Adobe (ADBE) 14 Mar 242024 Q1 Earnings call transcript

Good day, and welcome to the Q1 FY 2024 Adobe Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jonathan Vaas, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us. Dan call Wadhwani, Shantanu Anil President of Experience; the and Adobe's Chakravarthy, on President Digital David Vice CEO; of and me today Narayen, are Chair President and With CFO. Executive Durn, Digital Media; we which fiscal first financial recorded, XXXX discuss Adobe's On this being will call, results. is quarter year

and our information as and targets those well find and set on forth Adobe's plans, discussed differ results our may financial this product Investor PDFs including of materially these can risks, Actual assumptions. of XX, You website. The as as press release Relations on call, from results statements uncertainty remarks today, our contains and is prepared that financial March involve in forward-looking statements.

review filings. On non-GAAP Adobe's release please For today's earnings this we and GAAP more SEC information financial discuss measures. will and those call, on risks,

growth as results as reported currency Our rates GAAP rates. include well constant

constant stated. Vegas our beginning During and is March refer Venetian Adobe's Tuesday, rates, Relations website. Adobe Las the to will just in Expo and Convention available The growth on XX. are Summit around otherwise this corner executives earnings Adobe's reconciliations Investor in currency unless at on presentation, Center, release Non-GAAP

X over X:XX the the event keynote, are turn at host Following the More about available website. Time. details now will meeting will summit.adobe.com. Shantanu. will call at Summit on available will day be investor p.m. be an replay webcast we I and The Pacific to live Adobe's IR

share was non-GAAP year-over-year share growth. $X.XX, quarter. year-over-year Good QX, XX% revenue achieved earnings representing in joining per Adobe per $X.XX in Jonathan. us. had a Thanks, and We earnings for strong $X.XX first thank growth. afternoon, was for quarter you representing XX% and the GAAP billion

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data mobile which for online business. Thanks, strongest and new desktop report, first David. of points, the to showed shopping, was XX.X% growing strong our was online on $X.XX record shopping of holiday time are revenue revenue spending Cloud growth. billion, surpassed Subscription in XX% for Experience during record QX had a to business billion, agility $X.XX as season great quarter, Adobe's profitability. $XXX.X digital and well which XXXX and driving trillions drove engagement year-over-year sales. while growth investments achieving billion holiday X.X% as Hello, a new the and year-over-year everyone. Companies e-commerce analyzes improve prioritizing customer marketing for representing first

retention. Our Experience to applications monetization the entire Cloud span customer from Adobe funnel acquisition to

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in Adobe transform to how beyond. business. brands era generative articulate to of exciting forward off Dan. our personalization leadership it start QX look on at sharing achieve to QX their continuing scale playbook level is map to will were forward momentum to pass the and our helping the will for I We them new a and now AI. We product a from look fast in We in hearing and of and and road vision our customers

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robust book than momentum Workfront XX% our customer with applications experience the and as year-over-year; with management drivers and Digital achieved a constant Turning And Experience growth of billion, subscription strong and Experience was we the Cloud and an as retention which we reported Campaign enterprise expansion continued more currency. with year billion, QX in with as a geographies In our transformational XX% Adobe growing $X.XX to Digital success represents currency. business native we their customer including: year-over-year across constant products. continued tremendous in look QX, Content, Customer AEP to enterprises to and annualized of end-to-end pipeline growing are segment. year-over-year reported be imperative. category, experience for large in see leader that adoption $X.XX solutions; management remains growth of into business revenue with verticals, platform; our our across XX% and choosing strength a and QX and deals beyond. start customer was as revenue the closing Experience

record to rate XX% the year-over-year the on payment. rate XX% QX GAAP statement on sheet. a $XX.XX billion, a constant tax currency. as was reported XX.X% balance exiting tax basis. and and a basis targeted Figma in non-GAAP and Adobe's RPO growing due to the quarter than income was effective GAAP QX Turning in in came termination The higher

billion QX $X.XX cash short-term investment QX, a exhausted and in billion. In repurchase authority. our $XX exiting $X position which operations the ending and $X.XX cash flows from prior share were effectively into agreement, entered Our billion, billion quarter was we

delivering our back incredibly shape you. a approximately excellence, billion GAAP off earnings XXXX to a $X.XX. In capitalize demonstrates map, to per on of executional of a strategy combining Adobe's positioned and rate will Media in revenue billion; segment product on and Digital to to new We're secular of the is $X.XX; our well to beyond. growth commitment billion; trends revenue to are innovations is to of capital back XX.X% By tax of into As fiscal the ARR business half basis; right of share macroeconomic $X.XX targeting: net and revenue on these $X.XX start. strong repurchase profitable and the the $X.XX new power Adobe Shantanu, share across non-GAAP billion is we to we're the of of billion trajectory of Digital and returning a $XXX continued $X.XXX $XX and decade. result profitability, environment, revenue have $X.XX consistent share QX, monetize Experience Adobe approximately we per shareholders. In $X.XX Experience billion road the to to GAAP to billion million; billion; which next $X.XX of Digital year our Digital Adobe $X.XXX product strong and segment growth. the Media program, summary, of $X.XX earnings momentum our of innovation factoring billion; announcing that $X.XX the to non-GAAP for of subscription total driving light

and AI which augments Thanks, Cloud. have X Document categories manner that and opportunity. and ingenuity addressable our the across of Experience human Cloud, responsible proud across portfolio. innovation delivered growing Dan. embraced market we Creative believe We're and our delivered and large pace in product capabilities the groundbreaking generative in leader expands have AI the We and I'm Cloud,

to deliver a existing attract strategy to our drive and Companies focus customers and Glassdoor's innovation unwavering As and and Admired of JUST profitability. and to Places thank confident It to the their new like be take questions. Best we result is Most exciting to named our will employees you, particularly on users now execution, XX,XXX growth our Operator? to to Thank I'd ability in and execution. dedication Fortune's for and value we're continued Work, XXX.

from ISI. [Operator the Instructions] comes Our with first line Kirk Materne of question Evercore

to this the of David, for than out over seeing more of David the out think, guys major into see what's maybe pricing that when go XX% is tough, year? pricing to parse when a or might more infers going metrics I Obviously, translate to basis, we're ARR try exclude follows? know, that was Dan. that that's new out in increases, Can that up reconcile you sort everybody called back and you half business right that up pretty the will just in normalized ARR I Creative but it's you on I mentioned just all which now. year-over-year you headwind year, guess play we the the on a going the how

start and I'll and Yes, ahead add on. can others go

of business, to the business. with $XXX it year the start do First coming book high the looked QX all, with we is strong a across in we of a at million as watermark the -- entire at

accelerate look we here strategy everyone As business are at the our a specifically Creative takes looks think make sure I just I and because want growth drivers step clear. the to back sort very of Cloud, at to

business in to things to like signs, GenStudio in Firefly on AI about. as hold, existing results want offers of taking ] services focused CC And applications. about introduce flagship drivers 'XX and QX subscriptions are with We you normalizing year-over-year. Other Express the we pricing set Firefly access for Illustrator remained early capabilities Photoshop things things forward Assistant and with grew are out, really pools with if across growth stable and FY at FY for mobile. the introduction revenue, as new you We core [ point you -- look new QX our that we at Firefly, want our to ARR, record XX% on budget are the talked at and expanding if look as talked business to access key also commercial like about, suggesting we XX%. users look that core those the at actions, 'XX back and XX%, through new is business growth another you We for coming into the the

have business the and we as the and of Firefly enter late the And capabilities ramping So talked the incrementally enterprise. for in Express we Firefly stability the out pricing last Cloud half be the of that year. We're back as out already we'll year with services have we Creative started about, diversity and strong. rolling throughout year, is rolling

As we beginning saw at QX. the of talked very that a rollout the we of toward about, -- end good

the to expect coming ramping also Assistant through. second half Express AI and with We Mobile see

'XX. Acrobat out to pricing, also that that it's we we as start have prior have a new features, of capabilities significant new significant we FY that starting introduced that increase which the the back-end more those that the past. so relates what rolling being the benefited of we FY was with in sign pretty up these can are still in increases introduced. 'XX Firefly. that we introduced CC 'XX, value with pricing it overall, capabilities the of largely first a in into we the beta And beyond. And CC as lot with rolling we've the we've for off one talked and price had had price now about the Both actions that FY QX set put So are is new had pricing roll-off pricing pricing monetizing than in the and introduced We new X

from with Jefferies. question will next take Thill we our Brent And

the then the in beat Shantanu, half this the and had next you've of obviously it quarter, roughly for past the magnitude was beat quarters absolute quarter. guide lower

I what think on is seeing you some everyone it's and comment AI -- Is macro? things, you're you execution? you comment can on the in these none this this quarter? this Can just of is Is but just asking, of maybe headwind? current type think

that to AI rolls the and happen we would now year, the as available. be relates the Brent. when I $X.X in be pretty what to map happy which would it reiterate road mean, as available Express, to well as I us is in Acrobat pricing when both, was targets for mentioned, had Yes, in we and as taking product And beta, again, factored mean, off to, how and likely when that seriously, billion Assistant David guided our I'll

it $XXX think we look I accomplishment, say, mean, So I we if did of it factored those. I million. at "Hey, at you're and in from all looking it guess

hopefully look that I track did guidance. relates million." year, as at guide, on and $X.X to If it billion we $XXX the we the to exceed we're think last

and So provide products look out. we our at other would it's value and is that from still playing the Brent, look color, given beta, Maybe we at there, there, perspective, I in are the desktop utilization.

generations the And the some on in I give numbers X.X associated optimism that that really gave us so think billion with feedback that continue you to we're we getting seeing we're Acrobat positive is. that how

AI you with the monetization, go enterprise as an monetizing that's the relates for of look as creation, And we that's Express, it we've enterprise you doing where but buy that the line Cloud, and Creative I'm it. And GenStudio. most in combination it way rolling a Cloud monetizing monetization tremendous a packs as pricing when whether well as we place second we're think or entire generative how And into APIs. how where And it combination, in Cloud We're expected. the places know, as are provide expectations, out is for Brent to management from what interest we AEM, Creative really relates happy are rolled Creative people that's at the that out. Content the again, more now people very to monetizing as Firefly an in as as about expected. line models part to where first Workflow seeing are asset the and included enable custom it with is much X to well I our earlier, services extremely in and there's with do we if of

we little delivery again, is and as would feel QX. a little done. both the out. the So product both expectations I clear, for look what have way what about it's monetization the I we what in at seen well perhaps terms as really about really of bit from sort were optimistic I turning I we've I'm quarter guess, guide good, of But higher, that a mean,

Your Zelnick next from line Deutsche the question of Brad with comes Bank.

is Dan. for question My

the it's that it early thus credit the also you for what thinking and enforcement full affirm for raising were purchasing in decision? you not You're But this credit those the I credit pushed are and appreciate products out at year we're terms packs? all us. patterns still of some hoping guide, expected What's April And originally in I -- the far think year, but consumption beyond you generative you behind sooner. of least seeing limits can of

then on Thanks, part, toss Brad. for David over the first the to it second. Yes. jump in I'll

So about QX through And this relative an And certainly it's not on saw for year. think of on What of we're not billion the be the you to change full will think have what payment. material payment. but the with where them result rolls did the was targets, going in effect the provided QX December the for call. targets, GAAP They're as as Figma call everything talked I I We it updating of you It that the the as we that, EPS set need a we we we're result full we the share targets have impact. updating the to year. $X termination a our $X.XX call. and

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imagine, cost. of significant As Those those more not much X take actions you terms be what actions can in they credit. will will

primary should to usage. Alex, about adoption comfortable more will and and that is we've be now, And usage, to the we're the as be and about, bringing right throughout going bringing very we the see talked capabilities in more you seeing. that So more in start year, ramp a going through We're as lot proliferation with tools point expensive the to capabilities new drive well. we're feel

Just X to last thing call out.

call, mentioned users we AI As the on excited in so number using we're the about ever, QX highest of generative very trajectory.

experimentation. stages we're of add little as of I think And AI, about as maybe thinking it to are relates how early just it relates monetization to in a more it we the to bit

positive as at really value for So experimentation. us. we're the looking both value The well utilization utilization is actually as is what

and to know, the as it packs, monetization you relates have Cloud. generative think we Creative as the experimentation, in I the

we will you people normal continue to think look it. that's to pricing and see because more have use at part the way of see the us pricing and I as that want more in which

are using a in as We're monthly packs. actually going which the is Assistant more Acrobat, model, using model. an not think be generative I of seen, AI you've to we

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was So it's good I certainly and everybody to experimentation news think about I industry relates and how can commercial subscriptions And Certainly, I saying, are of apps integration another think enable determine that number largest else this the done us to is attracting say, is that to fair our the interface what customers number the I all it QX we've the about Firefly Creative new we Cloud. We've monitor to new will talked who customers. the as the record. best of that in attract the think in utilization. we

intended So that doing this we're Brad. absolutely we to we roll as experiment out, everything

accentuate I that well. as So wanted to

Your from Fargo Wells Michael of Turrin comes with the next question Securities. line

half seeing the Digital mix section couldn't growth we prepared Document about but side? to David, Can the the your Media you meaningfully, is towards help shift year, second that And of will remarks layer you're that creative off Document start notice side? the you the should trend we enthusiasm on for speak with led see we where a Cloud. think the the expect more bit? when continue to could Or to to it of Document start back some on more enhancements

be happy Document that. with We very Yes, of happy Cloud. to about talk and very continue were performance to the

innovation. Document that If is -- is and efforts our of combination growth really Cloud the understand trying of to a sort at product go-to-market our how plays you both look out,

effort funnel and to side, of active we monthly user top be Reader Reader growth. go-to-market for the see On to about us, think the fact continue a that continues

can people over So the continues to convert subscribers of to we paid potential grow.

our the We fact to about contributor Acrobat Web growth. major a that also has talked been

Web a we're users users seeing and in on to active drives the MAU of XX% monthly time lot the work we're XXX of first for that terms doing of Journey So some product-led website. that crossed growth the with And drive course, million year-over-year we conversion. value of to growth

we're that's the all So on side. doing go-to-market

And that's transaction why that strategy for Sign use has could of the and a great it's and people make PDF that start years for their PDFs so side selling continues nicely their integrated last and point that point the starting of On very right? workflow, to a to product grow so business, integrated innovation, into service. a an over couple directly the we our of been

it's sharing with see so a reviewing AI the that bring that value of expect We what for huge to viral years the of ago you Assistant commenting of also link can few link also huge but another point sharing and saw someone that, year-over-year, for a growth. and XXX% point broader well. introduced opportunity that's as when teams. also a grow We into with it's receives them offering. And us -- That's value to groups

for Assistant on AI for more insight, we lives your monetization base using but time, Should at insight value. a Acrobat. all looking is doing consumption-based of in lot think the just you of opportunity of certainly everyone also, that Acrobat are first users Assistant our hope obviously, AI Not So I of there's it. core effective. make for for

will add-on of Reader hundreds AI to the So purchase to there, Assistant active pack an users also monthly millions too. get be of and of access able

your So generate it's also it's take that. But a e-mails really how presentations monetize at broad and base ability that process. of the start continue and and the look conversation to to we

efforts is So really product the and combination innovation. that a of all of go-to-market potent of combination

be So we are -- about we continue bullish to this.

on multiple So the the monetization the of innovation of -- on the starting second excited times about part said in terms we all that's we've Creative we and/or that's very just call, your Cloud coming out, to side. question, as beta are ramp still are in

there. our in out come We expect we'll that to and start QX monetization

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Your next Kalia with Barclays. of line the question comes Saket from

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question with line from Alex Zukin the comes of Your Wolfe next Research.

for billion Creative guide half maybe of more it's a the Digital Media the quarter And tailwind pricing? going ARR this to around in doing Media the Can than should Digital takes reiterate, year? you it's for second number of simple. I question that very be that from think the for to clear the but year in clarifying just new And second versus puts in Digital and around ARR, headwind -- is is update ARR how accelerating to the question question maybe Media whether first in not full earlier, comments, outperforming mine ARR reiterate, half $X.X because specifically to in net my better December about, we half you gave a

Yes.

guide was played last expected. QX out were year. ahead of take we where our we as It So seriously.

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line your And Karl question Keirstead comes next the UBS. of from with

maybe this with that continue was getting Alex at. Dan, I'll subject

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Yes.

where X-year of line behind the forward of actions action. And Sign. of anniversary. pushed The we Doc actions a there of be pushed integrated X-year had taken X October of XXXX on from May XXXX, I'm we or we anniversary Cloud and In we that pricing So XXXX. XXXX, October those was pricing of forward will -- in October optimization the pricing sorry, May XXXX XXXX us then

end will in be actions and The will still will period. QX for a back at taking you QX pricing half be clean the in from product the year standpoint the look into look. a ago that least apparent in So more from a year. now clean be a some see actions of impact right QX company, will we're months X Creative of pricing both the side the the the on year

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And with from Jay we question Griffin will take of line Vleeschhouwer Securities. our next the

else whether the that, relatedly in on to the and Firefly to of for globally. investments aperture on again, up headcount developmental requisite are positions judging is sales talked to Could your meet to you senior. in you in respect of fairly comment comment in few Firefly, least behind to at particular, with sales what looking Firefly for significantly last ramping your doing there everything bring the and many Could bring about? And been needs? obvious you've there, you're of that fill population are positions go-to-market, is development, on pipeline you capacity seemingly number opening amount With the it's the able by support which your being for of the you're months, you that relevant David, up open to thinking everything

Yes.

answer question Let sales. on the Anil the one, and take me first can

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More the former.

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our with next Rangan take question from Goldman will Sachs. Kash We

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Great.

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automation. around part, second is Kash, The

that be able it's really So as in. clearly to Firefly that's are automate need created. to And and where people generating more content, how you content services come

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think of for benefits all I vectors X Adobe. those to point So

then think turn the of couple forward-looking, would And a about to. we points as I

the it those term look underscores You backlog, just for QX. you acceleration And about XX% strength that longer-term saw in individual business. When revenue, sequentially. normalize we year-over-year. think of When Strength the deferred you that the you RPO, on as it business, up near cash flow you payment, the a of think the up billion about that's underscores in think I subcomponents, call. I and that termination of acceleration, unbilled our about each acceleration this around which once of about through when $X flow, product cash talked strength have the lot the X-point we break momentum on commentary,

record in subscriptions business in see commercial You Creative QX. the

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really, year. And QX, half the really in You the in look can that as an performance from momentum see business the QX standpoint, strongest in ever of the we back the into enterprise. was enterprise superb

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take Morgan Keith our question next Stanley. We'll from Weiss with

the this. ramps, to Shantanu hear some business, than the I and have confidence things market to at more the shot appreciate little X team, you anything about number monetization second back but Cloud reaction. further sort blocks new are by Creative mechanism the including into pricing of of exhibited half? half products back putting think, Like certainty would of the turn we year? of Intelligence? close just we net avenues of one; Durn something. really certainty Dan in in reflecting hear actually last And investors your any go ARR to and X me right? a obviously, get squeezing of little confidence that is which we're like that bit to more investors the the [indiscernible] in Or there bit more worry to worried expected or are specification think stuff help your on is sort stock Are definitely sort is what a explanation after-hour building reaction's investors confidence would between and that's the of in. Document do take half so two ramp. Like the billion half still [ you there in lack is ] gap going GA? what uncertainty, that going And $X.X like to the I'm within so there, also the number some I are Is love back then and expect I there, new say and

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opportunity. big But that we're to picture, massive that. engage will think And I Adobe in qualified go uniquely for leverage interfaces. So has more models cause opportunity to only

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for Digital our I the Media million $X.X as the would year, think we our play we factored out in and evolve QX, for things when in and both how in it gave ARR in targets product ARR the road billion $XXX year. the map

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the it seats through is we just confidence as of QX new to us these target. monetize through that I also it that a relates not we new gave out. beat but that's just gives gave we're go-forward ahead the target QX what so the year, at it to target, we beginning think expanded And around how that it And ability Firefly are results our to execution, the that. services relates we financial play the and of financial then question doing. And And your I'll as

to have you right, You're model it.

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forward Keith. execute strong more those execution. against have metrics was against that conversation, have bit who outlined. it opportunity a strong a was strong start Summit. It product we QX going have. I go sure that are look but to the go We we was at the It we're start do a And little financial to a we'll start. I'm again, against to

with And So that's it to all But would for how Jonathan. back I answer joining. thank question. hand I'll you your that,

the with of you We seeing soon. All forward forward to And Summit. speaking many concludes right. Thanks, you at everybody. this I look to look call.