M+E Connections

Adobe’s recently finalized, $1.5 billion acquisition of Workfront and its work management platform for marketers presents significant opportunities for growth, according to Adobe executives.

“With the Workfront acquisition now being closed, we have the leading wealth management product for marketers,” Shantanu Narayen, Adobe CEO, chairman and president, said Dec. 10 during an earnings call for the fourth quarter and fiscal year (ended Nov. 27).

“We have a longstanding set of partners in an ecosystem with Workfront with over 61,000 joint customers, and Workfront is already equipped with” application programming interfaces (APIs) “for not just Experience Cloud but also Creative Cloud, which represents opportunities to further leverage and deliver synergies across our businesses,” he told analysts.

In announcing its plan to buy Workfront Nov. 9, Adobe said Adobe and Workfront were “longstanding partners with strong product synergies and a growing base of… shared customers,” and pointed out Workfront was “equipped with APIs that enable a seamless connection to Adobe Creative Cloud and Adobe Experience Cloud.” Shared Adobe and Workfront customers included Deloitte, Under Armour, Nordstrom, Prudential Financial, T-Mobile and The Home Depot. “The combination of Adobe Experience Cloud and Workfront will bring efficiency, collaboration, and productivity gains to marketing teams currently challenged with siloed work management solutions,” Adobe had said.

Adobe has “heard great feedback from customers and partners” about the addition of Workfront, according to Anil Chakravarthy, EVP and GM of Adobe’s Digital Experience Business and Worldwide Field Operations. “We’re laying a strong foundation for a marketing system of record that will enable our customers to have greater efficiency and agility in executing their campaigns and to optimize their campaigns with real-time insights,” he said Dec. 10.

And Adobe CFO John Murphy told analysts: “With the most comprehensive set of solutions for customer experience management applications and services, and the addition of Workfront, our addressable market for Digital Experience has grown.”

As a result, “we expect to drive multi-year growth of the data and insights category with our scaled next-generation Customer Data Platform,” Murphy said, adding: “The Digital Experience organization is optimized to drive subscription” and Software-as-a-Service (SaaS) revenue growth, while gaining share of an $85 billion addressable market for Digital Experience.

Meanwhile, “when you think about the macro trends that we all experience, every industry is experiencing a tectonic shift towards all things digital, and I believe that the events of this year have only accelerated that,” according to Narayen.

“The genie is not going to go back into the bottle, and even regulated industries that have traditionally been slower to embrace digital, have certainly picked up the pace this year,” Narayen told analysts, predicting: “The way we work will never be the same again, and it’s great to see how the PC has experienced a tremendous revival as the computing workhorse.”

Noting that documents are “at the center” of how all our work gets done, he explained: “Paper to digital transformation is only accelerating, and every business process is going digital, because every business is now a digital business. Digital has become the primary way for all businesses to engage with their customers. And it’s true that customer expectations are also at an all-time high because e-commerce is exploding.”

Pointing to an annual holiday report powered by Adobe Analytics, he said it’s projected that online holiday spending will reach $189 billion this year, which represents 33% year-over-year growth. “Underpinning all of this is a massive shift towards artificial intelligence and machine learning, which will only further these forces at play,” he said.

The comments came as Adobe reported Q4 revenue grew 14% from a year earlier to $3.42 billion and fiscal year 2020 revenue increased 15% to $12.87 billion. Q4 revenue grew to $2.25 billion ($4.64 per share) from $852 million ($1.74 per share), while profit for the year increased to $5.26 billion ($10.83 per share) from $2.95 billion ($6 per share).

Adobe’s Digital Media segment revenue jumped 20% in Q4 to $2.50 billion, while Creative revenue grew to $2.08 billion and Document Cloud revenue grew to $411 million. Digital Media annualized recurring revenue (ARR) grew to $10.18 billion exiting the quarter, a quarter-over-quarter increase of $548 million. Creative ARR grew to $8.72 billion, while and Document Cloud ARR grew to $1.46 billion. Digital Experience segment revenue, including Advertising Cloud revenue, was $877 million. However, after a segment reporting change, Digital Experience segment revenue was $819 million, 10% growth from a year earlier, Adobe said. Digital Experience subscription revenue grew 14% year-over-year.

For Q1, Adobe is targeting revenue of about $3.75 billion, with Digital Media segment year-over-year revenue growth of about 26%, net new Digital Media ARR of about $410 million, Murphy told analysts. The company is also targeting Digital Experience segment year-over-year revenue growth of about19% and Digital Experience year-over-year subscription revenue growth of about 22%, he said.

For fiscal year 2021, Adobe is targeting revenue of about $15.15 billion, Digital Media segment year-over-year revenue growth of about 19%, net new Digital Media ARR of about $1.75 billion, Digital Experience segment year-over-year revenue growth of about 19% and Digital Experience subscription revenue year-over-year growth of about 22%, he added.