq:ADBE) today reported financial results for its first quarter fiscal year 2021 ended March 5, 2021.

First Quarter Fiscal Year 2021 Financial Highlights

  • Adobe achieved record quarterly revenue of $3.91 billion in its first quarter of fiscal year 2021, which represents 26 percent year-over-year growth. Diluted earnings per share was $2.61 on a GAAP basis, representing 33 percent year-over-year growth, and $3.14 on a non-GAAP basis, representing 38 percent year-over-year growth.
  • Digital Media segment revenue was $2.86 billion, which represents 32 percent year-over-year growth. Creative revenue grew to $2.38 billion, representing 31 percent year-over-year growth. Document Cloud revenue was $480 million, representing 37 percent year-over-year growth.
  • Digital Media Annualized Recurring Revenue (“ARR”) increased $435 million quarter-over-quarter to $10.69 billion exiting the quarter. Creative ARR grew to $9.12 billion and Document Cloud ARR grew to $1.57 billion.
  • Digital Experience segment revenue was $934 million, representing 24 percent year-over-year growth. Digital Experience subscription revenue was $812 million, representing 27 percent year-over-year growth.
  • GAAP operating income in the first quarter was $1.45 billion, and non-GAAP operating income was $1.83 billion. GAAP net income was $1.26 billion, and non-GAAP net income was $1.52 billion.
  • Cash flows from operations were $1.77 billion.
  • Remaining Performance Obligation (“RPO”) exiting the quarter was $11.61 billion, representing 17 percent year-over-year growth.
  • Adobe repurchased approximately 1.9 million shares during the quarter.

Adobe’s first quarter fiscal 2021 results benefited from an extra week in the quarter due to the company’s 52/53 week financial calendar whereby fiscal 2021 is a 53-week year compared with fiscal 2020, which was a 52-week year.

A reconciliation between GAAP and non-GAAP results is provided at the end of this press release and on Adobe’s website.

Executive Quotes

“Adobe drove record Q1 revenue and we are raising our annual targets based on the tremendous opportunity across our business and our continued confidence in our global execution,” said Shantanu Narayen, president and CEO, Adobe. “Adobe’s Creative Cloud, Document Cloud and Experience Cloud have become mission critical to all customer segments—from students to individuals to large enterprises—across the world.”

“Our execution in the first quarter was strong, driving accelerated revenue growth and earnings,” said John Murphy, executive vice president and CFO, Adobe. “Adobe is unique in its ability to drive both top-line and bottom-line growth with strong cash flows and margins.”

Adobe Provides Second Quarter Financial Targets

The following table summarizes Adobe’s second quarter fiscal year 2021 targets:

Total revenue

~$3.72 billion

Digital Media segment revenue

~21 percent year-over-year growth

Digital Media annualized recurring revenue (ARR)

~$450 million of net new ARR

Digital Experience segment revenue

~18 percent year-over-year growth

Digital Experience subscription revenue

~20 percent year-over-year growth

Tax rate

GAAP: ~19.5 percent

Non-GAAP: ~16 percent

Share count

~482 million shares

Earnings per share

GAAP: ~$2.09

Non-GAAP: ~$2.81

Adobe Provides Updated Fiscal 2021 Annual Targets

Adobe today is providing updated fiscal 2021 annual targets, factoring in the company’s strong first quarter business performance and the momentum reflected in the company’s second quarter targets.

The following table summarizes Adobe’s updated fiscal year 2021 targets:

Total revenue

~$15.45 billion

Digital Media segment revenue

~22 percent year-over-year growth

Digital Media annualized recurring revenue (ARR)

~$1.8 billion of net new ARR

Digital Experience segment revenue

~20 percent year-over-year growth

Digital Experience subscription revenue

~23 percent year-over-year growth

Tax rate

GAAP: ~17.5 percent

Non-GAAP: ~16 percent

Share count

~481 million shares

Earnings per share

GAAP: ~$9.13

Non-GAAP: ~$11.85

A reconciliation between GAAP and non-GAAP targets is provided at the end of this press release.

Adobe to Webcast First Quarter Earnings Conference Call

Adobe will webcast its first quarter fiscal year 2021 earnings conference call today at 2:00 p.m. Pacific Time from its investor relations website: www.adobe.com/ADBE. Earnings documents, including Adobe management’s prepared conference call remarks with slides and an investor datasheet are posted to Adobe’s investor relations website in advance of the conference call for reference. A reconciliation between GAAP and non-GAAP earnings results and financial targets is also provided on the website.

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including those related to business momentum, the financial impacts of the Workfront acquisition, the effects of the COVID-19 pandemic on our business and results of operations, our market opportunity, market trends, current macroeconomic conditions, customer success, revenue, operating margin, seasonality, annualized recurring revenue, tax rate on a GAAP and non-GAAP basis, earnings per share on a GAAP and non-GAAP basis, and share count, all of which involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: failure to compete effectively, failure to develop, acquire, market and offer products and services that meet customer requirements, introduction of new technology, information security and privacy, potential interruptions or delays in hosted services provided by us or third parties, macroeconomic conditions and economic impact of the COVID-19 pandemic, risks associated with cyber-attacks, complex sales cycles, risks related to the timing of revenue recognition from our subscription offerings, fluctuations in subscription renewal rates, failure to realize the anticipated benefits of past or future acquisitions, failure to effectively manage critical strategic third-party business relationships, changes in accounting principles and tax regulations, uncertainty in the financial markets and economic conditions in the countries where we operate, and other various risks associated with being a multinational corporation. For a discussion of these and other risks and uncertainties, please refer to Adobe’s Annual Report on Form 10-K for our fiscal year 2020 ended Nov. 27, 2020, and Adobe's Quarterly Reports on Form 10-Q issued in fiscal year 2021.

The financial information set forth in this press release reflects estimates based on information available at this time. These amounts could differ from actual reported amounts stated in Adobe’s Quarterly Report on Form 10-Q for our quarter ended March 5, 2021, which Adobe expects to file in late March or early April 2021. Adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements.

About Adobe

Adobe is changing the world through digital experiences. For more information, visit www.adobe.com.

©2021 Adobe. All rights reserved. Adobe, Creative Cloud, Document Cloud and the Adobe logo are either registered trademarks or trademarks of Adobe (or one of its subsidiaries) in the United States and/or other countries. All other trademarks are the property of their respective owners.

Condensed Consolidated Statements of Income

(In millions, except per share data; unaudited)

 

 

Three Months Ended

 

March 5, 2021

 

February 28, 2020

Revenue:

 

 

 

Subscription

$

3,584

 

 

$

2,732

 

Product

 

155

 

 

 

143

 

Services and other

 

166

 

 

 

216

 

Total revenue

 

3,905

 

 

 

3,091

 

 

 

 

 

Cost of revenue:

 

 

 

Subscription

 

324

 

 

 

274

 

Product

 

10

 

 

 

7

 

Services and other

 

113

 

 

 

171

 

Total cost of revenue

 

447

 

 

 

452

 

 

 

 

 

Gross profit

 

3,458

 

 

 

2,639

 

 

 

 

 

Operating expenses:

 

 

 

Research and development

 

620

 

 

 

532

 

Sales and marketing

 

1,049

 

 

 

857

 

General and administrative

 

290

 

 

 

271

 

Amortization of intangibles

 

45

 

 

 

42

 

Total operating expenses

 

2,004

 

 

 

1,702

 

 

 

 

 

Operating income

 

1,454

 

 

 

937

 

 

 

 

 

Non-operating income (expense):

 

 

 

Interest expense

 

(30

)

 

 

(33

)

Investment gains (losses), net

 

5

 

 

 

(3

)

Other income (expense), net

 

4

 

 

 

18

 

Total non-operating income (expense), net

 

(21

)

 

 

(18

)

Income before income taxes

 

1,433

 

 

 

919

 

Provision for (benefit from) income taxes

 

172

 

 

 

(36

)

Net income

$

1,261

 

 

$

955

 

Basic net income per share

$

2.63

 

 

$

1.98

 

Shares used to compute basic net income per share

 

479

 

 

 

482

 

Diluted net income per share

$

2.61

 

 

$

1.96

 

Shares used to compute diluted net income per share

 

483

 

 

 

488

 

Condensed Consolidated Balance Sheets

(In millions; unaudited)

 

March 5, 2021

 

November 27,
2020

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

3,452

 

 

$

4,478

 

Short-term investments

 

1,511

 

 

 

1,514

 

Trade receivables, net of allowances for doubtful accounts of $21 for both periods

 

1,520

 

 

 

1,398

 

Prepaid expenses and other current assets

 

901

 

 

 

756

 

Total current assets

 

7,384

 

 

 

8,146

 

 

 

 

 

Property and equipment, net

 

1,530

 

 

 

1,517

 

Operating lease right-of-use assets, net

 

477

 

 

 

487

 

Goodwill

 

11,845

 

 

 

10,742

 

Other intangibles, net

 

1,729

 

 

 

1,359

 

Deferred income taxes

 

1,262

 

 

 

1,370

 

Other assets

 

758

 

 

 

663

 

Total assets

$

24,985

 

 

$

24,284

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

Trade payables

$

254

 

 

$

306

 

Accrued expenses

 

1,243

 

 

 

1,422

 

Deferred revenue

 

4,134

 

 

 

3,629

 

Income taxes payable

 

81

 

 

 

63

 

Operating lease liabilities

 

94

 

 

 

92

 

Total current liabilities

 

5,806

 

 

 

5,512

 

 

 

 

 

Long-term liabilities:

 

 

 

Debt

 

4,119

 

 

 

4,117

 

Deferred revenue

 

151

 

 

 

130

 

Income taxes payable

 

540

 

 

 

529

 

Deferred income taxes

 

81

 

 

 

10

 

Operating lease liabilities

 

494

 

 

 

499

 

Other liabilities

 

248

 

 

 

223

 

Total liabilities

 

11,439

 

 

 

11,020

 

 

 

 

 

Stockholders’ equity:

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

 

 

 

 

Additional paid-in-capital

 

7,617

 

 

 

7,357

 

Retained earnings

 

20,521

 

 

 

19,611

 

Accumulated other comprehensive income (loss)

 

(141

)

 

 

(158

)

Treasury stock, at cost

 

(14,451

)

 

 

(13,546

)

Total stockholders’ equity

 

13,546

 

 

 

13,264

 

Total liabilities and stockholders’ equity

$

24,985

 

 

$

24,284

 

Condensed Consolidated Statements of Cash Flows

(In millions; unaudited)

 

Three Months Ended

 

March 5, 2021

 

February 28, 2020

Cash flows from operating activities:

 

 

 

Net income

$

1,261

 

 

$

955

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation, amortization and accretion

 

196

 

 

 

188

 

Stock-based compensation

 

260

 

 

 

217

 

Unrealized investment (gains) losses, net

 

 

 

 

6

 

Other non-cash adjustments

 

138

 

 

 

(70

)

Changes in deferred revenue

 

471

 

 

 

114

 

Changes in other operating assets and liabilities

 

(554

)

 

 

(85

)

Net cash provided by operating activities

 

1,772

 

 

 

1,325

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchases, sales and maturities of short-term investments, net

 

(4

)

 

 

48

 

Purchases of property and equipment

 

(59

)

 

 

(94

)

Purchases and sales of long-term investments, intangibles and other assets, net

 

(25

)

 

 

(2

)

Acquisitions, net of cash acquired

 

(1,470

)

 

 

 

Net cash used for investing activities

 

(1,558

)

 

 

(48

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Repurchases of common stock

 

(950

)

 

 

(850

)

Taxes paid related to net share settlement of equity awards, net of proceeds from treasury stock re-issuances

 

(304

)

 

 

(379

)

Proceeds from issuance of debt

 

 

 

 

3,144

 

Repayment of debt

 

 

 

 

(3,150

)

Other financing activities, net

 

10

 

 

 

2

 

Net cash used for financing activities

 

(1,244

)

 

 

(1,233

)

Effect of exchange rate changes on cash and cash equivalents

 

4

 

 

 

(6

)

Net increase (decrease) in cash and cash equivalents

 

(1,026

)

 

 

38

 

Cash and cash equivalents at beginning of period

 

4,478

 

 

 

2,650

 

Cash and cash equivalents at end of period

$

3,452

 

 

$

2,688

 

Non-GAAP Results

(In millions, except per share data)

The following table shows Adobe’s GAAP results reconciled to non-GAAP results included in this release.

 

 

Three Months Ended

 

March 5,
2021

 

February 28,
2020

 

November 27,
2020

Operating income:

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

$

1,454

 

 

$

937

 

 

$

1,215

 

Stock-based and deferred compensation expense

 

286

 

 

 

214

 

 

 

239

 

Amortization of intangibles

 

89

 

 

 

94

 

 

 

84

 

Non-GAAP operating income

$

1,829

 

 

$

1,245

 

 

$

1,538

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

 

 

 

GAAP net income

$

1,261

 

 

$

955

 

 

$

2,250

 

Stock-based and deferred compensation expense

 

286

 

 

 

214

 

 

 

239

 

Amortization of intangibles

 

89

 

 

 

94

 

 

 

84

 

Investment (gains) losses, net

 

(5

)

 

 

3

 

 

 

(6

)

Income tax adjustments

 

(116

)

 

 

(159

)

 

 

(1,204

)

Non-GAAP net income

$

1,515

 

 

$

1,107

 

 

$

1,363

 

 

 

 

 

 

 

Diluted net income per share:

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income per share

$

2.61

 

 

$

1.96

 

 

$

4.64

 

Stock-based and deferred compensation expense

 

0.59

 

 

 

0.44

 

 

 

0.49

 

Amortization of intangibles

 

0.19

 

 

 

0.19

 

 

 

0.17

 

Investment (gains) losses, net

 

(0.01

)

 

 

0.01

 

 

 

(0.01

)

Income tax adjustments

 

(0.24

)

 

 

(0.33

)

 

 

(2.48

)

Non-GAAP diluted net income per share

$

3.14

 

 

$

2.27

 

 

$

2.81

 

 

 

 

 

 

 

Shares used in computing diluted net income per share

 

483

 

 

 

488

 

 

 

484

 

The following table shows Adobe’s GAAP first quarter fiscal year 2021 tax rate reconciled to the non-GAAP tax rate included in this release.

 

First Quarter
Fiscal 2021

Effective income tax rate:

 

 

 

GAAP effective income tax rate

12.0

%

Income tax adjustments

5.5

 

Stock-based and deferred compensation expense

(1.1

)

Amortization of intangibles

(0.4

)

Non-GAAP effective income tax rate

16.0

%

Reconciliation of GAAP to Non-GAAP Financial Targets

(Shares in millions)

The following tables show Adobe's second quarter fiscal year 2021 financial targets reconciled to the non-GAAP financial targets included in this release.

 

Second Quarter
Fiscal 2021

Diluted net income per share:

 

 

 

GAAP diluted net income per share

$

2.09

 

Stock-based and deferred compensation expense

 

0.57

 

Amortization of intangibles

 

0.18

 

Income tax adjustments

 

(0.03

)

Non-GAAP diluted net income per share

$

2.81

 

 

 

Shares used to compute diluted net income per share

 

482

 

 

 

Second Quarter
Fiscal 2021

Effective income tax rate:

 

 

 

GAAP effective income tax rate

 

19.5

%

Stock-based and deferred compensation expense

 

(1.4

)

Amortization of intangibles

 

(0.1

)

Income tax adjustments

 

(2.0

)

Non-GAAP effective income tax rate

 

16.0

%

The following tables show Adobe's updated fiscal year 2021 financial targets reconciled to the non-GAAP financial targets included in this release.

 

Fiscal Year 2021

Diluted net income per share:

 

 

 

GAAP diluted net income per share

$

9.13

 

Stock-based and deferred compensation expense

 

2.33

 

Amortization of intangibles

 

0.71

 

Income tax adjustments

 

(0.32

)

Non-GAAP diluted net income per share

$

11.85

 

 

 

Shares used to compute diluted net income per share

 

481

 

 

 

Fiscal Year 2021

Effective income tax rate:

 

 

 

GAAP effective income tax rate

 

17.5

%

Stock-based and deferred compensation expense

 

(1.4

)

Amortization of intangibles

 

(0.1

)

Non-GAAP effective income tax rate

 

16.0

%

Use of Non-GAAP Financial Information

Adobe continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Adobe uses non-GAAP financial information to evaluate its ongoing operations and for internal planning and forecasting purposes. Adobe's management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Adobe presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Adobe's operating results. Adobe believes these non-GAAP financial measures are useful because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. This allows institutional investors, the analyst community and others to better understand and evaluate our operating results and future prospects in the same manner as management.

Adobe's management believes it is useful for itself and investors to review, as applicable, both GAAP information as well as non-GAAP measures, which may exclude items such as stock-based and deferred compensation expenses, amortization of intangibles, investment gains and losses, the related tax impact of all of these items, income tax adjustments, and the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes. Adobe uses these non-GAAP measures in order to assess the performance of Adobe's business and for planning and forecasting in subsequent periods. Whenever such a non-GAAP measure is used, Adobe provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above.

Investor Relations Contact
Jonathan Vaas
Adobe
ir@adobe.com

Public Relations Contact
Ashley Levine
Adobe
aslevine@adobe.com

Source: Adobe