Revenue Growth of 23% Year Over Year Drives Record $1.99
Billion Cash Flows from Operations
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.
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Exhibit 99.1 Investor Relations Contact Jonathan
Vaas Adobe ir@adobe.com Public Relations
Contact Ashley Levine Adobe aslevine@adobe.com
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