Business Wire | Dec 16, 2021 08:05AM EST

Adobe Reports Record Q4 and Fiscal 2021 Revenue; Company Outlines Strategy for Next Decade of Growth

Dec. 16, 2021

SAN JOSE, Calif.--(BUSINESS WIRE)--Dec. 16, 2021--Adobe (Nasdaq:ADBE) today reported financial results for its fourth quarter and fiscal year 2021 ended Dec. 3, 2021.

"Adobe's record performance in Q4 resulted in fiscal 2021 revenue exceeding $15 billion," said Shantanu Narayen, chairman and CEO, Adobe. "Adobe's vision, category leadership, ground-breaking technology and large and loyal customer base position us well for fiscal 2022 and beyond."

"Adobe's financial performance in fiscal 2021 was outstanding, with top-line acceleration resulting in more than $7 billion in operating cash flows," said Dan Durn, executive vice president and CFO, Adobe. "With an estimated $205 billion addressable market, we are well positioned for significant growth in the years ahead with our industry-leading products and platforms."

Fourth Quarter Fiscal Year 2021 Financial Highlights

* Adobe achieved record revenue of $4.11 billion in its fourth quarter of fiscal year 2021, which represents 20 percent year-over-year growth. Diluted earnings per share was $2.57 on a GAAP basis and $3.20 on a non-GAAP basis. * Digital Media segment revenue was $3.01 billion, which represents 21 percent year-over-year growth. Creative revenue grew to $2.48 billion, representing 19 percent year-over-year growth. Document Cloud revenue was $532 million, representing 29 percent year-over-year growth. * Digital Media Annualized Recurring Revenue ("ARR") increased $571 million quarter over quarter to $12.24 billion exiting the quarter, including the addition of enterprise ARR of Frame.io, which closed on October 7, 2021. Creative ARR grew to $10.30 billion. Total enterprise ARR for Frame.io, including business closed by Adobe, exiting the quarter was approximately $29 million. Document Cloud ARR grew to $1.93 billion. * Digital Experience segment revenue was $1.01 billion, representing 23 percent year-over-year growth. Digital Experience subscription revenue was $886 million, representing 27 percent year-over-year growth. * GAAP operating income in the fourth quarter was $1.50 billion, and non-GAAP operating income was $1.86 billion. GAAP net income was $1.23 billion, and non-GAAP net income was $1.54 billion. * Cash flows from operations were a record $2.05 billion. * Remaining Performance Obligations ("RPO") exiting the quarter were $13.99 billion, representing 23 percent year-over-year growth. * Adobe repurchased approximately 1.6 million shares during the quarter.

Fiscal Year 2021 Financial Highlights

* Adobe achieved record annual revenue of $15.79 billion in fiscal year 2021, which represents 23 percent year-over-year growth. * The company reported annual GAAP diluted earnings per share of $10.02 and non-GAAP diluted earnings per share of $12.48. * Digital Media segment revenue was $11.52 billion, which represents 25 percent year-over-year growth. Creative revenue grew to $9.55 billion, representing 23 percent year-over-year growth. Document Cloud revenue was $1.97 billion, representing 32 percent year-over-year growth. Digital Media ARR grew by $1.98 billion during the year. * Digital Experience segment revenue was $3.87 billion, representing 24 percent year-over-year growth. Digital Experience subscription revenue was $3.38 billion, representing 27 percent year-over-year growth. * GAAP operating income was $5.80 billion, growing 37 percent year over year, and non-GAAP operating income was $7.26 billion, growing 31 percent year over year. GAAP net income was $4.82 billion, and non-GAAP net income was $6.00 billion. * Adobe generated a record $7.23 billion in operating cash flows during the year. * Adobe repurchased approximately 7.2 million shares during the year.

Adobe to Host Financial Analyst Meeting

Today, Adobe will host its annual financial analyst meeting together with its fourth quarter fiscal year 2021 earnings conference call. In addition to sharing its financial outlook, Adobe's executive team will outline the company's vision, strategies and opportunities across Adobe Creative Cloud, Adobe Document Cloud and Adobe Experience Cloud. As part of the financial analyst meeting, Adobe is announcing that it expects its total addressable market to expand to approximately $205 billion by 2024.

The meeting will be hosted virtually on Adobe's investor relations website at 8:00 a.m. Pacific Time. Earnings documents, including Adobe management's prepared slides and an investor datasheet are posted to Adobe's investor relations website in advance of the conference call for reference.

Adobe Provides Fiscal Year and First Quarter 2022 Financial Targets

Adobe's fiscal year 2022 and first quarter fiscal year 2022 targets factor in the following:

* The strengthening of the U.S. Dollar against foreign currencies; and * The return to a 13-week first quarter and a 52-week fiscal year from fiscal 2021, which included an extra week in Q11,2.

The following table summarizes Adobe's fiscal year 2022 targets:

Total revenue ~$17.90 billion

Digital Media annualized recurring revenue (ARR) ~$1.90 billion of net new ARR

Digital Media segment revenue (Y/Y growth) ~14 % ~17 % (Adjusted^ 3)

Digital Experience segment revenue (Y/Y growth) ~14 % ~17 % (Adjusted^ 3)

Digital Experience subscription revenue (Y/Y ~16 % ~19 % (Adjusted^growth) 3)

Tax rate GAAP: ~17.5 Non-GAAP: ~17 % %

Earnings per share^4 GAAP: Non-GAAP: ~$13.70 ~$10.25

The following table summarizes Adobe's first quarter fiscal year 2022 targets:

Total revenue ~$4.23 billion^1

Digital Media annualized recurring revenue (ARR) ~$400 million of net new ARR^ 2

Digital Media segment revenue (Y/Y growth) ~8 % ~17 % (Adjusted^ 3)

Digital Experience segment revenue (Y/Y growth) ~11 % ~18 % (Adjusted^ 3)

Digital Experience subscription revenue (Y/Y ~13 % ~20 % (Adjusted^growth) 3)

Tax rate GAAP: ~16 % Non-GAAP: ~17 %

Earnings per share^4 GAAP: Non-GAAP: ~$3.35 ~$2.63

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, 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 2020 ended Nov. 27, 2020, and Adobe's Quarterly Reports on Form 10-Q issued in fiscal year 2021.

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. 3, 2021, which Adobe expects to file in January 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.

* Additional week in the first quarter of fiscal year 2021 contributed approximately $267 million of total Adobe revenue. * Additional week in the first quarter of fiscal year 2021 contributed approximately $25 million of net new Digital Media ARR. * Adjusted to account for the extra week in first quarter fiscal year 2021 and to show growth rates in constant currency. * Targets assume share count of ~477 million for fiscal year 2022 and ~479 million for first quarter fiscal year 2022. About Adobe

Adobe is changing the world through digital experiences. For more information, visit www.adobe.com.

(c)2021 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 November December November 3, 2021 27, 2020 3, 2021 27, 2020

Revenue:

Subscription $ 3,812 $ 3,115 $ 14,573 $ 11,626

Product 128 127 555 507

Services and other 170 182 657 735

Total revenue 4,110 3,424 15,785 12,868



Cost of revenue:

Subscription 378 283 1,374 1,108

Product 12 10 41 36

Services and other 117 135 450 578

Total cost of revenue 507 428 1,865 1,722



Gross profit 3,603 2,996 13,920 11,146



Operating expenses:

Research and development 657 558 2,540 2,188

Sales and marketing 1,131 941 4,321 3,591

General and administrative 274 243 1,085 968

Amortization of intangibles 40 39 172 162

Total operating expenses 2,102 1,781 8,118 6,909



Operating income 1,501 1,215 5,802 4,237



Non-operating income (expense):

Interest expense (28 ) (27 ) (113 ) (116 )

Investment gains (losses), (4 ) 6 16 13 net

Other income (expense), net (1 ) 3 - 42

Total non-operating income (33 ) (18 ) (97 ) (61 )(expense), net

Income before income taxes 1,468 1,197 5,705 4,176

Provision for (benefit from) 235 (1,053 ) 883 (1,084 )income taxes

Net income $ 1,233 $ 2,250 $ 4,822 $ 5,260

Basic net income per share $ 2.59 $ 4.69 $ 10.10 $ 10.94

Shares used to compute basic 476 479 477 481 net income per share

Diluted net income per share $ 2.57 $ 4.64 $ 10.02 $ 10.83

Shares used to compute 480 484 481 485 diluted net income per share

Condensed Consolidated Balance Sheets

(In millions; unaudited)

December 3, November 2021 27, 2020

ASSETS



Current assets:

Cash and cash equivalents $ 3,844 $ 4,478

Short-term investments 1,954 1,514

Trade receivables, net of allowances for doubtful 1,878 1,398 accounts of $16 and $21, respectively

Prepaid expenses and other current assets 975 756

Total current assets 8,651 8,146



Property and equipment, net 1,673 1,517

Operating lease right-of-use assets, net 443 487

Goodwill 12,721 10,742

Other intangibles, net 1,820 1,359

Deferred income taxes 1,085 1,370

Other assets 848 663

Total assets $ 27,241 $ 24,284



LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:

Trade payables $ 312 $ 306

Accrued expenses 1,736 1,422

Deferred revenue 4,733 3,629

Income taxes payable 54 63

Operating lease liabilities 97 92

Total current liabilities 6,932 5,512



Long-term liabilities:

Debt 4,123 4,117

Deferred revenue 145 130

Income taxes payable 534 529

Deferred income taxes 5 10

Operating lease liabilities 453 499

Other liabilities 252 223

Total liabilities 12,444 11,020



Stockholders' equity:

Preferred stock - -

Common stock - -

Additional paid-in-capital 8,428 7,357

Retained earnings 23,905 19,611

Accumulated other comprehensive income (loss) (137 ) (158 )

Treasury stock, at cost (17,399 ) (13,546 )

Total stockholders' equity 14,797 13,264

Total liabilities and stockholders' equity $ 27,241 $ 24,284

Condensed Consolidated Statements of Cash Flows

(In millions; unaudited)

Three Months Ended

December November 3, 2021 27, 2020

Cash flows from operating activities:

Net income $ 1,233 $ 2,250

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and accretion 205 190

Stock-based compensation 269 233

Unrealized investment (gains) losses, net 7 (7 )

Other non-cash adjustments 87 (1,192 )

Changes in deferred revenue 482 310

Changes in other operating assets and liabilities (235 ) (2 )

Net cash provided by operating activities 2,048 1,782



Cash flows from investing activities:

Purchases, sales and maturities of short-term (423 ) (22 )investments, net

Purchases of property and equipment (81 ) (103 )

Purchases and sales of long-term investments, (5 ) (6 )intangibles and other assets, net

Acquisitions, net of cash acquired (1,212 ) -

Net cash used for investing activities (1,721 ) (131 )



Cash flows from financing activities:

Repurchases of common stock (1,000 ) (850 )

Taxes paid related to net share settlement of equity (116 ) (82 )awards, net of proceeds from treasury stock re-issuances

Other financing activities, net 38 (8 )

Net cash used for financing activities (1,078 ) (940 )

Effect of exchange rate changes on cash and cash (28 ) - equivalents

Net increase (decrease) in cash and cash equivalents (779 ) 711

Cash and cash equivalents at beginning of period 4,623 3,767

Cash and cash equivalents at end of period $ 3,844 $ 4,478

Non-GAAP Results

(In millions, except per share data)

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

Three Months Ended Year Ended

December November September December November 3, 27, 3, 3, 27, 2021 2020 2021 2021 2020

Operating income:



GAAP operating income $ 1,501 $ 1,215 $ 1,441 $ 5,802 $ 4,237

Stock-based anddeferred compensation 265 239 287 1,107 924 expense

Amortization of 91 84 83 350 360 intangibles

Non-GAAP operating $ 1,857 $ 1,538 $ 1,811 $ 7,259 $ 5,521 income



Net income:



GAAP net income $ 1,233 $ 2,250 $ 1,212 $ 4,822 $ 5,260

Stock-based anddeferred compensation 265 239 287 1,107 924 expense

Amortization of 91 84 83 350 360 intangibles

Investment (gains) 4 (6 ) (7 ) (16 ) (13 )losses, net

Income tax (57 ) (1,204 ) (79 ) (260 ) (1,628 )adjustments

Non-GAAP net income $ 1,536 $ 1,363 $ 1,496 $ 6,003 $ 4,903



Diluted net income per share:



GAAP diluted net $ 2.57 $ 4.64 $ 2.52 $ 10.02 $ 10.83 income per share

Stock-based anddeferred compensation 0.55 0.49 0.60 2.30 1.90 expense

Amortization of 0.19 0.17 0.17 0.73 0.74 intangibles

Investment (gains) 0.01 (0.01 ) (0.01 ) (0.03 ) (0.03 )losses, net

Income tax (0.12 ) (2.48 ) (0.17 ) (0.54 ) (3.34 )adjustments

Non-GAAP diluted net $ 3.20 $ 2.81 $ 3.11 $ 12.48 $ 10.10 income per share



Shares used incomputing diluted net 480 484 481 481 485 income per share

Reconciliation of GAAP to Non-GAAP Financial Targets

(Shares in millions)

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

Digital Digital Digital Media Experience ExperienceFiscal 2022 segment segment subscription revenue revenue revenue

(Y/Y (Y/Y (Y/Y growth) growth) growth)

GAAP Target 14 % 14 % 16 %

Impact of extra week in fiscal year 2021 2 2 2

Constant currency impact 1 1 1

Adjusted Target 17 % 17 % 19 %

Fiscal Year 2022

Diluted net income per share:

GAAP diluted net income per share

$

10.25

Stock-based and deferred compensation expense

3.25

Amortization of intangibles

0.83

Income tax adjustments

(0.63

)

Non-GAAP diluted net income per share

$

13.70

Shares used to compute diluted net income per share

477

Fiscal Year 2022

Diluted net income per share:



GAAP diluted net income per share $ 10.25

Stock-based and deferred compensation expense 3.25

Amortization of intangibles 0.83

Income tax adjustments (0.63 )

Non-GAAP diluted net income per share $ 13.70



Shares used to compute diluted net income per share 477

Fiscal Year 2022

Effective income tax rate:

GAAP effective income tax rate

17.5

%

Stock-based and deferred compensation expense

(0.9

)

Amortization of intangibles

(0.1

)

Income tax adjustments

0.5

Non-GAAP effective income tax rate

17.0

%

Fiscal Year 2022

Effective income tax rate:



GAAP effective income tax rate 17.5 %

Stock-based and deferred compensation expense (0.9 )

Amortization of intangibles (0.1 )

Income tax adjustments 0.5

Non-GAAP effective income tax rate 17.0 %

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

(Shares in millions)

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

Digital Digital Digital Media Experience ExperienceFirst Quarter Fiscal 2022 segment segment subscription revenue revenue revenue

(Y/Y (Y/Y (Y/Y growth) growth) growth)

GAAP Target 8 % 11 % 13 %

Impact of extra week in fiscal year 2021 8 7 7

Constant currency impact 1 0 0

Adjusted Target 17 % 18 % 20 %

First Quarter

Fiscal 2022

Diluted net income per share:

GAAP diluted net income per share

$

2.63

Stock-based and deferred compensation expense

0.70

Amortization of intangibles

0.21

Income tax adjustments

(0.19

)

Non-GAAP diluted net income per share

$

3.35

Shares used to compute diluted net income per share

479

First Quarter Fiscal 2022

Diluted net income per share:



GAAP diluted net income per share $ 2.63

Stock-based and deferred compensation expense 0.70

Amortization of intangibles 0.21

Income tax adjustments (0.19 )

Non-GAAP diluted net income per share $ 3.35



Shares used to compute diluted net income per share 479

First Quarter

Fiscal 2022

Effective income tax rate:

GAAP effective income tax rate

16.0

%

Stock-based and deferred compensation expense

(0.9

)

Amortization of intangibles

(0.1

)

Income tax adjustments

2.0

Non-GAAP effective income tax rate

17.0

%

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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CONTACT: Investor Relations Contact Jonathan Vaas Adobe ir@adobe.com

CONTACT: Public Relations Contact Ashley Levine Adobe aslevine@adobe.com