Adobe reports record q4 and fiscal 2022 revenue
San jose, calif.--(business wire)--adobe (nasdaq:adbe) today reported financial results for its fourth quarter and fiscal year 2022 ended dec. 2, 2022. “adobe drove record revenue and operating income in fiscal 2022,” said shantanu narayen, chairman and ceo, adobe. “our market opportunity, unparalleled innovation, operational rigor and exceptional talent position us well to drive our next decade of growth.” “adobe’s outstanding financial performance in fiscal 2022 drove record operating cash flows of $7.84 billion,” said dan durn, executive vice president and cfo, adobe. “strong demand for our offerings, industry-leading innovation and track record of top- and bottom-line growth set us up to capture the massive opportunities in 2023 and beyond.” fourth quarter fiscal year 2022 financial highlights adobe achieved revenue of $4.53 billion in its fourth quarter of fiscal year 2022, which represents 10 percent year-over-year growth or 14 percent in constant currency. diluted earnings per share was $2.53 on a gaap basis and $3.60 on a non-gaap basis. gaap operating income in the fourth quarter was $1.51 billion and non-gaap operating income was $2.02 billion. gaap net income was $1.18 billion and non-gaap net income was $1.68 billion. record cash flows from operations were $2.33 billion. remaining performance obligations (“rpo”) exiting the quarter were $15.19 billion. adobe repurchased approximately 5.0 million shares during the quarter. fourth quarter fiscal year 2022 business segment highlights digital media segment revenue was $3.30 billion, which represents 10 percent year-over-year growth or 14 percent in constant currency. creative revenue grew to $2.68 billion, representing 8 percent year-over-year growth or 13 percent in constant currency. document cloud revenue was $619 million, representing 16 percent year-over-year growth or 19 percent in constant currency. net new digital media annualized recurring revenue (“arr”) was $576 million, exiting the quarter with digital media arr of $13.97 billion. creative arr grew to $11.60 billion and document cloud arr grew to $2.37 billion. digital experience segment revenue was $1.15 billion, representing 14 percent year-over-year growth or 16 percent in constant currency. digital experience subscription revenue was $1.01 billion, representing 14 percent year-over-year growth or 16 percent in constant currency. fiscal year 2022 financial highlights adobe achieved revenue of $17.61 billion in fiscal year 2022, which represents 12 percent year-over-year growth or 15 percent adjusted year-over-year growth1. diluted earnings per share was $10.10 on a gaap basis and $13.71 on a non-gaap basis. gaap operating income was $6.10 billion and non-gaap operating income was $7.95 billion. gaap net income was $4.76 billion and non-gaap net income was $6.46 billion. adobe generated a record $7.84 billion in operating cash flows during the year. adobe repurchased approximately 15.7 million shares during the year. fiscal year 2022 business segment highlights digital media segment revenue was $12.84 billion, which represents 11 percent year-over-year growth or 16 percent adjusted year-over-year growth1. net new digital media arr was $1.91 billion during the fiscal year. creative revenue grew to $10.46 billion, representing 10 percent year-over-year growth or 14 percent adjusted year-over-year growth1. document cloud revenue was $2.38 billion, representing 21 percent year-over-year growth or 24 percent adjusted year-over-year growth1. digital experience segment revenue was $4.42 billion, representing 14 percent year-over-year growth or 17 percent adjusted year-over-year growth1. digital experience subscription revenue was $3.88 billion, representing 15 percent year-over-year growth or 18 percent adjusted year-over-year growth1. financial targets adobe is providing fiscal year 2023 targets, as well as q1 targets, which do not reflect the planned acquisition of figma that is expected to close during 2023. these targets factor in current expectations for the macroeconomic and foreign exchange environments. changes to foreign exchange rates: have resulted in a $712 million downward revaluation to adobe’s total digital media arr balance. as a reminder, arr is forecasted annually at december currency rates, and currency rates are held constant through that fiscal year for measurement purposes; end-of-year actual arr balances are revalued at new december rates for the next fiscal year; and are expected to result in an approximately four percent headwind to total revenue year-over-year growth rates in fiscal year 2023. the following table summarizes adobe’s fiscal year 2023 targets: total revenue $19.1 billion to $19.3 billion digital media net new arr ~$1.65 billion digital media segment revenue $13.9 billion to $14.0 billion digital experience segment revenue $4.925 billion to $5.025 billion digital experience subscription revenue $4.375 billion to $4.425 billion tax rate gaap: ~22.0% non-gaap: ~18.5% earnings per share2 gaap: $10.75 to $11.05 non-gaap: $15.15 to $15.45 the following table summarizes adobe’s fiscal year 2023 growth targets at the midpoint: y/y growth (midpoint) constant currency y/y growth (midpoint) total revenue ~9% ~13% digital media segment revenue ~9% ~13% digital experience segment revenue ~13% ~15% digital experience subscription revenue ~13% ~16% the following table summarizes adobe’s first quarter fiscal year 2023 targets: total revenue $4.60 billion to $4.64 billion digital media net new arr ~$375 million digital media segment revenue $3.350 billion to $3.375 billion digital experience segment revenue $1.16 billion to $1.18 billion digital experience subscription revenue $1.025 billion to $1.045 billion tax rate gaap: ~22.0% non-gaap: ~18.5% earnings per share2 gaap: $2.60 to $2.65 non-gaap: $3.65 to $3.70 adobe to host conference call adobe will webcast its fourth quarter and fiscal year 2022 earnings conference call today at 2:00 p.m. pacific time from its investor relations website: www.adobe.com/adbe. earnings documents, including adobe management’s prepared conference call remarks with slides and an investor datasheet are posted to adobe’s investor relations website in advance of the conference call for reference. forward-looking statements, non-gaap and other disclosures this press release contains forward-looking statements, including those related to business momentum, our market opportunity, market trends, current macroeconomic conditions, fluctuations in foreign currency exchange rates, strategic investments, customer success, revenue, operating margin, seasonality, annualized recurring revenue, tax rate on a gaap and non-gaap basis, earnings per share on a gaap and non-gaap basis, and share count, all of which involve risks and uncertainties that could cause actual results to differ materially. factors that might cause or contribute to such differences include, but are not limited to: failure to compete effectively, failure to develop, acquire, market and offer products and services that meet customer requirements; introduction of new technology, information security and privacy; potential interruptions or delays in hosted services provided by us or third parties; geopolitical and macroeconomic conditions; the russia-ukraine war; the impact of the covid-19 pandemic; risks associated with cyber-attacks; complex sales cycles; risks related to the timing of revenue recognition from our subscription offerings; fluctuations in subscription renewal rates; failure to realize the anticipated benefits of past or future acquisitions; failure to effectively manage critical strategic third-party business relationships; changes in accounting principles and tax regulations; uncertainty in the financial markets and economic conditions in the countries where we operate; and other various risks associated with being a multinational corporation. for a discussion of these and other risks and uncertainties, please refer to adobe’s annual report on form 10-k for our fiscal year 2021 ended dec. 3, 2021, and adobe's quarterly reports on form 10-q issued in fiscal year 2022. the financial information set forth in this press release reflects estimates based on information available at this time. these amounts could differ from actual reported amounts stated in adobe’s annual report on form 10-k for our fiscal year ended dec. 2, 2022, which adobe expects to file in jan. 2023. adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements. a reconciliation between gaap and non-gaap earnings results and financial targets is provided at the end of this press release and on adobe’s investor relations website. 1 adjusted to account for the extra week in first quarter fiscal year 2021 and to show growth rates in constant currency. 2 targets assume share count of ~461 million for first quarter fiscal year 2023 and ~456 million for fiscal year 2023. about adobe adobe is changing the world through digital experiences. for more information, visit www.adobe.com. ©2022 adobe. all rights reserved. adobe, creative cloud, document cloud and the adobe logo are either registered trademarks or trademarks of adobe (or one of its subsidiaries) in the united states and/or other countries. all other trademarks are the property of their respective owners. condensed consolidated statements of income (in millions, except per share data; unaudited) three months ended year ended december 2, 2022 december 3, 2021 december 2, 2022 december 3, 2021 revenue: subscription $ 4,232 $ 3,812 $ 16,388 $ 14,573 product 115 128 532 555 services and other 178 170 686 657 total revenue 4,525 4,110 17,606 15,785 cost of revenue: subscription 430 378 1,646 1,374 product 8 12 35 41 services and other 130 117 484 450 total cost of revenue 568 507 2,165 1,865 gross profit 3,957 3,603 15,441 13,920 operating expenses: research and development 773 657 2,987 2,540 sales and marketing 1,297 1,131 4,968 4,321 general and administrative 340 274 1,219 1,085 amortization of intangibles 42 40 169 172 total operating expenses 2,452 2,102 9,343 8,118 operating income 1,505 1,501 6,098 5,802 non-operating income (expense): interest expense (28 ) (28 ) (112 ) (113 ) investment gains (losses), net 4 (4 ) (19 ) 16 other income (expense), net 36 (1 ) 41 — total non-operating income (expense), net 12 (33 ) (90 ) (97 ) income before income taxes 1,517 1,468 6,008 5,705 provision for income taxes 341 235 1,252 883 net income $ 1,176 $ 1,233 $ 4,756 $ 4,822 basic net income per share $ 2.53 $ 2.59 $ 10.13 $ 10.10 shares used to compute basic net income per share 465 476 470 477 diluted net income per share $ 2.53 $ 2.57 $ 10.10 $ 10.02 shares used to compute diluted net income per share 466 480 471 481 condensed consolidated balance sheets (in millions; unaudited) december 2, 2022 december 3, 2021 assets current assets: cash and cash equivalents $ 4,236 $ 3,844 short-term investments 1,860 1,954 trade receivables, net of allowances for doubtful accounts of $23 and $16, respectively 2,065 1,878 prepaid expenses and other current assets 835 993 total current assets 8,996 8,669 property and equipment, net 1,908 1,673 operating lease right-of-use assets, net 407 443 goodwill 12,787 12,668 other intangibles, net 1,449 1,820 deferred income taxes 777 1,085 other assets 841 883 total assets $ 27,165 $ 27,241 liabilities and stockholders’ equity current liabilities: trade payables $ 379 $ 312 accrued expenses 1,790 1,736 debt 500 — deferred revenue 5,297 4,733 income taxes payable 75 54 operating lease liabilities 87 97 total current liabilities 8,128 6,932 long-term liabilities: debt 3,629 4,123 deferred revenue 117 145 income taxes payable 530 534 deferred income taxes 28 5 operating lease liabilities 417 453 other liabilities 265 252 total liabilities 13,114 12,444 stockholders’ equity: preferred stock — — common stock — — additional paid-in-capital 9,868 8,428 retained earnings 28,319 23,905 accumulated other comprehensive income (loss) (293 ) (137 ) treasury stock, at cost (23,843 ) (17,399 ) total stockholders’ equity 14,051 14,797 total liabilities and stockholders’ equity $ 27,165 $ 27,241 condensed consolidated statements of cash flows (in millions; unaudited) three months ended december 2, 2022 december 3, 2021 cash flows from operating activities: net income $ 1,176 $ 1,233 adjustments to reconcile net income to net cash provided by operating activities: depreciation, amortization and accretion 215 205 stock-based compensation 388 269 unrealized investment (gains) losses, net (4 ) 7 other non-cash adjustments 68 87 changes in deferred revenue 471 482 changes in other operating assets and liabilities 11 (235 ) net cash provided by operating activities 2,325 2,048 cash flows from investing activities: purchases, sales and maturities of short-term investments, net 29 (423 ) purchases of property and equipment (91 ) (81 ) purchases and sales of long-term investments, intangibles and other assets, net (7 ) (5 ) acquisitions, net of cash acquired — (1,212 ) net cash used for investing activities (69 ) (1,721 ) cash flows from financing activities: repurchases of common stock (1,750 ) (1,000 ) taxes paid related to net share settlement of equity awards, net of proceeds from treasury stock re-issuances (67 ) (116 ) other financing activities, net (94 ) 38 net cash used for financing activities (1,911 ) (1,078 ) effect of exchange rate changes on cash and cash equivalents 21 (28 ) net change in cash and cash equivalents 366 (779 ) cash and cash equivalents at beginning of period 3,870 4,623 cash and cash equivalents at end of period $ 4,236 $ 3,844 non-gaap results the following table shows adobe’s fiscal year 2022 gaap revenue growth rates reconciled to adjusted revenue growth rates included in this release. fiscal year 2022 total revenue digital media segment revenue creative cloud revenue document cloud revenue digital experience segment revenue digital experience subscription revenue (y/y growth) (y/y growth) (y/y growth) (y/y growth) (y/y growth) (y/y growth) gaap revenue growth rates 12 % 11 % 10 % 21 % 14 % 15 % impact of extra week in fiscal year 2021 2 2 2 2 2 2 constant currency impact 1 3 2 1 1 1 adjusted revenue growth rates 15 % 16 % 14 % 24 % 17 % 18 % the following table shows adobe’s gaap results reconciled to non-gaap results included in this release. (in millions, except per share data) three months ended year ended december 2, 2022 december 3, 2021 september 2, 2022 december 2, 2022 december 3, 2021 operating income: gaap operating income $ 1,505 $ 1,501 $ 1,484 $ 6,098 $ 5,802 stock-based and deferred compensation expense 392 265 371 1,420 1,107 amortization of intangibles 100 91 100 401 350 acquisition-related expenses (*) 26 — — 26 — non-gaap operating income $ 2,023 $ 1,857 $ 1,955 $ 7,945 $ 7,259 net income: gaap net income $ 1,176 $ 1,233 $ 1,136 $ 4,756 $ 4,822 stock-based and deferred compensation expense 392 265 371 1,420 1,107 amortization of intangibles 100 91 100 401 350 acquisition-related expenses (*) 26 — — 26 — investment (gains) losses, net (4 ) 4 6 19 (16 ) income tax adjustments (15 ) (57 ) (18 ) (165 ) (260 ) non-gaap net income $ 1,675 $ 1,536 $ 1,595 $ 6,457 $ 6,003 diluted net income per share: gaap diluted net income per share $ 2.53 $ 2.57 $ 2.42 $ 10.10 $ 10.02 stock-based and deferred compensation expense 0.84 0.55 0.79 3.02 2.30 amortization of intangibles 0.21 0.19 0.21 0.85 0.73 acquisition-related expenses (*) 0.06 — — 0.05 — investment (gains) losses, net (0.01 ) 0.01 0.01 0.04 (0.03 ) income tax adjustments (0.03 ) (0.12 ) (0.03 ) (0.35 ) (0.54 ) non-gaap diluted net income per share $ 3.60 $ 3.20 $ 3.40 $ 13.71 $ 12.48 shares used in computing diluted net income per share 466 480 469 471 481 non-gaap results (continued) the following table shows adobe’s fourth quarter fiscal year 2022 gaap tax rate reconciled to the non-gaap tax rate included in this release. fourth quarter fiscal 2022 effective income tax rate: gaap effective income tax rate 22.5 % income tax adjustments (3.0 ) stock-based and deferred compensation expense (1.5 ) amortization of intangibles (0.4 ) acquisition-related expenses (*) (0.1 ) non-gaap effective income tax rate 17.5 % (*) includes deal costs and certain professional fees associated with the planned acquisition of figma reconciliation of gaap to non-gaap financial targets the following tables show adobe's annual fiscal year 2023 financial targets reconciled to non-gaap financial targets included in this release. (shares in millions) fiscal year 2023 low high diluted net income per share: gaap diluted net income per share $ 10.75 $ 11.05 stock-based and deferred compensation expense 3.99 3.97 amortization of intangibles 0.82 0.82 income tax adjustments (0.41 ) (0.39 ) non-gaap diluted net income per share $ 15.15 $ 15.45 shares used to compute diluted net income per share 456 456 fiscal year 2023 effective income tax rate: gaap effective income tax rate 22.0 % stock-based and deferred compensation expense (1.4 ) amortization of intangibles (0.1 ) income tax adjustments (2.0 ) non-gaap effective income tax rate 18.5 % reconciliation of gaap to non-gaap financial targets (continued) the following tables show adobe's first quarter fiscal year 2023 financial targets reconciled to non-gaap financial targets included in this release. (shares in millions) first quarter fiscal 2023 low high diluted net income per share: gaap diluted net income per share $ 2.60 $ 2.65 stock-based and deferred compensation expense 0.93 0.93 amortization of intangibles 0.21 0.21 income tax adjustments (0.09 ) (0.09 ) non-gaap diluted net income per share $ 3.65 $ 3.70 shares used to compute diluted net income per share 461 461 first quarter fiscal 2023 effective income tax rate: gaap effective income tax rate 22.0 % stock-based and deferred compensation expense (1.4 ) amortization of intangibles (0.1 ) income tax adjustments (2.0 ) non-gaap effective income tax rate 18.5 % use of non-gaap financial information adobe continues to provide all information required in accordance with gaap, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only gaap financial measures. adobe uses non-gaap financial information to evaluate its ongoing operations and for internal planning and forecasting purposes. adobe's management does not itself, nor does it suggest that investors should, consider such non-gaap financial measures in isolation from, or as a substitute for, financial information prepared in accordance with gaap. adobe presents such non-gaap financial measures in reporting its financial results to provide investors with an additional tool to evaluate adobe's operating results. adobe believes these non-gaap financial measures are useful because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. this allows institutional investors, the analyst community and others to better understand and evaluate our operating results and future prospects in the same manner as management. adobe's management believes it is useful for itself and investors to review, as applicable, both gaap information as well as non-gaap measures, which may exclude items such as stock-based and deferred compensation expenses, amortization of intangibles, investment gains and losses, the related tax impact of all of these items, income tax adjustments, and the income tax effect of the non-gaap pre-tax adjustments from the provision for income taxes. adobe uses these non-gaap measures in order to assess the performance of adobe's business and for planning and forecasting in subsequent periods. whenever such a non-gaap measure is used, adobe provides a reconciliation of the non-gaap financial measure to the most closely applicable gaap financial measure. investors are encouraged to review the related gaap financial measures and the reconciliation of these non-gaap financial measures to their most directly comparable gaap financial measure as detailed above.
