Adobe Inc. reports 78.2% Net Income growth in 2020 and 15.2% Revenue growth
12/10/2020 • About Adobe Inc. (
$ADBE) • By InTwits
Adobe Inc. reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- Adobe Inc. is a fast growth stock: FY2020 revenue growth was 15.2%, 5 year revenue CAGR was 21.8% at FY2020 ROIC 26.9%
- EBITDA Margin is expanding: 39.7% in FY2020 vs. 35.8% in FY2019 vs. 31.2% in FY2016
- Adobe Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.1%. At the same time it's a lot of higher than industry average of 3.0%.
- CAPEX is quite volatile: $419m in FY2020, $394m in FY2019, $267m in FY2018, $178m in FY2017, $204m in FY2016
- The company has highly profitable business model: ROIC is 26.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Adobe Inc.'s Revenue surged on 15.2%. Revenue growth showed small slowdown in FY20Q4 - it was 14.4% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 3.9 pp from 35.8% to 39.7% in FY2020. EBITDA Margin stuck to a growing trend at 1.9 pp per annum in FY2016-FY2020.
Gross Margin increased slightly on 1.6 pp from 85.0% to 86.6% in FY2020. SG&A as a % of Revenue decreased slightly on 1.5 pp from 36.9% to 35.4% in FY2020. SG&A as a % of Revenue declined at -1.6 pp per annum in the last 5 years.
Net Income margin surged on 14.5 pp from 26.4% to 40.9% in FY2020. Net Income margin grew at 4.5 pp per annum in FY2016-FY2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 3.3% in FY2020. CAPEX/Revenue increased slightly on 0.82 pp from 2.4% in FY2017 to 3.3% in FY2020. For the last three years the average CAPEX/Revenue was 3.2%.
Return on investment
The company operates at high and attractive ROIC (26.9%) and ROE (44.2%). ROIC increased on 4.0 pp from 22.9% to 26.9% in FY2020. ROE surged on 14.5 pp from 29.7% to 44.2% in FY2020. ROIC grew at 2.3 pp per annum in the last 5 years. ROE stuck to a growing trend at 6.4 pp per annum in FY2016-FY2020.
Leverage (Debt)
Debt level is 0.0x Net Debt / EBITDA and 0.9x Debt / EBITDA. Net Debt / EBITDA dropped on 0.3x from 0.4x to 0.045x in FY2020. Debt jumped on 13.8% while cash jumped on 69.0%.
Adobe Inc. has no short term refinancing risk: cash is higher than short term debt (4,867.4%).
Valuation and dividends
Adobe Inc.'s trades at EV/EBITDA 46.5x and P/E 45.1x.
Management team
Adobe Inc.'s CEO is Shantanu Narayen. Shantanu Narayen has 13 years tenure with the company. The company's CFO is John F Murphy. John F Murphy has 2 years tenure at the company.
Financial and operational results
FY ended 11/27/2020
Adobe Inc. ($ADBE) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 5,854 | 7,302 | 9,030 | 11,171 | 12,868 | 15.2% |
| Gross Profit | 5,035 | 6,291 | 7,835 | 9,499 | 11,146 | 17.3% |
| SG&A | 2,486 | 2,822 | 3,366 | 4,125 | 4,559 | 10.5% |
| EBITDA | 1,825 | 2,494 | 3,187 | 4,005 | 5,113 | 27.7% |
| EBIT | 1,494 | 2,168 | 2,840 | | | |
| Interest expence | 70 | 74 | 89 | | | |
| Tax | 266 | 444 | 203 | | | |
| Net Income | 1,169 | 1,694 | 2,591 | 2,951 | 5,260 | 78.2% |
| Stock Based Compensation | 275 | 451 | 610 | | | |
Balance Sheet
|
|---|
| Cash | 1,011 | 2,306 | 1,643 | 2,650 | 4,478 | 69.0% |
| Accounts Receivable | 833 | 1,218 | 1,316 | | | |
| Accounts Payable | 88 | 114 | 186 | | | |
| Short Term Debt | 0 | 0 | 0 | 3,149 | 92 | -97.1% |
| Long Term Debt | 1,892 | 1,881 | 4,125 | 989 | 4,616 | 366.8% |
Cash flow
|
|---|
| Capex | 204 | 178 | 267 | 394 | 419 | 6.2% |
| Acquisitions | 48 | 460 | 6,314 | | | |
Ratios
|
|---|
| Revenue growth | 22.1% | 24.7% | 23.7% | 23.7% | 15.2% | |
| EBITDA growth | 46.9% | 36.7% | 27.8% | 25.7% | 27.7% | |
|
|---|
| Gross Margin | 86.0% | 86.2% | 86.8% | 85.0% | 86.6% | 1.6% |
| EBITDA Margin | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% | 3.9% |
| EBIT Margin | 25.5% | 29.7% | 31.5% | | |
| SG&A, % of revenue | 42.5% | 38.7% | 37.3% | 36.9% | 35.4% | -1.5% |
| SBC, % of revenue | 4.7% | 6.2% | 6.8% | | |
| Net Income Margin | 20.0% | 23.2% | 28.7% | 26.4% | 40.9% | 14.5% |
| CAPEX, % of revenue | 3.5% | 2.4% | 3.0% | 3.5% | 3.3% | -0.3% |
|
|---|
| ROIC | 15.9% | 21.3% | 23.3% | 22.9% | 26.9% | 4.0% |
| ROE | 16.2% | 21.3% | 29.1% | 29.7% | 44.2% | 14.5% |
| Net Debt/EBITDA | 0.5x | -0.2x | 0.8x | 0.4x | 0.0x | -0.3x |
| Interest expence / Average debt | 3.7% | 3.9% | 3.0% | | | |
People
|
|---|
| Insider ownership | 0.3% | 0.3% | 0.3% | | | |
| Employees | 15,706 | 17,973 | 21,357 | | | |
| Revenue/Employee, th. $ | 373 | 406 | 423 | | | |
Adobe Inc. ($ADBE) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 3,091 | 3,128 | 3,225 | 3,424 | | 18.8% | 14.0% | 13.8% | 14.4% |
| EBITDA | 1,153 | 1,234 | 1,260 | 1,405 | | 37.3% | 26.2% | 20.3% | 11.0% |
| Net Income | 955 | 1,100 | 955 | 2,250 | | 41.6% | 73.8% | 20.4% | 164.1% |
Balance Sheet
|
|---|
| Cash | 2,688 | 3,044 | 3,767 | 4,478 | | 54.6% | 46.1% | 70.5% | 69.0% |
| Short Term Debt | 84 | 85 | 90 | 92 | | -90.6% | -97.3% | -97.1% | -97.1% |
| Long Term Debt | 4,627 | 4,612 | 4,636 | 4,616 | | 42.9% | 366.8% | 369.0% | 366.8% |
Ratios
|
|---|
| Gross Margin | 85.4% | 86.7% | 86.8% | 87.5% | | 0.7% | 1.6% | 1.4% | 2.6% |
| EBITDA Margin | 37.3% | 39.5% | 39.1% | 41.0% | | 5.0% | 3.8% | 2.1% | -1.3% |
| Net Income Margin | 30.9% | 35.2% | 29.6% | 65.7% | | 5.0% | 12.1% | 1.6% | 37.2% |
Peers in Application Software
Below we provide Adobe Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 14.8% | 15.1% | 19.4% | 14.5% |
|---|
| Adobe Inc. ($ADBE) | - | 24.7% | 23.7% | 23.7% | 15.2% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 63.8% | 64.4% | 65.3% | 67.9% | 69.4% |
|---|
| Adobe Inc. ($ADBE) | 86.0% | 86.2% | 86.8% | 85.0% | 86.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| ANSYS, Inc. ($ANSS) | 45.1% | 41.9% | 41.4% | 39.5% | 36.1% |
| |
|---|
| Median (89 companies) | -5.3% | -4.2% | -3.3% | 2.7% | 6.8% |
|---|
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 2.9% | 2.3% | 2.4% | 2.9% | 2.5% |
|---|
| Adobe Inc. ($ADBE) | 3.5% | 2.4% | 3.0% | 3.5% | 3.3% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.8% | -11.8% | -10.6% | -4.5% | -2.2% |
|---|
| Adobe Inc. ($ADBE) | 15.9% | 21.3% | 23.3% | 22.9% | 26.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (53 companies) | -0.9x | -0.9x | -0.7x | 0.4x | 0.3x |
|---|
| Adobe Inc. ($ADBE) | 0.5x | -0.2x | 0.8x | 0.4x | 0.0x |
