Remaining Performance Obligations exiting the quarter were
$12.6 billion, up 22 percent year over year
Adobe (Nasdaq:ADBE) today reported financial results for its
third quarter fiscal year 2021 ended Sept. 3, 2021.
Third Quarter Fiscal Year 2021 Financial Highlights
- Adobe achieved record revenue of $3.94 billion in its third
quarter of fiscal year 2021, which represents 22 percent
year-over-year growth.
- GAAP diluted earnings per share was $2.52, representing 28
percent year-over-year growth, and non-GAAP diluted earnings per
share was $3.11, representing 21 percent year-over-year
growth.
- Digital Media segment revenue was $2.87 billion, which
represents 23 percent year-over-year growth. Creative revenue grew
to $2.37 billion, representing 21 percent year-over-year growth.
Document Cloud revenue was $493 million, representing 31 percent
year-over-year growth.
- Digital Media Annualized Recurring Revenue (“ARR”) increased
$455 million quarter over quarter to $11.67 billion exiting the
quarter. Creative ARR grew to $9.87 billion and Document Cloud ARR
grew to $1.79 billion.
- Digital Experience segment revenue was $985 million,
representing 26 percent year-over-year growth. Digital Experience
subscription revenue was $864 million, representing 29 percent
year-over-year growth.
- GAAP operating income in the third quarter was $1.44 billion,
and non-GAAP operating income was $1.81 billion. GAAP net income
was $1.21 billion, and non-GAAP net income was $1.50 billion.
- Cash flows from operations were $1.42 billion.
- Remaining Performance Obligations (“RPO”) exiting the quarter
were $12.63 billion, representing 22 percent year-over-year
growth.
- Adobe repurchased approximately 1.7 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 another outstanding quarter as Creative Cloud,
Document Cloud and Experience Cloud continue to transform
storytelling, learning and conducting business in a digital-first
world,” said Shantanu Narayen, president and CEO, Adobe. “Our
talented employees, category-defining innovation and product
leadership uniquely position us for continued momentum and
success.”
“We drove record revenues and strong profitability in the
quarter, demonstrating our ability to succeed in a dynamic
environment,” said John Murphy, executive vice president and CFO,
Adobe. “Our operational rigor and data-driven insights enable us to
execute while we continue to invest across massive market
opportunities.”
Adobe Provides Fourth Quarter Financial Targets
Adobe today is providing fourth quarter financial targets
factoring current macroeconomic conditions and expected year-end
seasonal strength.
The following table summarizes Adobe’s fourth quarter fiscal
year 2021 targets:
Total revenue
~$4.07 billion
Digital Media segment revenue
~20 percent year-over-year
growth
Digital Media annualized recurring revenue
(ARR)
~$550 million of net new ARR
Digital Experience segment revenue
~22 percent year-over-year
growth
Digital Experience subscription
revenue
~26 percent year-over-year
growth
Tax rate
GAAP: ~17 percent
Non-GAAP: ~16 percent
Share count
~480 million shares
Earnings per share
GAAP: ~$2.52
Non-GAAP: ~$3.18
A reconciliation between GAAP and non-GAAP targets is provided
at the end of this press release.
Adobe to Webcast Third Quarter Earnings Conference
Call
Adobe will webcast its third 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.
Adobe Announces Fourth Quarter Earnings Call and Financial
Analyst Meeting
Adobe will host its fourth quarter and fiscal year 2021 earnings
conference call and financial analyst meeting online on Dec. 16, at
8:00 a.m. Pacific Time. During the meeting, Adobe will provide an
overview of its strategy and financial targets for fiscal year
2022.
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 Sept.
3, 2021, which Adobe expects to file in late Sept. 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
Nine Months Ended
September 3, 2021
August 28, 2020
September 3, 2021
August 28, 2020
Revenue:
Subscription
$
3,657
$
2,948
$
10,761
$
8,511
Product
119
109
427
380
Services and other
159
168
487
553
Total revenue
3,935
3,225
11,675
9,444
Cost of revenue:
Subscription
344
282
996
825
Product
10
10
29
26
Services and other
113
135
333
443
Total cost of revenue
467
427
1,358
1,294
Gross profit
3,468
2,798
10,317
8,150
Operating expenses:
Research and development
651
566
1,883
1,630
Sales and marketing
1,068
892
3,190
2,650
General and administrative
265
230
811
725
Amortization of intangibles
43
41
132
123
Total operating expenses
2,027
1,729
6,016
5,128
Operating income
1,441
1,069
4,301
3,022
Non-operating income (expense):
Interest expense
(27
)
(28
)
(85
)
(89
)
Investment gains (losses), net
7
10
20
7
Other income (expense), net
(3
)
9
1
39
Total non-operating income (expense),
net
(23
)
(9
)
(64
)
(43
)
Income before income taxes
1,418
1,060
4,237
2,979
Provision for (benefit from) income
taxes
206
105
648
(31
)
Net income
$
1,212
$
955
$
3,589
$
3,010
Basic net income per share
$
2.54
$
1.99
$
7.51
$
6.25
Shares used to compute basic net income
per share
477
480
478
481
Diluted net income per share
$
2.52
$
1.97
$
7.45
$
6.20
Shares used to compute diluted net income
per share
481
485
481
486
Condensed Consolidated Balance
Sheets
(In millions; unaudited)
September 3, 2021
November 27, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
4,623
$
4,478
Short-term investments
1,541
1,514
Trade receivables, net of allowances for
doubtful accounts of $17 and $21, respectively
1,545
1,398
Prepaid expenses and other current
assets
910
756
Total current assets
8,619
8,146
Property and equipment, net
1,629
1,517
Operating lease right-of-use assets,
net
452
487
Goodwill
11,838
10,742
Other intangibles, net
1,557
1,359
Deferred income taxes
1,190
1,370
Other assets
859
663
Total assets
$
26,144
$
24,284
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade payables
$
331
$
306
Accrued expenses
1,450
1,422
Deferred revenue
4,243
3,629
Income taxes payable
70
63
Operating lease liabilities
97
92
Total current liabilities
6,191
5,512
Long-term liabilities:
Debt
4,122
4,117
Deferred revenue
142
130
Income taxes payable
533
529
Deferred income taxes
7
10
Operating lease liabilities
466
499
Other liabilities
269
223
Total liabilities
11,730
11,020
Stockholders’ equity:
Preferred stock
—
—
Common stock
—
—
Additional paid-in-capital
8,209
7,357
Retained earnings
22,750
19,611
Accumulated other comprehensive income
(loss)
(131
)
(158
)
Treasury stock, at cost
(16,414
)
(13,546
)
Total stockholders’ equity
14,414
13,264
Total liabilities and stockholders’
equity
$
26,144
$
24,284
Condensed Consolidated Statements of
Cash Flows
(In millions; unaudited)
Three Months Ended
September 3, 2021
August 28, 2020
Cash flows from operating activities:
Net income
$
1,212
$
955
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and
accretion
193
191
Stock-based compensation
280
232
Unrealized investment (gains) losses,
net
(4
)
(9
)
Other non-cash adjustments
(72
)
25
Changes in deferred revenue
102
(12
)
Changes in other operating assets and
liabilities
(296
)
54
Net cash provided by operating
activities
1,415
1,436
Cash flows from investing activities:
Purchases, sales and maturities of
short-term investments, net
(28
)
(191
)
Purchases of property and equipment
(95
)
(126
)
Purchases and sales of long-term
investments, intangibles and other assets, net
(10
)
2
Net cash used for investing activities
(133
)
(315
)
Cash flows from financing activities:
Repurchases of common stock
(1,000
)
(500
)
Proceeds from treasury stock re-issuances,
net of taxes paid related to net share
settlement of equity awards
81
103
Other financing activities, net
20
(17
)
Net cash used for financing activities
(899
)
(414
)
Effect of exchange rate changes on cash
and cash equivalents
(10
)
16
Net increase in cash and cash
equivalents
373
723
Cash and cash equivalents at beginning of
period
4,250
3,044
Cash and cash equivalents at end of
period
$
4,623
$
3,767
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
September 3,
2021
August 28, 2020
June 4, 2021
Operating income:
GAAP operating income
$
1,441
$
1,069
$
1,406
Stock-based and deferred compensation
expense
287
244
269
Amortization of intangibles
83
90
87
Non-GAAP operating income
$
1,811
$
1,403
$
1,762
Net income:
GAAP net income
$
1,212
$
955
$
1,116
Stock-based and deferred compensation
expense
287
244
269
Amortization of intangibles
83
90
87
Investment (gains) losses, net
(7
)
(10
)
(8
)
Income tax adjustments
(79
)
(33
)
(8
)
Non-GAAP net income
$
1,496
$
1,246
$
1,456
Diluted net income per share:
GAAP diluted net income per share
$
2.52
$
1.97
$
2.32
Stock-based and deferred compensation
expense
0.60
0.50
0.56
Amortization of intangibles
0.17
0.19
0.18
Investment (gains) losses, net
(0.01
)
(0.02
)
(0.02
)
Income tax adjustments
(0.17
)
(0.07
)
(0.01
)
Non-GAAP diluted net income per share
$
3.11
$
2.57
$
3.03
Shares used in computing diluted net
income per share
481
485
481
The following table shows Adobe’s GAAP
third quarter fiscal year 2021 tax rate reconciled to the non-GAAP
tax rate included in this release.
Third Quarter
Fiscal 2021
Effective income tax rate:
GAAP effective income tax rate
14.5
%
Income tax adjustments
2.5
Stock-based and deferred compensation
expense
(0.8
)
Amortization of intangibles
(0.2
)
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 fourth
quarter fiscal year 2021 financial targets reconciled to the
non-GAAP financial targets included in this release.
Fourth Quarter
Fiscal 2021
Diluted net income per share:
GAAP diluted net income per share
$
2.52
Stock-based and deferred compensation
expense
0.58
Amortization of intangibles
0.17
Income tax adjustments
(0.09
)
Non-GAAP diluted net income per share
$
3.18
Shares used to compute diluted net income
per share
480
Fourth Quarter
Fiscal 2021
Effective income tax rate:
GAAP effective income tax rate
17.0
%
Stock-based and deferred compensation
expense
(0.9
)
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210921006022/en/
Investor Relations Contact
Jonathan Vaas Adobe ir@adobe.com
Public Relations Contact
Ashley Levine Adobe aslevine@adobe.com
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