Record Q1 Net New Document Cloud ARR; Enterprise strength
drives RPO growth of 16 percent year over year
Adobe (Nasdaq:ADBE) today reported financial results for its
first quarter fiscal year 2024 ended March 1, 2024.
“Adobe drove record Q1 revenue demonstrating strong momentum
across Creative Cloud, Document Cloud and Experience Cloud,” said
Shantanu Narayen, chair and CEO, Adobe. “We’ve done an incredible
job harnessing the power of generative AI to deliver groundbreaking
innovation across our product portfolio.”
“Adobe’s Q1 results and record RPO reflect strong customer
adoption of our innovative products and services,” said Dan Durn,
executive vice president and CFO, Adobe. “As a result of our strong
trajectory of growth and profitability, we are announcing a new $25
billion share repurchase program, which demonstrates Adobe’s
continued commitment to returning capital to our shareholders.”
First Quarter Fiscal Year 2024 Financial Highlights
- Adobe achieved revenue of $5.18 billion in its first quarter of
fiscal year 2024, which represents 11 percent year-over-year growth
or 12 percent in constant currency. Diluted earnings per share was
$1.36 on a GAAP basis and $4.48 on a non-GAAP basis.
- GAAP operating income in the first quarter was $907 million and
non-GAAP operating income was $2.47 billion. GAAP net income was
$620 million and non-GAAP net income was $2.05 billion.
- Cash flows from operations were $1.17 billion.
- Remaining Performance Obligations (“RPO”) exiting the quarter
were $17.58 billion.
- Adobe repurchased approximately 3.1 million shares during the
quarter.
First Quarter Fiscal Year 2024 Business Segment
Highlights
- Digital Media segment revenue was $3.82 billion, which
represents 12 percent year-over-year growth or 13 percent in
constant currency. Creative revenue grew to $3.07 billion,
representing 11 percent year-over-year growth or 12 percent in
constant currency. Document Cloud revenue was $750 million,
representing 18 percent year-over-year growth as reported and in
constant currency.
- Net new Digital Media Annualized Recurring Revenue (“ARR”) was
$432 million, exiting the quarter with Digital Media ARR of $15.76
billion. Creative ARR grew to $12.78 billion and Document Cloud ARR
grew to $2.98 billion.
- Digital Experience segment revenue was $1.29 billion,
representing 10 percent year-over-year growth as reported and in
constant currency. Digital Experience subscription revenue was
$1.16 billion, representing 12 percent year-over-year growth as
reported and in constant currency.
Financial Targets
Adobe is providing second quarter targets, which factor in
current expectations for the macroeconomic and foreign exchange
environments.
The following table summarizes Adobe’s second quarter fiscal
year 2024 targets:
Total revenue
$5.25 billion to $5.30
billion
Digital Media net new ARR
~$440 million
Digital Media segment revenue
$3.87 billion to $3.90
billion
Digital Experience segment revenue
$1.31 billion to $1.33
billion
Digital Experience subscription
revenue
$1.165 billion to $1.185
billion
Tax rate
GAAP: ~18.5%
Non-GAAP: ~18.5%
Earnings per share1
GAAP: $3.35 to $3.40
Non-GAAP: $4.35 to $4.40
1 Targets assume diluted share count of ~453 million for second
quarter fiscal year 2024.
Adobe to Host Conference Call
Adobe will webcast its first quarter fiscal year 2024 earnings
conference call today at 2:00 p.m. Pacific Time from its investor
relations website: http://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.
Adobe to Host Investor Meeting at Adobe Summit 2024
Adobe will host its Investor Meeting with financial analysts and
investors on Tuesday, March 26, 2024 at 2:00 p.m. Pacific Time at
Adobe Summit in Las Vegas, Nev. Adobe’s executives will discuss the
company’s long-term market opportunity, strategy and innovation
roadmap, including artificial intelligence. The event will be
streamed live on the Adobe Investor Relations Website. Following
the event, a recording and related materials will be available on
the site.
Forward-Looking Statements, Non-GAAP and Other
Disclosures
In addition to historical information, this press release
contains “forward-looking statements” within the meaning of
applicable securities laws, including statements related to our
business, strategy, artificial intelligence and innovation
momentum; our market opportunity and future growth; our stock
repurchases, cash flows and use of cash; market trends; current
macroeconomic conditions; fluctuations in foreign currency exchange
rates; strategic investments; customer success; revenue; operating
margin; and 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. Each of the forward-looking statements we make in
this press release involves risks, uncertainties and assumptions
based on information available to us as of the date of this press
release. Such risks and uncertainties, many of which relate to
matters beyond our control, could cause actual results to differ
materially from these forward-looking statements. Factors that
might cause or contribute to such differences include, but are not
limited to: failure to innovate effectively and meet customer
needs; issues relating to development and use of AI; failure to
realize the anticipated benefits of investments or acquisitions;
failure to compete effectively; damage to our reputation or brands;
service interruptions or failures in information technology systems
by us or third parties; security incidents; failure to effectively
develop, manage and maintain critical third-party business
relationships; risks associated with being a multinational
corporation and adverse macroeconomic conditions; failure to
recruit and retain key personnel; complex sales cycles; changes in,
and compliance with, global laws and regulations, including those
related to information security and privacy; failure to protect our
intellectual property; litigation, regulatory inquiries and
intellectual property infringement claims; changes in tax
regulations; complex government procurement processes; risks
related to fluctuations in or the timing of revenue recognition
from our subscription offerings; fluctuations in foreign currency
exchange rates; impairment charges; our existing and future debt
obligations; catastrophic events; and fluctuations in our stock
price. Further information on these and other factors are discussed
in the section titled “Risk Factors” in Adobe’s most recently filed
Annual Report on Form 10-K and Adobe's most recently filed
Quarterly Reports on Form 10-Q. The risks described in this press
release and in Adobe’s filings with the U.S. Securities and
Exchange Commission should be carefully reviewed.
Undue reliance should not be placed on the financial information
set forth in this press release, which 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 fiscal quarter ended March 1, 2024, which Adobe
expects to file in March 2024. Adobe assumes no obligation to, and
does not currently intend to, update these forward-looking
statements.
A reconciliation between GAAP and non-GAAP earnings results and
financial targets and a statement regarding use of non-GAAP
financial information are provided at the end of this press release
and on Adobe’s investor relations website.
About Adobe
Adobe is changing the world through personalized digital
experiences. For more information, visit www.adobe.com.
©2024 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 1, 2024
March 3, 2023
Revenue:
Subscription
$
4,916
$
4,373
Product
119
120
Services and other
147
162
Total revenue
5,182
4,655
Cost of revenue:
Subscription
455
434
Product
5
8
Services and other
130
126
Total cost of revenue
590
568
Gross profit
4,592
4,087
Operating expenses:
Research and development
939
827
Sales and marketing
1,352
1,301
General and administrative
352
331
Acquisition termination fee
1,000
—
Amortization of intangibles
42
42
Total operating expenses
3,685
2,501
Operating income
907
1,586
Non-operating income (expense):
Interest expense
(27
)
(32
)
Investment gains (losses), net
18
1
Other income (expense), net
70
43
Total non-operating income (expense),
net
61
12
Income before income taxes
968
1,598
Provision for income taxes
348
351
Net income
$
620
$
1,247
Basic net income per share
$
1.37
$
2.72
Shares used to compute basic net income
per share
453
459
Diluted net income per share
$
1.36
$
2.71
Shares used to compute diluted net income
per share
456
460
Condensed Consolidated Balance
Sheets
(In millions; unaudited)
March 1, 2024
December 1, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
6,254
$
7,141
Short-term investments
566
701
Trade receivables, net of allowances for
doubtful accounts of $16 for both periods
2,057
2,224
Prepaid expenses and other current
assets
1,131
1,018
Total current assets
10,008
11,084
Property and equipment, net
1,988
2,030
Operating lease right-of-use assets,
net
366
358
Goodwill
12,803
12,805
Other intangibles, net
1,011
1,088
Deferred income taxes
1,310
1,191
Other assets
1,265
1,223
Total assets
$
28,751
$
29,779
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade payables
$
300
$
314
Accrued expenses
1,569
1,942
Debt
1,497
—
Deferred revenue
5,975
5,837
Income taxes payable
123
85
Operating lease liabilities
73
73
Total current liabilities
9,537
8,251
Long-term liabilities:
Debt
2,138
3,634
Deferred revenue
135
113
Income taxes payable
668
514
Operating lease liabilities
378
373
Other liabilities
435
376
Total liabilities
13,291
13,261
Stockholders’ equity:
Preferred stock
—
—
Common stock
—
—
Additional paid-in capital
12,037
11,586
Retained earnings
33,809
33,346
Accumulated other comprehensive income
(loss)
(277
)
(285
)
Treasury stock, at cost
(30,109
)
(28,129
)
Total stockholders’ equity
15,460
16,518
Total liabilities and stockholders’
equity
$
28,751
$
29,779
Condensed Consolidated Statements of
Cash Flows
(In millions; unaudited)
Three Months Ended
March 1, 2024
March 3, 2023
Cash flows from operating activities:
Net income
$
620
$
1,247
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and
accretion
212
212
Stock-based compensation
451
416
Unrealized investment (gains) losses,
net
(13
)
3
Other non-cash adjustments
(97
)
(33
)
Changes in deferred revenue
160
63
Changes in other operating assets and
liabilities
(159
)
(215
)
Net cash provided by operating
activities
1,174
1,693
Cash flows from investing activities:
Purchases, sales and maturities of
short-term investments, net
139
287
Purchases of property and equipment
(37
)
(101
)
Purchases and sales of long-term
investments, intangibles and other assets, net
(36
)
(30
)
Net cash provided by investing
activities
66
156
Cash flows from financing activities:
Repurchases of common stock
(2,000
)
(1,400
)
Taxes paid related to net share settlement
of equity awards, net of proceeds from treasury stock
re-issuances
(125
)
(95
)
Repayment of debt
—
(500
)
Other financing activities, net
(3
)
(19
)
Net cash used for financing activities
(2,128
)
(2,014
)
Effect of exchange rate changes on cash
and cash equivalents
1
1
Net change in cash and cash
equivalents
(887
)
(164
)
Cash and cash equivalents at beginning of
period
7,141
4,236
Cash and cash equivalents at end of
period
$
6,254
$
4,072
Non-GAAP Results
The following table shows Adobe’s GAAP results reconciled to
non-GAAP results included in this release.
(In millions, except per share data)
Three Months Ended
March 1, 2024
March 3, 2023
December 1,
2023
Operating income:
GAAP operating income
$
907
$
1,586
$
1,743
Stock-based and deferred compensation
expense
469
417
431
Amortization of intangibles
83
95
91
Acquisition-related expenses (*)
1,007
33
34
Loss contingency (**)
1
—
44
Non-GAAP operating income
$
2,467
$
2,131
$
2,343
Net income:
GAAP net income
$
620
$
1,247
$
1,483
Stock-based and deferred compensation
expense
469
417
431
Amortization of intangibles
83
95
91
Acquisition-related expenses (*)
1,007
33
34
Loss contingency (**)
1
—
44
Investment (gains) losses, net
(18
)
(1
)
(4
)
Income tax adjustments
(116
)
(45
)
(120
)
Non-GAAP net income
$
2,046
$
1,746
$
1,959
Diluted net income per share:
GAAP diluted net income per share
$
1.36
$
2.71
$
3.23
Stock-based and deferred compensation
expense
1.03
0.91
0.94
Amortization of intangibles
0.18
0.21
0.20
Acquisition-related expenses (*)
2.21
0.07
0.07
Loss contingency (**)
—
—
0.10
Investment (gains) losses, net
(0.04
)
—
(0.01
)
Income tax adjustments
(0.26
)
(0.10
)
(0.26
)
Non-GAAP diluted net income per share
$
4.48
$
3.80
$
4.27
Shares used in computing diluted net
income per share
456
460
459
Non-GAAP Results (continued)
The following table shows Adobe’s first quarter fiscal year 2024
GAAP tax rate reconciled to the non-GAAP tax rate included in this
release.
First Quarter
Fiscal 2024
Effective income tax rate:
GAAP effective income tax rate
36.0
%
Income tax adjustments
2.5
Acquisition-related expenses (*)
(18.5
)
Stock-based and deferred compensation
expense
(1.3
)
Amortization of intangibles
(0.2
)
Non-GAAP effective income tax rate
(***)
18.5
%
(*) Associated with the Figma transaction, and includes deal
costs, certain professional fees and the termination fee (**)
Associated with an IP litigation matter (***) Represents Adobe’s
fixed long-term non-GAAP tax rate based on projections and
currently available information through fiscal 2025
Reconciliation of GAAP to Non-GAAP Financial Targets
The following tables show Adobe's second quarter fiscal year
2024 financial targets reconciled to non-GAAP financial targets
included in this release.
(Shares in millions)
Second Quarter Fiscal
2024
Low
High
Diluted net income per share:
GAAP diluted net income per share
$
3.35
$
3.40
Stock-based and deferred compensation
expense
1.05
1.05
Amortization of intangibles
0.18
0.18
Income tax adjustments
(0.23
)
(0.23
)
Non-GAAP diluted net income per share
$
4.35
$
4.40
Shares used to compute diluted net income
per share
453
453
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, 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/20240314033246/en/
Investor Relations Contact Jonathan Vaas Adobe
ir@adobe.com
Public Relations Contact Ashley Levine Adobe
adobepr@adobe.com
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