Company achieves first $5 billion revenue quarter with
exiting RPO of over $17 billion
Adobe (Nasdaq:ADBE) today reported financial results for its
fourth quarter and fiscal year 2023 ended Dec. 1, 2023.
“Adobe drove record revenue of $19.41 billion in FY23 and 17
percent year-over-year EPS growth, with strong momentum across
Creative Cloud, Document Cloud and Experience Cloud,” said Shantanu
Narayen, chair and CEO, Adobe. “Adobe’s strategy, category
leadership, ground-breaking innovation, exceptional talent and
global customer base position us well for 2024 and beyond.”
“Adobe’s remarkable performance in FY23 drove world-class
margins and operating cash flows of $7.30 billion,” said Dan Durn,
executive vice president and CFO, Adobe. “Adobe’s strategy, scale,
speed of execution and profitability position the company for years
of sustained success.”
Fourth Quarter Fiscal Year 2023 Financial Highlights
- Adobe achieved revenue of $5.05 billion in its fourth quarter
of fiscal year 2023, which represents 12 percent year-over-year
growth or 13 percent in constant currency. Diluted earnings per
share was $3.23 on a GAAP basis and $4.27 on a non-GAAP basis.
- GAAP operating income in the fourth quarter was $1.74 billion
and non-GAAP operating income was $2.34 billion. GAAP net income
was $1.48 billion and non-GAAP net income was $1.96 billion.
- Cash flows from operations were $1.60 billion.
- Remaining Performance Obligations (“RPO”) exiting the quarter
were $17.22 billion.
- Adobe repurchased approximately 1.8 million shares during the
quarter.
Fourth Quarter Fiscal Year 2023 Business Segment
Highlights
- Digital Media segment revenue was $3.72 billion, which
represents 13 percent year-over-year growth or 14 percent in
constant currency. Creative revenue grew to $3.00 billion,
representing 12 percent year-over-year growth or 14 percent in
constant currency. Document Cloud revenue was $721 million,
representing 16 percent year-over-year growth or 17 percent in
constant currency.
- Net new Digital Media Annualized Recurring Revenue (“ARR”) was
$569 million, exiting the quarter with Digital Media ARR of $15.17
billion. Creative ARR grew to $12.37 billion and Document Cloud ARR
grew to $2.81 billion.
- Digital Experience segment revenue was $1.27 billion,
representing 10 percent year-over-year growth or 11 percent in
constant currency. Digital Experience subscription revenue was
$1.12 billion, representing 12 percent year-over-year growth as
reported and in constant currency.
Fiscal Year 2023 Financial Highlights
- Adobe achieved record revenue of $19.41 billion in fiscal year
2023, which represents 10 percent year-over-year growth or 13
percent in constant currency. Diluted earnings per share was $11.82
on a GAAP basis and $16.07 on a non-GAAP basis.
- GAAP operating income was $6.65 billion and non-GAAP operating
income was $8.92 billion. GAAP net income was $5.43 billion and
non-GAAP net income was $7.38 billion.
- Adobe generated $7.30 billion in operating cash flows during
the year.
- Adobe repurchased approximately 11.5 million shares during the
year.
Fiscal Year 2023 Business Segment Highlights
- Digital Media segment revenue was $14.22 billion, which
represents 11 percent year-over-year growth or 14 percent in
constant currency. Net new Digital Media ARR was $1.91 billion
during the fiscal year.
- Creative revenue grew to $11.52 billion, representing 10
percent year-over-year growth or 14 percent in constant
currency.
- Document Cloud revenue was $2.70 billion, representing 13
percent year-over-year growth or 15 percent in constant
currency.
- Digital Experience segment revenue was $4.89 billion,
representing 11 percent year-over-year growth or 12 percent in
constant currency. Digital Experience subscription revenue was
$4.33 billion, representing 12 percent year-over-year growth or 13
percent in constant currency.
Financial Targets
Adobe is providing fiscal year 2024 targets, as well as first
quarter targets which factor in current expectations for the
macroeconomic and foreign exchange environments. As is customary,
these targets do not reflect the planned acquisition of Figma.
Changes to foreign exchange rates have resulted in a $160
million upward revaluation to Adobe’s total Digital Media ARR
balance entering fiscal 2024. As a reminder, ARR is forecasted
annually at currency rates determined in December, and currency
rates are held constant through that fiscal year for measurement
purposes; end-of-year actual ARR balances are revalued in December
at new rates for the next fiscal year.
The following table summarizes Adobe’s fiscal year 2024
targets:
Total revenue
$21.30 billion to $21.50
billion
Digital Media net new ARR
~$1.90 billion
Digital Media segment revenue
$15.75 billion to $15.85
billion
Digital Experience segment revenue
$5.275 billion to $5.375
billion
Digital Experience subscription
revenue
$4.75 billion to $4.80
billion
Tax rate
GAAP: ~18.0%
Non-GAAP: ~18.5%
Earnings per share1
GAAP: $13.45 to $13.85
Non-GAAP: $17.60 to $18.00
The following table summarizes Adobe’s first quarter fiscal year
2024 targets:
Total revenue
$5.10 billion to $5.15
billion
Digital Media net new ARR
~$410 million
Digital Media segment revenue
$3.77 billion to $3.80
billion
Digital Experience segment revenue
$1.27 billion to $1.29
billion
Digital Experience subscription
revenue
$1.14 billion to $1.16
billion
Tax rate
GAAP: ~18.0%
Non-GAAP: ~18.5%
Earnings per share1
GAAP: $3.35 to $3.40
Non-GAAP: $4.35 to $4.40
- Targets assume diluted share count of ~454 million for fiscal
year 2024 and ~456 million for first quarter fiscal year 2024.
Adobe to Host Conference Call
Adobe will webcast its fourth quarter and fiscal year 2023
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.
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 (“AI”) and innovation
momentum; our market opportunity and future growth; market and AI
trends; current macroeconomic conditions; fluctuations in foreign
currency exchange rates; strategic investments; customer success;
revenue; operating margin; operating efficiencies and annualized
recurring revenue; tax rate on a GAAP and non-GAAP basis; earnings
per share on a GAAP and non-GAAP basis; share count; and industry
positioning. 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 Annual Report on Form
10-K for our fiscal year ended Dec. 1, 2023, which Adobe expects to
file in Jan. 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.
©2023 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
Year Ended
December 1, 2023
December 2, 2022
December 1, 2023
December 2, 2022
Revenue:
Subscription
$
4,763
$
4,232
$
18,284
$
16,388
Product
114
115
460
532
Services and other
171
178
665
686
Total revenue
5,048
4,525
19,409
17,606
Cost of revenue:
Subscription
505
430
1,822
1,646
Product
6
8
29
35
Services and other
123
130
503
484
Total cost of revenue
634
568
2,354
2,165
Gross profit
4,414
3,957
17,055
15,441
Operating expenses:
Research and development
889
773
3,473
2,987
Sales and marketing
1,368
1,297
5,351
4,968
General and administrative
372
340
1,413
1,219
Amortization of intangibles
42
42
168
169
Total operating expenses
2,671
2,452
10,405
9,343
Operating income
1,743
1,505
6,650
6,098
Non-operating income (expense):
Interest expense
(28
)
(28
)
(113
)
(112
)
Investment gains (losses), net
4
4
16
(19
)
Other income (expense), net
89
36
246
41
Total non-operating income (expense),
net
65
12
149
(90
)
Income before income taxes
1,808
1,517
6,799
6,008
Provision for income taxes
325
341
1,371
1,252
Net income
$
1,483
$
1,176
$
5,428
$
4,756
Basic net income per share
$
3.26
$
2.53
$
11.87
$
10.13
Shares used to compute basic net income
per share
455
465
457
470
Diluted net income per share
$
3.23
$
2.53
$
11.82
$
10.10
Shares used to compute diluted net income
per share
459
466
459
471
Condensed Consolidated Balance Sheets
(In millions; unaudited)
December 1, 2023
December 2, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
7,141
$
4,236
Short-term investments
701
1,860
Trade receivables, net of allowances for
doubtful accounts of $16 and $23, respectively
2,224
2,065
Prepaid expenses and other current
assets
1,018
835
Total current assets
11,084
8,996
Property and equipment, net
2,030
1,908
Operating lease right-of-use assets,
net
358
407
Goodwill
12,805
12,787
Other intangibles, net
1,088
1,449
Deferred income taxes
1,191
777
Other assets
1,223
841
Total assets
$
29,779
$
27,165
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade payables
$
314
$
379
Accrued expenses
1,942
1,790
Debt
—
500
Deferred revenue
5,837
5,297
Income taxes payable
85
75
Operating lease liabilities
73
87
Total current liabilities
8,251
8,128
Long-term liabilities:
Debt
3,634
3,629
Deferred revenue
113
117
Income taxes payable
514
530
Operating lease liabilities
373
417
Other liabilities
376
293
Total liabilities
13,261
13,114
Stockholders’ equity:
Preferred stock
—
—
Common stock
—
—
Additional paid-in-capital
11,586
9,868
Retained earnings
33,346
28,319
Accumulated other comprehensive income
(loss)
(285
)
(293
)
Treasury stock, at cost
(28,129
)
(23,843
)
Total stockholders’ equity
16,518
14,051
Total liabilities and stockholders’
equity
$
29,779
$
27,165
Condensed Consolidated Statements of Cash Flows (In
millions; unaudited)
Three Months Ended
December 1, 2023
December 2, 2022
Cash flows from operating activities:
Net income
$
1,483
$
1,176
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and
accretion
222
215
Stock-based compensation
427
388
Unrealized investment (gains) losses,
net
(3
)
(4
)
Other non-cash adjustments
(129
)
68
Changes in deferred revenue
467
471
Changes in other operating assets and
liabilities
(870
)
11
Net cash provided by operating
activities
1,597
2,325
Cash flows from investing activities:
Purchases, sales and maturities of
short-term investments, net
219
29
Purchases of property and equipment
(47
)
(91
)
Purchases and sales of long-term
investments, intangibles and other assets, net
(19
)
(7
)
Net cash provided by (used for) investing
activities
153
(69
)
Cash flows from financing activities:
Repurchases of common stock
(1,000
)
(1,750
)
Taxes paid related to net share settlement
of equity awards, net of proceeds from treasury stock
re-issuances
(202
)
(67
)
Other financing activities, net
(15
)
(94
)
Net cash used for financing activities
(1,217
)
(1,911
)
Effect of exchange rate changes on cash
and cash equivalents
7
21
Net change in cash and cash
equivalents
540
366
Cash and cash equivalents at beginning of
period
6,601
3,870
Cash and cash equivalents at end of
period
$
7,141
$
4,236
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
Year Ended
December 1,
2023
December 2,
2022
September 1,
2023
December 1,
2023
December 2,
2022
Operating income:
GAAP operating income
$
1,743
$
1,505
$
1,697
$
6,650
$
6,098
Stock-based and deferred compensation
expense
431
392
448
1,735
1,420
Amortization of intangibles
91
100
92
373
401
Acquisition-related expenses (*)
34
26
27
116
26
Loss contingency (**)
44
—
—
44
—
Non-GAAP operating income
$
2,343
$
2,023
$
2,264
$
8,918
$
7,945
Net income:
GAAP net income
$
1,483
$
1,176
$
1,403
$
5,428
$
4,756
Stock-based and deferred compensation
expense
431
392
448
1,735
1,420
Amortization of intangibles
91
100
92
373
401
Acquisition-related expenses (*)
34
26
27
116
26
Loss contingency (**)
44
—
—
44
—
Investment (gains) losses, net
(4
)
(4
)
(6
)
(16
)
19
Income tax adjustments
(120
)
(15
)
(86
)
(303
)
(165
)
Non-GAAP net income
$
1,959
$
1,675
$
1,878
$
7,377
$
6,457
Diluted net income per share:
GAAP diluted net income per share
$
3.23
$
2.53
$
3.05
$
11.82
$
10.10
Stock-based and deferred compensation
expense
0.94
0.84
0.98
3.78
3.02
Amortization of intangibles
0.20
0.21
0.20
0.81
0.85
Acquisition-related expenses (*)
0.07
0.06
0.06
0.25
0.05
Loss contingency (**)
0.10
—
—
0.10
—
Investment (gains) losses, net
(0.01
)
(0.01
)
(0.01
)
(0.03
)
0.04
Income tax adjustments
(0.26
)
(0.03
)
(0.19
)
(0.66
)
(0.35
)
Non-GAAP diluted net income per share
$
4.27
$
3.60
$
4.09
$
16.07
$
13.71
Shares used in computing diluted net
income per share
459
466
459
459
471
Non-GAAP Results (continued) The following table shows
Adobe’s fourth quarter fiscal year 2023 GAAP tax rate reconciled to
the non-GAAP tax rate included in this release.
Fourth Quarter
Fiscal 2023
Effective income tax rate:
GAAP effective income tax rate
18.0
%
Income tax adjustments
2.5
Stock-based and deferred compensation
expense
(1.5
)
Amortization of intangibles
(0.3
)
Acquisition-related expenses (*)
(0.1
)
Loss contingency (**)
(0.1
)
Non-GAAP effective income tax rate
(***)
18.5
%
(*) Includes deal costs and certain professional fees associated
with the planned acquisition of Figma (**) 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 annual fiscal year
2024 financial targets reconciled to non-GAAP financial targets
included in this release.
(Shares in millions)
Fiscal Year 2024
Low
High
Diluted net income per share:
GAAP diluted net income per share
$
13.45
$
13.85
Stock-based and deferred compensation
expense
4.33
4.33
Amortization of intangibles
0.73
0.73
Acquisition-related expenses (*)
0.13
0.13
Income tax adjustments
(1.04
)
(1.04
)
Non-GAAP diluted net income per share
$
17.60
$
18.00
Shares used to compute diluted net income
per share
454
454
Fiscal Year 2024
Effective income tax rate:
GAAP effective income tax rate
18.0
%
Stock-based and deferred compensation
expense
(1.3
)
Amortization of intangibles
(0.2
)
Income tax adjustments
2.0
Non-GAAP effective income tax rate
(***)
18.5
%
Reconciliation of GAAP to Non-GAAP Financial Targets
(continued) The following tables show Adobe's first quarter
fiscal year 2024 financial targets reconciled to non-GAAP financial
targets included in this release.
(Shares in millions)
First 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
1.00
1.00
Amortization of intangibles
0.18
0.18
Acquisition-related expenses (*)
0.07
0.07
Income tax adjustments
(0.25
)
(0.25
)
Non-GAAP diluted net income per share
$
4.35
$
4.40
Shares used to compute diluted net income
per share
456
456
First Quarter
Fiscal 2024
Effective income tax rate:
GAAP effective income tax rate
18.0
%
Stock-based and deferred compensation
expense
(1.2
)
Amortization of intangibles
(0.2
)
Acquisition-related expenses (*)
(0.1
)
Income tax adjustments
2.0
Non-GAAP effective income tax rate
(***)
18.5
%
(*) Includes deal costs and certain professional fees associated
with the planned acquisition of Figma (***) Represents Adobe’s
fixed long-term non-GAAP tax rate based on projections and
currently available information through fiscal 2025
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/20231213946803/en/
Investor Relations Contact Jonathan Vaas Adobe
ir@adobe.com
Public Relations Contact Ashley Levine Adobe
adobepr@adobe.com
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