01—Abstract
Summary
Summary of the 8-K filed March 14, 2024. Cited figures are marked; the original filing is the authoritative source.
Adobe reported first quarter fiscal 2024 results (quarter ended March 1, 2024) with total revenue of $5.18 billiona, up 11% year over year (12% in constant currency).
GAAP diluted EPS was $1.36b, but this figure is depressed by a $1.0 billion acquisition termination fee tied to the terminated Figma transaction. Non-GAAP diluted EPS was $4.48, versus $3.80 a year earlier. GAAP operating income fell to $907 million from $1,586 million, while non-GAAP operating income rose to $2.47 billion from $2.13 billion.
Growth was driven by subscription revenue of $4.92 billionc, Digital Media ARR of $15.76 billion (with $432 million of net new ARR), and RPO of $17.58 billion, up 16% year over year. The quarter also featured $2.0 billion in share repurchases, with cash and equivalents declining to $6.25 billion and total debt falling to about $3.6 billion from roughly $3.6 billion plus the current portion. Operating cash flow was $1.17 billion, down from $1.69 billion in the prior-year period.
For the second quarter, Adobe guided to total revenue of $5.25 billion to $5.30 billiond and non-GAAP EPS of $4.35 to $4.40, with a roughly 18.5% non-GAAP tax rate. Separately, the Board approved a new stock repurchase authorization of up to $25 billion through March 14, 2028.
This replaces prior programs and is designed to offset dilution and reduce share count, though Adobe has no obligation to repurchase any specific amount. Investors should weigh the strong underlying non-GAAP profitability and buyback capacity against the GAAP earnings hit from the Figma termination fee and softer operating cash flow.
02—Key points
Key Highlights
- Q1 FY2024 revenue of $5.18 billion, up 11% year over year (12% constant currency); Digital Media revenue grew 12% and Digital Experience revenue grew 10%.
- GAAP diluted EPS of $1.36 was reduced by a $1.0 billion acquisition termination fee related to the Figma transaction; non-GAAP diluted EPS was $4.48, up from $3.80.
- GAAP operating income declined to $907 million from $1,586 million, while non-GAAP operating income increased to $2.47 billion from $2.13 billion.
- Remaining Performance Obligations reached $17.58 billion, up 16% year over year, and Digital Media ARR reached $15.76 billion with $432 million of net new ARR.
- Adobe repurchased about $2.0 billion of stock in the quarter and announced a new $25 billion share repurchase authorization running through March 14, 2028.
- Operating cash flow fell to $1.17 billion from $1.69 billion a year earlier, and cash and equivalents dropped to $6.25 billion.
- Q2 FY2024 guidance calls for revenue of $5.25 to $5.30 billion and non-GAAP EPS of $4.35 to $4.40, with GAAP EPS of $3.35 to $3.40.
03—Questions
Frequently Asked Questions
Why is GAAP EPS so much lower than non-GAAP EPS this quarter?
The $1.0 billion acquisition termination fee tied to the Figma transaction is recorded in GAAP operating expenses and excluded from non-GAAP results. Acquisition-related expenses added about $2.21 per share to the non-GAAP reconciliation, so GAAP EPS of $1.36 is not comparable to the $4.48 non-GAAP figure.
Is the $25 billion buyback a firm commitment to repurchase shares?
No. The authorization sets a maximum amount through March 14, 2028. Adobe has no obligation to buy any specific amount, and the timing and volume depend on market conditions, legal requirements, capital needs and alternative uses of capital. Repurchases may occur in the open market or through structured agreements with third parties.
Is the revenue growth driven by recurring income?
Largely yes. Subscription revenue was $4.92 billion of the $5.18 billion total, and RPO of $17.58 billion grew 16% year over year, which suggests good visibility into future revenue. Growth in Digital Media ARR and Document Cloud, which grew 18%, supports this view.
Why did operating cash flow decline, and does it raise concerns?
Operating cash flow fell to $1.17 billion from $1.69 billion, partly due to the termination fee and changes in other operating assets and liabilities. The filing does not attribute the full decline, so investors should review the cash flow commentary on the earnings call for a clearer breakdown of the drivers.
What should investors watch for in the coming quarters?
Key items include whether Q2 guidance is met, the pace of Digital Media net new ARR (guided to about $440 million), the rate of repurchases under the new program, and details from the Investor Meeting on March 26, 2024 covering long-term strategy and AI initiatives.
04—Continue