June 18, 2021 Adobe BUY Company Update : Design Software

On Adobe's essentialness: content, data, cash flow and RPO

We are raising our FY21-FY24 estimates and reiterating our Jay Vleeschhouwer recommendation as Adobe continues to execute financially [email protected] and technologically. We are raising our price objective to 646-442-4251 $620 from $597 commensurate with our assumptions for cash flow, coupled with our longtime strategic, competitive and technological assessments. Stock Symbol NASDAQ: ADBE Current Price $551.36 We estimate that revenues will surpass $21 billion by FY24 12 mos. Target Price $620.00 (as compared with less than $1 billion when we began our Investment Opinion Buy coverage) and the art and science of being Adobe will continue to beget a steep trajectory for cash flow. Market Cap $265,204.2 mln Shares O/S 481.0 mln Adobe’s 2Q21 revenues and earnings were above our Avg Daily Vol. (3 mos.) 2,548,399 shs. estimates, including upside in Creative and DX revenues. 52-Week Price Low/High $416.03 - $561.36 Creative Cloud continued to show strong momentum across the various offerings and DX showed margin improvement from EPS its revenue scaling and the Ad Cloud reclassification. Adobe cited strong bookings in “enterprise” (including for Adobe FY 21E FY 22E FY 23E Experience Platform and Acrobat) and “accelerated recovery” Q1 (Feb) $3.14A $3.14E $3.57E in SMB) – reflected in strong growth for RPO. Q2 (May) 3.03A 3.23E 3.71E Q3 (Aug) 2.98E 3.32E 3.85E Operating cash flow increased by 68% year/year to $1.988 billion, and we’re estimating over $7.6 billion for FY21. In Q4 (Nov) 3.10E 3.55E 4.08E addition, we estimate that operating cashflow could approach $12.25E $13.24E $15.20E $10 billion by FY24. P/E 45.0x 41.6x 36.3x We include below our updated compilation of the open jobs Price/Sales 16.9x 15.4x 13.8x data: the reopening of the hiring aperture has been in all 600 regions and in R&D and sales. There are multiple product, technology and market investment 550 initiatives to sustain growth and addressable market expansion, i.e., Adobe’s “future creative stack”; Project Firefly 500 (the API strategy); Commerce merchant services; video, 3D and immersive; Stock, and documents; and, “marketing system 450 of record”. These will cumulatively further build upon the “DM³” strategy. This is an essential aspect of the culture and strategy: 400 reinvesting in core and new businesses. Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Adobe We maintain our longtime view that given Adobe’s predominance in its three segments, portfolio breadth and integrations (i.e., within and across the segments), and regular enhancements of DM, DX, and DC and operational execution; continued subscriber growth (we calculate that the cumulative CC base has more than doubled over the past four years); addressable markets; investments in sales and engineering capacity (plus priority initiatives, such as retention) -- all of which are ultimately comprehended in ARR, RPO and cash flow – there will continue to be attractive appreciation potential.

17 State Street, 3rd Floor, New York, NY 10004 • 212.509.9500 • www.griffinsecurities.com Please Review Disclosures on Page 26 of This Report Adobe June 18, 2021

REVISED FY21-FY24 ESTIMATES

. For 3Q21, we are revising our estimate to $3.877 billion, up 20%, and $2.98 a share, from a prior $$3.814 billion, and $2.84 a share.

We expect that Digital Media will be about $2.844 billion, up 22% year/year, including Document Cloud revenues of $489 million, up 30%. In addition, we’re estimating a $439 million addition to Digital Media ARR.

The company is guiding to about ≈$3.88 billion and ≈$3.00 a share;

. For FY21, we’re revising our estimate to $15.662 billion, up almost 22%, and $12.25 a share, from a prior $15.457 billion and $11.83 a share, including 24% growth in Digital Media and 22% growth for Digital Experience. We’re estimating a more than $2.0 billion addition to Digital Media ARR for the year.

We’re estimating a non-GAAP operating margin of 46%, up 340bp, including a 190bp improvement in the gross margin (including a nearly 200bp DX improvement). We estimate the 2H21 non-GAAP margin will be about 45.7%, up ≈160bp year/year (even with higher headcount and rebuilding of certain expenses with reopenings, such as travel; Adobe’s events, such as Summit, may resume being real in 2022).

The company did not update its FY21 revenue guidance of about $15.45 billion. Workfront is expected now to do better than the original “$140-$150 million” of GAAP revenues that Adobe had assume at the time of the acquisition in early FY21 (Adobe, commendably, doesn’t speak about “non- GAAP revenues” vis-à-vis acquisitions accounting);

. For FY22, we’re revising our estimate to $17.190 billion, up 10%, and $13.24 a share, from a prior $16.961 billion and $12.84 a share, including 9% growth in Digital Media (11%, if we exclude the extra week in 1Q21, but perhaps still too conservative) and 14% growth for Digital Experience subscriptions. We’re estimating a non-GAAP operating margin of 46%, about flat with FY21;

. For FY23, we’re revising our estimate to $19.256 billion, up 12%, and $15.20 a share, from a prior $18.883 billion and $14.61 a share, including 12% growth in Digital Media (perhaps too conservative) and 14% growth in Digital Experience. We’re estimating a non-GAAP operating margin of about 47%, up 100bp, and operating cash flow of more than $8.8 billion.

. For FY24, we’re revising our estimate to $21.457 billion, up 11%, and $17.20 a share, from a prior $20.919 billion and $16.48 a share, including 11% growth in Digital Media and 12% growth in Digital Experience. We’re estimating a non-GAAP operating margin of more than 48%, up ≈100bp, and operating cash flow of about $9.8 billion. .

Griffin Securities Equity Research 2 Adobe June 18, 2021

2Q21 DETAILED REVIEW

The Creative ARR of $9.526 billion compared with our $9.448 billion estimate, an increase of $1.592 billion, or 20% year/year.

We’re estimating a Creative ARR of $10.38 billion, up $1.6 billion, or 18%, by the end of 3Q21, and $16.5 billion by the end of FY24 (implying an FY19-FY24 CAGR of ≈18%).

The Document Cloud ARR increased to $1.685 billion, vs. our estimate of $1.694 billion, $1.572 billion in 1Q21, $1.474 billion in 4Q20, $1.339 billion in 3Q20, and $1.241 billion in 2Q20. The $113 million sequential increase in Document Cloud ARR was above the $105 million average sequential increase over the prior four quarters.

Therefore, the total Digital Media ARR was $11.221 billion, vs. our estimate of $11.142 billion, up $318 million from the prior quarter and up $2.036 billion, or 22%, over the past year. The company anticipates a further sequential increase of about $440 million in 3Q21, vs. our prior estimated increase of $387 million.

In 2Q21, total revenues of $3.835 billion, up 23%, were well above our $3.719 billion estimate and earnings of $3.03 a share exceeded our estimate of $2.81 a share. The revenue upside was largely in Digital Media.

The non-GAAP operating margin of 45.9% increased 340bp year/year and exceeded our 44.9% estimate. we’re estimating an increase of 340bp in FY21 (including an improved gross margin in DX) to 46.1% and more than 48% by FY24.

Subscription revenues were $3.520 billion, up 24% year/year from $2.831 billion in 2Q20, vs. our estimate of $3.502 billion (2Q20 subscriptions revenues were originally reported as $2.874 billion, the difference due to the adjustment for Ad Cloud).

Product revenues (i.e., perpetual) were $153 million, up 20% year/year.

Services & support revenues (including Ad Cloud pursuant to the reclassification last year) were $162 million, down 4%, from $169 million in 2Q20 (which was reclassified from $126 million as originally reported for 2Q20).

Digital Media revenues were $2.787 billion, up 25% year/year, vs. our estimate of $2.694 billion.

[Adobe has announced the return of David Wadhwani to the company as executive vice president and chief business officer for the Digital Media segment. As with Adobe’s products for customers, being a part of senior management is clearly compelling].

Document Cloud revenues of $469 million, up 23% year/year compared with our estimate of $479 million. Document Cloud TTM subscriptions revenues were almost $1.52 billion, up 36%; we’re estimating more than $1.7 billion for FY21, up 33% and that Document Cloud TTM subscriptions revenues could surpass $2 billion by mid-FY23.

As for Document Cloud, we have long viewed the Acrobat business as the third major opportunity – in addition to Media and Marketing – for building material incremental recurring revenues, and this has been clearly underway for the past few years. Acrobat had historically been Adobe’s highest new license volume brand (once upon a time this was disclosed), and it has had the largest base of licenses.

We infer that Creative Cloud individual/team GAAP revenues were in the neighborhood of $1.75 billion,

Griffin Securities Equity Research 3 Adobe June 18, 2021

about three-fourths of Creative revenues, plus the revenues from Creative ETLAs/CCE and Stock (with an annual revenue rate approaching $400 million, if not more).

Creative revenues – i.e., Digital Media revenues excluding Document Cloud – were $2.318 billion, up 24%, as compared with our estimate of $2.215 billion.

For Creative Cloud, we calculate that the gross cumulative base has reached 24 million since the inception of Creative Cloud; the last disclosed cumulative base number was 6.9 million as of 1Q16.

Digital Experience revenues were $936 million, up 21% year/year, vs. our estimate of $926 million (excluding Ad Cloud). We calculate that Workfront added $40 million to revenues, net of purchase accounting.

The adjusted DX subscriptions revenues were $817 million, up 24.5% from $656 million in 2Q20, which was reclassified from $707 million (the difference being attributable to having moved Ad Cloud out of the DX numbers). Our estimate for adjusted DX subscriptions revenues had been $792 million.

The company anticipates that DX subscriptions revenues will be up about 25% in 3Q21, implying about $835 million (±$3 million), vs. our prior estimate of about $820 million.

Finally, the Publishing & Advertising” business, formerly Print & Publishing, had revenues of $110 million, down 10%, mostly due to the large decline in Ad Cloud. On the other hand, it appears there may have been a large amount of upfront product revenue attributable to the accounting for PostScript/OEM revenues. We had estimated segment revenues of $99.5 million.

Subscriptions cost of revenues increased 22% year/year to $328 million (9.3% of subscriptions revenues), vs. $269 million (9.5% of subscriptions revenues) in 2Q20 - which was originally reported as $317 million, or 11.0% of subscriptions revenues. The reclassification underscored the magnitude of adverse cost of revenue impact of the Ad Cloud business had (e.g. including media costs).

The Digital Media cost of revenues were $99 million, up $15 million year/year; we had estimated $96 million. The Digital Media segment gross margin, therefore, was again over 96%.

The DX cost of revenues were $319 million, or 34.1% of DX revenues, vs. an adjusted $275 million in 2Q20, or 35.5% of revenues, and $319 million in 1Q21, or 34.2% of revenues. we had estimated 2Q21 DX CoR of $330.9 million.

In terms of operating expenses, R&D spending of $612 million, up $80 million year/year, were above our $600 million estimate, while sales & marketing spending of $1.073 billion, or 28.0% of revenues (down 1 point year/year), was below our estimate of $1.090 billion (the upside in R&D spending was more or less offset therefore by the lower than expected sales & marketing spending).

The 2Q21 non-GAAP operating income of $1.762 billion, or 45.9% of revenues (up 340bp year/year), compared with our estimate of $1.668 billion, or 44.9% of estimated revenues.

In Charts 1a-12g we show Adobe’s recurring revenues by brand (Creative Cloud, Experience Cloud); Creative ARR; Creative Cloud subscribers by product; Creative Cloud by individual subscribers; Creative Cloud by team subscribers; Creative Cloud revenues by product (point-product, full-product); Creative Cloud revenues by subscribers (individual, team); Creative Suite/Creative Cloud, Creative Cloud, Photoshop/Photography Plan, and Acrobat/Document Cloud revenues (FY06-FY24E); services revenue & margin; operating and free cash flow; deferred revenues (FY06-2Q21); and, open positions by region and function (R&D, sales).

Griffin Securities Equity Research 4 Adobe June 18, 2021

GEO REVIEW

Including hedging gains/losses, the net year/year effect on revenues of currency changes in 2Q21 was $78 million, equivalent to 250bp of year/year growth, vs. $44 million in 1Q21, $5 million in 4Q20, ($25 million) in 3Q20, and ($41) million in 2Q20.

The net sequential currency effect was $10 million, vs. $37 million in 1Q21, $21 million in 4Q20, $15 million in 3Q20, and ($18) million in 2Q20.

. Americas revenues were $2.185 billion, up 21% year/year. The TTM Americas revenues were $8.255 billion, up 18%;

. EMEA revenues were $1.026 billion, up 24% year/year. The TTM EMEA revenues were $3.836 billion, up 20%; and,

. Asia/Pacific revenues were $624 million, up 27% year/year. The TTM Asia revenues were $2.298 billion, up 24%.

BALANCE SHEET & CASH FLOW

Adobe maintains a strong balance sheet with cash and equivalents of $5.768 billion, vs. $4.963 billion at 1Q21, $5.992 billion at 4Q20, $5.264 billion at 3Q20, and $4.351 billion at 2Q20. Net cash therefore was as of 2Q21.

The company repurchased 2.1 million shares for $983 million.

Total deferred revenue was $4.283 billion (up 24% year/year), vs. $4.285 billion at 1Q21, $3.759 billion at 4Q20, $3.448 billion at 3Q20, and $3.461 billion at 2Q20. The 5-year CAGR for deferred revenues through 2Q21 was almost 21%.

“Remaining performance obligation”, or RPO, was $12.23 billion (up 23% year/year), vs. $11.61 billion at 1Q21, $11.34 billion at 4Q20, $10.34 billion at 3Q20, and $9.92 billion at 2Q20. From 2Q19 to 2Q21, RPO increased by 46% (a two-year CAGR of 21%).

Cash flow from operations was $1.988 billion, vs. $1.772 billion in 1Q21, $1.782 billion in 4Q20, $1.436 billion in 3Q20, and $1.184 billion in 2Q20. Therefore, TTM OCF was $6.98 billion, up $2.17 billion from the TTM ended 2Q20. The company noted a drop in DSOs to 35 days from 38 in 1Q21 and 40 in 2Q20

We anticipate operating cash flow for FY21 could exceed $7.6 billion, and that operating cash flow could approach $10 billion by FY24.

Griffin Securities Equity Research 5 Adobe June 18, 2021

Table 1. Adobe, RPO & next-twelve-month revenues

Total RPO ($, Non-cancellable ($, Remaining RPO ($, NTM revenue ($, % of estimates NTM

mlns.) mlns.) mlns.) mlns). revenues

1Q19 $8,130 $602.3 ≈$7,528 ≈$5,500 Nmf

2Q19 $8,370 $575.4 ≈$7,795 ≈$5,770 Nmf

3Q19 $8,770 $647.8 ≈$8,122 ≈$6,010 Nmf

4Q19 $9.820 $776.4 ≈$9,044 ≈$6,690 Nmf

1Q20 $9,910 ≈$515 ≈$9,395 ≈$6,940 Nmf

2Q20 $9.920 ≈$570 ≈$9.350 ≈$6.930 Nmf

3Q20 $10,340 ≈$595 ≈$9.745 ≈$7,210 NA

4Q20 $11,340 ≈$670 ≈$10.670 ≈$7,790 NA

1Q21 $11,610 ≈$600 ≈$11,010 ≈$8,150 NA

2Q21 $12,230 * * * *

Source: Company data, Griffin Securities estimates. * pending 2Q21 10-Q

Griffin Securities Equity Research 6 Adobe June 18, 2021

HIGHLIGHTED QUOTES FROM THE CONFERENCE CALL – AND OUR COMMENTS

. Regarding the Creative business, the company saw “strong customer acquisition in core creative and emerging categories, including photography, video and 3D&I” (3D and immersive, i.e., augmented reality).

. Regarding Document Cloud, the company saw “strength in Acrobat across all routes to market and offerings with enterprise bookings growth up over 60% year over year” (in the primordial days of packaged Acrobat, Adobe used to disclose that the “VLA” business was the majority of Acrobat revenues). In addition, the company noted “accelerated demand for Sign”;

. In Digital Experience, the company referred to “explosive growth for Adobe Experience Platform and associated services like Customer Journey Analytics and Real-time CDP, which combined blew past the $100 million book of business mark in Q2” – this was unusually assertive language for Adobe;

. By market/customer cohort, there was “accelerated recovery in the SMB segment with our Creative Cloud for Teams offering”, “success in enterprise licensing, driven by account expansion at renewal” (i.e., seat expansion), and more “multi-solution engagements with enterprise customers across geographies”;

. With regard to headcount and jobs data, “we certainly have a number of positions open that we’re actively recruiting against, but we’re committed to investing to be able to capture the large opportunities. So we’re going to continue to hire for innovation and we’re going to continue to invest in sales headcount as well as leverage our ability with variable marketing to really drive performance. So, I don’t think this is the time to pull back given the momentum in the business.…”.

Chart A. Adobe, “The Modern Creative Tech Stack”

Source: Adobe, Summit 2021. Chart A comments. This chart, while not naming specific products, essentially depicts the DM² continuum, i.e., which would include Creative Cloud, AEM, other DX brands/functions and now Workfront.

Griffin Securities Equity Research 7 Adobe June 18, 2021

Chart B. Adobe, “Commerce roadmap updates”

Source: Adobe, Summit 2021. Chart 2a comments. Setting aside the commercial for Commerce in this slide, there are important indications of what Adobe means to do or to focus on technically and thematically; in particular we’d highlight the references to “extensible & integrated”, which in turn ties to the API and developer ecosystem strategy (built on the large number of developers from the acquisition) and “frictionless”, a term that has been used more and more by management (i.e., in our view, making computing easy is in fact hard to do and is itself a form of valuable IP). We estimate that Magento could be a quarter-billion dollar business this year.

Griffin Securities Equity Research 8 Adobe June 18, 2021

Chart C. Adobe, “Adobe Experience Platform” architecture

Source: Adobe, Summit 2021. Chart C comments. This chart on AEP supersedes and updates, but is essentially consistent with, the depiction below from Summit 2019, there were some modifications of or additions to terms: under “real- time customer profile”, Adobe has added “profile merging”; under “AI & ML”, “searching” has become “model operationalization” (is that a word?); under “application delivery”, “delivery” and “triggered journeys” have become “edge computing”, “destination connectors”, “streaming services”, “business services”, and “real-time access”. “API & development framework” has been inserted between “application delivery” and :activation”, underscoring this strategic element of Adobe’s market/ecosystem development strategy. Similarly, “streaming” has been inserted between what is now “data sources” (formerly “inputs”) and “data pipeline & semantics”.

Griffin Securities Equity Research 9 Adobe June 18, 2021

Chart D. Adobe, Marketing System of Record

Source: Adobe, Summit 2021.

Chart D comments. This chart, or something like it, may very well become the center of gravity for how Adobe depicts its DX strategy.

Griffin Securities Equity Research 10 Adobe June 18, 2021

ADOBE RÉSUMÉS

The “V” recovery that began at the end of 3Q20 has extended into 2Q21. The total number of openings as of the end of 2Q21 were more than 1,310, a new high, up almost 30% from the end of 1Q21, more than 180% from the end of FY20 and more than 150% from the end of 2Q20. At the trough in late June 2020/early July 2020, there were barely a dozen openings. The current total surpasses the prior high set in April 2019; total openings have been up sequentially each month since July 2020, including R&D and sales.

Adobe’s total headcount was 24,710, up 1,121 from 1Q21, an unusually large increase for a non-increase for a non-acquisition quarter but consistent with the intent to resume hiring.

The 2Q21 monthly average for total positions was 1,220 (over 5% of headcount as of the end of 1Q21), vs. the 1Q21 average of 800, the 4Q20 average of more than 350, fewer than 80 in 3Q20, and about 590 in 2Q20. In the charts below, we depict the data since 2012 (when we began this series of reports) and a more focused view of FY20-2Q21.

Each region – Americas, EMEA, and Asia – was up from the end of 1Q21 (Asia most of all) and from the end of FY20 (also Asia most of all, followed by the Americas). The Americas were up over 125% year/year, EMEA doubled, and Asia was up by more than 290% (given the mid-2020 troughs, the year/year comparisons will be less meaningful over the next two to four months).

Adobe-R&D was up over 25% from the end of 1Q21 and by more than 310% from the end of FY20; Adobe-sales were up by more than 10% from 1Q21 and by more than 85% from the end of FY20.

By keyword, brand and function search, there have been notable increases for the fiscal year-to-date for “AEM”, “account executive”, “e-commerce”, “GTM” (go-to-market), “Magento”, “”, “retention”, “self- serve”, and “Workfront”. By region, we counted:

. ≈740 positions in the Americas, up over 10% from the end of 1Q21, 170% from the end of FY20, and more than 225%% from 2Q20. The 2Q21 monthly average was 700, vs. more than 480 in 1Q21 , ≈215 in 4Q20, ≈45 in 3Q20, and 360 in 2Q20;

. ≈195 positions in EMEA, up over 40% from the end of 1Q21, 165% from the end of FY20 and 100% from 2Q20. The 2Q21 monthly average was about 175, vs. almost 140 in 1Q21, 57 in 4Q20, 13 in 3Q20, and 112 in 2Q20. The U.K. accounted for the largest part of the EMEA openings (now more than 65, more than doubling from three months ago and from six months ago), followed by Romania (which, we should note, has become popular for engineering at a few of our engineering software companies); and,

. ≈380 positions in Asia (i.e., mostly India, Japan and Australia), up over 70% from the end of 1Q21, 225% from the end of FY20 and more than 190% from the end of 2Q20. The 2Q21 monthly average was 345, vs. almost 180 in 1Q21, 82 in 4Q20, fewer than 20 in 3Q20, and about 120 in 2Q20. India accounted for the largest part of the Asia positions (320, vs. 170 three months ago and more than 50 six months ago), followed by Japan and Australia (over two-thirds of the India positions were in “engineering”). .

By function, we counted:

. more than 600 positions in R&D (“engineering”), up over 25% from the end of 1Q21, 315% from the end of FY20 and more than 185% from the end of 2Q20. The 2Q21 monthly average was about 560, vs. more than 340 in 1Q21, ≈125 in 4Q20, almost 30 in 3Q20, and about 240 in 2Q20.

Griffin Securities Equity Research 11 Adobe June 18, 2021

R&D accounted on average for more than 45% of openings during 2Q21, vs. about 42% in 1Q21, 37% during 4Q20, 25% during 3Q20, and over 40% during 2Q20. For FY21, we estimate that R&D will account for more than 30% of total operating expenses; and, .

. about 410 positions in sales, up over 10% from the end of 1Q21, more than 85% from the end of FY20, and more than 185% from 2Q20. Sales openings have increased sequentially each month since June 2020 (with the exception of a slight decline in March 2021). The 2Q21 monthly average was more than 380, vs. more than 310 in 1Q21, ≈130 in 4Q20, 15 in 3Q20, and almost 170 in 2Q20. The prior monthly high for sales was ≈360 in March 2018.

Sales accounted on average for over 30% of openings in 2Q21, about 40% of openings in 1Q21, 34% during 4Q20, 23% during 3Q20 (including a low of just 15% in August 2020), and 28% during 2Q20.

The Americas accounted for an average of 29% of total sales openings during 2Q21 (vs. 38% in 1Q21 and 31% in 4Q21; during June through September 2020, sales accounted for only a single-digit percent of openings, or none); EMEA-sales accounted for an average of 40% sales openings during 2Q21 (vs. 49% in 1Q21 and 44% in 4Q21); and Asia-sales accounted for an average of 32% of sales openings during 2Q21 (vs. 40% during 1Q21 and 34% in 4Q20).

A spot check prior to the release showed ≈1,265 open positions, including 600 R&D positions and ≈365 sales positions (up 65% from the end of FY20). By geo, we counted ≈705 in the Americas (up 115% year/year and almost 160% from the end of FY20), ≈210 in EMEA (up over 110% year/year and over 180% from the end of FY20), and ≈350 in Asia (up 260% year/year, including almost 80% in India, and 200% from the end of FY20). Total open positions were up over 140% year/year and up over 170% from the end of FY20.

Chart 1a. Adobe, non-GAAP operating margin, FY08-FY24E

50.0% 49.0% 48.0% 47.0% 46.0% 45.0% 44.0% 43.0% 42.0% 41.0% 40.0% 39.0% 38.0% 37.0% 36.0% 35.0% 34.0% 33.0% 32.0% 31.0% 30.0% 29.0% Model transition 28.0% 27.0% 26.0% 25.0% 24.0% 23.0% 22.0% 21.0% 20.0% 19.0% 18.0% 17.0% 16.0% 15.0%

ADBE non-GAAP operating margin

Source: Company data, Griffin Securities

Griffin Securities Equity Research 12 Adobe June 18, 2021

Chart 1b. Adobe, operating expense ratios, FY10-FY24E

50.0% 47.5% 45.0% 42.5% 40.0% 37.5% 35.0% 32.5% 30.0% 27.5% 25.0% 22.5% 20.0% 17.5% 15.0% 12.5% 10.0% 7.5% 5.0% 2.5% 0.0%

ADBE R&D % ADBE sales & marketing % ADBE CoR %

Source: Company data, Griffin Securities

Chart 2a. Adobe, operating & free cash flow, 2008-2024E $10,000.0 50.0% $9,500.0 47.5% $9,000.0 45.0% $8,500.0 42.5% $8,000.0 40.0% $7,500.0 37.5% $7,000.0 35.0% $6,500.0 32.5% $6,000.0 30.0% $5,500.0 27.5% $5,000.0 25.0% $4,500.0 22.5% $4,000.0 20.0% $3,500.0 17.5% $3,000.0 15.0% $2,500.0 12.5% $2,000.0 10.0% $1,500.0 7.5% $1,000.0 5.0% $500.0 2.5% $0.0 0.0%

ADBE - OCF ADBE - FCF ADBE - operating margin

Source: Company data, Griffin Securities.

Griffin Securities Equity Research 13 Adobe June 18, 2021

Chart 2b. Adobe, deferred revenues, FY06-2Q21

$4,500.0 $4,400.0 $4,300.0 $4,200.0 $4,100.0 $4,000.0 $3,900.0 $3,800.0 $3,700.0 $3,600.0 $3,500.0 $3,400.0 $3,300.0 $3,200.0 $3,100.0 $3,000.0 $2,900.0 $2,800.0 $2,700.0 $2,600.0 $2,500.0 $2,400.0 $2,300.0 $2,200.0 $2,100.0 $2,000.0 $1,900.0 $1,800.0 $1,700.0 $1,600.0 $1,500.0 $1,400.0 $1,300.0 $1,200.0 $1,100.0 $1,000.0 $900.0 $800.0 $700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $0.0

ADBE deferred revenue

Source: Company data, Griffin Securities.

Chart 2c. Adobe, net cash, FY06-2Q21

$5,000.0 $4,750.0 $4,500.0 $4,250.0 $4,000.0 $3,750.0 $3,500.0 $3,250.0 $3,000.0 $2,750.0 $2,500.0 $2,250.0 $2,000.0 $1,750.0 $1,500.0 $1,250.0 $1,000.0 $750.0 Magento, Marketo acq. $500.0 $250.0 $0.0 ($250.0) ($500.0) ($750.0) ($1,000.0) ADBE net cash

Source: Company data, Griffin Securities.

Griffin Securities Equity Research 14 Adobe June 18, 2021

Chart 3a. Adobe, revenues by geo, FY04-2Q21

$2,500.0 $2,450.0 $2,400.0 $2,350.0 $2,300.0 $2,250.0 $2,200.0 $2,150.0 $2,100.0 $2,050.0 $2,000.0 $1,950.0 $1,900.0 $1,850.0 $1,800.0 $1,750.0 $1,700.0 $1,650.0 $1,600.0 $1,550.0 $1,500.0 $1,450.0 $1,400.0 $1,350.0 $1,300.0 $1,250.0 $1,200.0 $1,150.0 $1,100.0 $1,050.0 $1,000.0 $950.0 $900.0 $850.0 $800.0 $750.0 $700.0 $650.0 $600.0 $550.0 $500.0 $450.0 $400.0 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $0.0

Americas Asia EMEA

Source: Adobe Systems, Griffin Securities. Chart 3b. Adobe, TTM revenues by geo, FY04-2Q21

$8,500.0 $8,250.0 $8,000.0 $7,750.0 $7,500.0 $7,250.0 $7,000.0 $6,750.0 $6,500.0 $6,250.0 $6,000.0 $5,750.0 $5,500.0 $5,250.0 $5,000.0 $4,750.0 $4,500.0 $4,250.0 $4,000.0 $3,750.0 $3,500.0 $3,250.0 $3,000.0 $2,750.0 $2,500.0 $2,250.0 $2,000.0 $1,750.0 $1,500.0 $1,250.0 $1,000.0 $750.0 $500.0 $250.0 $0.0

Americas - TTM Asia - TTM EMEA - TTM

Source: Adobe Systems, Griffin Securities.

Griffin Securities Equity Research 15 Adobe June 18, 2021

Chart 4a. Adobe, total open positions, 2012 – May 2021

1500 1450 1400 1350 1300 1250 1200 1150 1100 1050 1000 950 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0

ADBE - total

Source: Company data, Griffin Securities.

Chart 4b. Adobe, total open positions, December 2019– May 2021

1500 1450 1400 1350 1300 1250 1200 1150 1100 1050 1000 950 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0

ADBE - total

Source: Company data, Griffin Securities. Chart 4b comments. This charts shows the openings in the months immediately before bioeconomic conditions took effect, the trough in mid-2020, and the subsequent rebound. .

Griffin Securities Equity Research 16 Adobe June 18, 2021

Chart 4c. Adobe, open sales positions, by region, December 2019 – May 2021

250 240 230 220 210 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0

ADBE sales - Americas ADBE sales - Asia ADBE sales- EMEA

Source: Company data, Griffin Securities.

Chart 4d. Adobe, open positions by country, FY18 – May 2021

400 390 380 370 360 350 340 330 320 310 300 290 280 270 260 250 240 230 220 210 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0

France - ADBE Germany - ADBE India - ADBE Japan - ADBE

Source: Company data, Griffin Securities.

Chart 4d comments. The positions in India have mostly to do with “engineering”, while the positions in France, Germany, and Japan have mostly to do with sales or marketing.

Griffin Securities Equity Research 17 Adobe June 18, 2021

Chart 4e. Adobe, open sales & R&D positions, December 2019 – May 2021

750 725 700 675 650 625 600 575 550 525 500 475 450 425 400 375 350 325 300 275 250 225 200 175 150 125 100 75 50 25 0

ADBE - R&D ADBE - sales

Source: Company data, Griffin Securities.

Chart 4g. Adobe, total headcount, 2012 – 2QFY21

25,000 24,500 24,000 23,500 23,000 22,500 22,000 21,500 21,000 20,500 20,000 19,500 19,000 18,500 18,000 17,500 17,000 16,500 16,000 15,500 15,000 14,500 14,000 13,500 13,000 12,500 12,000 11,500 11,000 10,500 10,000

ADBE - headcount

Source: Company data, Griffin Securities.

Griffin Securities Equity Research 18 Adobe June 18, 2021

ADOBE MODEL

(in millions, except EPS data)

FY19A 1Q20A 2Q20A 3Q20A 4Q20A FY20A 1Q21A 2Q21A 3Q21E 4Q21E FY21E 1Q22E 2Q22E 3Q22E 4Q22E FY22E 1Q23E 2Q23E 3Q23E 4Q23E FY23E 1Q24E 2Q24E 3Q24E 4Q24E FY24E Digital Media $7,707.0 $2,169.0 $2,232.4 $2,336.8 $2,494.9 $9,233.1 $2,858.7 $2,787.3 $2,844.0 $2,953.7 $11,443.6 $2,994.8 $3,065.8 $3,139.6 $3,295.5 $12,495.7 $3,356.8 $3,430.2 $3,518.2 $3,664.8 $13,970.0 $3,759.0 $3,833.4 $3,926.6 $4,036.2 $15,555.1 Digital Experience $3,206.2 $753.6 $774.6 $779.3 $820.4 $3,127.8 $934.4 $937.6 $947.1 $1,007.1 $3,826.2 $1,037.5 $1,067.0 $1,096.5 $1,150.0 $4,351.0 $1,185.0 $1,215.5 $1,241.0 $1,301.5 $4,943.0 $1,330.0 $1,362.5 $1,391.0 $1,448.5 $5,532.0 Publishing $258.1 $168.8 $121.6 $109.6 $109.5 $509.5 $112.0 $110.1 $85.6 $84.8 $392.4 $89.6 $89.6 $78.6 $85.8 $343.5 $87.6 $90.6 $78.6 $86.8 $343.5 $99.6 $100.6 $84.6 $84.8 $369.5 Total Revenues $11,171.3 $3,091.3 $3,128.6 $3,225.7 $3,424.9 $12,870.4 $3,905.1 $3,834.9 $3,876.6 $4,045.6 $15,662.3 $4,121.9 $4,222.3 $4,314.6 $4,531.3 $17,190.1 $4,629.4 $4,736.3 $4,837.7 $5,053.1 $19,256.5 $4,629.4 $5,296.4 $5,402.1 $5,569.5 $21,456.6

Direct costs $1,452.6 $400.6 $363.4 $377.4 $383.4 $1,524.8 $403.2 $401.0 $410.4 $414.3 $1,628.8 $431.8 $446.0 $457.1 $474.5 $1,809.4 $484.5 $494.7 $502.3 $520.1 $2,001.5 $525.4 $537.1 $545.9 $563.3 $2,171.7 Amort of intangibles $220.2 $51.7 $51.9 $49.4 $44.9 $197.8 $44.2 $43.1 $43.0 $43.0 $173.3 $42.4 $42.4 $42.4 $42.4 $169.8 $39.2 $39.2 $39.2 $39.2 $156.8 $39.2 $39.2 $39.2 $39.2 $156.8 Cost of revenues $1,672.7 $452.3 $415.2 $426.8 $428.3 $1,722.6 $447.3 $444.1 $453.4 $457.3 $1,802.1 $474.3 $488.4 $499.5 $517.0 $1,979.2 $523.7 $533.9 $541.5 $559.3 $2,158.4 $564.6 $576.3 $585.1 $602.5 $2,328.6 Gross profit $9,498.6 $2,639.0 $2,713.3 $2,798.9 $2,996.6 $11,147.8 $3,457.8 $3,390.9 $3,423.3 $3,588.2 $13,860.2 $3,647.6 $3,733.9 $3,815.1 $4,014.3 $15,210.9 $4,105.7 $4,202.3 $4,296.2 $4,493.8 $17,098.1 $4,624.0 $4,720.1 $4,817.0 $4,967.0 $19,128.0 Research & dev. $1,930.2 $531.9 $531.9 $566.3 $557.8 $2,187.8 $620.0 $612.0 $624.1 $634.7 $2,490.8 $642.9 $649.3 $656.7 $664.3 $2,613.2 $675.9 $686.3 $693.7 $699.3 $2,755.2 $709.5 $718.9 $728.3 $740.9 $2,897.6 Sales & marketing $3,244.3 $869.5 $907.7 $897.0 $945.5 $3,619.6 $1,048.8 $1,073.1 $1,090.8 $1,157.2 $4,369.9 $1,172.4 $1,201.5 $1,216.7 $1,280.5 $4,871.1 $1,315.6 $1,345.5 $1,354.7 $1,414.0 $5,429.9 $1,462.7 $1,490.0 $1,508.1 $1,559.9 $6,020.6 Gen. & admin. $880.6 $270.9 $223.7 $230.3 $242.8 $967.6 $290.0 $256.0 $286.2 $290.4 $1,122.6 $292.4 $292.4 $295.4 $298.4 $1,178.6 $306.4 $310.4 $310.4 $312.4 $1,239.6 $318.5 $320.6 $322.6 $324.8 $1,286.5 Non-recurring item $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Amortization $175.2 $42.3 $40.1 $40.8 $39.2 $162.4 $44.7 $43.7 $43.7 $43.7 $175.7 $38.8 $38.8 $38.8 $38.8 $155.1 $34.0 $34.0 $34.0 $34.0 $136.0 $36.4 $36.4 $36.4 $36.4 $136.0

Operating expenses $6,230.5 $1,714.5 $1,703.4 $1,734.3 $1,785.2 $6,937.4 $2,003.5 $1,984.7 $2,044.8 $2,125.9 $8,159.0 $2,146.5 $2,182.0 $2,207.6 $2,281.9 $8,818.0 $2,331.9 $2,376.2 $2,392.8 $2,459.7 $9,560.7 $2,527.1 $2,565.8 $2,595.3 $2,661.9 $10,350.1 Operating income $3,268.1 $924.4 $1,010.0 $1,064.6 $1,211.4 $4,210.4 $1,454.3 $1,406.1 $1,378.5 $1,462.3 $5,701.2 $1,501.1 $1,551.9 $1,607.5 $1,732.4 $6,392.9 $1,773.8 $1,826.1 $1,903.4 $2,034.1 $7,537.4 $2,096.9 $2,154.3 $2,221.7 $2,305.0 $8,777.9 Interest,other income ($63.4) ($17.9) ($15.9) ($8.9) ($18.0) ($60.8) ($21.0) ($20.0) ($28.0) ($24.0) ($93.0) ($16.0) ($16.0) ($16.0) ($16.0) ($64.0) ($12.0) ($10.0) ($10.0) ($9.0) ($41.0) ($12.0) ($12.0) ($12.0) ($12.0) ($48.0) Income before taxes $3,204.7 $906.5 $994.0 $1,055.6 $1,193.4 $4,149.6 $1,433.3 $1,386.1 $1,350.5 $1,438.3 $5,608.2 $1,485.1 $1,535.9 $1,591.5 $1,716.4 $6,328.9 $1,761.8 $1,816.1 $1,893.4 $2,025.1 $7,496.4 $2,084.9 $2,142.3 $2,209.7 $2,293.0 $8,729.9 Taxes $253.3 ($35.5) ($99.4) $104.5 ($1,049.8) ($1,080.2) $172.0 $270.0 $256.6 $294.9 $993.5 $289.6 $299.5 $310.3 $334.7 $1,234.1 $343.5 $354.1 $369.2 $394.9 $1,461.8 $417.0 $428.5 $441.9 $458.6 $1,746.0 Net income $2,951.5 $942.0 $1,093.4 $951.2 $2,243.2 $5,229.8 $1,261.3 $1,116.1 $1,093.9 $1,143.5 $4,614.8 $1,195.5 $1,236.4 $1,281.2 $1,381.7 $5,094.8 $1,418.2 $1,462.0 $1,524.2 $1,630.2 $6,034.6 $1,667.9 $1,713.9 $1,767.7 $1,834.4 $6,983.9 GAAP income $6.00 $1.93 $2.25 $1.96 $4.63 $10.77 $2.61 $2.32 $2.27 $2.38 $9.58 $2.49 $2.58 $2.67 $2.88 $10.61 $2.95 $3.05 $3.18 $3.40 $12.57 $3.47 $3.57 $3.68 $3.82 $14.55 Non-GAAP $7.87 $2.24 $2.43 $2.56 $2.80 $10.04 $3.14 $3.03 $2.98 $3.10 $12.25 $3.14 $3.23 $3.32 $3.55 $13.24 $3.57 $3.71 $3.85 $4.08 $15.20 $4.10 $4.24 $4.35 $4.51 $17.20 Shares outstanding 491.6 488.0 485.0 485.0 484.4 485.6 483.0 481.0 481.0 481.0 481.5 480.0 480.0 480.0 480.0 480.0 480.0 480.0 480.0 480.0 480.0 480.0 480.0 480.0 480.0 480.0 As % of revenues Digital Media 69.0% 70.2% 71.4% 72.4% 72.8% 71.7% 73.2% 72.7% 73.4% 73.0% 73.1% 72.7% 72.6% 72.8% 72.7% 72.7% 72.5% 72.4% 72.7% 72.5% 72.5% 81.2% 72.4% 72.7% 72.5% 72.5% Digital Marketing 28.7% 24.4% 24.8% 24.2% 24.0% 24.3% 23.9% 24.4% 24.4% 24.9% 24.4% 25.2% 25.3% 25.4% 25.4% 25.3% 25.6% 25.7% 25.7% 25.8% 25.7% 28.7% 25.7% 25.7% 26.0% 25.8% Print & Publishing 2.3% 5.5% 3.9% 3.4% 3.2% 4.0% 2.9% 2.9% 2.2% 2.1% 2.5% 2.2% 2.1% 1.8% 1.9% 2.0% 1.9% 1.9% 1.6% 1.7% 1.8% 2.2% 1.9% 1.6% 1.5% 1.7% Total Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 112.1% 100.0% 100.0% 100.0% 100.0% Direct costs 13.0% 13.0% 11.6% 11.7% 11.2% 11.8% 10.3% 10.5% 10.6% 10.2% 10.4% 10.5% 10.6% 10.6% 10.5% 10.5% 10.5% 10.4% 10.4% 10.3% 10.4% 11.3% 10.1% 10.1% 10.1% 10.1% Gross profit 87.0% 87.0% 88.4% 88.3% 88.8% 88.2% 89.7% 89.5% 89.4% 89.8% 89.6% 89.5% 89.4% 89.4% 89.5% 89.5% 89.5% 89.6% 89.6% 89.7% 89.6% 88.7% 89.9% 89.9% 89.9% 89.9% Sales & marketing 29.0% 28.1% 29.0% 27.8% 27.6% 28.1% 26.9% 28.0% 28.1% 28.6% 27.9% 28.4% 28.5% 28.2% 28.3% 28.3% 28.4% 28.4% 28.0% 28.0% 28.2% 31.6% 28.1% 27.9% 28.0% 28.1% Gen. & admin. 7.9% 8.8% 7.2% 7.1% 7.1% 7.5% 7.4% 6.7% 7.4% 7.2% 7.2% 7.1% 6.9% 6.8% 6.6% 6.9% 6.6% 6.6% 6.4% 6.2% 6.4% 6.9% 6.1% 6.0% 5.8% 6.0% Research & dev. 17.3% 17.2% 17.0% 17.6% 16.3% 17.0% 15.9% 16.0% 16.1% 15.7% 15.9% 15.6% 15.4% 15.2% 14.7% 15.2% 14.6% 14.5% 14.3% 13.8% 14.3% 15.3% 13.6% 13.5% 13.3% 13.5% Amort. of intangibles 1.6% 1.4% 1.3% 1.3% 1.1% 1.3% 1.1% 1.1% 1.1% 1.1% 1.1% 0.9% 0.9% 0.9% 0.9% 0.9% 0.7% 0.7% 0.7% 0.7% 0.7% 0.8% 0.7% 0.7% 0.7% 0.6%

Operating expenses 55.8% 55.5% 54.4% 53.8% 52.1% 53.9% 51.3% 51.8% 52.7% 52.5% 52.1% 52.1% 51.7% 51.2% 50.4% 51.3% 50.4% 50.2% 49.5% 48.7% 49.6% 54.6% 48.4% 48.0% 47.8% 48.2% Oper. Margin: non-GAAP 39.9% 39.9% 42.5% 43.4% 44.8% 42.7% 46.8% 45.9% 45.5% 46.0% 46.1% 45.7% 45.8% 46.0% 46.9% 46.1% 46.1% 46.7% 47.5% 48.1% 47.1% 47.6% 48.2% 48.4% 48.7% 48.2% Oper. Margin: GAAP 29.3% 29.9% 32.3% 33.0% 35.4% 32.7% 37.2% 36.7% 35.6% 36.1% 36.4% 36.4% 36.8% 37.3% 38.2% 37.2% 38.3% 38.6% 39.3% 40.3% 39.1% 45.3% 40.7% 41.1% 41.4% 40.9% Income before taxes 28.7% 29.3% 31.8% 32.7% 34.8% 32.2% 36.7% 36.1% 34.8% 35.6% 35.8% 36.0% 36.4% 36.9% 37.9% 36.8% 38.1% 38.3% 39.1% 40.1% 38.9% 45.0% 40.4% 40.9% 41.2% 40.7% Taxes 7.9% -3.9% -10.0% 9.9% -88.0% -26.0% 12.0% 19.5% 19.0% 20.5% 17.7% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 20.0% 20.0% 20.0% 20.0% 20.0% Net income 26.4% 30.5% 34.9% 29.5% 65.5% 40.6% 32.3% 29.1% 28.2% 28.3% 29.5% 29.0% 29.3% 29.7% 30.5% 29.6% 30.6% 30.9% 31.5% 32.3% 31.3% 36.0% 32.4% 32.7% 32.9% 32.5%

New subscribers (000s.) 3,295 817 817 853 1,110 3,597 842 887 869 1,052 3,650 882 907 885 1,081 3,755 902 930 904 1,082 3,818 930 951 921 1,104 3,906 Total subscribers (000s.) 18,787 19,604 20,421 21,274 22,384 22,384 23,226 24,113 24,982 26,034 26,034 26,916 27,823 28,708 29,789 29,789 30,691 31,621 32,525 33,607 33,607 34,537 35,488 36,409 37,513 37,513 Creative Cloud ARPU* $31.73 $32.02 $32.36 $33.20 $33.41 $36.59 $36.57 $36.49 $36.45 $38.90 $39.07 $39.18 $39.33 $39.50 $39.57 $39.71 $39.95 $40.01 $40.09 $40.32 Creative Cloud ETLA (mlns) $800 $825 $850 $895 $910 $935 $950 $995 $1,020 $1,030 $1,055 $1,095 $1,120 $1,130 $1,155 $1,185 $1,210 $1,220 $1,245 $1,275 Creative ARR $7,582 $7,934 $6,866 $8,784 $9,121 $9,526 $9,882 $10,382 $10,939 $11,575 $12,124 $12,762 $13,270 $13,736 $14,114 $14,623 $15,100 $15,521 $15,946 $16,509 Year-over-year Digital Media 21.8% 22.1% 18.1% 19.1% 20.1% 19.8% 31.8% 24.9% 21.7% 18.4% 23.9% 4.8% 10.0% 10.4% 11.6% 9.2% 12.1% 11.9% 12.1% 11.2% 11.8% 12.0% 11.8% 11.6% 10.1% 11.3% Digital Experience 31.2% 1.4% -1.1% -5.1% -4.4% -2.4% 24.0% 21.0% 21.5% 22.8% 22.3% 11.0% 13.8% 15.8% 14.2% 13.7% 14.2% 13.9% 13.2% 13.2% 13.6% 12.2% 12.1% 12.1% 11.3% 11.9% Publishing -1.1% 108.3% 72.3% 114.8% 97.3% 97.4% -33.6% -9.5% -21.9% -22.6% -23.0% -20.1% -18.6% -8.2% 1.2% -12.5% -2.2% 1.1% 0.0% 1.2% 0.0% 13.7% 11.0% 7.6% -2.3% 7.6% Total Revenues 23.7% 18.9% 14.0% 13.8% 14.5% 15.2% 26.3% 22.6% 20.2% 18.1% 21.7% 5.6% 10.1% 11.3% 12.0% 9.8% 12.3% 12.2% 12.1% 11.5% 12.0% 0.0% 11.8% 11.7% 10.2% 11.4% Source: Company data; Griffin Securities estimates.

Griffin Securities Equity Research 19 Adobe June 18, 2021

ADOBE RESEARCH LIBRARY (COMPANY REPORTS #1-#159, ET AL)

# Date Subject 1 6/3/2011 Initiation of coverage 2 6/22/2011 Review of 2Q11 results & outlook 3 7/5/2011 Review of 2Q11 10-Q new data 7/7/2011 Announced an upgrade program for customers of competing Mac-based digital video products 7/15/2011 Analysis of Adobe’s Mac-based software business Announced acquisition of EchoSign, plus technology updates of AIR 3 beta and Flash Player 11 7/22/2011 beta 8/3/2011 Announced a public preview of , a new HTML5 web motion and interaction design tool 8/17/2011 Awarded an expanded contract from the U.S. Department of Defense for its “Connect” service 9/8/2011 Review of enterprise content authoring and consumer digital imaging announcements 4 9/21/2011 Review of 3Q11 results & outlook 9/26/2011 Analysis of Adobe’s consumer business and seasonal importance to 4Q revenues 5 10/6/2011 Review of annual Adobe Max conference 6 10/12/2011 Review of 3Q11 10-Q new data 11/2/2011 Acquisition of privately-held Auditude, to complement and extend digital video applications 11/8/2011 Preview of annual analyst meeting 7 11/10/2011 Review of annual analyst meeting 11/21/2011 Sequel to November 10th analyst meeting report, plus update on Adobe Labs technology updates 12/8/2011 Acquisition of Efficient Frontier 8 12/16/2011 Review of 4Q11 results & outlook 1/19/2012 Comments on transition to subscriptions model 9 1/27/2012 Review of FY11 10-K new data 2/1/2012 Review of new segments ADBE will be reporting at1Q12, vs. prior segments 2/21/2012 Review of Griffin-hosted call with management of Digital Marketing segment 2/29/2012 Comments on Photoshop Touch for iPad and Project Primetime for video 3/6/2012 Comment on Photoshop Lightroom and LeanPrint 3/12/2012 Earnings preview & Adobe Labs update 10 3/20/2012 Review of 1Q12 results & outlook 11 3/26/2012 Review of Digital Marketing Summit (part 1) 3/27/2012 Review of Digital Marketing Summit (part 2) 12 3/30/2012 Review of 1Q12 10-Q new data 4/17/2012 Comment on pending CS6 launch 13 4/24/2012 Comment on CS6/Creative Cloud announcement 5/9/2012 Comments on CS6/Creative Cloud availability, and Creative Suite revenues 5/15/2012 Update on Digital Publishing Suite, "CQ", ColdFusion, and Adobe Labs 5/22/2012 Comment on new video products announcements 6/13/2012 Earnings preview & Connect 9 announcement 14 6/20/2012 Review of 2Q12 results & outlook 6/27/2012 Comments on Lightroom 4 availability on Creative Cloud 15 6/28/2012 Review of 2Q 10-Q new data 7/25/2012 Comment on Technical Communication Suite 8/9/2012 Update on Digital Publishing Suite 9/6/2012 Update on Creative Cloud & Digital Publishing Suite 10/1/2012 Review of 3Q12 10-Q new data 10/9/2012 Acrobat 11, Photoshop Elements 11 16 11/7/2012 Initiated FY14E and Creative Cloud revenue model 12/10/2012 Preview of 4Q12; Digital Publishing Suite update 17 12/14/2012 Review of 4Q12 results & outlook; revised FY13E-FY14E 12/18/2012 Adobe Labs update 18 1/23/2013 Review of FY12 10-K new data; update of Creative Cloud estimates

Griffin Securities Equity Research 20 Adobe June 18, 2021

2/5/2013 Updated Digital Media/Digital Marketing segment revenues; Digital Publishing Suite new release 2/13/2013 LiveCycle ES4 2/21/2013 HTML5 product announcements 19 3/6/2012 Digital Marketing Summit - first read 20 3/11/2013 Review of Digital Marketing Summit; revised FY13E-FY14E; raised price objective 21 3/20/2013 Review of 1Q13 results & outlook; revised FY13E-FY14E 3/22/2013 Highlights of Digital Publishing Suite webcast 22 3/29/2013 Review of 1Q13 10-Q new data 4/15/2013 NAB video products previews 5/1/2013 Update on Digital Publishing Suite 23 5/7/2013 Adobe Max conference 5/15/2013 Adobe Max "sneak peek" technology previews 24 5/17/2013 Digital Publishing Summit 25 6/172013 Preview of 2Q13 results 26 6/19/2013 Review of 2Q13 results & outlook; revised FY13E-FY14E-FY15E 27 6/28/2013 acquisition 28 7/1/2013 Review of 2Q13 10-Q new data 9/12/2013 Creative Cloud single-app promotion; Marketing Cloud, digital media, PDF Print Engine releases 29 9/13/2013 Preview of 3Q13 results 30 9/18/2013 Review of 3Q13 results & outlook; revised FY13E-FY14E-FY15E 10/14/2013 Photoshop Elements 12, Premiere Elements 12 31 11/1/2013 DPS customer event update 11/6/2013 Creative Cloud video apps updates 11/14/2013 Adobe Campaign (formerly Neolane) update 32 12/10/2013 Preview of 4Q13 results 33 12/13/2013 Review of 4Q13 & revised FY14E-FY15E; raised PO to $70 34 1/22/2014 Review of FY13 10-K new data 3/6/2014 DPS & Experience Manager update 35 3/17/2014 Preview of 1Q14; initiation of FY16E 36 3/19/2014 Review of 1Q14; revised FY14E-FY15E-FY16E; raising PO 37 3/26/2014 Review of annual Digital Marketing Summit 38 4/2/2014 Review of 1Q14 10-Q new data 5/7/2014 ColdFusion update 39 5/14/2014 Marketing Cloud update 40 6/10/2014 Preview of 2Q14 results 41 6/18/2014 Review of 2Q14; revised FY14E-FY15E-FY16E; raising PO 6/24/2014 Creative Cloud product updates released 42 6/30/2014 Review of 2Q14 10-Q new data 9/8/2014 Video products update 43 9/15/2014 Preview of 3Q14 results & new Creative Cloud charts 44 9/17/2014 Review of 3Q14; revised FY14E-FY15E-FY16E 45 9/29/2014 Review of 3Q14 10-Q new data 46 10/7/2014 Adobe Max conference 11/18/2014 Review of design software job openings new data 47 12/8/2014 Preview of 4Q14 48 12/12/2014 Review of 4Q14; revised FY15E-FY16E; raised PO to $90 12/1714 Digital Publishing Suite update 49 1/12/2015 Initiation of 2017 estimates 50 1/20/2015 Review of FY14 10-K new data 2/12/2015 Design software comparative cash flow analysis (2005-2017E) 51 2/17/2015 Highlights of Griffin Securities call with Adobe Digital Marketing senior management 3/4/2015 Digital Publishing Suite (DPS) next-generation 52 3/11/2015 Review of annual Digital Marketing Summit

Griffin Securities Equity Research 21 Adobe June 18, 2021

53 3/16/2015 Preview of 1Q15 results 54 3/17/2015 Document Cloud introduction 55 3/18/2015 Review of 1Q15; revised FY15E-FY17E 56 3/30/2015 Review of 1Q15 10-Q new data 57 4/29/2015 Creative Cloud & Marketing Cloud update; Microsoft partnership 5/28/2015 "Publish", next-generation of Digital Publishing Suite (DPS) 58 6/15/2015 Preview of 2Q15 results 59 6/17/2015 Review of 2Q15 & revised FY15E-FY17E 6/23/2015 Creative Cloud "2015" release 8/4/2015 Digital Publishing Solution (update to Digital Publishing Suite) 60 9/16/2015 Preview of 3Q15 results & Creative Cloud update 61 9/18/2015 Review of 3Q15 & revised FY15E-FY17E 62 9/24/2015 Review of 3Q15 10-Q new data 63 10/6/2015 Adobe Max conference (day 1) 64 10/7/2015 Revised FY15E-FY17E; initiated FY18E 65 12/8/2015 Preview of 4Q15 results & strategy update 12/28/2015 Review of design software job openings new data 66 1/19/2016 Review of FY15 10-K new data 2/23/2016 Adobe Experience Manager Mobile & ColdFusion 67 3/8/2016 Preview of 1Q16 results 68 3/18/2016 Review of 1Q16; revised FY16E-FY18E; revised PO to $116 69 3/30/2016 Review of annual Digital Marketing Summit 70 4/1/2016 Review of 1Q16 10-Q new data Document Cloud-Digital Marketing integration; acquisition; Digital Marketing non- 5/9/2016 subscriptions revenues 5/16/2016 Review of design software job openings new data 71 6/17/2016 Preview of 2Q16 results 72 6/22/2016 Review of 2Q16; revised FY16E-FY18E 73 6/30/2016 Review of 2Q16 10-Q new data 8/8/2016 Experience Manager Mobile update 74 9/13/2016 Preview of 3Q16 results 75 9/21/2016 Review of 3Q16 results; revised FY16E-FY18E; revised PO to $118 9/21/2016 Design software comparative cash flow analysis (2006-2018E) 76 9/27/2016 Review of 3Q16 10-Q new data 9/27/2016 Microsoft-Adobe Systems cloud platform relationship 77 11/3/2016 Adobe Max & analyst meeting highlights; initiated FY19E; revised PO to $133 11/21/2016 Adobe Max analyst meeting highlights (part deux) & "sneak peeks"; TubeMogul acquisition 78 12/12/2016 Preview of 4Q16 results 79 12/16/2016 Review of 4Q16 results; revised FY17E-FY19E Completion of TubeMogul acquisition; TV Media Management Platform (new); & 12/28/2016 Microsoft Dynamics 1/4/2017 Review of design software job openings new data (#14) 80 1/10/2017 TubeMogul acquisition & guidance update 81 1/23/2017 Review of FY16 10-K new data 82 3/13/2017 Preview of 1Q17 results 83 3/17/2017 Review of 1Q17; revised FY17E-FY19E; raised PO to $147 84 3/21/2017 Digital Marketing Summit (#1) - comments on product new & MSFT relationship 85 3/27/2017 Digital Marketing Summit (#2) - comments on strategy & technology 86 3/29/2017 Review of 1Q17 10-Q new data 87 6/5/2017 The Adobe Picture Book (#1); initiating FY20E; revised PO to $155 88 6/21/2017 Review of 2Q17; revised FY17E-FY20E; revised PO to $165 89 6/28/2017 Review of 2Q17 10-Q new data 8/10/2017 Apple-Amazon-Facebook ("Appazonbook") & design software

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8/23/2017 Review of design software job openings new data (#15) 9/11/2017 Adobe-Microsoft product integrations 90 9/12/2017 Preview of 3Q17 results 91 9/20/2017 Review of 3Q17 results; revised FY17E-FY20E 9/25/2017 Design software comparative cash flow analysis (2010-2020E) 92 9/27/2017 Review of 3Q17 10-Q new data 93 10/16/2017 The Adobe Picture Book (#2) 94 10/18/2017 Adobe Max 2017 product announcements & pricing 95 10/19/2017 Adobe Max 2017 analyst meeting & revised FY18E-FY20E raised PO to $192 96 10/23/2017 Adobe Max "sneak peeks" 97 12/11/2017 Preview of 4Q17 results 98 12/15/2017 Review of 4Q17 results; revised FY18E-FY20E; raised PO to 4210 12/19/2017 Design software comparative cash flow analysis (2010-2020E) 12/27/2017 Review of design software job openings new data (#16) 12/27/2017 Stock-based compensation comparative analysis 99 1/22/2018 Taxation update; CFO retirement; revised FY18E-FY20E; raised PO to $226 100 1/22/2018 Review of FY17 10-K new data 2/13/2018 Digital Marketing-Digital Media new features & integrations 3/5/2018 Cloud-y picture book #3 (Adobe, Amazon, Oracle, Microsoft, Salesforce, SAP) 101 3/13/2018 Preview of 1Q18 results 102 3/16/2018 Review of 1Q18 results; revised FY18E-FY20E; raised PO to $242 3/19/2018 Stock-based compensation comparative analysis (#2) 103 3/27/2018 Adobe-Microsoft partnership update (China; data models) 104 3/28/2018 Digital Marketing Summit - comments on strategy & technology 105 4/2/2018 Review of 1Q18 10-Q new data 4/23/2018 Review of design software job openings new data (#16.5) 5/17/2018 Review of design software job openings new data (#16.6) 5/31/2018 Cloud-y picture book #4 (Adobe, Amazon, Oracle, Microsoft, Salesforce, SAP) 106 5/21/2018 Magento acquisition 107 6/21/2018 Review of 2Q18; revised FY18E-FY20E; raised PO to $278 108 6/28/2018 Review of 2Q18 10-Q new data 7/2/2018 Stock-based compensation comparative analysis (#3) 7/9/2018 Review of design software job openings new data (#16.7) 109 8/21/2018 Initiation of 2021 estimates; revised FY18E-FY20E 8/29/2018 Cloud-y picture book #5 (Adobe, Amazon, Oracle, Microsoft, Salesforce, SAP) 8/29/2018 Design software comparative cash flow analysis (2006-2021E) 110 9/6/2018 Preview of 3Q18 results 111 9/14/2018 Review of 3Q18; revised FY18E-FY21E; raised PO to $296 112 9/21/2018 Marketo acquisition 9/24/2018 Review of design software job openings new data (#16.8) 9/25/2018 Microsoft-Adobe alliance update 113 9/27/2018 Review of 3Q18 10-Q new data 114 10/3/2018 Acrobat/Document Cloud update 115 10/9/2018 Subscriptions cost of revenue analysis 116 10/15/2018 Adobe Max 2018 & FY19 preliminary guidance 117 10/16/2018 Adobe Max 2018 analyst meeting 118 10/22/2018 Adobe Max 2018 "sneak peeks" 10/31/2018 Review of design software job openings new data (#16.9) 11/29/2018 Cloud-y picture book #6 (Adobe, Amazon, Oracle, Microsoft, Salesforce, SAP) 119 12/14/2018 Review of 4Q18; revised FY19E-FY21E 12/19/2018 Review of design software job openings new data (#17) 12/26/2018 Stock-based compensation comparative analysis (#4) 1/24/2019 Review of design software job openings new data (#17.1)

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120 1/25/2019 Review of FY18 10-K new data 121 1/27/2019 Subscriptions cost of revenue analysis (#2) 2/19/2019 Review of design software job openings new data (#17.2) 122 2/11/2019 Preview of 1Q19 results 123 3/15/2019 Review of 1Q19; revised FY19E-FY21E; raised PO to $300 3/19/2019 Cloud-y picture book #7 (Adobe, Amazon, Oracle, Microsoft, Salesforce, SAP) 124 3/26/2019 Digital Marketing Summit - comments on strategy, new technology and partners 3/29/2019 Review of design software job openings new data (#17.3) 3/31/2019 Stock-based compensation comparative analysis (#5) 125 4/1/2019 Review of 1QFY19 10-Q new data 4/8/2019 Design software comparative cash flow analysis (2006-2021E) 5/9/2019 Review of design software job openings new data (#17.4) 126 6/19/2019 Review of 2Q19; revised FY19E-FY21E; raised PO to $303 6/23/2019 Cloud-y picture book #8 (Adobe, Amazon, Oracle, Microsoft, Salesforce, SAP) 127 6/26/2019 Review of 2QFY19 10-Q new data 7/12/2019 Review of design software job openings new data (#17.5) 8/13/2019 Review of design software job openings new data (#17.6) 128 8/20/2019 Initiation of FY22 estimates 129 9/18/2019 Review of 3Q19; revised FY19E-FY22E; raised PO to $317 130 9/26/2019 Review of 3Q19 10-Q new data 10/2/2019 Stock-based compensation comparative analysis (#6) 10/7/2019 Review of Adobe job openings new data (#17.7) 131 11/4/2019 Quick view of Max & FY20 guidance 132 11/5/2019 Adobe Max 2019 analyst meeting 133 11/6/2019 Adobe Max 2019 "sneak peeks" 134 12/8/2019 Review of Adobe job openings new data (#17.8) & 4Q19 preview 135 12/13/2019 Review of 4Q19; revised FY20E-FY22E; raised PO to $334 136 1/21/2020 Review of FY19 10-K new data 137 2/18/2020 Review of Adobe job openings new data (#18.2) 138 3/13/2020 Review of 1Q20; revised FY20E-FY23E; maintained $234 PO 3/17/2020 Design software comparative cash flow analysis (2009-2023E) 3/25/2020 Comparative 2020E-2021E results sensitivities 139 3/26/2020 Review of 1Q20 10-Q new data; revised 3Q20E-4Q20E 4/5/2020 Review of design software job openings new data (#18.3) 140 4/15/2020 Summit 2020: comments on strategy, new products and "sneak peeks" 5/17/2020 Review of design software job openings new data (#18.4) 141 6/12/2020 Review of 2Q20; revised FY20E-FY23E; raised PO to $427 142 6/24/2020 Review of 2Q20 10-Q new data 143 7/7/2020 Review of Adobe job openings new data (#18.5) 144 8/11/2020 Adobe – IBM “customer experience” partnership 145 9/1/2020 Review of Adobe job openings new data (#18.6) 146 9/16/2020 Review of 3Q20; revised FY20E-FY23E; raised PO to $597 147 9/23/2020 Review of 3Q20 10-Q new data 148 10/12/2020 Comments on hosted conference call with Adobe CTO 149 10/21/2020 Adobe Max 2020 “sneak peeks” 150 11/9/2020 Workfront acquisition 151 12/4/2020 Review of Adobe job openings new data (#18.7) 152 12/11/2020 Review of 4Q20; revised FY21E-FY23E 153 12/14/2020 Review of 2020 analyst meeting 154 1/18/2021 Review of FY20 10-K new data 155 3/2/2021 Review of Adobe job openings new data (#21.1) 156 3/25/2021 Review of 1Q21; revised FY21E-FY24E 157 4/1/2021 Review of 1Q21 10-Q new data

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158 5/10/2021 Summit 2021: comments on strategy, new products and "sneak peeks" 159 6/1/2021 Review of Adobe job openings new data (#21.2) Source: Griffin Securities.

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Disclosures

ANALYST(s) CERTIFICATION: The analyst responsible for covering the securities in this report certify that the views expressed in this research report accurately reflect their personal views about the subject Companies mentioned and its securities. The analyst responsible for covering the securities in this report certify that no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation or view contained in this research report.

MEANINGS OF RATINGS: Our rating system is based upon 12 to 36 month price targets. BUY describes stocks that we expect to appreciate by more than 20%. HOLD/NEUTRAL describes stocks that we expect to change plus or minus 20%. SELL describes stocks that we expect to decline by more than 20%. SC describes stocks that Griffin Securities has Suspended Coverage of this Company and price target, if any, for this stock, because it does not currently have a sufficient basis for determining a rating or target and/or Griffin Securities is redirecting its research resources. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. NR describes stocks that are Not Rated, indicating that Griffin Securities does not cover or rate this Company.

DISTRIBUTION OF RATINGS/IB SERVICES: IB Serv./Past 12 Mos.

Rating Count Percent Count Percent

BUY [BUY] 10 83.33 0 0.00 HOLD [HOLD] 2 16.66 0 0.00 SELL [SELL] 0 0.00 0 0.00

COMPANIES MENTIONED:

Ticker Company Name Rating

ADBE Adobe Buy ADBE Adobe Buy

MARKET MAKING: Griffin Securities does not maintain a market in the shares of these Companies or any other company mentioned in the report.

COMPENSATION OR SECURITIES OWNERSHIP:

The analyst Jay Vleeschhouwer who is responsible for covering the securities in this report receives compensation based upon, among other factors, the overall profitability of Griffin Securities, including profits derived from investment banking revenue. Jay Vleeschhouwer who prepared the research report, did not receive any compensation from the Companies or any other companies mentioned in this report in connection with the preparation of this report.

The analyst Jay Vleeschhouwer who is responsible for covering the securities in this report currently does not own common stock in the Companies or any other companies mentioned in this report, but in the future may from time to time engage in transactions with respect to the Companies or other companies mentioned in the report.

Griffin Securities from time to time in the future may request expenses to be paid for copying, printing, mailing and distribution of the report by the Companies and other companies mentioned in this report. Griffin Securities expects to receive, or intends to seek, compensation for investment banking services from the Companies in the next three months.

Griffin Securities Equity Research 26 Adobe June 18, 2021

Rating and Price Target History for: Adobe (ADBE US) as of 06-15-2021

06/21/18 09/14/18 03/15/19 06/19/19 09/18/19 11/05/19 12/13/19 06/12/20 09/16/20 B:$278 B:$296 B:$300 B:$303 B:$317 B:$330 B:$334 B:$427 B:$597 600 550 500 450 400 350 300 250 200 Q2 Q3 2019 Q1 Q2 Q3 2020 Q1 Q2 Q3 2021 Q1

Created by: BlueMatrix

FORWARD-LOOKING STATEMENTS: This Report contains forward-looking statements, which involve risks and uncertainties. Actual results may differ significantly from such forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the “Risk Factors” section in the SEC filings available in electronic format through SEC Edgar filings at www.SEC.gov on the Internet.

GENERAL: Griffin Securities, Inc. (“Griffin Securities”) a FINRA member firm with its principal office in New York, New York, USA is an investment banking firm providing corporate finance, merger and acquisitions, brokerage, and investment opportunities for institutional, corporate, and private clients. The analyst(s) are employed by Griffin Securities. Our research professionals provide important input into our investment banking and other business selection processes. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

Griffin Securities may from time to time perform corporate finance or other services for some companies described herein and may occasionally possess material, nonpublic information regarding such companies. This information is not used in preparation of the opinions and estimates herein. While the information contained in this report and the opinions contained herein are based on sources believed to be reliable, Griffin Securities has not independently verified the facts, assumptions and estimates contained in this report. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information and opinions contained in this report.

The information contained herein is not a complete analysis of every material fact in respect to any company, industry or security. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Griffin Securities. It does not take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. Certain transactions - including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The information contained in this report is subject to change without notice and Griffin Securities assumes no responsibility to update the report. In addition, regulatory, compliance, or other reasons may prevent us from providing updates.

DISCLOSURES FOR OTHER COMPANIES MENTIONED IN THIS REPORT: To obtain applicable current disclosures in electronic format for the subject companies in this report, please refer to SEC Edgar filings at www.SEC.gov. In particular,

Griffin Securities Equity Research 27 Adobe June 18, 2021

for a description of risks and uncertainties related to subject companies’ businesses in this report, see the “Risk Factors” section in the SEC filings.

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