Company Achieves Record Quarterly Revenue Across Creative
Cloud, Document Cloud and Experience Cloud
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.
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version on businesswire.com: https://www.businesswire.com/news/home/20210323005953/en/
Investor Relations Contact Jonathan Vaas Adobe
ir@adobe.com
Public Relations Contact Ashley Levine Adobe aslevine@adobe.com
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