COMPANY PROFILE

Adobe Inc. develops, markets, and supports computer software products and technologies. The Company's products allow users to express and use information across all print and electronic media. Adobe offers a line of application software products, type products, and content for creating, distributing, and managing information. No other company in the world gives everyone, from emerging artists to global brands, everything they need to design and deliver exceptional digital experiences. Our innovation and leadership in digital media and digital marketing give our customers a real competitive advantage, positioning us for continued growth well into the future.

Recent Earnings

• EPS Beats $2.05 Adj. vs. $1.97 Est.

• Revs. Beat $2.83B vs. $2.82B Est.

• Q3 digital media revenue: $1.96B

• Q3 digital experience revenue: $821M

Adobe’s vision is that mobile devices and tablets should be used for creation in addition to consumption.

We drove strong revenue growth in both Creative Cloud and Document Cloud in Q3. Net new Digital Media Annualized Recurring Revenue or “ARR” was $386 million, and total Digital Media ARR exiting Q3 grew to $7.86 billion. Q3 Creative revenue was $1.65 billion, which represents 22% year-over-year growth.

In Q3, new Adobe IDs created from Adobe mobile apps rose more than 40% year-over-year, showing that mobile continues to be a healthy onramp for subscriptions.

We’ve expanded our Adobe Ambassador Network to target more than 100 colleges across the country, where students evangelize creativity and lead on-campus workshops to help fellow students learn to use Adobe creative products

With Document Cloud, we are accelerating the transformation of paper-to-digital processes and reinventing how people scan, edit, collaborate, sign and share digital documents. Q3 Document Cloud revenue and net new ARR were records for a quarter, and we grew total Document Cloud ARR to $993 million. Key Document Cloud customer wins in Q3 included Deutsche Bank, Saudi Aramco, Dell and the U.S. Department of Veteran Affairs.

We continue to be the leader in Customer Experience Management, which has a TAM of more than $70 billion by 2021. While we experienced some bookings delays in Q3, our robust product roadmap and customer pipeline positions us for multiple years of strong growth.

Business and financial highlights in Q3 included:

• Record Digital Media revenue of $1.96 billion, including record Creative revenue of $1.65 billion and record Adobe Document Cloud revenue of $307 million;

• Strong net new Digital Media ARR of $386 million;

• Record Digital Experience revenue of $821 million;

• Remaining Performance Obligation, or RPO, grew to $8.77 billion;

• Cash flow from operations of $922 million

• Approximately 92% of our revenue in Q3 was from recurring sources.

Opinion

From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Adobe scores well as of 9/17/19:

• 87% high 3YR sales growth

• 91% low debt to enterprise value

• 86% high 1YR sales growth

• 84% high operating margins

• 81% high operating ROIC

Software is eating the world. We have all heard this before and it’s true. Adobe is a key beneficiary of this concept of more software driving everything. With strong sales growth, high margins, strong cash flow generation and significant investments in innovative new products, Adobe is a key go-to brand in the software industry. It’s expensive and will likely always be expensive until the cycle ends but the brand is quickly becoming a recurring revenue machine and makes some of the most in-demand software for a variety of corporate and small business industries. Adobe is at the center of helping consumer brands collect and decipher data to serve customers better. Buy this one on any dips.