Adobe Reports Record Revenue
Adobe (Nasdaq:ADBE) today reported financial results for its second quarter fiscal year 2020 ended May 29, 2020.
Second Quarter Fiscal Year 2020 Financial Highlights
A reconciliation between GAAP and non-GAAP results is provided at the end of this press release and on Adobe's website.
"Adobe's strategy to empower customers to create the world's content, automate critical document processes and enable enterprises to engage with their customers digitally, drove record revenue in Q2," said Shantanu Narayen, president and CEO, Adobe. "The tectonic shift towards 'all things digital' across all customer segments globally will serve as a tailwind to our growth initiatives as we emerge from this crisis."
"Adobe delivered another quarter of record revenue and expanding profitability despite the challenging environment, demonstrating the resiliency of our business model," said John Murphy, executive vice president and CFO, Adobe. "We drove record Digital Media net new ARR for Q2, highlighting how mission-critical creative and document solutions are in engaging remotely."
Advertising Cloud Update
Adobe also announced that given the macroeconomic environment, it significantly accelerated in Q2 its previously stated strategy of eliminating low-margin Advertising Cloud transaction-driven offerings. The company will continue to offer its Advertising Cloud software solutions. The macroeconomic environment and this strategic shift impacted Advertising Cloud targeted revenue in Q2 by approximately $50 million.
Adobe Provides Third Quarter Financial Targets
Adobe today is providing third quarter financial targets factoring current macroeconomic conditions, continued impacts of the pandemic, typical Q3 summer seasonality and its updated strategy for Advertising Cloud.
The following table summarizes Adobe's third quarter fiscal year 2020 targets.
In light of the macroeconomic environment and the strategic shifts for Advertising Cloud, Adobe is withdrawing the annual fiscal 2020 targets provided in December 2019.
A reconciliation between GAAP and non-GAAP targets is provided at the end of this press release.
Adobe to Webcast Earnings Conference Call
Adobe will webcast its second quarter fiscal year 2020 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 effects of the COVID-19 pandemic on our business and results of operations, market trends, customer success, revenue, profitability, operating margin, seasonality, annualized recurring revenue, non-operating other expense, 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 2019 ended Nov. 29, 2019, and Adobe's Quarterly Reports on Form 10-Q issued in fiscal year 2020.
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 May 29, 2020, which Adobe expects to file in June 2020. Adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements.
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The following table shows Adobe's second quarter fiscal year 2020 GAAP tax rate reconciled to the non-GAAP tax rate included in this release.
Reconciliation of GAAP to Non-GAAP Financial Targets
The following table shows Adobe's third quarter fiscal year 2020 GAAP earnings per share target reconciled to the non-GAAP financial target included in this release.
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, restructuring and other charges, 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.