ADBE
$621.70
Adobe Systems
$.78
.13%
Earnings Details
2nd Quarter May 2021
Thursday, June 17, 2021 4:05:00 PM
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Summary

Adobe Systems Beats

Adobe Systems (ADBE) reported 2nd Quarter May 2021 earnings of $3.02 per share on revenue of $3.8 billion. The consensus earnings estimate was $2.81 per share on revenue of $3.7 billion. The Earnings Whisper number was $2.94 per share. Revenue grew 22.6% on a year-over-year basis.

The company said it expects third quarter non-GAAP earnings of approximately $3.00 per share on revenue of approximately $3.88 billion. The current consensus earnings estimate is $2.89 per share on revenue of $3.83 billion for the quarter ending August 31, 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
$3.02
Earnings Whisper
$2.94
Consensus Estimate
$2.81
Reported Revenue
$3.84 Bil
Revenue Estimate
$3.73 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Adobe Reports Outstanding Second Quarter Results

Revenue Growth of 23% Year Over Year Drives Record $1.99 Billion Cash Flows from Operations

SAN JOSE, Calif.--(BUSINESS WIRE)--Adobe (Nasdaq:ADBE) today reported financial results for its second quarter fiscal year 2021 ended June 4, 2021.

Second Quarter Fiscal Year 2021 Financial Highlights

  • Adobe achieved quarterly revenue of $3.84 billion in its second quarter of fiscal year 2021, which represents 23 percent year-over-year growth. Diluted earnings per share was $2.32 on a GAAP basis and $3.03 on a non-GAAP basis.
  • Digital Media segment revenue was $2.79 billion, which represents 25 percent year-over-year growth. Creative revenue grew to $2.32 billion, representing 24 percent year-over-year growth. Document Cloud revenue was $469 million, representing 30 percent year-over-year growth.
  • Digital Media Annualized Recurring Revenue (“ARR”) increased $518 million quarter-over-quarter to $11.21 billion exiting the quarter. Creative ARR grew to $9.53 billion and Document Cloud ARR grew to $1.68 billion.
  • Digital Experience segment revenue was $938 million, representing 21 percent year-over-year growth. Digital Experience subscription revenue was $817 million, representing 25 percent year-over-year growth.
  • GAAP operating income in the second quarter was $1.41 billion, and non-GAAP operating income was $1.76 billion. GAAP net income was $1.12 billion, and non-GAAP net income was $1.46 billion.
  • Cash flows from operations were a record $1.99 billion.
  • Remaining Performance Obligations (“RPO”) exiting the quarter were $12.23 billion, representing 23 percent year-over-year growth.
  • Adobe repurchased approximately 2.1 million shares during the quarter.

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

Executive Quotes

“Adobe had an outstanding second quarter as Creative Cloud, Document Cloud and Experience Cloud continue to transform work, learn and play in a digital-first world,” said Shantanu Narayen, president and CEO, Adobe. “Our innovative product roadmap and unparalleled leadership in creativity, digital documents and customer experience management position us for continued success in 2021 and beyond.”

“Adobe delivered strong Digital Media annualized recurring revenue and Digital Experience bookings, as well as record cash flows from operations in Q2,” said John Murphy, executive vice president and CFO, Adobe. “The large market opportunity and momentum we are seeing across our creative, document and customer experience management businesses position us well to deliver another record year.”

Adobe Provides Third Quarter Financial Targets

Adobe today is providing third quarter financial targets factoring current macroeconomic conditions and expected return of summer seasonality associated with the months of June, July and August.

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

Total revenue

~$3.88 billion

Digital Media segment revenue

~22 percent year-over-year growth

Digital Media annualized recurring revenue (ARR)

~$440 million of net new ARR

Digital Experience segment revenue

~21 percent year-over-year growth

Digital Experience subscription revenue

~25 percent year-over-year growth

Tax rate

GAAP: ~19 percent  

Non-GAAP: ~16 percent

Share count

~480 million shares

Earnings per share

GAAP: ~$2.27

Non-GAAP: ~$3.00

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

Adobe to Webcast Second Quarter Earnings Conference Call

Adobe will webcast its second 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 effects of the COVID-19 pandemic on our business and results of operations, 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 June 4, 2021, which Adobe expects to file in late June 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

 

Six Months Ended

 

June 4, 2021

 

May 29, 2020

 

June 4, 2021

 

May 29, 2020

Revenue:

 

 

 

 

 

 

 

Subscription

$

3,520

 

 

 

$

2,831

 

 

 

$

7,104

 

 

 

$

5,563

 

 

Product

153

 

 

 

128

 

 

 

308

 

 

 

271

 

 

Services and other

162

 

 

 

169

 

 

 

328

 

 

 

385

 

 

Total revenue

3,835

 

 

 

3,128

 

 

 

7,740

 

 

 

6,219

 

 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

Subscription

328

 

 

 

269

 

 

 

652

 

 

 

543

 

 

Product

9

 

 

 

9

 

 

 

19

 

 

 

16

 

 

Services and other

107

 

 

 

137

 

 

 

220

 

 

 

308

 

 

Total cost of revenue

444

 

 

 

415

 

 

 

891

 

 

 

867

 

 

 

 

 

 

 

 

 

 

Gross profit

3,391

 

 

 

2,713

 

 

 

6,849

 

 

 

5,352

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

612

 

 

 

532

 

 

 

1,232

 

 

 

1,064

 

 

Sales and marketing

1,073

 

 

 

901

 

 

 

2,122

 

 

 

1,758

 

 

General and administrative

256

 

 

 

224

 

 

 

546

 

 

 

495

 

 

Amortization of intangibles

44

 

 

 

40

 

 

 

89

 

 

 

82

 

 

Total operating expenses

1,985

 

 

 

1,697

 

 

 

3,989

 

 

 

3,399

 

 

 

 

 

 

 

 

 

 

Operating income

1,406

 

 

 

1,016

 

 

 

2,860

 

 

 

1,953

 

 

 

 

 

 

 

 

 

 

Non-operating income (expense):

 

 

 

 

 

 

 

Interest expense

(28

)

 

 

(28

)

 

 

(58

)

 

 

(61

)

 

Investment gains (losses), net

8

 

 

 

 

 

 

13

 

 

 

(3

)

 

Other income (expense), net

 

 

 

12

 

 

 

4

 

 

 

30

 

 

Total non-operating income (expense), net

(20

)

 

 

(16

)

 

 

(41

)

 

 

(34

)

 

Income before income taxes

1,386

 

 

 

1,000

 

 

 

2,819

 

 

 

1,919

 

 

Provision for (benefit from) income taxes

270

 

 

 

(100

)

 

 

442

 

 

 

(136

)

 

Net income

$

1,116

 

 

 

$

1,100

 

 

 

$

2,377

 

 

 

$

2,055

 

 

Basic net income per share

$

2.34

 

 

 

$

2.28

 

 

 

$

4.97

 

 

 

$

4.26

 

 

Shares used to compute basic net income per share

478

 

 

 

481

 

 

 

478

 

 

 

482

 

 

Diluted net income per share

$

2.32

 

 

 

$

2.27

 

 

 

$

4.93

 

 

 

$

4.23

 

 

Shares used to compute diluted net income per share

481

 

 

 

485

 

 

 

482

 

 

 

486

 

 

Condensed Consolidated Balance Sheets

(In millions; unaudited)

 

June 4, 2021

 

November 27,
2020

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

4,250

 

 

 

$

4,478

 

 

Short-term investments

1,518

 

 

 

1,514

 

 

Trade receivables, net of allowances for doubtful accounts of $19 and $21, respectively

1,477

 

 

 

1,398

 

 

Prepaid expenses and other current assets

833

 

 

 

756

 

 

Total current assets

8,078

 

 

 

8,146

 

 

 

 

 

 

Property and equipment, net

1,573

 

 

 

1,517

 

 

Operating lease right-of-use assets, net

458

 

 

 

487

 

 

Goodwill

11,859

 

 

 

10,742

 

 

Other intangibles, net

1,641

 

 

 

1,359

 

 

Deferred income taxes

1,168

 

 

 

1,370

 

 

Other assets

805

 

 

 

663

 

 

Total assets

$

25,582

 

 

 

$

24,284

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

Trade payables

$

312

 

 

 

$

306

 

 

Accrued expenses

1,538

 

 

 

1,422

 

 

Deferred revenue

4,144

 

 

 

3,629

 

 

Income taxes payable

55

 

 

 

63

 

 

Operating lease liabilities

96

 

 

 

92

 

 

Total current liabilities

6,145

 

 

 

5,512

 

 

 

 

 

 

Long-term liabilities:

 

 

 

Debt

4,120

 

 

 

4,117

 

 

Deferred revenue

139

 

 

 

130

 

 

Income taxes payable

510

 

 

 

529

 

 

Deferred income taxes

80

 

 

 

10

 

 

Operating lease liabilities

477

 

 

 

499

 

 

Other liabilities

259

 

 

 

223

 

 

Total liabilities

11,730

 

 

 

11,020

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

 

 

 

 

Additional paid-in-capital

7,877

 

 

 

7,357

 

 

Retained earnings

21,538

 

 

 

19,611

 

 

Accumulated other comprehensive income (loss)

(121

)

 

 

(158

)

 

Treasury stock, at cost

(15,442

)

 

 

(13,546

)

 

Total stockholders’ equity

13,852

 

 

 

13,264

 

 

Total liabilities and stockholders’ equity

$

25,582

 

 

 

$

24,284

 

 

Condensed Consolidated Statements of Cash Flows

(In millions; unaudited)

 

Three Months Ended

 

June 4, 2021

 

May 29, 2020

Cash flows from operating activities:

 

 

 

Net income

$

1,116

 

 

 

$

1,100

 

 

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

 

 

 

Depreciation, amortization and accretion

194

 

 

 

188

 

 

Stock-based compensation

260

 

 

 

227

 

 

Unrealized investment (gains) losses, net

(7

)

 

 

(1

)

 

Other non-cash adjustments

110

 

 

 

(137

)

 

Changes in deferred revenue

(2

)

 

 

(154

)

 

Changes in other operating assets and liabilities

317

 

 

 

(39

)

 

Net cash provided by operating activities

1,988

 

 

 

1,184

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

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

(10

)

 

 

176

 

 

Purchases of property and equipment

(95

)

 

 

(96

)

 

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

(2

)

 

 

 

 

Net cash provided by (used for) investing activities

(107

)

 

 

80

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

Repurchases of common stock

(1,000

)

 

 

(850

)

 

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

(89

)

 

 

(53

)

 

Other financing activities, net

9

 

 

 

2

 

 

Net cash used for financing activities

(1,080

)

 

 

(901

)

 

Effect of exchange rate changes on cash and cash equivalents

(3

)

 

 

(7

)

 

Net increase in cash and cash equivalents

798

 

 

 

356

 

 

Cash and cash equivalents at beginning of period

3,452

 

 

 

2,688

 

 

Cash and cash equivalents at end of period

$

4,250

 

 

 

$

3,044

 

 

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

 

June 4,
2021

 

May 29,
2020

 

March 5,
2021

Operating income:

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

$

1,406

 

 

 

$

1,016

 

 

 

$

1,454

 

 

Stock-based and deferred compensation expense

269

 

 

 

227

 

 

 

286

 

 

Amortization of intangibles

87

 

 

 

92

 

 

 

89

 

 

Non-GAAP operating income

$

1,762

 

 

 

$

1,335

 

 

 

$

1,829

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

 

 

 

GAAP net income

$

1,116

 

 

 

$

1,100

 

 

 

$

1,261

 

 

Stock-based and deferred compensation expense

269

 

 

 

227

 

 

 

286

 

 

Amortization of intangibles

87

 

 

 

92

 

 

 

89

 

 

Investment (gains) losses, net

(8

)

 

 

 

 

 

(5

)

 

Income tax adjustments

(8

)

 

 

(232

)

 

 

(116

)

 

Non-GAAP net income

$

1,456

 

 

 

$

1,187

 

 

 

$

1,515

 

 

 

 

 

 

 

 

Diluted net income per share:

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income per share

$

2.32

 

 

 

$

2.27

 

 

 

$

2.61

 

 

Stock-based and deferred compensation expense

0.56

 

 

 

0.47

 

 

 

0.59

 

 

Amortization of intangibles

0.18

 

 

 

0.19

 

 

 

0.19

 

 

Investment (gains) losses, net

(0.02

)

 

 

 

 

 

(0.01

)

 

Income tax adjustments

(0.01

)

 

 

(0.48

)

 

 

(0.24

)

 

Non-GAAP diluted net income per share

$

3.03

 

 

 

$

2.45

 

 

 

$

3.14

 

 

 

 

 

 

 

 

Shares used in computing diluted net income per share

481

 

 

 

485

 

 

 

483

 

 

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

 

Second Quarter
Fiscal 2021

Effective income tax rate:

 

GAAP effective income tax rate

 

19.5

%

Income tax adjustments

 

(2.0

)

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 third quarter fiscal year 2021 financial targets reconciled to the non-GAAP financial targets included in this release.

 

Third Quarter
Fiscal 2021

Diluted net income per share:

 

GAAP diluted net income per share

$

2.27

 

Stock-based and deferred compensation expense

 

0.60

 

Amortization of intangibles

 

0.17

 

Income tax adjustments

 

(0.04

)

Non-GAAP diluted net income per share

$

3.00

 

 

 

Shares used to compute diluted net income per share

480

 

 

 

Third Quarter
Fiscal 2021

Effective income tax rate:

 

GAAP effective income tax rate

 

19.0

%

Stock-based and deferred compensation expense

 

(1.4

)

Amortization of intangibles

 

(0.1

)

Income tax adjustments

 

(1.5

)

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.

Exhibit 99.1
Investor Relations Contact
Jonathan Vaas
Adobe
ir@adobe.com

Public Relations Contact
Ashley Levine
Adobe
aslevine@adobe.com

Source: Adobe