Category: Uncategorized
- Published: 29 November -0001
Adobe Reports Strong Q1 Revenue and Earnings
Company Achieves 37 Percent Year-Over-Year Revenue Growth
Adobe Systems Incorporated (Nasdaq:ADBE - News) today reported financial results for its first quarter ended Feb. 29, 2008.
In the first quarter of fiscal 2008, Adobe achieved revenue of $890.4 million, compared to $649.4 million reported for the first quarter of fiscal 2007 and $911.2 million reported in the fourth quarter of fiscal 2007. This represents 37 percent year-over-year revenue growth. Adobe’s first quarter revenue target range was $855 to $885 million.
“Driving our strong performance in Q1 was continued demand for our Creative Suite 3 family of products, as well as another record quarter for our Acrobat product family,” said Shantanu Narayen, president and chief executive officer of Adobe. “As the proliferation of digital content accelerates, customers worldwide are looking to Adobe for solutions that enable the creation of rich, engaging experiences across a variety of media and devices. This trend will continue to drive our diverse business, and we are reaffirming our fiscal year financial targets.”
During the first quarter, Adobe repurchased 33.3 million shares of its outstanding common stock, at a cost of $1.25 billion.
First Quarter GAAP Results
Adobe’s GAAP diluted earnings per share for the first quarter of fiscal 2008 were $0.38, based on 571.3 million weighted average shares. This compares with GAAP diluted earnings per share of $0.24 reported in the first quarter of fiscal 2007 based on 604.2 million weighted average shares, and GAAP diluted earnings per share of $0.38 reported in the fourth quarter of fiscal 2007 based on 587.9 million weighted average shares. Adobe’s first quarter GAAP earnings per share target range was $0.34 to $0.36.
GAAP operating income was $275.4 million in the first quarter of fiscal 2008, compared to $146.3 million in the first quarter of fiscal 2007 and $275.8 million in the fourth quarter of fiscal 2007. As a percent of revenue, GAAP operating income in the first quarter of fiscal 2008 was 30.9 percent, compared to 22.5 percent in the first quarter of fiscal 2007 and 30.3 percent in the fourth quarter of fiscal 2007.
GAAP net income was $219.4 million for the first quarter of fiscal 2008, compared to $143.9 million reported in the first quarter of fiscal 2007, and $222.2 million in the fourth quarter of fiscal 2007.
First Quarter Non-GAAP Results
Non-GAAP diluted earnings per share for the first quarter of fiscal 2008 were $0.48. This compares with non-GAAP diluted earnings per share of $0.30 reported in the first quarter of fiscal 2007, and non-GAAP diluted earnings per share of $0.49 reported in the fourth quarter of fiscal 2007. Adobe’s first quarter non-GAAP earnings per share target range was $0.44 to $0.46.
Adobe’s non-GAAP operating income was $359.0 million in the first quarter of fiscal 2008, compared to $223.8 million in the first quarter of fiscal 2007 and $362.2 million in the fourth quarter of fiscal 2007. As a percent of revenue, non-GAAP operating income in the first quarter of fiscal 2008 was 40.3 percent, compared to 34.5 percent in the first quarter of fiscal 2007 and 39.7 percent in the fourth quarter of fiscal 2007.
Non-GAAP net income was $273.0 million for the first quarter of fiscal 2008, compared to $183.6 million in the first quarter of fiscal 2007, and $289.6 million in the fourth quarter of fiscal 2007.
A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.
Adobe Provides Second Quarter Financial Targets and Reaffirms Fiscal Year 2008 Targets
For the second quarter of fiscal 2008, Adobe announced it is targeting revenue of $855 million to $885 million. The Company is targeting a GAAP operating margin of 29 to 30 percent in the second quarter. On a non-GAAP basis, the Company is targeting a second quarter operating margin of approximately 39 percent.
In addition, Adobe is targeting its share count to be between 546 million and 550 million shares in the second quarter of fiscal 2008. The Company also is targeting GAAP non-operating income to be $14 million to $16 million, and non-GAAP non-operating income to be $5 million to $7 million. Adobe’s GAAP and non-GAAP tax rate is expected to be approximately 27 percent.
These targets lead to a second quarter earnings per share target range of $0.35 to $0.37 on a GAAP basis, and a earnings per share target range of $0.45 to $0.47 on a non-GAAP basis.
For fiscal year 2008, Adobe reaffirmed it is targeting annual revenue growth of approximately 13 percent. The Company also reaffirmed it is targeting an annual GAAP operating margin of approximately 30 percent, and a non-GAAP operating margin of approximately 39 percent.
In addition, Adobe provided fiscal year 2008 earnings targets. On a GAAP basis, the Company is targeting earnings per share of $1.45 to $1.51. On a non-GAAP basis, the Company is targeting earnings per share of $1.86 to $1.92.
A reconciliation between these GAAP and non-GAAP financial targets is provided at the end of this press release.
Forward-Looking Statements Disclosure
This press release contains forward-looking statements, including those related to revenue, operating margin, other income, tax rate, share count, earnings per share, and business momentum 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: delays in development or shipment of Adobe’s new products or major new versions of existing products, introduction of new products and business models by existing and new competitors, failure to successfully manage transitions to new business models and markets, failure to anticipate and develop new products and services in response to changes in demand for application software and software delivery, computers, printers, or other non PC-devices, adverse changes in general economic or political conditions in any of the major countries in which Adobe does business, difficulty in predicting revenue from new businesses, costs related to intellectual property acquisitions, disputes and litigation, inability to protect Adobe’s intellectual property from unauthorized copying, use, disclosure or malicious attack, failure to realize the anticipated benefits of past or future acquisitions and difficulty in integrating such acquisitions, changes to Adobe’s distribution channel, disruption of Adobe’s business due to catastrophic events, risks associated with international operations, fluctuations in foreign currency exchange rates, changes in, or interpretations of, accounting principles, impairment of Adobe’s goodwill or intangible assets, unanticipated changes in, or interpretations of, tax rules and regulations, Adobe’s inability to attract and retain key personnel, market risks associated with Adobe’s equity investments, and interruptions or terminations in Adobe’s relationships with turnkey assemblers. For further discussion of these and other risks and uncertainties, individuals should refer to Adobe’s SEC filings.
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 the first quarter ended Feb. 29, 2008, which the Company expects to file in April 2008. Adobe does not undertake an obligation to update forward-looking statements.
About Adobe Systems Incorporated
Adobe revolutionizes how the world engages with ideas and information – anytime, anywhere and through any medium. For more information, visit www.adobe.com.
© 2008 Adobe Systems Incorporated. All rights reserved. Adobe, the Adobe logo, Acrobat and Creative Suite are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners.
Condensed Consolidated Statements of Income (In thousands, except per share data; unaudited) Three Months Ended February 29, 2008 March 2, 2007 Revenue: Products $ 851,962 $ 620,298 Services and support 38,483 29,109 Total revenue 890,445 649,407 Total cost of revenue: Products 59,805 53,815 Services and support 22,670 18,448 Total cost of revenue 82,475 72,263 Gross profit 807,970 577,144 Operating expenses: Research and development 168,485 137,129 Sales and marketing 262,595 214,678 General and administrative 82,929 61,275 Restructuring and other charges 1,431 — Amortization of purchased intangibles 17,099 17,725 Total operating expenses 532,539 430,807 Operating income 275,431 146,337 Non-operating income: Interest and other income, net 13,290 22,515 Interest expense (1,809 ) (51 ) Investment gain 8,732 5,601 Total non-operating income 20,213 28,065 Income before income taxes 295,644 174,402 Provision for income taxes 76,265 30,551 Net income $ 219,379 $ 143,851 Basic net income per share $ 0.39 $ 0.24 Shares used in computing basic net income per share 561,113 587,969 Diluted net income per share $ 0.38 $ 0.24 Shares used in computing diluted net income per share 571,259 604,249 Condensed Consolidated Balance Sheets (In thousands, except per share data; unaudited) February 29, November 30, 2008 2007 ASSETS Current assets: Cash and cash equivalents $ 1,032,733 $ 946,422 Short-term investments 682,511 1,047,432 Trade receivables, net of allowances for doubtful accounts of $4,271 and $4,398, respectively 293,266 318,145 Other receivables 38,839 44,666 Deferred income taxes 132,892 171,472 Prepaid expenses and other assets 46,031 44,840 Total current assets 2,226,272 2,572,977 Property and equipment, net 297,522 289,758 Goodwill 2,144,368 2,148,102 Purchased and other intangibles, net 357,221 402,619 Investment in lease receivable 207,239 207,239 Other assets 108,279 92,984 $ 5,340,901 $ 5,713,679 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Trade and other payables $ 62,019 $ 66,867 Accrued expenses 368,978 383,436 Accrued restructuring 5,956 3,731 Income taxes payable 40,931 215,058 Deferred revenue 191,662 183,318 Total current liabilities 669,546 852,410 Long-term liabilities: Deferred revenue 22,956 25,950 Deferred income taxes 146,344 148,943 Income taxes payable 197,741 — Debt 450,000 — Accrued restructuring 12,069 13,987 Other liabilities 28,095 22,407 Total liabilities 1,526,751 1,063,697 Stockholders’ equity: Preferred stock, $0.0001 par value; 2,000 shares authorized — — Common stock, $0.0001 par value 61 61 Additional paid-in-capital 2,317,582 2,340,969 Retained earnings 4,260,970 4,041,592 Accumulated other comprehensive income 26,215 27,948 Treasury stock, at cost (59,963 and 29,425 shares, respectively), net of reissuances (2,790,678 ) (1,760,588 ) Total stockholders’ equity 3,814,150 4,649,982 $ 5,340,901 $ 5,713,679 Condensed Consolidated Statements of Cash Flows (In thousands; unaudited) Three Months Ended February 29, 2008 March 2, 2007 Cash flows from operating activities: Net income $ 219,379 $ 143,851 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and accretion 69,202 68,498 Stock-based compensation expense, net of tax 43,034 46,285 Net investment (gains) (9,493 ) (5,835 ) Changes in deferred revenue 5,350 7,585 Changes in operating assets and liabilities 71,828 10,736 Net cash provided by operating activities 399,300 271,120 Cash flows from investing activities: Sales and maturities of short-term investments, net of purchases 362,592 (249,540 ) Purchases of property and equipment (26,268 ) (48,300 ) Purchases of long term investments and other assets, net of sales (8,038 ) (9,517 ) Cash paid for acquisitions 485 (3,094 ) Net cash provided by (used for) investing activities 328,771 (310,451 ) Cash flows from financing activities: Purchases of treasury stock (1,150,022 ) (301,468 ) Reissuances of treasury stock 53,510 94,033 Proceeds from borrowings under credit facility 450,000 — Excess tax benefits from stock-based compensation — 1,556 Net cash used for financing activities (646,512 ) (205,879 ) Effect of exchange rate changes on cash and cash equivalents 4,752 (1,260 ) Net increase (decrease) in cash and cash equivalents 86,311 (246,470 ) Cash and cash equivalents at beginning of period 946,422 772,500 Cash and cash equivalents at end of period $ 1,032,733 $ 526,030 Non-GAAP Results (In thousands, except per share data) The following table shows the Company’s non-GAAP results reconciled to GAAP results included in this release for the quarters ended February 29, 2008, March 2, 2007 and November 30, 2007. Three Months Ended February 29, 2008 March 2, 2007 November 30, 2007 GAAP operating income $ 275,431 $ 146,337 $ 275,832 Stock-based compensation 43,034 31,852 39,791 Restructuring and other charges 1,431 — — Amortization of purchased intangibles 39,071 45,644 46,570 Non-GAAP operating income $ 358,967 $ 223,833 $ 362,193 GAAP net income $ 219,379 $ 143,851 $ 222,208 Stock-based compensation, net of tax 30,859 23,089 30,401 Restructuring and other charges, net of tax 1,026 — — Amortization of purchased intangibles, net of tax 28,018 32,606 35,524 R&D tax benefit, net of tax — (12,330 ) — Investment (gain) loss, net of tax (6,262 ) (3,592 ) 1,478 Non-GAAP net income $ 273,020 $ 183,624 $ 289,611 Diluted net income per share: GAAP net income $ 0.38 $ 0.24 $ 0.38 Stock-based compensation, net of tax 0.06 0.04 0.05 Restructuring and other charges, net of tax — — — Amortization of purchased intangibles, net of tax 0.05 0.05 0.06 R&D tax benefit, net of tax — (0.02 ) — Investment gain, net of tax (0.01 ) (0.01 ) — Non-GAAP net income $ 0.48 $ 0.30 $ 0.49 Shares used computing diluted net income per share 571,259 604,249 587,865 The following tables show the Company’s reconciliation of non-GAAP to GAAP operating expense and operating margin for the quarters ended February 29, 2008, March 2, 2007 and November 30, 2007. Three Months Ended February 29, 2008 March 2, 2007 November 30, 2007 GAAP operating expenses $ 532,539 $ 430,807 $ 536,783 Stock-based compensation (42,190 ) (30,648 ) (38,577 ) Restructuring and other charges (1,431 ) — — Amortization of purchased intangibles (17,099 ) (17,725 ) (17,893 ) Non-GAAP operating expenses $ 471,819 $ 382,434 $ 480,313 Three Months Ended February 29, 2008 March 2, 2007 November 30, 2007 GAAP operating margin 30.9 % 22.5 % 30.3 % Stock-based compensation 4.8 4.9 4.4 Restructuring and other charges 0.2 — — Amortization of purchased intangibles 4.4 7.1 5.0 Non-GAAP operating margin 40.3 % 34.5 % 39.7 % The following table shows the Company’s reconciliation of non-GAAP to GAAP effective tax rate for the quarter ended February 29, 2008. February 29, 2008 GAAP effective income tax rate 25.8 % Stock-based compensation 0.3 Amortization of purchased intangibles 0.3 Investment gain (0.1 ) Non-GAAP effective income tax rate 26.3 % Second Quarter and Fiscal Year 2008 Non-GAAP Financial Targets (In millions, except per share data) The following tables show the Company’s second quarter and fiscal year 2008 non-GAAP financial targets reconciled to GAAP financial targets included in this release. Second Quarter Fiscal 2008 Low High Fiscal 2008 GAAP operating margin 29.0 % 30.0 % 30.0 % Stock-based compensation 5.3 4.7 4.7 Amortization of purchased intangibles 4.7 4.3 4.3 Non-GAAP operating margin 39.0 % 39.0 % 39.0 % Second Quarter Fiscal 2008 Low High Non-operating income: GAAP non-operating income $ 14.0 $ 16.0 Investment gain (9.0 ) (9.0 ) Non-GAAP non-operating income $ 5.0 $ 7.0 Second Quarter Fiscal 2008 Fiscal 2008 Low High Low High Diluted net income per share: GAAP net income per share $ 0.35 $ 0.37 $ 1.45 $ 1.51 Stock-based compensation, net of tax 0.06 0.06 0.22 0.22 Amortization of purchased intangibles, net of tax 0.05 0.05 0.20 0.20 Investment gain, net of tax (0.01 ) (0.01 ) (0.01 ) (0.01 ) Non-GAAP net income per share $ 0.45 $ 0.47 $ 1.86 $ 1.92 Shares used in computing diluted net income per share 550.0 546.0 555.0 551.0Adobe 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. Accordingly, 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 in a manner that focuses on what Adobe believes to be its ongoing business operations. Adobe’s management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes the stock-based compensation impact of SFAS 123R, restructuring and other charges, amortization of purchased intangibles and incomplete technology, investment gains and losses and the related tax impact of these items, the net tax impact of the R&D tax benefit, the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes, and the non-GAAP measures that exclude such information in order to assess the performance of Adobe’s business and for planning and forecasting in subsequent periods. Whenever Adobe uses such a non-GAAP financial measure, it 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.
Contact:
Adobe Systems Incorporated Mike Saviage, 408-536-4416 (Investor Relations) This email address is being protected from spambots. You need JavaScript enabled to view it. Holly Campbell, 408-536-6401 (Public Relations) This email address is being protected from spambots. You need JavaScript enabled to view it.
