Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Good day and welcome to the Adobe, Inc. Annual Meeting of Stockholders. I would now like to turn the conference over to Shantanu Narayen, Chairman and CEO. Please go ahead.

Hello, everyone, and welcome to Adobe's 2020 Annual Meeting of Shareholders. I hope you're all safe and healthy. I'm Shantanu Narayen, Chairman of the Board of Adobe and Chairman of this Annual Meeting of Stockholders. It is our first ever virtual annual meeting given the shelter-in-place orders to prevent the spread of COVID-19. We are living in unprecedented times. The human impact is tragic, and our thoughts are with everyone who is impacted. Like most companies, we're doing our part to contribute to flatten the curve of the spread. Times like these reveal what is truly important, the health of our family, friends and colleagues. Given these circumstances, we will not review Adobe's operations as we have in the past. Please visit our Investor Relations page on adobe.com, for information related to operations and results. I will now call the meeting to order. This meeting is being held based on the notice of the annual meeting we sent or made available to all of Adobe's stockholders of record. Dana Rao, General Counsel and Corporate Secretary, is the secretary of this meeting, and he will record the minutes. Also based on an appointment from our Board, Christopher Hummel from Broadridge, joins us today as the inspector of elections. We ask that Mr. Hummel, our inspector, determine the exact number of shares of common stock represented at the meeting and a final report of the number of shares represented will be supplied before the voting begins. While Mr. Hummel is determining the number of shares present today, I would like to recognize from the members of Adobe's Board and management team that are in attendance today, including John Murphy, Executive Vice President and Chief Financial Officer; and Mike Saviage, Vice President of Investor Relations. Also joining us are Prasadh Cadambi and Alison Barr of KPMG. Before we begin, I would like to take a moment to recognize Chuck Geschke, who will be retiring from the Board after this meeting. As one of Adobe's founders, Chuck instilled in our company a commitment to the relentless pursuit of innovation, resulting in some of the industry's most transformative software inventions, including PostScript, PDF, and Acrobat, Illustrator, Photoshop and Premier. Chuck always had a sight set on creating new markets and categories to fill unmet needs, expanding our customer universe and total addressable market opportunity. Most importantly, Chuck helped build a culture where people treat each other as they like to be treated and genuinely support their colleagues' success, no matter what their background, gender or beliefs. This focus, not only on what we do, but how we do it is what's made Adobe what it is today, one of the world's most valuable software companies and an innovation powerhouse, a leader in corporate responsibility, a top rising brand and a best workplace. While Chuck may not be serving on Adobe's Board officially anymore, his presence and legacy will always be felt in our daily work. I want to thank Chuck for his many years of service and all of his contributions on behalf of Adobe's Board. I will now turn the meeting over to Dana.

Thank you, Santanu. Good morning, everyone. We will now cover the formalities required to make this a proper meeting. After voting on the agenda items, we will adjourn the formal portion of the meeting and proceed to any questions. Questions may be submitted on the web portal until the formal portion of the meeting is adjourned and will be addressed pursuant to the meeting rules of conduct. Broadridge mailed the meeting notice and a notice of Internet availability of proxy materials beginning on February 28 to all stockholders of record as of February 12. Supplemental notice to inform stockholders of the change to our virtual meeting was filed with the Securities and Exchange Commission and made available to stockholders on March 26. Our record shows that on the record date, there were 483,268,215 shares of common stock outstanding and entitled to vote at this meeting. Mr. Hummel tells me that signed proxies were at least 422,900,244 shares of common stock, or approximately 88% of the total outstanding shares on the record date, are represented at this meeting. This constitutes a quorum for the transaction of business, and this meeting is duly constituted. Please note that a list of stockholders as of the record date is available for inspection during the entire time of this annual meeting on the annual meeting web portal. It is 9:06 a.m., and the polls are now open to consider the following 5 proposals as described in the proxy statement that was made available to all stockholders of record with the notice of meeting. You may submit your vote by clicking the voting button on the web portal and following the instructions there. Proposal one, the election of 10 members of our Board of Directors to serve for a 1-year term. As Shantanu mentioned, Mr. Geschke will be retiring at the end of this meeting and has, therefore, elected not to stand for reelection today. As a result, Mr. Geschke's nomination will not be voted at this meeting, and our Board will be reduced in size to 10 members upon his retirement. Proposal two, the approval of the 2020 employee stock purchase plan as described in the proxy statement. Proposal three, the ratification of KPMG's appointment as Adobe's independent registered public accounting firm for our 2020 fiscal year. Proposal four, an advisory vote on executive compensation. And proposal five, consider and vote upon a stockholder proposal regarding agenda and racial pay equity. The Board recommends a vote for each of the nominees in proposal one for each of proposals two, three and four and against proposal five. I will now turn it over to Natasha Lamb of Arjuna Capital to speak to proposal five. Operator, please open Natasha Lamb's line.

Good morning. My name is Natasha Lamb, and I move proposal #5 on behalf of Arjuna Capital asking for a report on gender and racial pay equity. On its face, Adobe has taken an important first step by publishing statistically adjusted pay parity numbers, assessing the pay of men and women performing similar jobs and the pay of white and nonwhite employees performing similar jobs in the United States. Yet this statistically adjusted pay parity reporting is only half the story, the other half is median pay disclosure, which is the objective of this proposal. Paydowns are comprised of 2 parts: equal pay for your current job versus peers and equal opportunity to high-paying jobs. Median pay gaps reflect a lack of equal opportunity by measuring whether women and minorities are holding as many high-paying jobs. The gender pay gap is literally defined as the median pay of women working full-time compared to the median pay of men. Women in the U.S. make $0.82 on the dollar on this basis. African-American women make $0.62 and Latino women make $0.54. Median pay gaps are considered the valid way of measuring paying equity by the U.S. Census Bureau; the Department of Labor; the Organization for Economic Cooperation and Development, the OECD; and the International Labor Organization, the ILO; not to mention the United Kingdom, which now mandates disclosure of median pay gaps. To choose to ignore median pay gaps and for the Board to label them "confusing" or "misleading" is a disservice to the groups these pay gaps affect. We can see Adobe's pay gaps in the U.K. because they are mandated. Our company reported a 19% hourly pay gap and a 42% bonus pay gap for its U.K. operations. But notably, Adobe has not published median information beyond the U.K. Yet companies like Starbucks, Citigroup and Mastercard are already showing leadership by publishing their median pay gap data globally. These disclosures can improve performance and provide a baseline for measuring progress moving forward. A 2019 study in the Harvard Business Review found that wage transparency in countries that mandated narrowed the median wage gap. There are many ways to shrink gender and racial pay gaps at a company. Improving diversity, ensuring statistically adjusted pay parity, advancing women and minorities into positions of leadership. But the only benchmark to measure whether the pay gap is actually shrinking from these various levers is to publish the pay gap itself. Thank you for your time as we firmly believe our company is best served by a transparent and honest accounting of pay equity.

Thank you, Natasha. I want to remind stockholders that if you have already voted by proxy, you do not need to vote in this virtual meeting unless you want to change your vote. The proxy holders will vote your shares according to the proxy. I will now pause for a moment for voting. [Voting]

It is 9:11 a.m. and the polls are now closed. Mr. Hummel, please tally the results. The report of Mr. Hummel, as, the inspector of elections, states that the results of today's meeting are as follows: one, all 10 directors were reelected as members of our Board of Directors to serve for a 1-year term; two, the stockholders approved the proposal to approve the new 2020 employee stock purchase plan; three, the stockholders approved the proposal to ratify the appointment of KPMG LLP as Adobe's independent registered public accounting firm for our 2020 fiscal year; four, the stockholders approved the proposal to approve, on an advisory basis, the compensation of our named executive officers; and five, these stockholders did not approve the stockholder proposal regarding a gender and racial pay equity. We will report the final voting results on a Form 8-K and file it with the SEC within 4 business days after this meeting. This concludes the formal business portion of the meeting. The formal meeting is now adjourned. I would like to thank each of you for your attendance today. We appreciate your continued interest and support of Adobe. I will now give the floor to Mike Saviage to see if there are any questions for Shantanu and John. Mike?

[Operator Instructions] At this time, there are no questions in the portal. [Operator Instructions] As there are no questions, this concludes our Q&A session. Are there any final comments anyone would like to make?

Thank you, Mike. And again, I would like to thank all of the shareholders who attended this meeting under these circumstances. We appreciate your continued interest and support of Adobe. Above all, please stay safe and stay healthy. Thank you for joining us today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.