Adobe Financial Analyst · PDF file2020 Adobe Creative Cloud Total Addressable Market....
Transcript of Adobe Financial Analyst · PDF file2020 Adobe Creative Cloud Total Addressable Market....
© 2017 Adobe Systems Incorporated. All Rights Reserved.
Adobe Financial Analyst BriefingOctober 18, 2017
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WelcomeMike Saviage | VP, Investor Relations
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Financial Disclaimer
Some of the information discussed today contains forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of the risks and uncertainties, you should review Adobe’s SEC filings, including the annual report on Form 10-K for fiscal year 2016 and the quarterly reports on Form 10-Q filed by the company in 2017. In our presentation, we may discuss non-GAAP financial measures. The GAAP financial measures that correspond to such non-GAAP measures, as well as the reconciliation between the two, are available on our website at http://www.adobe.com/ADBE.
Adobe does not undertake an obligation to update forward-looking statements.
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Adobe's Growth OpportunitiesShantanu Narayen | CEO
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Through Digital Experiences
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TRANSFORMING HOW BUSINESSES COMPETE
EMPOWERINGPEOPLE TO CREATE
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EMPOWERINGPEOPLE TO CREATE
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Every story, every surface Creativity unleashed Harness the collective IQ
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Digital Media Offerings
Adobe Document CloudAdobe Creative Cloud
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Digital Media Product Momentum
• Video – HDR/4K/VR, animation, motion graphics
• Adobe Stock – New editorial content and Adobe Sensei-powered search
• Adobe Spark – New paid premium mobile offering
• Flagship product updates
• Hundreds of new features & enhancements year-to-date, including new magic powered by Adobe Sensei
• Desktop – New Adobe Acrobat Pro release
• Mobile – New Adobe Scan mobile app
• Adobe Sign – year-round product updates, 15 new partner integrations, global expansion
• Partnership signed with Microsoft
• Launched digital signature open standards consortium with top digital identity providers
Adobe Document CloudAdobe Creative Cloud
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MAX 2017 Highlights
Adobe XD Adobe Dimension
Character Animator
Lightroom Photography Service
Adobe Spark
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Creative Cloud Business Momentum
>40%New to
Creative Cloudfranchise1
~66%Creative Cloud
Enterprise seats licensed with services
>10MBehancemembers
>1MAdobe XD beta
downloads
2XY/Y growth in
Adobe Stock ARR2
Source: Adobe, as of Q3 FY20171 Cumulative new subscriptions, excludes Enterprise and Acrobat Single App subscriptions2 Compares Adobe Stock ARR exiting Q3 FY2017 and Q3 FY2016
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Adobe Document Cloud Business Momentum
~200B PDFs opened per year in Acrobat & Acrobat Reader
~30% Y/Y growth of
documents signed on mobile devices with Adobe Sign
~19% Y/Y Acrobat unit
growth in Q3 FY17 *
>500M Document Cloud
mobile apps installs
~33% Of subscribers
new to Acrobat franchise
Source: Adobe, as of Q3 FY2017* Acrobat perpetual and subscription units licensed as Single App
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Driving Digital Media Growth
CORE MARKET EXPANSION VALUE EXPANSION
• Creative Suite & Acrobat migration to subscriptions
• New user growth & enterprise seat expansion
• New media authoring categories
• Upsell and price optimization
• Photography
• Photo hobbyist growth
• New mobile paid offerings
• Premium Cloud service
• Next generation apps
• Adobe Spark
• Adobe Scan
• Adobe XD
• Adobe Stock
• Adobe Sign
• Training, marketplace & collaboration services
• Creative Cloud enterprise services
• Document Cloud business automation
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2020 Adobe Creative Cloud Total Addressable Market
Creative Cloud 2020 TAM
$24.2BTotal Addressable Market
$19.5BTotal Addressable Market
Creative Cloud 2019 TAM
$7.1B$11.4BMarket ExpansionCore Value Expansion
$5.7B
Source: Adobe, October 2017
Current Creative Cloud installed base and ARR, Creative Suite and Acrobat migration, new Creative user growth, education and
enterprise user growth, new media authoring (3D/AR/VR), upsell and price optimization
Photo hobbyist growth, Adobe Lightroom and Photoshop Elements migration, new
paid mobile users, premium photo service, new creative offerings for consumers and creatives at work, online video creators
Adobe Stock, training content and services, collaboration services,
Creative Cloud enterprise services
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Document Cloud 2020 TAMDocument Cloud 2019 TAM
2020 Adobe Document Cloud Total Addressable Market
$5.3BTotal Addressable Market
$4.5BTotal Addressable Market
$1.4BValue ExpansionCore
$3.9B
Source: Adobe, October 2017
Current Acrobat subscription installed base and ARR, Acrobat migration to subscriptions, PDF creation market,
electronic documents market
Electronic signatures, document protection, form
fill and sign, review and approve markets
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• Undisputed market leadership
• Content explosion and mobility trends continue to be a tailwind
• Broader strategy creating larger TAM opportunity
• Multiple drivers of ARR growth
Digital Media Summary
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TRANSFORMING HOW BUSINESSES COMPETE
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Architect for actionPut art & science to workPeople buy experiences,
not products
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Adobe Experience Cloud Offering
ExperienceManager
Campaign PrimetimeTarget AudienceManager
Analytics Media Optimizer Display
Media Optimizer Search
Media Optimizer Video
Marketing Cloud Analytics Cloud
Experience Cloud
Advertising Cloud
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Adobe Experience Cloud
Adobe Marketing Cloud
Integrated marketing solutionsDifferentiate brand story, connect with customers on personal level, engage
them in moments that matter
Adobe Analytics Cloud
Intelligence engine for the enterprise Combine digital and offline data to help
brands move from insights to action, smarter and faster
Adobe Advertising Cloud
Industry’s first end-to-end platformManage advertising spanning
traditional TV and all digital formats
ExperienceManager
Campaign PrimetimeTarget AudienceManager
Analytics
• Experience personalization & optimization
• Campaign orchestration & journey management
• Experience management & delivery
• Monetization of video experiences
• Customer journey context
• Meaningful measurement
• Automated audience creation
• Insights into action
• Automated media execution – plan, buy, measure, optimize ad buys
• Cross-channel
• Real-time bidding , private marketplace and curated inventory
• Dynamic creative optimization
Media Optimizer Display
Media Optimizer Search
Media Optimizer Video
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Adobe Experience Cloud Business Momentum
3 Based on Q3 FY2017 top 100 estimated ARR customers4 Based on Q3 FY2017 top 500 estimated ARR customers
~70%Of top 500 customershave 3+ solutions 4
155 TrillionAnnual customer data
transactions 1
57%Of analytics transactions from mobile devices 2
Industry analyst leadership
Source: Adobe1 Transactions based on trailing 4 quarters as of Q3 FY20172 % of analytics server calls from mobile devices in Q3 FY2017
$4.9MAverage ARR of
top 100 customers 3
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Unified Experiences
Adobe Cloud Platform
CRMCommercePOS Merchandising
Back Office
Front Office
Inventory Mgmt. Store Operations ERP Business Intelligence
Real-time Unified Profile
Transactions
Service Tickets
Location
Preferred Device
Product Use
Content Preferences
Demographics
Subscriptions
Last Purchase
OrchestrationDigital Behavior
Mobile Web Online Ads Email Mailer / Print Call Center Video / TV In Store / Venue IoTSocial
Architecting for the Experience Business
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Driving Adobe Experience Cloud Growth
• Demand for omnichannel customer engagement & analytics
• Shift in ad spend to digital
• Account penetration (upsell, cross-sell)
• Geographic & vertical market expansion
• Partner ecosystem for digital transformation implementation
• Microsoft partnership to broaden go-to-market reach and enterprise value proposition
• Data & content platform as foundation for delivering customer experiences
• Adobe Sensei to provide new capabilities and increase competitive advantage
CUSTOMERENGAGEMENT
PARTNERLEVERAGE
PRODUCTDIFFERENTIATION
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Experience Cloud 2020 TAMExperience Cloud 2019 TAM
2020 Adobe Experience Cloud Total Addressable Market
$53.1BTotal Addressable Market
$40BTotal Addressable Market
$8.0B$31.5BAdobe Analytics CloudAdobe Marketing Cloud Adobe Advertising Cloud
$13.6B
Source: Adobe, October 2017
Experience Manager, Target, Campaign, Primetime, Social
Analytics, Audience Manager Media Optimizer
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Adobe Experience Cloud Summary
• Large and growing "Experience Business" opportunity
• Market leader with most complete and integrated offering
• Adobe Cloud Platform provides differentiation and competitive advantage
• Unparalleled scale of content and data accelerates Adobe Sensei benefits
• Investments in innovation, go-to-market and partners fueling long-term growth
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Market Leading
Innovation
Broad & Diversified
Customer Base
~$83B
TRANSFORMING HOW BUSINESSES COMPETE
EMPOWERINGPEOPLE TO CREATE
Total Addressable Market
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Adobe’s Growth StrategyMark Garrett | EVP & CFO
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• Some contract types will change from ratable to upfront revenue recognition (e.g., non-services-enabled Creative Cloud and Document Cloud contracts, on-premise term licenses)
• One-time reduction expected for deferred revenue and unbilled backlog
• Annual revenue expected to remain largely unchanged
• Certain costs related to contract acquisition currently expensed (e.g., sales commissions) may be capitalized
ASC 606 Implementation Update
• Effective for Adobe beginning in FY2019 (starting December 1, 2018)
• Implementation on track
• In process of assessing comprehensive adoption impacts
Context Financial ImplicationsExpected Impact
• Negligible impact expected for Creative Cloud and Document Cloud services-enabled offerings
• Negligible impact expected for fully-hosted products (e.g., Adobe Analytics, Adobe Target, Adobe Sign and managed services offerings of Adobe Experience Manager and Adobe Campaign)
• Some impact expected with enterprises utilizing non-services enabled Creative Cloud and Document Cloud deployments and on-premise term licenses which are currently recognized as subscription revenue (e.g., some Adobe Experience Manager and Adobe Campaign, some Print & Publishing products)
October 18, 2017
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Capital Structure
• Strong liquidity position
• $5.4B of cash and short-term investments
• $1.0B unutilized credit facility, remains available until 2020
• Conservative leverage approach
• $1.9B of public debt outstanding
• Rated A by S&P
• Rated A3 by Moody's
• Excess domestic cash returned to stockholders through stock repurchase
Source: Adobe, exiting Q3 FY2017
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Reaffirming Q4 FY2017 P&L TargetsOctober 18, 2017
The information discussed on this slide contains forward looking statements that involve risk and uncertainty. Actual results may differ materially. For a discussion of these risks and uncertainties, you should review Adobe’s SEC filings. Please see our investor relations website for a discussion of these targets and a detailed reconciliation between GAAP and non-GAAP targets.
Revenue ~ $1.950 billion
Non-operating expense ~ $13 million
Tax rate GAAP: ~ 24% Non-GAAP: ~ 21%
Earnings per share GAAP: ~ $0.86 Non-GAAP: ~ $1.15
Share count ~ 500 million shares
© 2017 Adobe Systems Incorporated. All Rights Reserved.
FY2015 - FY2018 CAGR TargetsOctober 18, 2017
The information discussed on this slide contains forward looking statements that involve risk and uncertainty. Actual results may differ materially. For a discussion of these risks and uncertainties, you should review Adobe’s SEC filings.
CAGR TARGET ESTIMATE
Total Adobe revenue ~20% BEAT
Digital Media segment revenue >20% BEAT
Digital Media ARR >20% BEAT
Experience Cloud revenue >20% ~20%
Non-GAAP EPS ~30% BEAT
Operating Cash Flow ~25% BEAT
Experience Cloud bookings ~30% CHANGED METHODOLOGY
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Business MomentumTotal Revenue and Margin
$4.147$4.796
$5.854
~$7.245
~$8.7
10.0%
18.8%
25.5%
0%
10%
20%
30%
40%
50%
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
FY2014 FY2015 FY2016 FY2017E* FY2018E**
GAA
P O
pera
ting
Mar
gin
%
Reve
nue
($B)
Adobe Revenue & GAAP Operating Margin
Revenue GAAP Operating Margin %
Source: Adobe* Based on Q4 FY2017 financial targets** Based on FY18 financial targets
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Business MomentumTotal Revenue and Margin
$4.147$4.796
$5.854
~$7.245
~$8.721.8%
28.9%
33.8%
0%
10%
20%
30%
40%
50%
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
FY2014 FY2015 FY2016 FY2017E* FY2018E**
Non
-GAA
P O
pera
ting
Mar
gin
%
Reve
nue
($B)
Adobe Revenue & Non-GAAP Operating Margin
Revenue Non-GAAP Operating Margin %Source: Adobe* Based on Q4 FY2017 financial targets; please see our investor relations website for a reconciliation between GAAP and non-GAAP operating margin** Based on FY18 financial targets
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~$4.0B
~$0.2B
~$1.1B
~$0.7B
Business MomentumCreative Cloud Revenue Mix
Perpetual and OEM
SubscriptionService & Support
Subscription
Service & Support
Perpetual and OEM
$1.8B ~$4.2B
Source: Adobe* Based on Q4 FY2017 financial targets
FY2014 Revenue Mix FY2017E* Revenue Mix
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Business MomentumCreative Cloud: ARR and Revenue
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
FY2014 FY2015 FY2016 FY2017E*
$Mill
ions
Revenue ARR
Source: Adobe* Based on Q4 FY2017 financial targets; ARR based on December 2016 FX rates held constant through the year
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~$0.5B
~$0.3B
Business MomentumDocument Cloud Revenue Mix
~$0.2B
~$0.04B
~$0.6B
Perpetual and OEM
Subscription
Service & Support
Subscription
Service & Support
Perpetual and OEM
$0.8B ~$0.8B
Source: Adobe* Based on Q4 FY2017 financial targets
FY2014 Revenue Mix FY2017E* Revenue Mix
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Business MomentumDocument Cloud: ARR and Revenue
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
FY2014 FY2015 FY2016 FY2017E*
$Mill
ions
Revenue ARR
Source: Adobe* Based on Q4 FY2017 financial targets; ARR based on December 2016 FX rates held constant through the year
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~$1.5B
~$0.4B
~$0.1B
Business MomentumAdobe Experience Cloud Revenue Mix
~$0.7B
~$0.3B
~$0.2BPerpetual and OEM
Subscription**
Service & Support
Subscription**
Service & Support
Perpetual and OEM
~$1.2B ~$2.0B
Source: Adobe* Based on Q4 FY2017 financial targets ** Includes revenue from SaaS, managed service and term offerings for Adobe Analytics Cloud and Adobe Marketing Cloud, as well as total revenue for Adobe Advertising Cloud
FY2014 Revenue Mix FY2017E* Revenue Mix
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$0
$500
$1,000
$1,500
$2,000
$2,500
FY2014 FY2015 FY2016 FY2017E* FY2018E*
$Mill
ions
Revenue Subscription Revenue**
Business MomentumExperience Cloud: Revenue and Subscription Revenue
Source: Adobe* Based on Q4 FY2017 financial targets ** Includes revenue from SaaS, managed service and term offerings for Adobe Analytics Cloud and Adobe Marketing Cloud, as well as total revenue for Adobe Advertising Cloud
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Business MomentumTotal Adobe: Deferred Revenue and Unbilled Backlog
$829 $1,155 $1,485$2,015
$1,032
$2,188
$2,892
$3,422
$1,860
$3,343
$4,377
$5,437
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
FY2013 FY2014 FY2015 FY2016 FY2017E
$Mill
ions
Deferred Revenue Unbilled Backlog
Source: Adobe
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Business MomentumOperating Cash Flow
$1,287
$1,470
$2,201
$1,200
$1,600
$2,000
$2,400
$2,800
FY2014 FY2015 FY2016 FY2017E
$Mill
ions
Source: Adobe
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Digital Media Summary
• Content explosion and mobility trends continue to be a tailwind
• Broader strategy creating larger TAM opportunity
• Multiple drivers continue to fuel ARR growth moving forward
• New user acquisition
• Creative Suite and Acrobat migration
• Value expansion via services
• Upsell and pricing optimization
Source: Adobe
2020 MARKET OPPORTUNITY
Core $12.8B
Market Expansion $5.7B
Value Expansion $11.0B
~$30BAddressable Market
© 2017 Adobe Systems Incorporated. All Rights Reserved.
Adobe Experience Cloud Summary
• Large and growing "Experience Business“ opportunity
• Market leader with most integrated offering for customers
• Content and data platform provides differentiation and competitive advantage
• Investments in innovation, go-to-market and partners fueling long-term growth potential
Source: Adobe
2020 MARKET OPPORTUNITY
~$53BAddressable Market
Marketing Cloud $31.5B
Analytics Cloud $13.6B
Advertising Cloud $8.0B
© 2017 Adobe Systems Incorporated. All Rights Reserved.
FY2018 Preliminary TargetsOctober 18, 2017
1 All Revenue and EPS targets were set based on September 2017 foreign exchange (“FX”) rates forward adjusted to mid-2018, which for current planning purposes are assumed to be constant during fiscal year 2018. 2 Includes revenue from SaaS, managed service and term offerings for Adobe Analytics Cloud and Adobe Marketing Cloud, as well as total revenue for Adobe Advertising Cloud3 Includes annualized subscription value of SaaS, managed service and term offerings under contract for Adobe Analytics Cloud and Adobe Marketing Cloud
The information discussed on this slide contains forward looking statements that involve risk and uncertainty. Actual results may differ materially. For a discussion of these risks and uncertainties, you should review Adobe’s SEC filings. Please see our investor relations website for a reconciliation between GAAP and non-GAAP targets.
Total Adobe revenue1 ~$8.7B (~20% Y/Y)
Digital Media segment revenue ~23% Y/Y
Experience Cloud subscription revenue2 ~20% Y/Y
Experience Cloud total revenue ~15% Y/Y
GAAP EPS ~$4.40
Non-GAAP EPS ~$5.50
Digital Media ARR ~$1B of net new ARRExperience Cloud bookings3 ~20% Y/Y
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Growth and Margin at Scale
• Large, expanding opportunity• ~$83B TAM in 2020
• Strong business momentum and market leadership
• Significant top-line and bottom-line growth