Adobe Inc.

Summary

Adobe Inc. operates as a diversified software company worldwide. It operates through three segments: Digital Media, Digital Experience, and Publishing and Advertising. The Digital Media segment offers products, services, and solutions that enable individuals, teams, and enterprises to create, publish, and promote content; and Document Cloud, a unified cloud-based document services platform. Its flagship product is Creative Cloud, a subscription service that allows members to access its creative products. This segment serves content creators, workers, marketers, educators, enthusiasts, communicators, and consumers. The Digital Experience segment provides an integrated platform and set of applications and services that enable brands and businesses to create, manage, execute, measure, monetize, and optimize customer experiences from analytics to commerce. This segment serves marketers, advertisers, agencies, publishers, merchandisers, merchants, web analysts, data scientists, developers, and executives across the C-suite. The Publishing and Advertising segment offers products and services, such as e-learning solutions, technical document publishing, web conferencing, document and forms platform, web application development, and high-end printing, as well as Advertising Cloud offerings. The company offers its products and services directly to enterprise customers through its sales force and local field offices, as well as to end users through app stores and through its website at adobe.com. It also distributes products and services through a network of distributors, value-added resellers, systems integrators, software vendors and developers, retailers, and original equipment manufacturers. The company was formerly known as Adobe Systems Incorporated and changed its name to Adobe Inc. in October 2018. Adobe Inc. was founded in 1982 and is headquartered in San Jose, California.

Mission

“Changing the world through digital experiences.” [1]

Adobe’s statement reflects how it wants to inspire, transform and move the world forward through technology. Adobe will continue to simplify and ease the life of people using concise and productive applications.

Vision

Adobe in the future wants to be the leading provider of digital media and marketing solutions, giving people tools to powerful cutting edge technology which will enable them to create and deliver engaging content.

Main Offerings

Adobe offers a multitude of products including: [2]

- Acrobat Pro

- Photoshop

- Premiere Pro

- Illustrator

- Adobe Stock

- After Effects

- Animate

Competitors

Adobe offers a range of services, and therefore has a number of competitors for its services.

Creative software

For photoshop, some of the main competing softwares are GIMP, a free alternative, Affinity Photo, and Canva, which offers similar services with competitive prices.

Digital Marketing and Analytics

The main competitors are Salesforce, Oracle, Hubspot, and the Google marketing platform. All provide marketing related services such as market automation, customer relationship management, digital marketing, analytics and advertising.

Video and multimedia

For Adobe Premiere, main competitors are Final cut pro and Vegas pro in the video editing space, which may be faster than the Premiere Pro as it is easier to do light editing, but harder to edit non-traditional timelines as it is non-customisable

Web design

Sketch, Figma, Axure RP are all tools that compete with Adobe for this service, providing design tools for prototyping, user testing, and real time collaborations during web and experience designing.

Market share

In the application development field, Adobe has 60.80% with the Creative cloud, significantly higher than the second highest which is Microsoft Azure with 15%

To break this down further, Premiere Pro has possessed 23.3% of the video editing market, which is the highest, though Apple’s Final Cut Pro is very close in market shares (22.86%)

Adobe document cloud has 0.35% in market share in the data management technologies, dwarfed by the likes of G suite (68%) and office 365 (7%).

Valuation (DCF)

Balance sheet (historic and forecasted)

Annual As Reported in Millions of U.S. Dollars
	2018	2019	2020	2021	2022	2023	2024	2025	2026	2027
Total cash and cash equivalents	1,643.00	2,650.00	4,478.00	3,844.00	4,236.00	11,486.45	19,429.99	28,124.06	37,630.47	48,018.48
ST Investments	1,586.00	1,527.00	1,514.00	1,954.00	1,860.00	1,934.40	2,011.78	2,092.25	2,175.94	2,262.97
Trade receivables	1,331.00	1,544.00	1,408.00	1,894.00	2,088.00	2,244.54	2,413.92	2,597.18	2,795.44	3,009.94
Doubtful Account	(15.00)	(10.00)	(10.00)	(16.00)	(23.00)	(24.15)	(25.36)	(26.63)	(27.96)	(29.35)
Prepaid expenses and other current assets	268.00	690.00	675.00	993.00	835.00	860.05	885.85	912.43	939.80	967.99
Total current assets	4,813.00	6,401.00	8,065.00	8,669.00	8,996.00	16,501.29	24,716.18	33,699.29	43,513.70	54,230.03
PPE	2,525.00	2,954.00	3,056.00	3,124.00	3,477.00	3,768.69	4,079.83	4,411.74	4,765.82	5,140.76
accumulated depreciation and amortizatio	(1,406.00)	(1,569.00)	(1,458.00)	(1,451.00)	(1,569.00)	(1,830.21)	(2,103.85)	(2,390.53)	(2,690.85)	(3,005.49)
Operating lease right-of-use assets, net	--	--	487.00	443.00	407.00	415.14	423.44	431.91	440.55	449.36
Goodwill	10,581.00	10,691.00	10,742.00	12,668.00	12,787.00	13,042.74	13,303.59	13,569.67	13,841.06	14,117.88
other intangibles	2,068.00	1,719.00	1,359.00	1,820.00	1,449.00	1,492.47	1,537.24	1,583.36	1,630.86	1,679.79
Deferred income taxes	--	--	1,370.00	1,085.00	777.00	777.00	777.00	777.00	777.00	777.00
other assets	231.00	656.00	744.00	883.00	841.00	724.24	606.19	486.79	365.94	243.56
Total Assets	18,812.00	20,852.00	24,365.00	27,241.00	27,165.00	34,891.36	43,339.63	52,569.23	62,644.07	73,632.90
Liabilities ($ Millions)
Trade payables	186.00	209.00	306.00	312.00	379.00	397.95	417.85	438.74	460.68	483.71
Accrued expenses	1,163.00	1,367.00	1,418.00	1,736.00	1,790.00	1,879.50	1,973.48	2,072.15	2,175.76	2,284.54
Debt	0.00	0.00	0.00	0.00	500.00	520.00	540.80	562.43	584.93	608.33
Deferred Revenue	2,916.00	3,378.00	3,629.00	4,733.00	5,297.00	5,667.79	6,064.54	6,489.05	6,943.29	7,429.32
Income taxes payable	36.00	56.00	63.00	59.00	75.00	80.25	85.87	91.88	98.31	105.19
Operating lease liabilities	0.00	0.00	92.00	97.00	87.00	92.22	97.75	103.62	109.84	116.43
Total current liabilities	4,301.00	5,010.00	5,508.00	6,937.00	8,128.00	8,637.71	9,180.28	9,757.87	10,372.79	11,027.51
Long-term liabilities:
Debt	4,115.00	4,138.00	4,117.00	4,123.00	3,629.00	3,774.16	3,925.13	4,082.13	4,245.42	4,415.23
Deferred revenue	138.00	123.00	130.00	145.00	117.00	125.19	133.95	143.33	153.36	164.10
Income taxes payable	644.00	616.00	529.00	534.00	530.00	561.80	595.51	631.24	669.11	709.26
Operating lease liabilities	252.00	261.00	499.00	453.00	417.00	446.19	477.42	510.84	546.60	584.86
Other liabilities	--	173.00	223.00	252.00	293.00	319.37	347.06	376.14	406.68	438.77
Total liabilities	9,450.00	10,321.00	11,006.00	12,444.00	13,114.00	13,864.42	14,659.35	15,501.55	16,393.97	17,339.74
Stockholders’ equity:
Common stock
Additional paid-in-capital	5,685.00	6,505.00	7,357.00	8,428.00	9,868.00	10,972.46	12,107.50	13,273.98	14,472.79	15,704.85
Retained earnings	11,816.00	14,829.00	19,706.00	23,905.00	28,319.00	34,451.27	41,243.23	48,751.30	57,036.24	66,163.44
Accumulated other comprehensive income (loss)	(148.00)	(188.00)	(158.00)	(137.00)	(293.00)	(301.79)	(310.84)	(320.17)	(329.77)	(339.67)
Treasury stock	(7,991.00)	(10,615.00)	(13,546.00)	(17,399.00)	(23,843.00)	(24,095.00)	(24,359.60)	(24,637.43)	(24,929.15)	(25,235.46)
Total equity	9,362.00	10,531.00	13,359.00	14,797.00	14,051.00	21,026.94	28,680.28	37,067.68	46,250.10	56,293.16
Total equity and liabilities	18,812.00	20,852.00	24,365.00	27,241.00	27,165.00	34,891.36	43,339.63	52,569.23	62,644.07	73,632.90
Check	0	0	0	0	0	0	0	0	0	0

Income statement (historic and forecasted)

Annual As Reported in Millions of U.S. Dollars
	2018	2019	2020	2021	2022	2023	2024	2025	2026	2027
Revenue:
Product	622.00	648.00	507.00	555.00	532.00	563.92	597.76	633.62	671.64	711.94
Subscription	7,922.00	9,994.00	11,626.00	14,573.00	16,388.00	17,535.16	18,762.62	20,076.00	21,481.33	22,985.02
Service and Other	486.00	529.00	735.00	657.00	686.00	720.30	756.32	794.13	833.84	875.53
Total Revenue	9,030.00	11,171.00	12,868.00	15,785.00	17,606.00	18,819.38	20,116.69	21,503.76	22,986.80	24,572.48
Cost of revenue
Subscription	--	--	1,108.00	1,374.00	1,646.00	1,695.38	1,746.24	1,798.63	1,852.59	1,908.17
Products	46.00	40.00	36.00	41.00	35.00	36.05	37.13	38.25	39.39	40.57
Stock-based Compensation & Service and Support	341.00	411.00	578.00	450.00	484.00	508.20	533.61	560.29	588.31	617.72
Total cost of revenue	387.00	451.00	1,722.00	1,865.00	2,165.00	2,239.63	2,316.98	2,397.16	2,480.29	2,566.46
Gross profit	8,643.00	10,720.00	11,146.00	13,920.00	15,441.00	16,579.75	17,799.71	19,106.59	20,506.51	22,006.02
Operating expenses:
Research & Development	1,538.00	1,930.00	2,188.00	2,540.00	2,987.00	3,136.35	3,293.17	3,457.83	3,630.72	3,812.25
Sales and marketing	2,621.00	3,245.00	3,591.00	4,321.00	4,968.00	5,141.88	5,321.85	5,508.11	5,700.89	5,900.43
General and Administrative	588.00	707.00	776.00	878.00	1,030.00	1,060.90	1,092.73	1,125.51	1,159.27	1,194.05
Depreciation	157.00	173.00	192.00	207.00	189.00	198.45	208.37	218.79	229.73	241.22
Amortization of intangibles	91.00	175.00	162.00	172.00	169.00	177.45	186.32	195.64	205.42	215.69
Total operating expenses	4,995.00	6,230.00	6,909.00	8,118.00	9,343.00	9,715.03	10,102.44	10,505.87	10,926.04	11,363.64
Operating income	3,648.00	4,490.00	4,237.00	5,802.00	6,098.00	6,864.72	7,697.27	8,600.72	9,580.48	10,642.38
Interest expense	(99.00)	(157.00)	(116.00)	(113.00)	(113.00)	113.22	117.75	122.46	127.36	132.46
Investment gains (losses), net	3.00	52.00	14.00	16.00	(19.00)	(19.95)	(20.95)	(21.99)	(23.09)	(24.25)
Other income (expense), net	50.00	42.00	41.00	0.00	42.00	44.10	46.31	48.62	51.05	53.60
Other items	(810.00)	(1,222.00)	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Total non-operating income (expense), net	(856.00)	(1,285.00)	(61.00)	(97.00)	(90.00)	(94.50)	(99.23)	(104.19)	(109.40)	(114.87)
Net Income Before Taxes	2,792.00	3,205.00	4,176.00	5,705.00	6,008.00	6,770.22	7,598.05	8,496.53	9,471.08	10,527.52
Tax	15.00	251.00	(1,084.00)	883.00	1,252.00	1,354.04	1,519.61	1,699.31	1,894.22	2,105.50
Net Income	2,591.00	2,951.00	5,260.00	4,822.00	4,756.00	5,416.18	6,078.44	6,797.22	7,576.87	8,422.01
Basic Weighted Average Shares	491.00	486.00	481.00	477.00	470.00	493.50	518.18	544.08	571.29	599.85
Basic EPS	5.28	6.07	10.94	10.11	10.12	10.98	11.73	12.49	13.26	14.04
Diluted Weighted Average Shares	498.00	492.00	485.00	481.00	471.00	494.55	519.28	545.24	572.50	601.13
Diluted EPS	5.20	6.00	10.85	10.02	10.10	10.95	11.71	12.47	13.23	14.01

Cash flow statement (historic and forecasted)

Annual As Reported in Millions of U.S. Dollars
	2018	2019	2020	2021	2022	2023	2024	2025	2026	2027
Net Income	2,590.80	2,951.50	5,260.00	4,822.00	4,756.00	5,416.18	6,078.44	6,797.22	7,576.87	8,422.01
Depreciation	346.50	736.70	757.00	788.00	856.00	898.45	908.37	918.79	929.73	941.22
Reduction of operating lease right-of-use assets	--	--	87.00	73.00	83.00	77.08	77.23	77.40	77.58	77.78
Stock-based compensation	609.60	787.70	909.00	1,069.00	1,440.00	848.72	874.18	900.41	927.42	955.24
Other non-cash items	7.20	13.80	40.00	7.00	10.00	10.50	11.03	11.58	12.16	12.76
Trade receivables, net	(2.00)	(187.80)	106.00	(430.00)	(198.00)	(167.04)	(180.40)	(194.84)	(210.42)	(227.26)
Prepaid expenses and other assets	(77.20)	(531.10)	(288.00)	(475.00)	(94.00)	(125.59)	(128.55)	(131.52)	(134.50)	(137.48)
Trade payables	54.90	23.10	96.00	(20.00)	66.00	18.95	19.90	20.89	21.94	23.03
Accrued Expenses	43.80	171.70	86.00	162.00	7.00	89.50	93.98	98.67	103.61	108.79
Income taxes payable	479.20	4.20	(72.00)	2.00	19.00	37.05	39.33	41.74	44.31	47.03
Deferred revenue	444.70	497.00	258.00	1,053.00	536.00	378.98	405.51	433.89	464.27	496.77
Cash from Operating Activities	4,029.40	4,421.90	5,727.00	7,230.00	7,838.00	7,482.78	8,199.00	8,974.24	9,812.94	10,719.90
Cash Flow-Investing Activities ($ Millions)
Purchases and sales of long-term invest	(18.50)	(48.70)	(15.00)	(42.00)	(46.00)	(48.30)	(50.72)	(53.25)	(55.91)	(55.91)
Purchases of short-term investments	(566.10)	(699.90)	(1,071.00)	(1,533.00)	(909.00)	(954.45)	(1,002.17)	(1,052.28)	(1,104.90)	(1,160.14)
Proceeds from sales of short-term invest	1,709.50	86.10	167.00	191.00	270.00	283.50	297.68	312.56	328.19	344.60
Maturities of short-term investments	765.90	699.50	915.00	877.00	683.00	717.15	753.01	790.66	830.19	871.70
Purchases of property and equipment	(266.60)	(394.50)	(419.00)	(348.00)	(442.00)	(243.39)	(260.43)	(278.66)	(298.16)	(319.03)
Acquisitions, net of cash acquired	(6,314.40)	(100.70)	0.00	(2,682.00)	(126.00)	0.00	0.00	0.00	0.00	0.00
Proceeds from sale of long-term investments	4.90	2.60	9.00	0.00	0.00	100.00	100.00	100.00	100.00	100.00
Cash from Investing Activities	(4,685.30)	(455.60)	(414.00)	(3,537.00)	(570.00)	(145.49)	(162.63)	(180.97)	(200.59)	(218.79)
Cash Flow-Financing Activities ($ Millions)
Taxes paid related to net share settlements	(393.20)	(440.00)	(681.00)	(719.00)	(518.00)	(543.90)	(571.10)	(599.65)	(629.63)	(661.11)
Repurchases of common stock	(2,050.00)	(2,750.00)	(3,050.00)	(3,950.00)	(6,550.00)	0.00	0.00	0.00	0.00	0.00
Proceeds from re-issuance of treasury stock	191.00	232.90	270.00	291.00	278.00	291.90	306.50	321.82	337.91	354.81
Long Term Debt Issuance	2,248.30	0.00	3,144.00	0.00	0.00	165.16	171.77	178.64	185.78	193.21
Repayment of debt	(1.70)	--	(3,150.00)	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Cash from Financing Activities	(5.60)	(2,946.10)	(3,488.00)	(4,301.00)	(6,825.00)	(86.84)	(92.83)	(99.19)	(105.94)	(113.09)
Foreign Exchange Effects	(1.70)	(12.70)	3.00	(26.00)	(51.00)
Net Change in Cash	(663.20)	1,007.50	1,828.00	(634.00)	392.00	7,250.45	7,943.54	8,694.07	9,506.41	10,388.01
Net Cash - Beginning Balance	2,306.10	1,642.80	2,650.00	4,478.00	3,844.00	4,236.00	11,486.45	19,429.99	28,124.06	37,630.47
Net Cash - Ending Balance	1,642.80	2,650.20	4,478.00	3,844.00	4,236.00	11,486.45	19,429.99	28,124.06	37,630.47	48,018.48