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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
FORM 10-Q
(Mark One)
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended August 30, 2024
or
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-15175
ADOBE INC.
(Exact name of registrant as specified in its charter)
________________________________
| | | | | |
| Delaware | 77-0019522 |
(State or other jurisdiction of
incorporation or organization) | (I.R.S. Employer
Identification No.) |
345 Park Avenue, San Jose, California 95110-2704
(Address of principal executive offices and zip code)
(408) 536-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Common Stock, $0.0001 par value per share | ADBE | NASDAQ |
________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of September 20, 2024, 440.2 million shares of the registrant’s common stock, $0.0001 par value per share, were issued and outstanding.
ADOBE INC.
FORM 10-Q
TABLE OF CONTENTS
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PART I—FINANCIAL INFORMATION | |
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PART II—OTHER INFORMATION | |
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PART I—FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ADOBE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
| | | | | | | | | | | |
| | August 30,
2024 | | December 1,
2023 |
| (Unaudited) | | (*) |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 7,193 | | | $ | 7,141 | |
| Short-term investments | 322 | | | 701 | |
Trade receivables, net of allowances for doubtful accounts of $17 and $16, respectively | 1,802 | | | 2,224 | |
| Prepaid expenses and other current assets | 1,399 | | | 1,018 | |
| Total current assets | 10,716 | | | 11,084 | |
| Property and equipment, net | 1,969 | | | 2,030 | |
| Operating lease right-of-use assets, net | 368 | | | 358 | |
| Goodwill | 12,814 | | | 12,805 | |
| Other intangibles, net | 858 | | | 1,088 | |
| Deferred income taxes | 1,548 | | | 1,191 | |
| Other assets | 1,557 | | | 1,223 | |
| Total assets | $ | 29,830 | | | $ | 29,779 | |
| | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Trade payables | $ | 318 | | | $ | 314 | |
| Accrued expenses | 1,848 | | | 1,942 | |
| Debt | 1,499 | | | — | |
| Deferred revenue | 5,779 | | | 5,837 | |
| Income taxes payable | 130 | | | 85 | |
| Operating lease liabilities | 70 | | | 73 | |
| Total current liabilities | 9,644 | | | 8,251 | |
| Long-term liabilities: | | | |
| Debt | 4,128 | | | 3,634 | |
| Deferred revenue | 127 | | | 113 | |
| Income taxes payable | 585 | | | 514 | |
| | | |
| Operating lease liabilities | 381 | | | 373 | |
| Other liabilities | 420 | | | 376 | |
| Total liabilities | 15,285 | | | 13,261 | |
| Stockholders’ equity: | | | |
Preferred stock, $0.0001 par value; 2 shares authorized; none issued | — | | | — | |
Common stock, $0.0001 par value; 900 shares authorized; 601 shares issued; 445 and 455 shares outstanding, respectively | — | | | — | |
| Additional paid-in capital | 13,026 | | | 11,586 | |
| Retained earnings | 36,911 | | | 33,346 | |
| Accumulated other comprehensive income (loss) | (309) | | | (285) | |
Treasury stock, at cost (156 and 146 shares, respectively) | (35,083) | | | (28,129) | |
| Total stockholders’ equity | 14,545 | | | 16,518 | |
| Total liabilities and stockholders’ equity | $ | 29,830 | | | $ | 29,779 | |
_________________________________________
(*) The condensed consolidated balance sheet as of December 1, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | August 30,
2024 | | September 1,
2023 | | August 30,
2024 | | September 1,
2023 |
| Revenue: | | | | | | | |
| Subscription | $ | 5,180 | | | $ | 4,631 | | | $ | 15,156 | | | $ | 13,521 | |
| Product | 82 | | | 96 | | | 305 | | | 346 | |
| Services and other | 146 | | | 163 | | | 438 | | | 494 | |
| Total revenue | 5,408 | | | 4,890 | | | 15,899 | | | 14,361 | |
Cost of revenue: | | | | | | | |
| Subscription | 413 | | | 447 | | | 1,324 | | | 1,317 | |
| Product | 6 | | | 7 | | | 19 | | | 23 | |
| Services and other | 135 | | | 126 | | | 399 | | | 380 | |
| Total cost of revenue | 554 | | | 580 | | | 1,742 | | | 1,720 | |
| Gross profit | 4,854 | | | 4,310 | | | 14,157 | | | 12,641 | |
Operating expenses: | | | | | | | |
| Research and development | 1,022 | | | 881 | | | 2,945 | | | 2,584 | |
| Sales and marketing | 1,431 | | | 1,337 | | | 4,228 | | | 3,983 | |
| General and administrative | 366 | | | 353 | | | 1,073 | | | 1,041 | |
| | | | | | | |
Acquisition termination fee | — | | | — | | | 1,000 | | | — | |
| Amortization of intangibles | 43 | | | 42 | | | 127 | | | 126 | |
| Total operating expenses | 2,862 | | | 2,613 | | | 9,373 | | | 7,734 | |
| Operating income | 1,992 | | | 1,697 | | | 4,784 | | | 4,907 | |
Non-operating income (expense): | | | | | | | |
| Interest expense | (51) | | | (27) | | | (119) | | | (85) | |
| Investment gains (losses), net | 12 | | | 6 | | | 34 | | | 12 | |
| Other income (expense), net | 89 | | | 67 | | | 241 | | | 157 | |
| Total non-operating income (expense), net | 50 | | | 46 | | | 156 | | | 84 | |
| Income before income taxes | 2,042 | | | 1,743 | | | 4,940 | | | 4,991 | |
| Provision for income taxes | 358 | | | 340 | | | 1,063 | | | 1,046 | |
| Net income | $ | 1,684 | | | $ | 1,403 | | | $ | 3,877 | | | $ | 3,945 | |
| Basic net income per share | $ | 3.78 | | | $ | 3.07 | | | $ | 8.63 | | | $ | 8.62 | |
| Shares used to compute basic net income per share | 445 | | | 456 | | | 449 | | | 458 | |
| Diluted net income per share | $ | 3.76 | | | $ | 3.05 | | | $ | 8.58 | | | $ | 8.59 | |
| Shares used to compute diluted net income per share | 448 | | | 459 | | | 452 | | | 459 | |
ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| | August 30,
2024 | | September 1,
2023 | | August 30,
2024 | | September 1,
2023 |
| | | | | | | |
| Increase/(Decrease) | | Increase/(Decrease) |
| Net income | $ | 1,684 | | | $ | 1,403 | | | $ | 3,877 | | | $ | 3,945 | |
| Other comprehensive income (loss), net of taxes: | | | | | | | |
| Available-for-sale securities: | | | | | | | |
| Unrealized gains / losses on available-for-sale securities | 3 | | | 5 | | | 10 | | | 19 | |
| Reclassification adjustment for recognized gains / losses on available-for-sale securities | — | | | — | | | — | | | 5 | |
| Net increase (decrease) from available-for-sale securities | 3 | | | 5 | | | 10 | | | 24 | |
| Derivatives designated as hedging instruments: | | | | | | | |
Unrealized gains / losses on derivative instruments | (60) | | | 8 | | | (59) | | | — | |
| Reclassification adjustment for realized gains / losses on derivative instruments | 1 | | | (4) | | | 9 | | | (28) | |
| Net increase (decrease) from derivatives designated as hedging instruments | (59) | | | 4 | | | (50) | | | (28) | |
| Foreign currency translation adjustments | 23 | | | 3 | | | 16 | | | 12 | |
| Other comprehensive income (loss), net of taxes | (33) | | | 12 | | | (24) | | | 8 | |
| Total comprehensive income, net of taxes | $ | 1,651 | | | $ | 1,415 | | | $ | 3,853 | | | $ | 3,953 | |
ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended August 30, 2024 |
| | | Common Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Treasury Stock | | |
| | | Shares | | Amount | | | | | Shares | | Amount | | Total |
Balances at May 31, 2024 | | 601 | | | $ | — | | | $ | 12,504 | | | $ | 35,227 | | | $ | (276) | | | (152) | | | $ | (32,612) | | | $ | 14,843 | |
| Net income | | — | | | — | | | — | | | 1,684 | | | — | | | — | | | — | | | 1,684 | |
Other comprehensive income (loss), net of taxes | | — | | | — | | | — | | | — | | | (33) | | | — | | | — | | | (33) | |
Re-issuance of treasury stock under stock compensation plans | | — | | | — | | | 48 | | | — | | | — | | | 1 | | | 48 | | | 96 | |
| Repurchases of common stock | | — | | | — | | | — | | | — | | | — | | | (5) | | | (2,519) | | | (2,519) | |
| | | | | | | | | | | | | | | | |
| Stock-based compensation | | — | | | — | | | 474 | | | — | | | — | | | — | | | — | | | 474 | |
| | | | | | | | | | | | | | | | |
Balances at August 30, 2024 | | 601 | | | $ | — | | | $ | 13,026 | | | $ | 36,911 | | | $ | (309) | | | (156) | | | $ | (35,083) | | | $ | 14,545 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 1, 2023 |
| | | Common Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Treasury Stock | | |
| | | Shares | | Amount | | | | | Shares | | Amount | | Total |
Balances at June 2, 2023 | | 601 | | | $ | — | | | $ | 10,717 | | | $ | 30,609 | | | $ | (297) | | | (145) | | | $ | (26,191) | | | $ | 14,838 | |
Net income | | — | | | — | | | — | | | 1,403 | | | — | | | — | | | — | | | 1,403 | |
Other comprehensive income (loss),
net of taxes | | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | 12 | |
Re-issuance of treasury stock under stock compensation plans | | — | | | — | | | 36 | | | — | | | — | | | 2 | | | 48 | | | 84 | |
| Repurchases of common stock | | — | | | — | | | — | | | — | | | — | | | (2) | | | (1,003) | | | (1,003) | |
| | | | | | | | | | | | | | | | |
| Stock-based compensation | | — | | | — | | | 442 | | | — | | | — | | | — | | | — | | | 442 | |
| | | | | | | | | | | | | | | | |
Balances at September 1, 2023 | | 601 | | | $ | — | | | $ | 11,195 | | | $ | 32,012 | | | $ | (285) | | | (145) | | | $ | (27,146) | | | $ | 15,776 | |
ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended August 30, 2024 |
| | | Common Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Treasury Stock | | |
| | | Shares | | Amount | | | | | Shares | | Amount | | Total |
Balances at December 1, 2023 | | 601 | | | $ | — | | | $ | 11,586 | | | $ | 33,346 | | | $ | (285) | | | (146) | | | $ | (28,129) | | | $ | 16,518 | |
| Net income | | — | | | — | | | — | | | 3,877 | | | — | | | — | | | — | | | 3,877 | |
Other comprehensive income (loss),
net of taxes | | — | | | — | | | — | | | — | | | (24) | | | — | | | — | | | (24) | |
Re-issuance of treasury stock under stock compensation plans | | — | | | — | | | 48 | | | (312) | | | — | | | 3 | | | 100 | | | (164) | |
| Repurchases of common stock | | — | | | — | | | — | | | — | | | — | | | (13) | | | (7,053) | | | (7,053) | |
| | | | | | | | | | | | | | | | |
| Stock-based compensation | | — | | | — | | | 1,392 | | | — | | | — | | | — | | | — | | | 1,392 | |
| Value of shares in deferred compensation plan | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Balances at August 30, 2024 | | 601 | | | $ | — | | | $ | 13,026 | | | $ | 36,911 | | | $ | (309) | | | (156) | | | $ | (35,083) | | | $ | 14,545 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 1, 2023 |
| | | Common Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Treasury Stock | | |
| | | Shares | | Amount | | | | | Shares | | Amount | | Total |
Balances at December 2, 2022 | | 601 | | | $ | — | | | $ | 9,868 | | | $ | 28,319 | | | $ | (293) | | | (139) | | | $ | (23,843) | | | $ | 14,051 | |
Net income | | — | | | — | | | — | | | 3,945 | | | — | | | — | | | — | | | 3,945 | |
Other comprehensive income (loss),
net of taxes | | — | | | — | | | — | | | — | | | 8 | | | — | | | — | | | 8 | |
Re-issuance of treasury stock under stock compensation plans | | — | | | — | | | 36 | | | (252) | | | — | | | 4 | | | 103 | | | (113) | |
| Repurchases of common stock | | — | | | — | | | — | | | — | | | — | | | (10) | | | (3,407) | | | (3,407) | |
| | | | | | | | | | | | | | | | |
| Stock-based compensation | | — | | | — | | | 1,291 | | | — | | | — | | | — | | | — | | | 1,291 | |
| Value of shares in deferred compensation plan | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Balances at September 1, 2023 | | 601 | | | $ | — | | | $ | 11,195 | | | $ | 32,012 | | | $ | (285) | | | (145) | | | $ | (27,146) | | | $ | 15,776 | |
ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| | | | | | | | | | | |
| | Nine Months Ended |
| | August 30,
2024 | | September 1,
2023 |
| Cash flows from operating activities: | | | |
| Net income | $ | 3,877 | | | $ | 3,945 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 639 | | | 650 | |
| Stock-based compensation | 1,392 | | | 1,291 | |
| Reduction of operating lease right-of-use assets | 56 | | | 54 | |
| Deferred income taxes | (341) | | | (276) | |
| Unrealized losses (gains) on investments, net | (24) | | | (7) | |
| Other non-cash items | 9 | | | — | |
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: | | | |
| Trade receivables, net | 414 | | | 217 | |
| Prepaid expenses and other assets | (799) | | | (787) | |
| Trade payables | 2 | | | (47) | |
| Accrued expenses and other liabilities | (162) | | | (153) | |
| Income taxes payable | 116 | | | 749 | |
| Deferred revenue | (44) | | | 69 | |
| Net cash provided by operating activities | 5,135 | | | 5,705 | |
| Cash flows from investing activities: | | | |
| | | |
| Maturities of short-term investments | 379 | | | 754 | |
| Proceeds from sales of short-term investments | 9 | | | 215 | |
| | | |
| Purchases of property and equipment | (135) | | | (313) | |
| Purchases of long-term investments, intangibles and other assets | (125) | | | (34) | |
| Proceeds from sale of long-term investments and other assets | 2 | | | 1 | |
Net cash provided by investing activities | 130 | | | 623 | |
| Cash flows from financing activities: | | | |
| Repurchases of common stock | (7,000) | | | (3,400) | |
| Proceeds from re-issuance of treasury stock | 361 | | | 314 | |
| Taxes paid related to net share settlement of equity awards | (525) | | | (387) | |
| Proceeds from issuance of debt | 1,997 | | | — | |
| Repayment of debt | — | | | (500) | |
| Other financing activities, net | (56) | | | 8 | |
| | | |
| Net cash used for financing activities | (5,223) | | | (3,965) | |
| Effect of foreign currency exchange rates on cash and cash equivalents | 10 | | | 2 | |
| Net change in cash and cash equivalents | 52 | | | 2,365 | |
| Cash and cash equivalents at beginning of period | 7,141 | | | 4,236 | |
| Cash and cash equivalents at end of period | $ | 7,193 | | | $ | 6,601 | |
| Supplemental disclosures: | | | |
| Cash paid for income taxes, net of refunds | $ | 1,389 | | | $ | 590 | |
| Cash paid for interest | $ | 94 | | | $ | 103 | |
| | | |
| | | |
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 1, 2023 on file with the SEC (our “Annual Report”).
Use of Estimates
In preparing the condensed consolidated financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of the SEC, we must make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ materially from these estimates.
Significant Accounting Policies
There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.
Recent Accounting Pronouncements Not Yet Effective
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for our annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes, which prescribes standardized categories and disaggregation of information in the reconciliation of provision for income taxes, requires disclosure of disaggregated income taxes paid, and modifies other income tax-related disclosure requirements. The updated standard is effective for us beginning with our fiscal year 2026 annual reporting period. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.
With the exception of the new standards discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended August 30, 2024, as compared to the recent accounting pronouncements described in our Annual Report, that are of significance or potential significance to us.
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 2. REVENUE
Segment Information
Our segment results for the three months ended August 30, 2024 and September 1, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) | Digital
Media | | Digital
Experience | | Publishing and
Advertising | | Total |
Three months ended August 30, 2024 | | | | | | | |
| Revenue | $ | 3,995 | | | $ | 1,354 | | | $ | 59 | | | $ | 5,408 | |
| Cost of revenue | 137 | | | 395 | | | 22 | | | 554 | |
| Gross profit | $ | 3,858 | | | $ | 959 | | | $ | 37 | | | $ | 4,854 | |
| Gross profit as a percentage of revenue | 97 | % | | 71 | % | | 63 | % | | 90 | % |
Three months ended September 1, 2023 | | | | | | | |
| Revenue | $ | 3,594 | | | $ | 1,229 | | | $ | 67 | | | $ | 4,890 | |
| Cost of revenue | 161 | | | 397 | | | 22 | | | 580 | |
| Gross profit | $ | 3,433 | | | $ | 832 | | | $ | 45 | | | $ | 4,310 | |
| Gross profit as a percentage of revenue | 96 | % | | 68 | % | | 67 | % | | 88 | % |
Our segment results for the nine months ended August 30, 2024 and September 1, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) | Digital
Media | | Digital
Experience | | Publishing and
Advertising | | Total |
Nine months ended August 30, 2024 | | | | | | | |
| Revenue | $ | 11,719 | | | $ | 3,970 | | | $ | 210 | | | $ | 15,899 | |
| Cost of revenue | 489 | | | 1,187 | | | 66 | | | 1,742 | |
| Gross profit | $ | 11,230 | | | $ | 2,783 | | | $ | 144 | | | $ | 14,157 | |
| Gross profit as a percentage of revenue | 96 | % | | 70 | % | | 69 | % | | 89 | % |
Nine months ended September 1, 2023 | | | | | | | |
| Revenue | $ | 10,500 | | | $ | 3,627 | | | $ | 234 | | | $ | 14,361 | |
| Cost of revenue | 455 | | | 1,200 | | | 65 | | | 1,720 | |
| Gross profit | $ | 10,045 | | | $ | 2,427 | | | $ | 169 | | | $ | 12,641 | |
| Gross profit as a percentage of revenue | 96 | % | | 67 | % | | 72 | % | | 88 | % |
Revenue by geographic area for the three and nine months ended August 30, 2024 and September 1, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months | | Nine Months |
| (in millions) | 2024 | | 2023 | | 2024 | | 2023 |
Americas | $ | 3,241 | | | $ | 2,943 | | | $ | 9,539 | | | $ | 8,601 | |
| EMEA | 1,405 | | | 1,229 | | | 4,085 | | | 3,615 | |
| APAC | 762 | | | 718 | | | 2,275 | | | 2,145 | |
| Total | $ | 5,408 | | | $ | 4,890 | | | $ | 15,899 | | | $ | 14,361 | |
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Revenue by major offerings in our Digital Media reportable segment for the three and nine months ended August 30, 2024 and September 1, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months | | Nine Months |
| (in millions) | 2024 | | 2023 | | 2024 | | 2023 |
| Creative Cloud | $ | 3,188 | | | $ | 2,909 | | | $ | 9,380 | | | $ | 8,522 | |
| Document Cloud | 807 | | | 685 | | | 2,339 | | | 1,978 | |
| Total Digital Media revenue | $ | 3,995 | | | $ | 3,594 | | | $ | 11,719 | | | $ | 10,500 | |
Subscription revenue by segment for the three and nine months ended August 30, 2024 and September 1, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months | | Nine Months |
| (in millions) | 2024 | | 2023 | | 2024 | | 2023 |
Digital Media | $ | 3,921 | | | $ | 3,506 | | | $ | 11,474 | | | $ | 10,225 | |
| Digital Experience | 1,231 | | | 1,096 | | | 3,599 | | | 3,208 | |
| Publishing and Advertising | 28 | | | 29 | | | 83 | | | 88 | |
| Total subscription revenue | $ | 5,180 | | | $ | 4,631 | | | $ | 15,156 | | | $ | 13,521 | |
Contract Balances
A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is required before payment of consideration is due. Included in trade receivables on the condensed consolidated balance sheets are unbilled receivable balances which have not yet been invoiced, and are typically related to license revenue or services which are delivered prior to invoicing. As of August 30, 2024, the balance of trade receivables, net of allowances for doubtful accounts, was $1.80 billion, inclusive of unbilled receivables of $83 million. As of December 1, 2023, the balance of trade receivables, net of allowances for doubtful accounts, was $2.22 billion, inclusive of unbilled receivables of $80 million.
We maintain an allowance for doubtful accounts which reflects our best estimate of potentially uncollectible trade receivables and is based on both specific and general reserves. We maintain general reserves on a collective basis by considering factors such as historical experience, credit-worthiness, the age of the trade receivable balances, current economic conditions and a reasonable and supportable forecast of future economic conditions. The allowance for doubtful accounts was $17 million and $16 million as of August 30, 2024 and December 1, 2023, respectively.
A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract assets are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion on the condensed consolidated balance sheets. We regularly review contract asset balances for impairment, considering factors such as historical experience, credit-worthiness, age of the balance, current economic conditions and a reasonable and supportable forecast of future economic conditions. Contract asset impairments were not material for the nine months ended August 30, 2024. Contract assets were $214 million and $141 million as of August 30, 2024 and December 1, 2023, respectively.
Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from subscription services, including non-cancellable and non-refundable committed funds and refundable customer deposits. Deferred revenue is recognized as revenue when transfer of control to customers has occurred. As of August 30, 2024, the balance of deferred revenue was $5.91 billion, which includes $44 million of refundable customer deposits. Arrangements with some of our enterprise customers with non-cancellable and non-refundable committed funds provide options to either renew monthly on-premise term-based licenses or use some or all funds to purchase other Adobe products or services. Non-cancellable and non-refundable committed funds related to these agreements comprised approximately 4% of the total deferred revenue.
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
As of December 1, 2023, the balance of deferred revenue was $5.95 billion. During the three and nine months ended August 30, 2024, approximately $1.07 billion and $5.43 billion of revenue, respectively, was recognized that was included in the balance of deferred revenue as of December 1, 2023.
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods. As of August 30, 2024, remaining performance obligations were approximately $18.14 billion. Non-cancellable and non-refundable funds related to some of our enterprise customer agreements referred to above comprised approximately 4% of the total remaining performance obligations. Approximately 69% of the remaining performance obligations, excluding the aforementioned enterprise customer agreements, are expected to be recognized over the next 12 months with the remainder recognized thereafter.
Incremental costs of obtaining a contract with a customer are capitalized if we expect the benefit of those costs to be longer than one year and primarily relate to sales commissions paid to our sales force personnel. Capitalized contract acquisition costs are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion on the condensed consolidated balance sheets. Capitalized contract acquisition costs were $717 million and $656 million as of August 30, 2024 and December 1, 2023, respectively.
We record refund liabilities for amounts that may be subject to future refunds, which include sales returns reserves and customer rebates and credits. Refund liabilities are included in accrued expenses on the condensed consolidated balance sheets. Refund liabilities were $107 million and $111 million as of August 30, 2024 and December 1, 2023, respectively.
NOTE 3. ACQUISITIONS
Figma
On September 15, 2022, we entered into a definitive merger agreement under which we intended to acquire Figma, Inc. (“Figma”) for approximately $20 billion, comprised of approximately half cash and half stock.
On December 17, 2023, we entered into a mutual termination agreement with Figma to terminate the proposed merger. In accordance with the terms of the termination agreement, we paid Figma a termination fee of $1 billion. The termination fee was recorded in operating expenses in our condensed consolidated statements of income during the nine months ended August 30, 2024, and was not tax-deductible for financial statement purposes.
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents consist of highly liquid marketable securities with remaining maturities of three months or less at the date of purchase. We classify our investments in marketable debt securities as “available-for-sale.” We carry these investments at fair value, based on quoted market prices or other readily available market information. Unrealized gains and unrealized non-credit-related losses of marketable debt securities are included in accumulated other comprehensive income, net of taxes, in our condensed consolidated balance sheets. Unrealized credit-related losses are recorded to other income (expense), net in our condensed consolidated statements of income with a corresponding allowance for credit-related losses in our condensed consolidated balance sheets. Gains and losses are determined using the specific identification method and recognized when realized in our condensed consolidated statements of income.
Cash, cash equivalents and short-term investments consisted of the following as of August 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Estimated
Fair Value |
| Current assets: | | | | | | | |
| Cash | $ | 571 | | | $ | — | | | $ | — | | | $ | 571 | |
| Cash equivalents: | | | | | | | |
| | | | | | | |
| Money market funds | 6,622 | | | — | | | — | | | 6,622 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total cash and cash equivalents | 7,193 | | | — | | | — | | | 7,193 | |
| Short-term fixed income securities: | | | | | | | |
| Asset-backed securities | 6 | | | — | | | — | | | 6 | |
| Corporate debt securities | 146 | | | — | | | (1) | | | 145 | |
| | | | | | | |
| | | | | | | |
| U.S. agency securities | 13 | | | — | | | — | | | 13 | |
| U.S. Treasury securities | 159 | | | — | | | (1) | | | 158 | |
| Total short-term investments | 324 | | | — | | | (2) | | | 322 | |
| Total cash, cash equivalents and short-term investments | $ | 7,517 | | | $ | — | | | $ | (2) | | | $ | 7,515 | |
Cash, cash equivalents and short-term investments consisted of the following as of December 1, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Estimated
Fair Value |
| Current assets: | | | | | | | |
| Cash | $ | 618 | | | $ | — | | | $ | — | | | $ | 618 | |
| Cash equivalents: | | | | | | | |
| | | | | | | |
| Money market funds | 6,498 | | | — | | | — | | | 6,498 | |
| | | | | | | |
| Time deposits | 25 | | | — | | | — | | | 25 | |
| | | | | | | |
| Total cash equivalents | 6,523 | | | — | | | — | | | 6,523 | |
| Total cash and cash equivalents | 7,141 | | | — | | | — | | | 7,141 | |
| Short-term fixed income securities: | | | | | | | |
| Asset-backed securities | 15 | | | — | | | — | | | 15 | |
| | | | | | | |
| Corporate debt securities | 438 | | | — | | | (4) | | | 434 | |
| | | | | | | |
| | | | | | | |
| U.S. agency securities | 13 | | | — | | | (1) | | | 12 | |
| U.S. Treasury securities | 247 | | | — | | | (7) | | | 240 | |
| | | | | | | |
| | | | | | | |
| Total short-term investments | 713 | | | — | | | (12) | | | 701 | |
| Total cash, cash equivalents and short-term investments | $ | 7,854 | | | $ | — | | | $ | (12) | | | $ | 7,842 | |
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table summarizes the estimated fair value of short-term fixed income debt securities classified as short-term investments based on stated effective maturities as of August 30, 2024:
| | | | | | | |
| (in millions) | | | Estimated
Fair Value |
| Due within one year | | | $ | 308 | |
| Due between one and two years | | | 14 | |
| | | |
| | | |
| Total | | | $ | 322 | |
We review our debt securities classified as short-term investments on a regular basis for impairment. For debt securities in unrealized loss positions, we determine whether any portion of the decline in fair value below the amortized cost basis is due to credit-related factors if we neither intend to sell nor anticipate that it is more likely than not that we will be required to sell prior to recovery of the amortized cost basis. We consider factors such as the extent to which the market value has been less than the cost, any noted failure of the issuer to make scheduled payments, changes to the rating of the security and other relevant credit-related factors in determining whether or not a credit loss exists. During the nine months ended August 30, 2024 and September 1, 2023, we did not recognize an allowance for credit-related losses on any of our investments.
NOTE 5. FAIR VALUE MEASUREMENTS
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The fair value of our financial assets and liabilities at August 30, 2024 was determined using the following inputs:
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Fair Value Measurements at Reporting Date Using |
| | | | Quoted Prices
in Active
Markets for
Identical Assets | | Significant
Other
Observable
Inputs | | Significant
Unobservable
Inputs |
| | Total | | (Level 1) | | (Level 2) | | (Level 3) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Money market funds | $ | 6,622 | | | $ | 6,622 | | | $ | — | | | $ | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Short-term investments: | | | | | | | |
| Asset-backed securities | 6 | | | — | | | 6 | | | — | |
| Corporate debt securities | 145 | | | — | | | 145 | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| U.S. agency securities | 13 | | | — | | | 13 | | | — | |
| U.S. Treasury securities | 158 | | | — | | | 158 | | | — | |
| Prepaid expenses and other current assets: | | | | | | | |
| Foreign currency derivatives | 9 | | | — | | | 9 | | | — | |
| | | | | | | |
| Other assets: | | | | | | | |
| Deferred compensation plan assets | 266 | | | 266 | | | — | | | — | |
| Foreign currency derivatives | 1 | | | — | | | 1 | | | — | |
| | | | | | | |
| Total assets | $ | 7,220 | | | $ | 6,888 | | | $ | 332 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | |
| Accrued expenses: | | | | | | | |
| | | | | | | |
| Foreign currency derivatives | $ | 42 | | | $ | — | | | $ | 42 | | | $ | — | |
| | | | | | | |
Other liabilities: | | | | | | | |
| Foreign currency derivatives | 9 | | | — | | | 9 | | | — | |
| Total liabilities | $ | 51 | | | $ | — | | | $ | 51 | | | $ | — | |
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The fair value of our financial assets and liabilities at December 1, 2023 was determined using the following inputs:
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Fair Value Measurements at Reporting Date Using |
| | | | Quoted Prices
in Active
Markets for
Identical Assets | | Significant
Other
Observable
Inputs | | Significant
Unobservable
Inputs |
| | Total | | (Level 1) | | (Level 2) | | (Level 3) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| | | | | | | |
| Money market funds | $ | 6,498 | | | $ | 6,498 | | | $ | — | | | $ | — | |
| | | | | | | |
| Time deposits | 25 | | | 25 | | | — | | | — | |
| | | | | | | |
| Short-term investments: | | | | | | | |
| Asset-backed securities | 15 | | | — | | | 15 | | | — | |
| Corporate debt securities | 434 | | | — | | | 434 | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| U.S. agency securities | 12 | | | — | | | 12 | | | — | |
| U.S. Treasury securities | 240 | | | — | | | 240 | | | — | |
| Prepaid expenses and other current assets: | | | | | | | |
| Foreign currency derivatives | 52 | | | — | | | 52 | | | — | |
| Other assets: | | | | | | | |
| Deferred compensation plan assets | 206 | | | 206 | | | — | | | — | |
| | | | | | | |
| Total assets | $ | 7,482 | | | $ | 6,729 | | | $ | 753 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | |
| Accrued expenses: | | | | | | | |
| | | | | | | |
| Foreign currency derivatives | $ | 4 | | | $ | — | | | $ | 4 | | | $ | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Our fixed income available-for-sale debt securities consist of high quality, investment grade securities from diverse issuers with a weighted average credit rating of AA. We value these securities based on pricing from independent pricing vendors who use matrix pricing valuation techniques including market approach methodologies that model information generated by market transactions involving identical or comparable assets, as well as discounted cash flow methodologies. Inputs include quoted prices in active markets for identical assets or inputs other than quoted prices that are observable either directly or indirectly in determining fair value, including benchmark yields, issuer spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. We therefore classify all of our fixed income available-for-sale securities as Level 2. We perform routine procedures such as comparing prices obtained from multiple independent sources to ensure that appropriate fair values are recorded.
The fair values of our money market funds, time deposits and deferred compensation plan assets, which consist of money market and other mutual funds, are based on quoted prices in active markets at the measurement date.
Our over-the-counter foreign currency derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange and interest rate data at the measurement date.
Our other current financial assets and current financial liabilities have fair values that approximate their carrying values.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS
We may use derivatives to partially offset our business exposure to foreign currency and interest rate risk on expected future cash flows and certain existing assets and liabilities. We do not use any of our derivative instruments for trading purposes.
We enter into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty. We do not offset fair value amounts recognized for derivative instruments under master netting arrangements. We also enter into collateral security agreements with certain of our counterparties to exchange cash collateral when the net fair value of certain derivative instruments fluctuates from contractually established thresholds.
Cash Flow Hedges
In countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts and forward contracts to hedge a portion of our forecasted foreign currency denominated revenue and expenses. These foreign exchange contracts, carried at fair value, have maturities of up to 24 months.
As of August 30, 2024, we had net derivative losses on our foreign currency cash flow hedges expected to be recognized within the next 36 months, of which $52 million of net losses are expected to be recognized into revenue within the next 12 months.
Non-Designated Hedges
Our derivatives not designated as hedging instruments consist of foreign currency forward contracts that we primarily use to hedge monetary assets and liabilities denominated in non-functional currencies.
Fair value asset derivatives are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion, and fair value liability derivatives are included in accrued expenses for the current portion and other liabilities for the long-term portion on our condensed consolidated balance sheets. The fair value of derivative instruments as of August 30, 2024 and December 1, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | 2024 | | 2023 |
| | Fair Value
Asset
Derivatives | | Fair Value
Liability
Derivatives | | Fair Value
Asset
Derivatives | | Fair Value
Liability
Derivatives |
| Derivatives designated as hedging instruments: | | | | | | | |
| Foreign exchange option contracts | $ | 5 | | | $ | — | | | $ | 42 | | | $ | — | |
| Foreign exchange forward contracts | 3 | | | 49 | | | 1 | | | — | |
| | | | | | | |
| | | | | | | |
| Derivatives not designated as hedging instruments: | | | | | | | |
| Foreign exchange forward contracts | 2 | | | 2 | | | 9 | | | 4 | |
| Total derivatives | $ | 10 | | | $ | 51 | | | $ | 52 | | | $ | 4 | |
Gains and losses on derivative instruments, net of tax, recognized in our condensed consolidated statements of comprehensive income for the three and nine months ended August 30, 2024 were primarily associated with our foreign exchange forward contracts, for which we recognized $40 million of net losses in both periods. Gains and losses on derivative instruments, net of tax, for the three and nine months ended September 1, 2023 were immaterial.
For the three and nine months ended August 30, 2024 and September 1, 2023, the effects of derivative instruments on our condensed consolidated statements of income were immaterial.
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 7. GOODWILL AND OTHER INTANGIBLES
Goodwill as of August 30, 2024 and December 1, 2023 was $12.81 billion and $12.81 billion, respectively. During the second quarter of fiscal 2024, we completed our annual goodwill impairment test associated with our reporting units and determined there was no impairment of goodwill.
Other intangible assets subject to amortization as of August 30, 2024 and December 1, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | 2024 | | 2023 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net | | Gross Carrying Amount | | Accumulated Amortization | | Net |
| Customer contracts and relationships | $ | 1,205 | | | $ | (713) | | | $ | 492 | | | $ | 1,204 | | | $ | (619) | | | $ | 585 | |
| Purchased technology | 877 | | | (664) | | | 213 | | | 984 | | | (647) | | | 337 | |
| Trademarks | 376 | | | (250) | | | 126 | | | 376 | | | (217) | | | 159 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other | 36 | | | (9) | | | 27 | | | 22 | | | (15) | | | 7 | |
Other intangibles, net | $ | 2,494 | | | $ | (1,636) | | | $ | 858 | | | $ | 2,586 | | | $ | (1,498) | | | $ | 1,088 | |
Amortization expense related to other intangibles was $84 million and $252 million for the three and nine months ended August 30, 2024, respectively. Comparatively, amortization expense related to other intangibles was $92 million and $284 million for the three and nine months ended September 1, 2023, respectively. Of these amounts, $41 million and $125 million were included in cost of revenue for the three and nine months ended August 30, 2024, respectively, and $50 million and $158 million were included in cost of revenue for the three and nine months ended September 1, 2023, respectively.
As of August 30, 2024, the estimated aggregate amortization expense in future periods was as follows:
| | | | | | | | |
| (in millions) | | |
| Fiscal Year | | Other Intangibles (1) |
| Remainder of 2024 | $ | 83 | |
| 2025 | 303 | |
| 2026 | 151 | |
| 2027 | 109 | |
| 2028 | 66 | |
| Thereafter | 126 | |
| Total expected amortization expense | $ | 838 | |
_________________________________________
(1)Excludes capitalized in-process research and development which is considered indefinite lived until the completion or abandonment of the associated research and development efforts.
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 8. ACCRUED EXPENSES
Accrued expenses as of August 30, 2024 and December 1, 2023 consisted of the following:
| | | | | | | | | | | |
| (in millions) | 2024 | | 2023 |
| Accrued compensation and benefits | $ | 504 | | | $ | 535 | |
| Accrued bonuses | 447 | | | 547 | |
| | | |
| Accrued corporate marketing | 149 | | | 132 | |
| | | |
Sales and use taxes | 111 | | | 122 | |
| Refund liabilities | 107 | | | 111 | |
| | | |
| | | |
| | | |
| | | |
| Other | 530 | | | 495 | |
| Accrued expenses | $ | 1,848 | | | $ | 1,942 | |
Other primarily includes general business accruals, accrued hosting fees, royalties payable and accrued interest expense.
NOTE 9. STOCK-BASED COMPENSATION
Restricted Stock Units
Restricted stock unit activity for the nine months ended August 30, 2024 was as follows:
| | | | | | | | | | | | | | | | | |
| Number of Shares (in millions) | | Weighted Average
Grant Date
Fair Value | | Aggregate Fair Value (1) (in millions) |
| Beginning outstanding balance | 7.8 | | | $ | 418.63 | | | |
| Awarded | 2.9 | | | $ | 586.20 | | | |
| Released | (2.6) | | | $ | 441.45 | | | |
| Forfeited | (0.4) | | | $ | 449.34 | | | |
| | | | | |
| Ending outstanding balance | 7.7 | | | $ | 472.50 | | | $ | 4,436 | |
| | | | | |
| Expected to vest | 7.1 | | | $ | 471.45 | | | $ | 4,100 | |
_________________________________________
(1) The aggregate fair value is calculated using the closing stock price as of August 30, 2024 of $574.41.
The total fair value of restricted stock units vested during the nine months ended August 30, 2024 was $1.42 billion.
Performance Shares
In the first quarter of fiscal 2024, the Executive Compensation Committee of our Board of Directors (the “ECC”) approved the 2024 Performance Share Program, the terms of which are similar to the 2023 Performance Share Program that is still outstanding. For information regarding our outstanding Performance Share Programs, including the terms, see “Note 12. Stock-Based Compensation” of our Annual Report on Form 10-K for the fiscal year ended December 1, 2023.
As of August 30, 2024, the performance shares awarded under our 2024, 2023 and 2022 Performance Share Programs remained outstanding and unvested.
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Performance share activity for the nine months ended August 30, 2024 was as follows:
| | | | | | | | | | | | | | | | | |
| Number of Shares (in millions) | | Weighted Average
Grant Date
Fair Value | | Aggregate Fair Value (1) (in millions) |
| Beginning outstanding balance | 0.5 | | | $ | 465.71 | | | |
| Awarded | 0.2 | | | $ | 645.40 | | | |
| Released | (0.1) | | | $ | 455.65 | | | |
| Forfeited | (0.1) | | | $ | 487.20 | | | |
| Ending outstanding balance | 0.5 | | | $ | 536.74 | | | $ | 301 | |
| | | | | |
| Expected to vest | 0.5 | | | $ | 534.50 | | |