ADBE
$399.09
Adobe Systems
$4.71
1.19%
Earnings Details
1st Quarter February 2022
Tuesday, March 22, 2022 4:05:00 PM
Tweet Share Watch
Summary

Adobe Systems Beats but Guides Lower

Adobe Systems (ADBE) reported 1st Quarter February 2022 earnings of $3.41 per share on revenue of $4.3 billion. The consensus earnings estimate was $3.34 per share on revenue of $4.2 billion. The Earnings Whisper number was $3.38 per share. Revenue grew 9.1% on a year-over-year basis.

The company said it expects second quarter non-GAAP earnings of approximately $3.30 per share on revenue of approximately $4.34 billion. The current consensus earnings estimate is $3.35 per share on revenue of $4.41 billion for the quarter ending May 31, 2022.

Adobe Systems Inc offers a line of software and services used by creative professionals, marketers, developers, enterprises and consumers for creating, managing, delivering, measuring, optimizing and engaging with compelling operating systems.

Results
Reported Earnings
$3.41
Earnings Whisper
$3.38
Consensus Estimate
$3.34
Reported Revenue
$4.26 Bil
Revenue Estimate
$4.24 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Adobe Reports Record Revenue in Q1 Fiscal 2022

Document Cloud ARR Surpasses $2 Billion Exiting the Quarter

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

 
Current 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:

Repurchases of common stock

 

(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.

Investor Relations Contact
Jonathan Vaas
Adobe
ir@adobe.com

Public Relations Contact
Ashley Levine
Adobe
aslevine@adobe.com

Source: Adobe