Adobe Inc. (NASDAQ:ADBE) Q2 2019 Earnings Conference Call - Final Transcript

Jun 18, 2019 • 05:00 pm ET

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Adobe Inc. (NASDAQ:ADBE) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
John Murphy

Our trade DSO was 42 days, which compares to 44 days in the year-ago quarter, and 46 days last quarter.

Remaining Performance Obligation, or RPO, was approximately $8.37 billion exiting Q2, which compares to $8.13 billion exiting Q1.

Deferred revenue exiting Q2 was $3.13 billion. The sequential decline in deferred revenue was a result of timing rather than business performance due to fewer billing cycles in our second quarter. The impact was more than offset by an increase in unbilled backlog.

Our ending cash and short-term investment position exiting Q2 was $3.48 billion, and cash flow from operations was $1.11 billion in the quarter.

In Q2, we repurchased approximately 2.5 million shares at a cost of $659 million. We currently have $6.6 billion remaining of our $8 billion repurchase authority granted in May 2018, which goes through 2021.

Now we will discuss our financial targets. As a reminder, our Q3 includes the summer months of June, July and August, and we expect normal seasonality to influence our results during the quarter.

In Q3 FY19, we are targeting revenue of approximately $2,800 million; Digital Media segment year-over-year revenue growth of approximately 20%; Net new Digital Media ARR of approximately $360 million; Digital Experience segment year-over-year revenue growth of approximately 34%; Other Expense of approximately $22 million; Tax rate of approximately 11% on a GAAP and non-GAAP basis; share count of approximately 491 million shares; GAAP earnings per share of approximately $1.40; and non-GAAP earnings per share of approximately $1.95.

As usual, we are not updating annual targets at this time of the year. We are pleased with our first half performance and we expect our first half momentum to continue in the second half, with typical seasonality in Q3 and strength in Q4. We continue to expect sequential operating margin growth as we move through the second half of the year.

I'll now turn the call back over to Mike.

Executive
Mike Saviage

Thanks, John. Adobe MAX, our user conference focused on our Digital Media solutions, will occur during the first week of November this year in Los Angeles. On day one, at MAX, on Monday, November 4th, we plan to host a Financial Analyst Meeting. Invitations, including discounted registration information, will be sent to our analyst and investor email list later this summer. More information about the event can be found online at max.adobe.com.

If you wish to listen to a playback of today's conference call, a webcast archive of the call will be available on our IR site later today. Alternatively, you can listen to a phone replay by calling 888-203-1112; use conference ID number 2843011. International callers should dial 719-457-0820. The phone playback service will be available beginning at 5 pm Pacific Time today and ending at 5 pm Pacific Time on June 25th, 2019.

We would now be happy to take your questions, and we ask that you limit your questions to one per person. Operator?