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 Record Revenue
Company Announces Plan to Repurchase $1.6 Billion of Stock
SAN JOSE, Calif. — June 22, 2010 — Adobe Systems Incorporated (Nasdaq:ADBE) today reported financial results for its second quarter fiscal year 2010 ended June 4, 2010.
In the second quarter of fiscal 2010, Adobe achieved record revenue of $943.0 million, compared to $704.7 million reported for the second quarter of fiscal 2009 and $858.7 million reported in the first quarter of fiscal 2010. This represents 34 percent year-over-year revenue growth. Adobe’s second quarter revenue target range was $875 to $925 million.
“Record revenue and our strong Q2 financial performance were driven by the successful launch of Creative Suite 5,” said Shantanu Narayen, president and CEO of Adobe. “Our growth is being fueled by the explosion of digital content across all media and devices.”
Second Quarter Fiscal 2010 GAAP Results
Adobe’s GAAP diluted earnings per share for the second quarter of fiscal 2010 were $0.28, based on 533.3 million weighted average shares. This compares with GAAP diluted earnings per share of $0.24 reported in the second quarter of fiscal 2009 based on 528.0 million weighted average shares, and GAAP diluted earnings per share of $0. 24 reported in the first quarter of fiscal 2010 based on 532.6 million weighted average shares.
GAAP operating income was $227.3 million in the second quarter of fiscal 2010, compared to $161.4 million in the second quarter of fiscal 2009 and $176.8 million in the first quarter of fiscal 2010. As a percent of revenue, GAAP operating income in the second quarter of fiscal 2010 was 24.1 percent, compared to 22.9 percent in the second quarter of fiscal 2009 and 20.6 percent in the first quarter of fiscal 2010.
GAAP net income was $148.6 million for the second quarter of fiscal 2010, compared to $126.1 million reported in the second quarter of fiscal 2009 and $127.2 million in the first quarter of fiscal 2010.
Second Quarter Fiscal 2010 Non-GAAP Results
Adobe’s non-GAAP diluted earnings per share for the second quarter of fiscal 2010 were $0.44. This compares with non-GAAP diluted earnings per share of $0.35 reported in the second quarter of fiscal 2009 and non-GAAP diluted earnings per share of $0.40 reported in the first quarter of fiscal 2010.
Adobe’s non-GAAP operating income was $334.5 million in the second quarter of fiscal 2010, compared to
$237.7 million in the second quarter of fiscal 2009 and $289.3 million in the first quarter of fiscal 2010. As a percent of revenue, non-GAAP operating income in the second quarter of fiscal 2010 was 35.5 percent, compared to 33.7 percent in both the second quarter of fiscal 2009 and the first quarter of fiscal 2010.
Non-GAAP net income was $234.2 million for the second quarter of fiscal 2010, compared to $185.0 million in the second quarter of fiscal 2009 and $211.7 million in the first quarter of fiscal 2010.
Reconciliation between GAAP and non-GAAP results is provided at the end of this press release.
Third Quarter Fiscal 2010 Financial Targets
For the third quarter of fiscal 2010, Adobe is targeting revenue of $950 million to $1 billion. The Company’s operating margin is targeted to be 25.5 percent to 27.5 percent on a GAAP basis, and 36 percent to 37 percent on a non-GAAP basis. In addition, the Company is targeting its share count to be between 532 million and 534 million shares, and it is targeting non-operating expense between $12.5 million and $13.5 million. Adobe’s GAAP and non-GAAP tax rate is expected to be approximately 25 percent.
These targets lead to a third quarter diluted earnings per share target range of $0.32 to $0.37 on a GAAP basis, and an earnings per share target range of $0.46 to $0.50 on a non-GAAP basis.
Reconciliation between these GAAP and non-GAAP financial targets is provided at the end of this press release.
Stock Repurchase Program
Adobe also announced its Board of Directors has granted authority for the Company to repurchase up to $1.6 billion in common stock through the end of fiscal 2012. This new program modifies the existing share-based program to offset dilution to a dollar-based authority.
“This stock repurchase program reaffirms our confidence and optimism in the long-term future of Adobe, and our commitment to returning value to our stockholders,” said Mark Garrett, executive vice president and chief financial officer of Adobe.
Forward-Looking Statements Disclosure
This press release contains forward-looking statements, including those related to revenue, operating margin, non-operating expense, tax rate, share count, earnings per share, anticipated stock repurchases 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: failure to develop, market and distribute new products and services or upgrades or enhancements to existing products and services that meet customer requirements, introduction of new products, services and business models by existing and new competitors, failure to successfully manage transitions to new business models and markets, the economic downturn and continued uncertainty in the financial markets and other 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, failure to realize the anticipated benefits of past or future acquisitions, and difficulty in integrating such acquisitions, costs related to intellectual property acquisitions, disputes and litigation, inability to protect Adobe’s intellectual property from third-party infringers, or unauthorized copying, use or disclosure, security vulnerabilities in our products and systems, interruptions or delays in our service or service from third-party service providers that host or deliver services, security or privacy breaches, or failure in data collection, failure to manage Adobe’s sales and distribution channels and third-party customer service and technical support providers effectively, disruption of Adobe’s business due to catastrophic events, risks associated with global operations, currency fluctuations, risks associated with our debt service obligations, changes in, or interpretations of, accounting principles, impairment of Adobe’s goodwill or amortizable intangible assets, changes in, or interpretations of, tax rules and regulations, Adobe’s inability to attract and retain key personnel, impairment of Adobe’s investment portfolio due to deterioration of the capital markets, and market risks associated with Adobe’s equity investments. 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 our second quarter ended June 4, 2010, which the Company expects to file in July 2010. 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.
###
© 2010 Adobe Systems Incorporated. All rights reserved. Adobe, Adobe Creative Suite and the Adobe logo 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 |
| Six Months Ended |
| ||||||||
|
| June 4, |
| May 29, |
| June 4, |
| May 29, |
| ||||
Revenue: |
|
|
|
|
|
|
|
|
| ||||
Products |
| $ | 795,260 |
| $ | 647,985 |
| $ | 1,499,198 |
| $ | 1,377,846 |
|
Subscription |
| 92,279 |
| 12,070 |
| 187,786 |
| 24,408 |
| ||||
Services and support |
| 55,496 |
| 44,618 |
| 114,751 |
| 88,809 |
| ||||
Total revenue |
| 943,035 |
| 704,673 |
| 1,801,735 |
| 1,491,063 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenue: |
|
|
|
|
|
|
|
|
| ||||
Products |
| 39,645 |
| 47,678 |
| 63,155 |
| 99,113 |
| ||||
Subscription |
| 50,190 |
| 8,080 |
| 95,925 |
| 15,563 |
| ||||
Services and support |
| 17,998 |
| 16,250 |
| 38,121 |
| 34,685 |
| ||||
Total cost of revenue |
| 107,833 |
| 72,008 |
| 197,201 |
| 149,361 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
| 835,202 |
| 632,665 |
| 1,604,534 |
| 1,341,702 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Research and development |
| 167,318 |
| 138,470 |
| 341,658 |
| 288,387 |
| ||||
Sales and marketing |
| 320,976 |
| 243,209 |
| 618,270 |
| 492,700 |
| ||||
General and administrative |
| 89,953 |
| 70,818 |
| 180,999 |
| 144,869 |
| ||||
Restructuring charges |
| 11,541 |
| 3,531 |
| 23,163 |
| 15,801 |
| ||||
Amortization of purchased intangibles |
| 18,129 |
| 15,284 |
| 36,326 |
| 30,676 |
| ||||
Total operating expenses |
| 607,917 |
| 471,312 |
| 1,200,416 |
| 972,433 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating income |
| 227,285 |
| 161,353 |
| 404,118 |
| 369,269 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Non-operating income (expense): |
|
|
|
|
|
|
|
|
| ||||
Interest and other income (expense), net |
| (6,313 | ) | 4,802 |
| (5,702 | ) | 18,086 |
| ||||
Interest expense |
| (16,076 | ) | (620 | ) | (23,771 | ) | (1,412 | ) | ||||
Investment gains (losses), net |
| (10,723 | ) | (1,805 | ) | (14,257 | ) | (19,051 | ) | ||||
Total non-operating income (expense), net |
| (33,112 | ) | 2,377 |
| (43,730 | ) | (2,377 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
| 194,173 |
| 163,730 |
| 360,388 |
| 366,892 |
| ||||
Provision for income taxes |
| 45,562 |
| 37,659 |
| 84,623 |
| 84,386 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 148,611 |
| $ | 126,071 |
| $ | 275,765 |
| $ | 282,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
| $ | 0.28 |
| $ | 0.24 |
| $ | 0.53 |
| $ | 0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic net income per share |
| 526,148 |
| 524,159 |
| 525,124 |
| 524,219 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Diluted net income per share |
| $ | 0.28 |
| $ | 0.24 |
| $ | 0.52 |
| $ | 0.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted net income per share |
| 533,259 |
| 528,013 |
| 533,305 |
| 528,233 |
|
Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
|
| June 4, |
| November 27, |
| ||
|
| 2010 |
| 2009 |
| ||
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,137,606 |
| $ | 999,487 |
|
Short-term investments |
| 1,507,116 |
| 904,986 |
| ||
Trade receivables, net of allowances for doubtful accounts of $14,295 and $15,225, respectively |
| 439,151 |
| 410,879 |
| ||
Deferred income taxes |
| 70,955 |
| 77,417 |
| ||
Prepaid expenses and other current assets |
| 121,243 |
| 80,855 |
| ||
Total current assets |
| 3,276,071 |
| 2,473,624 |
| ||
|
|
|
|
|
| ||
Property and equipment, net |
| 407,621 |
| 388,132 |
| ||
Goodwill |
| 3,488,252 |
| 3,494,589 |
| ||
Purchased and other intangibles, net |
| 447,372 |
| 527,388 |
| ||
Investment in lease receivable |
| 207,239 |
| 207,239 |
| ||
Other assets |
| 180,376 |
| 191,265 |
| ||
Total assets |
| $ | 8,006,931 |
| $ | 7,282,237 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Trade payables |
| $ | 50,273 |
| $ | 58,904 |
|
Accrued expenses |
| 468,587 |
| 419,646 |
| ||
Accrued restructuring |
| 16,504 |
| 37,793 |
| ||
Income taxes payable |
| 71,978 |
| 46,634 |
| ||
Deferred revenue |
| 362,566 |
| 281,576 |
| ||
Total current liabilities |
| 969,908 |
| 844,553 |
| ||
|
|
|
|
|
| ||
Long-term liabilities: |
|
|
|
|
| ||
Debt |
| 1,493,651 |
| 1,000,000 |
| ||
Deferred revenue |
| 41,777 |
| 36,717 |
| ||
Accrued restructuring |
| 7,729 |
| 6,921 |
| ||
Income taxes payable |
| 218,153 |
| 223,528 |
| ||
Deferred income taxes |
| 66,142 |
| 252,486 |
| ||
Other liabilities |
| 30,816 |
| 27,464 |
| ||
Total liabilities |
| 2,828,176 |
| 2,391,669 |
| ||
|
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
|
| ||
Preferred stock, $0.0001 par value; 2,000 shares authorized |
| — |
| — |
| ||
Common stock, $0.0001 par value |
| 61 |
| 61 |
| ||
Additional paid-in-capital |
| 2,376,202 |
| 2,390,061 |
| ||
Retained earnings |
| 5,570,097 |
| 5,299,914 |
| ||
Accumulated other comprehensive income |
| 39,995 |
| 24,446 |
| ||
Treasury stock, at cost (75,766 and 78,177 shares, respectively), net of reissuances |
| (2,807,600 | ) | (2,823,914 | ) | ||
Total stockholders’ equity |
| 5,178,755 |
| 4,890,568 |
| ||
Total liabilities and stockholders’ equity |
| $ | 8,006,931 |
| $ | 7,282,237 |
|
Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
|
| Three Months Ended |
| ||||
|
| June 4, |
| May 29, |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
| $ | 148,611 |
| $ | 126,071 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation, amortization and accretion |
| 74,906 |
| 64,725 |
| ||
Stock-based compensation expense, net of tax |
| 61,804 |
| 40,959 |
| ||
Unrealized investment losses |
| 9,891 |
| 714 |
| ||
Changes in deferred revenue |
| 44,600 |
| (11,971 | ) | ||
Changes in operating assets and liabilities |
| (88,722 | ) | 41,031 |
| ||
|
|
|
|
|
| ||
Net cash provided by operating activities |
| 251,090 |
| 261,529 |
| ||
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Purchases of short-term investments, net of sales and maturities |
| (417,860 | ) | (203,571 | ) | ||
Purchases of property and equipment |
| (49,628 | ) | (10,312 | ) | ||
Purchases of long-term investments and other assets, net of sales |
| (13,415 | ) | (3,869 | ) | ||
|
|
|
|
|
| ||
Net cash used for investing activities |
| (480,903 | ) | (217,752 | ) | ||
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
| ||
Purchases of treasury stock |
| (250,000 | ) | — |
| ||
Reissuance of treasury stock |
| 34,236 |
| 20,215 |
| ||
Debt issuance costs |
| (520 | ) | — |
| ||
Excess tax benefits from stock-based compensation |
| 1,427 |
| — |
| ||
|
|
|
|
|
| ||
Net cash (used for) provided by financing activities |
| (214,857 | ) | 20,215 |
| ||
|
|
|
|
|
| ||
Effect of exchange rate changes on cash and cash equivalents |
| (7,166 | ) | 13,863 |
| ||
Net (decrease) increase in cash and cash equivalents |
| (451,836 | ) | 77,855 |
| ||
Cash and cash equivalents at beginning of period |
| 1,589,442 |
| 1,148,925 |
| ||
Cash and cash equivalents at end of period |
| $ | 1,137,606 |
| $ | 1,226,780 |
|
Non-GAAP Results
(In thousands, except per share data)
The following tables show Adobe’s GAAP results reconciled to non-GAAP results included in this release.
|
| Three Months Ended |
| |||||||
|
| June 4, |
| May 29, |
| March 5, |
| |||
|
|
|
|
|
|
|
| |||
Operating income: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
GAAP operating income |
| $ | 227,285 |
| $ | 161,353 |
| $ | 176,833 |
|
Stock-based and deferred compensation expense |
| 59,631 |
| 43,284 |
| 64,886 |
| |||
Restructuring charges |
| 11,541 |
| 3,531 |
| 11,622 |
| |||
Amortization of purchased intangibles |
| 36,009 |
| 29,528 |
| 35,993 |
| |||
Non-GAAP operating income |
| $ | 334,466 |
| $ | 237,696 |
| $ | 289,334 |
|
|
|
|
|
|
|
|
| |||
Net income: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
GAAP net income |
| $ | 148,611 |
| $ | 126,071 |
| $ | 127,154 |
|
Stock-based and deferred compensation expense |
| 59,631 |
| 43,284 |
| 64,886 |
| |||
Restructuring charges |
| 11,541 |
| 3,531 |
| 11,622 |
| |||
Amortization of purchased intangibles |
| 36,009 |
| 29,528 |
| 35,993 |
| |||
Investment (gains) losses, net |
| 10,723 |
| 1,805 |
| 3,534 |
| |||
Income tax adjustments |
| (32,337 | ) | (19,182 | ) | (31,502 | ) | |||
Non-GAAP net income |
| $ | 234,178 |
| $ | 185,037 |
| $ | 211,687 |
|
|
|
|
|
|
|
|
| |||
Diluted net income per share: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
GAAP diluted net income per share |
| $ | 0.28 |
| $ | 0.24 |
| $ | 0.24 |
|
Stock-based and deferred compensation expense |
| 0.11 |
| 0.08 |
| 0.12 |
| |||
Restructuring charges |
| 0.02 |
| 0.01 |
| 0.02 |
| |||
Amortization of purchased intangibles |
| 0.07 |
| 0.06 |
| 0.07 |
| |||
Investment (gains) losses, net |
| 0.02 |
| — |
| 0.01 |
| |||
Income tax adjustments |
| (0.06 | ) | (0.04 | ) | (0.06 | ) | |||
Non-GAAP diluted net income per share |
| $ | 0.44 |
| $ | 0.35 |
| $ | 0.40 |
|
|
|
|
|
|
|
|
| |||
Shares used in computing diluted net income per share |
| 533,259 |
| 528,013 |
| 532,645 |
|
Non-GAAP Results (continued)
(In thousands)
|
| Three Months Ended |
| |||||||
|
| June 4, |
| May 29, |
| March 5, |
| |||
|
|
|
|
|
|
|
| |||
Operating expenses: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
GAAP operating expenses |
| $ | 607,917 |
| $ | 471,312 |
| $ | 592,499 |
|
Stock-based and deferred compensation expense |
| (58,012 | ) | (41,892 | ) | (63,938 | ) | |||
Restructuring charges |
| (11,541 | ) | (3,531 | ) | (11,622 | ) | |||
Amortization of purchased intangibles |
| (18,129 | ) | (15,284 | ) | (18,197 | ) | |||
Non-GAAP operating expenses |
| $ | 520,235 |
| $ | 410,605 |
| $ | 498,742 |
|
|
| Three Months Ended |
| ||||
|
| June 4, |
| May 29, |
| March 5, |
|
|
|
|
|
|
|
|
|
Operating margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
| 24.1 | % | 22.9 | % | 20.6 | % |
Stock-based and deferred compensation expense |
| 6.3 |
| 6.1 |
| 7.6 |
|
Restructuring charges |
| 1.2 |
| 0.5 |
| 1.4 |
|
Amortization of purchased intangibles |
| 3.9 |
| 4.2 |
| 4.1 |
|
Non-GAAP operating margin |
| 35.5 | % | 33.7 | % | 33.7 | % |
|
| Three Months |
|
|
| June 4, |
|
Effective income tax rate: |
|
|
|
|
|
|
|
GAAP effective income tax rate |
| 23.5 | % |
Stock-based and deferred compensation expense |
| 0.8 |
|
Restructuring charges |
| 0.1 |
|
Investment losses |
| 0.1 |
|
Amortization of purchased intangibles |
| 0.5 |
|
Non-GAAP effective income tax rate |
| 25.0 | % |
Third Quarter Non-GAAP Financial Targets
(In millions, except per share data)
The following tables show the Company’s third quarter fiscal year 2010 GAAP financial targets reconciled to non-GAAP financial targets included in this release.
|
| Third Quarter |
| ||
|
| Low |
| High |
|
Operating margin: |
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
| 25.5 | % | 27.5 | % |
Stock-based and deferred compensation expense |
| 6.6 |
| 5.9 |
|
Restructuring charges |
| 0.1 |
| 0.1 |
|
Amortization of purchased intangibles |
| 3.8 |
| 3.5 |
|
Non-GAAP operating margin |
| 36.0 | % | 37.0 | % |
|
| Third Quarter |
| ||||
|
| Low |
| High |
| ||
Diluted net income per share: |
|
|
|
|
| ||
|
|
|
|
|
| ||
GAAP diluted net income per share |
| $ | 0.32 |
| $ | 0.37 |
|
Stock-based and deferred compensation expense |
| 0.12 |
| 0.11 |
| ||
Amortization of purchased intangibles |
| 0.07 |
| 0.07 |
| ||
Income tax adjustments |
| (0.05 | ) | (0.05 | ) | ||
Non-GAAP diluted net income per share |
| $ | 0.46 |
| $ | 0.50 |
|
|
|
|
|
|
| ||
Shares used in computing diluted net income per share |
| 534.0 |
| 532.0 |
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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 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 and deferred compensation impact, restructuring charges, amortization of purchased intangibles, investment gains and losses, and the related tax impact of all of these items, 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.