Adobe reports record revenue in q1 fiscal 2022
San jose, calif.--(business wire)--adobe (nasdaq:adbe) today reported financial results for its first quarter fiscal year 2022 ended march 4, 2022. “adobe achieved record q1 revenue as creative cloud, document cloud and experience cloud continue to be pivotal in driving the digital economy,” said shantanu narayen, chairman and ceo, adobe. “adobe is committed to empowering individuals, transforming businesses and connecting communities.” “adobe’s q1 results reflect the company’s strong execution and resilience through unprecedented circumstances,” said dan durn, executive vice president and cfo, adobe. “our momentum, product innovation and immense market opportunity position us for success in 2022 and beyond.” first quarter fiscal year 2022 financial highlights adobe achieved record revenue of $4.26 billion in its first quarter of fiscal year 2022, which represents 9 percent year-over-year growth or 17 percent adjusted year-over-year growth1. diluted earnings per share was $2.66 on a gaap basis and $3.37 on a non-gaap basis. digital media segment revenue was $3.11 billion, which represents 9 percent year-over-year growth or 17 percent adjusted year-over-year growth1. creative revenue grew to $2.55 billion, representing 7 percent year-over-year growth or 16 percent adjusted year-over-year growth1. document cloud revenue was $562 million, representing 17 percent year-over-year growth or 26 percent adjusted year-over-year growth1. digital media annualized recurring revenue (“arr”) increased $418 million quarter over quarter to $12.57 billion exiting the quarter. creative arr grew to $10.54 billion and document cloud arr grew to $2.03 billion. digital experience segment revenue was $1.06 billion, representing 13 percent year-over-year growth or 20 percent adjusted year-over-year growth1. digital experience subscription revenue was $932 million, representing 15 percent year-over-year growth or 22 percent adjusted year-over-year growth1. gaap operating income in the first quarter was $1.58 billion, and non-gaap operating income was $1.99 billion. gaap net income was $1.27 billion, and non-gaap net income was $1.60 billion. cash flows from operations were $1.77 billion. remaining performance obligations (“rpo”) exiting the quarter were $13.83 billion, representing 19 percent year-over-year growth. adobe repurchased approximately 3.8 million shares during the quarter. impact of war in ukraine on march 4, 2022, adobe announced a halt of all new sales of adobe products and services in russia and belarus. in addition, today adobe is reducing its digital media arr balance by $75 million, which represents all arr for existing business in russia and belarus. while adobe will continue to provide digital media services in ukraine, the company reduced arr by an additional $12 million, which represents its entire digital media business in ukraine. this results in a total arr reduction of $87 million and an expected revenue impact of $75 million for fiscal year 2022. second quarter 2022 financial targets adobe’s second quarter fiscal year 2022 targets factor in current macroeconomic and geopolitical conditions. the following table summarizes adobe’s second quarter fiscal year 2022 targets: total revenue ~$4.34 billion digital media annualized recurring revenue (arr) ~$440 million of net new arr digital media segment revenue (y/y growth) ~13% ~14% (constant currency2) digital experience segment revenue (y/y growth) ~15% ~16% (constant currency2) digital experience subscription revenue (y/y growth) ~17% ~18% (constant currency2) tax rate gaap: ~20% non-gaap: ~18.5% earnings per share3 gaap: ~$2.44 non-gaap: ~$3.30 adobe to webcast earnings conference call adobe will webcast its first quarter 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, the effects of the covid-19 pandemic on our business and results of operations, our market opportunity, market trends, current macroeconomic conditions, 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 and economic 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 quarterly report on form 10-q for our fiscal quarter ended march 4, 2022, which adobe expects to file in late march or early april 2022. 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 adjusted to show growth rates in constant currency. 3 targets assume share count of ~474 million for second quarter fiscal year 2022. 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 march 4, 2022 march 5, 2021 revenue: subscription $ 3,958 $ 3,584 product 145 155 services and other 159 166 total revenue 4,262 3,905 cost of revenue: subscription 393 324 product 10 10 services and other 109 113 total cost of revenue 512 447 gross profit 3,750 3,458 operating expenses: research and development 701 620 sales and marketing 1,158 1,049 general and administrative 269 290 amortization of intangibles 42 45 total operating expenses 2,170 2,004 operating income 1,580 1,454 non-operating income (expense): interest expense (28 ) (30 ) investment gains (losses), net (9 ) 5 other income (expense), net — 4 total non-operating income (expense), net (37 ) (21 ) income before income taxes 1,543 1,433 provision for income taxes 277 172 net income $ 1,266 $ 1,261 basic net income per share $ 2.68 $ 2.63 shares used to compute basic net income per share 473 479 diluted net income per share $ 2.66 $ 2.61 shares used to compute diluted net income per share 475 483 condensed consolidated balance sheets (in millions; unaudited) march 4, 2022 december 3, 2021 assets current assets: cash and cash equivalents $ 2,739 $ 3,844 short-term investments 1,962 1,954 trade receivables, net of allowances for doubtful accounts of $18 and $16, respectively 1,685 1,878 prepaid expenses and other current assets 1,090 993 total current assets 7,476 8,669 property and equipment, net 1,703 1,673 operating lease right-of-use assets, net 435 443 goodwill 12,795 12,668 other intangibles, net 1,743 1,820 deferred income taxes 950 1,085 other assets 874 883 total assets $ 25,976 $ 27,241 liabilities trade payables $ 295 $ 312 accrued expenses 1,333 1,736 debt 499 — deferred revenue 4,894 4,733 income taxes payable 83 54 operating lease liabilities 93 97 total current liabilities 7,197 6,932 long-term liabilities: debt 3,626 4,123 deferred revenue 125 145 income taxes payable 540 534 deferred income taxes 4 5 operating lease liabilities 447 453 other liabilities 262 252 total liabilities 12,201 12,444 stockholders’ equity: preferred stock — — common stock — — additional paid-in-capital 8,750 8,428 retained earnings 24,961 23,905 accumulated other comprehensive income (loss) (177 ) (137 ) treasury stock, at cost (19,759 ) (17,399 ) total stockholders’ equity 13,775 14,797 total liabilities and stockholders’ equity $ 25,976 $ 27,241 condensed consolidated statements of cash flows (in millions; unaudited) three months ended march 4, 2022 march 5, 2021 cash flows from operating activities: net income $ 1,266 $ 1,261 adjustments to reconcile net income to net cash provided by operating activities: depreciation, amortization and accretion 213 196 stock-based compensation 322 260 unrealized investment (gains) losses, net 17 — other non-cash adjustments 153 138 changes in deferred revenue 141 471 changes in other operating assets and liabilities (343 ) (554 ) net cash provided by operating activities 1,769 1,772 cash flows from investing activities: purchases, sales and maturities of short-term investments, net (26 ) (4 ) purchases of property and equipment (100 ) (59 ) purchases and sales of long-term investments, intangibles and other assets, net (28 ) (25 ) acquisitions, net of cash acquired . (106 ) (1,470 ) net cash used for investing activities (260 ) (1,558 ) cash flows from financing activities: (2,400 ) (950 ) taxes paid related to net share settlement of equity awards, net of proceeds from treasury stock re-issuances (175 ) (304 ) other financing activities, net (29 ) 10 net cash used for financing activities (2,604 ) (1,244 ) effect of exchange rate changes on cash and cash equivalents (10 ) 4 net change in cash and cash equivalents (1,105 ) (1,026 ) cash and cash equivalents at beginning of period 3,844 4,478 cash and cash equivalents at end of period $ 2,739 $ 3,452 non-gaap results the following table shows adobe’s first quarter fiscal year 2022 gaap revenue growth rates reconciled to adjusted revenue growth rates included in this release. first quarter fiscal 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 9 % 9 % 7 % 17 % 13 % 15 % impact of extra week in fiscal year 2021 8 8 8 9 7 7 constant currency impact 0 0 1 0 0 0 adjusted revenue growth rates 17 % 17 % 16 % 26 % 20 % 22 % 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 march 4, 2022 march 5, 2021 december 3, 2021 operating income: gaap operating income $ 1,580 $ 1,454 $ 1,501 stock-based and deferred compensation expense 312 286 265 amortization of intangibles 101 89 91 non-gaap operating income $ 1,993 $ 1,829 $ 1,857 net income: gaap net income $ 1,266 $ 1,261 $ 1,233 stock-based and deferred compensation expense 312 286 265 amortization of intangibles 101 89 91 investment (gains) losses, net 9 (5 ) 4 income tax adjustments (86 ) (116 ) (57 ) non-gaap net income $ 1,602 $ 1,515 $ 1,536 diluted net income per share: gaap diluted net income per share $ 2.66 $ 2.61 $ 2.57 stock-based and deferred compensation expense 0.66 0.59 0.55 amortization of intangibles 0.21 0.19 0.19 investment (gains) losses, net 0.02 (0.01 ) 0.01 income tax adjustments (0.18 ) (0.24 ) (0.12 ) non-gaap diluted net income per share $ 3.37 $ 3.14 $ 3.20 shares used in computing diluted net income per share 475 483 480 non-gaap results (continued) the following table shows adobe’s first quarter fiscal year 2022 gaap tax rate reconciled to the non-gaap tax rate included in this release first quarter fiscal 2022 effective income tax rate: gaap effective income tax rate 18.0 % income tax adjustments 2.0 stock-based and deferred compensation expense (1.1 ) amortization of intangibles (0.4 ) non-gaap effective income tax rate 18.5 % reconciliation of gaap to non-gaap financial targets the following tables show adobe's second quarter fiscal year 2022 financial targets reconciled to non-gaap financial targets included in this release. second quarter fiscal 2022 digital media segment revenue digital experience segment revenue digital experience subscription revenue (y/y growth) (y/y growth) (y/y growth) gaap target revenue growth rates 13 % 15 % 17 % constant currency impact 1 1 1 constant currency target revenue growth rates 14 % 16 % 18 % (shares in millions) second quarter fiscal 2022 diluted net income per share: gaap diluted net income per share $ 2.44 stock-based and deferred compensation expense 0.79 amortization of intangibles 0.21 income tax adjustments (0.14 ) non-gaap diluted net income per share $ 3.30 shares used to compute diluted net income per share 474 second quarter fiscal 2022 effective income tax rate: gaap effective income tax rate 20.0 % stock-based and deferred compensation expense (1.4 ) amortization of intangibles (0.1 ) non-gaap effective income tax rate 18.5 % reconciliation of gaap to non-gaap financial targets (continued) the following table shows adobe's updated annual fiscal year 2022 gaap target tax rate reconciled to the non-gaap target tax rate. fiscal year 2022 effective income tax rate: gaap effective income tax rate 19.5 % stock-based and deferred compensation expense (1.4 ) amortization of intangibles (0.1 ) income tax adjustments 0.5 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.
