Another quarter, another strong report from software maker Adobe Systems (ADBE). The company earned $0.94 per share on revenue of $1.68 billion, beating expectations by a wide margin. Investors who bought the stock when it was in the double digits, converting its business from software sales to a monthly cloud licensing model, are enjoying the gains. These investors need not do anything next, as Adobe’s growth continues.
Adobe, best known for Acrobat Reader and Flash, is the de facto supplier of software for the creative industry. It has a near monopoly with photography post-processing, designing, and video editing. The Creative Cloud wins over the customer early on: when users are students. Adobe’s first-quarter results demonstrated significant growth acceleration. Sales grew 21.7% year-over-year. Free cash flow, adjusted for stock-based compensation, grew 67 percent Y/Y to $730 million. Deferred revenue was a massive $2.1 billion.
Adobe’s share buyback program returned ~ $240 million to shareholders. The company bought back 2.2 million shares. On its conference call, Adobe said that the positive customer feedback and brand loyalty contributed to growth:
“To forge stronger customer connections that lead to brand loyalty and growth, forward-looking enterprises are reimagining the experience they provide to their customers. At Adobe, we’ve have always known that a great customer experience is the differentiator that separates market leaders from the pack.”
Source: SA Transcript
Adobe’s Digital media unit once again generated a record $1.14 billion in revenue. Though the stock trades at near 52-week highs, the stock has clear upside ahead.
