Adobe (Nasdaq:ADBE) today reported financial results for its second quarter fiscal year 2022 ended June 3, 2022.
“Adobe achieved record Q2 revenue with strong demand across Creative Cloud, Document Cloud and Experience Cloud,” said Shantanu Narayen, chairman and CEO, Adobe. “We are winning in our established businesses and seeing significant momentum in new categories from content authoring for a broad base of creators to PDF functionality on the web to the leading real-time customer data platform for global enterprises.”
“We delivered another quarter of strong financial results, with greater than $2 billion in operating cash flows demonstrating the strength of Adobe’s growing revenue streams and financial discipline,” said Dan Durn, executive vice president and CFO, Adobe. “Our operating model continues to fuel consistent growth, enabling the company to invest in category-leading cloud solutions and emerging innovations that are gaining traction in the marketplace.”
Second Quarter Fiscal Year 2022 Financial Highlights
- Adobe achieved record revenue of $4.39 billion in its second quarter of fiscal year 2022, which represents 14 percent year-over-year growth or 15 percent in constant currency. Diluted earnings per share was $2.49 on a GAAP basis and $3.35 on a non-GAAP basis.
- GAAP operating income in the second quarter was $1.53 billion, and non-GAAP operating income was $1.97 billion. GAAP net income was $1.18 billion, and non-GAAP net income was $1.59 billion.
- Cash flows from operations were $2.04 billion.
- Remaining Performance Obligations (“RPO”) exiting the quarter were $13.82 billion.
- Adobe repurchased approximately 1.9 million shares during the quarter.
Second Quarter Fiscal Year 2022 Business Segment Highlights
- Digital Media segment revenue was $3.20 billion, which represents 15 percent year-over-year growth or 16 percent in constant currency. Creative revenue grew to $2.61 billion, representing 12 percent year-over-year growth or 14 percent in constant currency. Document Cloud revenue was $595 million, representing 27 percent year-over-year growth or 28 percent in constant currency.
- Net New Digital Media Annualized Recurring Revenue (“ARR”) was $464 million, exiting the quarter with Digital Media ARR of $12.95 billion. Creative ARR grew to $10.82 billion and Document Cloud ARR grew to $2.13 billion.
- Digital Experience segment revenue was $1.10 billion, representing 17 percent year-over-year growth or 18 percent in constant currency. Digital Experience subscription revenue was $961 million, representing 18 percent year-over-year growth.
Financial Targets
Adobe is providing third quarter and updated full fiscal year 2022 targets that factor in the following:
- The increase in effective tax rates resulting from lower-than-expected tax benefits associated with stock-based compensation1.
- The impact of the ongoing war in Ukraine, and Adobe’s decision to cease all new sales in Russia and Belarus2.
- An incremental FX headwind of $175 million across Q3 and Q4 fiscal year 2022 revenue.
- Summer seasonality in Q3 followed by a sequentially strong Q4.
The following table summarizes Adobe’s third quarter fiscal year 2022 targets:
|
Total revenue |
~$4.43 billion |
|||
|
Digital Media annualized recurring revenue (ARR) |
~$430 million of net new ARR |
|||
|
Digital Media segment revenue (Y/Y growth) |
~13% |
~16% (constant currency) |
||
|
Digital Experience segment revenue (Y/Y growth) |
~12% |
~14% (constant currency) |
||
|
Digital Experience subscription revenue (Y/Y growth) |
~13% |
~15% (constant currency) |
||
|
Tax rate |
GAAP: ~22.5% |
Non-GAAP: ~18.5% |
||
|
Earnings per share3 |
GAAP: ~$2.35 |
Non-GAAP: ~$3.33 |
||
The following table summarizes Adobe’s updated fiscal year 2022 targets:
|
Total revenue |
~$17.65 billion |
|||
|
Digital Media annualized recurring revenue (ARR) |
~$1.90 billion of net new ARR |
|||
|
Digital Media segment revenue (Y/Y growth) |
~12% |
~17% (adjusted4) |
||
|
Digital Experience segment revenue (Y/Y growth) |
~14% |
~17% (adjusted4) |
||
|
Digital Experience subscription revenue (Y/Y growth) |
~15% |
~19% (adjusted4) |
||
|
Tax rate |
GAAP: ~21% |
Non-GAAP: ~18.5% |
||
|
Earnings per share5 |
GAAP: ~$9.95 |
Non-GAAP: ~$13.50 |
||
Adobe to Webcast Earnings Conference Call
Adobe will webcast its second 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, fluctuations in foreign currency exchange rates, 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 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 June 3, 2022, which Adobe expects to file in June 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 In March 2022, the company disclosed an increase in effective tax rates resulting from lower-than-expected tax benefits associated with stock-based compensation.
2 In March 2022, the company disclosed an expected impact of $75 million to fiscal year 2022 Digital Media revenue from these events.
3 Targets assume share count of ~470 million for third quarter fiscal year 2022.
4 Adjusted to account for the extra week in first quarter fiscal year 2021 and to show growth rates in constant currency.
5 Targets assume share count of ~471 million for fiscal year 2022.
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