Exhibit 99.1
| | Investor Relations Contact |
| Mike Saviage |
| Adobe Systems Incorporated |
| 408-536-4416 |
| ir@adobe.com |
| |
| Public Relations Contact |
| Holly Campbell |
| Adobe Systems Incorporated |
| | 408-536-6401 |
| | campbell@adobe.com |
FOR IMMEDIATE RELEASE
Adobe Reports Strong Q1 Revenue and Earnings
Company Achieves 37 Percent Year-Over-Year Revenue Growth
SAN JOSE, Calif. – March 18, 2008 – Adobe Systems Incorporated (Nasdaq:ADBE) today reported financial results for its first quarter ended February 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.
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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
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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 February 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.
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© 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.
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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 | |
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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 | |
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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 | |
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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 | |
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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 | % |
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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 | | Fiscal | | | |
| | Low | | High | | 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 | | 551.0 | |
| | | | | | | | | | | | | | | |
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. 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
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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.
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