Adobe Reports Record Revenue in Q2 Fiscal 2022

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:

The following table summarizes Adobe’s updated fiscal year 2022 targets:

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.

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.

Non-GAAP Results

The following table shows Adobe’s second quarter fiscal year 2022 GAAP revenue growth rates reconciled to adjusted revenue growth rates included in this release.

The following table shows Adobe’s GAAP results reconciled to non-GAAP results included in this release.

Non-GAAP Results (continued)

The following table shows Adobe’s second quarter fiscal year 2022 GAAP tax rate reconciled to the non-GAAP tax rate included in this release.

Reconciliation of GAAP to Non-GAAP Financial Targets

The following tables show Adobe's third quarter fiscal year 2022 financial targets reconciled to non-GAAP financial targets included in this release.

Reconciliation of GAAP to Non-GAAP Financial Targets (continued)

The following tables show Adobe's updated fiscal year 2022 financial targets reconciled to non-GAAP financial targets included in this release.

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.

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