This Result Q3 The company reported revenue of $4.43 billion and non-GAAP earnings per share of $3.40 respectively met and exceeded analysts’ expectations. Still, the company said it may need to finance that deal with a loan and gave a lukewarm outlook for the next quarter with headwinds of $4.52 billion in sales expected.” The stock is trading nearly 10% lower premarket — a sign of how Adobe was likely hoping that news of consolidation and the departure of a rival could give the company a boost.
Investors aren’t the only ones a little worried…
Those kinds of reactions – from their target audience – are a strong signal for Adobe and Figma to definitely keep an eye on how they integrate and take their users with them, whatever the next step is.
The acquisition will take the form of a half-cash, half-stock transaction, Adobe said, and will also include 6 million additional restricted stock units to be granted to Figma’s CEO and employees over a four-year period after are vested upon completion. It is expected to close in 2023, “subject to receipt of necessary regulatory clearances and approvals and the satisfaction of other closing conditions, including Figma shareholder approval.”
Design and prototyping for individuals and teams, executed in a highly streamlined and modern cloud-based environment, are Figma’s product strengths, and it has amassed approximately 4 million users to date. Adobe has since built and acquired a number of companies in the wider world of digital creation, and this has taken it not only into the larger and more general areas of design, but also into marketing and other design-related areas in the longer creation chain. However, Adobe’s DNA is in design and it has developed iconic products in areas such as imaging (like Photoshop), typefaces, illustrations, video and 3D and more.
The idea now is to create a seamless connection between these and Figma and essentially extend them as a native platform to bring them all together. Adobe of course already had something like this in the form of AdobeXD. It’s not clear what will happen to it if that deal goes through.
Indeed, whether all of this will attract the attention of antitrust authorities will be worth watching: Adobe is already dominant in so many of the tools used, and now it will also be the dominant player on the platform to introduce and deploy all of these tools.
“Adobe’s greatness is rooted in our ability to create new categories and deliver cutting-edge technologies through organic innovation and inorganic acquisitions,” said Shantanu Narayen, Adobe chairman and CEO, in a statement. “The combination of Adobe and Figma is transformative and will accelerate our vision of collaborative creativity.”
“With Adobe’s amazing innovation and expertise, particularly in 3D, video, vector, imaging and fonts, we can continue to reinvent end-to-end product design in the browser while developing new tools and areas that customers can use to design products faster and more comprehensively, with ease,” added Dylan Field, Co-Founder and CEO of Figma. Field will remain and continue to lead the Figma business, Adobe said.
A price tag of $20 billion is a significant leap for Figma last estimated at 10 billion dollars in June 2021 when it was raised 200 million dollars. But Adobe is doing more than just knocking out a major competitor. It absorbs a fast growing business.
It notes that Figma’s total addressable market is $16.5 billion by 2025 and that “the company is expected to add approximately $200 million in new net ARR this year, which is $400 million in total ARR through the end of 2022, with a best-in-class net dollar retention of more than 150 percent. With gross margins of around 90 percent and positive operating cash flows, Figma has built an efficient, high-growth business.”
The deal is definitely running the gauntlet for other big names in the digital design world. In particular, it will be interesting to see what’s next for companies like Canva and Sketch.
field is due speak at this year’s disrupt event: hopefully (!) he still makes it – it’s going to be a damn good session if he makes it.
The companies will hold a conference call later today and we’ll listen and add interesting details as they become available.
There’s more to come.