01—Abstract
Summary
Summary of the 8-K filed September 12, 2024. Cited figures are marked; the original filing is the authoritative source.
Adobe (ADBE) reported record third quarter fiscal 2024 results for the quarter ended August 30, 2024.
Total revenue was $5.41 billiona, up 11% year over year both as reported and in constant currency. GAAP diluted EPS was $3.76 and non-GAAP diluted EPS was $4.65, compared with $3.05 GAAP and $4.09 non-GAAP a year earlier. GAAP operating income was $1.99 billion (up from $1.70 billion), and non-GAAP operating income was $2.52 billion.
Operating cash flow was $2.02 billionb, and the company repurchased roughly 5.2 million shares during the quarter for $2.5 billion in cash. The headline growth metric was Digital Media net new ARR of $504 million, a record Q3 figure, with total Digital Media ARR reaching $16.76 billion. Digital Experience segment revenue grew 10% to $1.35 billion, and remaining performance obligations (RPO) reached $18.14 billion, up about 15% year over year.
Management guided fourth quarter revenue to $5.50c-$5.55 billion and non-GAAP EPS to $4.63-$4.68, reflecting current macroeconomic conditions and seasonal strength. Investors should note that the GAAP results for the nine-month period were weighed down by a $1.0 billion acquisition termination fee tied to the Figma transaction, which is excluded from non-GAAP results.
Net income for the nine months was $3.88 billiond, versus $3.95 billion a year earlier, and cash and equivalents ended the quarter at $7.19 billion against total debt of about $5.6 billion. Total debt rose from $3.6 billion of long-term debt at fiscal year-end 2023 to roughly $5.6 billion, reflecting $1.5 billion of current debt.
02—Key points
Key Highlights
- Q3 FY2024 revenue of $5.41 billion, up 11% year over year as reported and in constant currency; Digital Media revenue grew 11% to $4.00 billion.
- Record Q3 net new Digital Media ARR of $504 million, with total Digital Media ARR of $16.76 billion.
- GAAP diluted EPS of $3.76 (up from $3.05) and non-GAAP diluted EPS of $4.65 (up from $4.09), a 14% increase in non-GAAP EPS.
- RPO exiting the quarter was $18.14 billion, growing about 15% year over year.
- Operating cash flow of $2.02 billion; the company repurchased about 5.2 million shares, or $2.5 billion in cash, during the quarter.
- Q4 guidance calls for revenue of $5.50-$5.55 billion and non-GAAP EPS of $4.63-$4.68 on about 445 million diluted shares.
- Nine-month GAAP results include a $1.0 billion Figma acquisition termination fee, which is excluded from non-GAAP results.
03—Questions
Frequently Asked Questions
How did Adobe perform financially in Q3 fiscal 2024?
Adobe reported revenue of $5.41 billion, up 11% year over year, with GAAP diluted EPS of $3.76 and non-GAAP diluted EPS of $4.65. Both GAAP and non-GAAP earnings grew substantially from the prior year, and operating cash flow was $2.02 billion.
What drove the growth in Adobe's Digital Media business?
Digital Media revenue grew 11% to $4.00 billion, with Document Cloud revenue up 18% to $807 million and Creative revenue up 10% to $3.19 billion. Record Q3 net new Digital Media ARR of $504 million brought total Digital Media ARR to $16.76 billion.
What is Adobe guiding for the fourth quarter?
Adobe guided Q4 total revenue to $5.50-$5.55 billion, Digital Media net new ARR to about $550 million, and non-GAAP EPS to $4.63-$4.68, versus GAAP EPS of $3.58-$3.63. Guidance assumes about 445 million diluted shares.
Why do GAAP and non-GAAP results differ so much?
Non-GAAP results exclude stock-based and deferred compensation (about $485 million in the quarter), amortization of intangibles, investment gains and losses, a litigation-related loss contingency reversal, and income tax adjustments. Adobe uses a fixed long-term non-GAAP tax rate of about 18.5%, compared with a GAAP effective rate of 17.5% in the quarter.
What was the impact of the Figma-related termination fee?
Adobe recorded a $1.0 billion acquisition termination fee in the nine-month period, which reduced GAAP operating income and net income. The company excludes this and other Figma-related acquisition expenses from its non-GAAP results, so it does not appear in the quarter's non-GAAP figures.
04—Continue