Exhibit 99.1
For More Information, Contact:
For Immediate Release
Investor Relations: Macromedia
Michael Look
415 832 5995
mlook@macromedia.com
Public Relations:
Macromedia
Melissa Sheridan
415 832 2246
msheridan@macromedia.com
MACROMEDIA REPORTS SECOND QUARTER FISCAL YEAR 2006 RESULTS
Net income increases 41 percent on record revenues
Three Months Ended September 30 | ||||||
2005 | 2004 | |||||
Summary Financial Results | ||||||
Net revenues (millions) | $ | 127.9 | $ | 107.9 | ||
Net income per diluted share – GAAP | $ | 0.25 | $ | 0.20 | ||
Net income per diluted share – Non-GAAP | $ | 0.30 | $ | 0.22 |
San Francisco, CA – October 24, 2005 – Macromedia, Inc. (Nasdaq: MACR) today reported financial results for its fiscal 2006 second quarter ended September 30, 2005, reporting the highest revenue and earnings in the Company’s history. Net revenues for the quarter were $127.9 million, an 18 percent increase compared to the $107.9 million reported for the same period last year.
GAAP net income for the fiscal second quarter was $20.3 million, or $0.25 per diluted share, compared to $14.5 million, or $0.20 per diluted share, for the same quarter a year ago. Non-GAAP net income for the fiscal second quarter was $24.9 million, or $0.30 per diluted share, compared to $15.8 million, or $0.22 per diluted share, for the same quarter a year ago. Non-GAAP results exclude expenses associated with the proposed Adobe merger and the tax effect of the planned
repatriation of foreign earnings partially offset by other tax items, as outlined in the attached consolidated statements and related reconciliations. Non-GAAP results also reflect an estimated annual tax rate of 20 percent, reflecting U.S. federal and state income taxes and foreign taxes at rates other than U.S. statutory rates.
“With the advancement of rich Internet application development, new mobile adoption on the Flash Platform, and the launch of Studio 8, this has been an outstanding quarter,” said Stephen Elop, CEO, Macromedia. “We are in the midst of one of the most profound changes in our industry. Developers and consumers alike continue to embrace the concept that great digital experiences matter, demonstrated by the more than 100 million people who have already downloaded Flash Player 8.”
Business Outlook – Third Quarter Fiscal Year 2006
For the quarter ending December 31, 2005, Macromedia expects net revenues to be in the range of $130 to $140 million, with gross margins in the 90 to 92 percent range and operating profit margin between 20 and 23 percent, excluding certain merger-related costs.
Conference Call
Macromedia’s second quarter fiscal year 2006 financial results will be discussed in a Macromedia Breeze presentation available at http://www.macromedia.com/MACR/. In addition, a teleconference is scheduled to begin at 2 p.m. Pacific Time / 5 p.m. Eastern Time on Monday, October 24, 2005. After the conclusion of the teleconference, a replay of the conference call will be available on the Company’s website.
ABOUT MACROMEDIA
Experience matters. Macromedia is motivated by the belief that great experiences build great businesses. Our software empowers millions of business users, developers, and designers to create and deliver effective, compelling, and memorable experiences—on the Internet, on fixed media, on wireless, and on digital devices.
Cautionary Note About Forward Looking Statements
Matters discussed in this news release may be considered forward looking statements, including those under the heading “Business Outlook” that relate to expected future financial results which involve risks and uncertainties. Such risks and uncertainties include those related to the pending merger with Adobe Systems Incorporated, customer acceptance of new products and services and new versions of existing products, the impact of competition, the risk of delays in product development and release dates, the risk of not attracting and retaining key personnel, new regulations and other government actions that may materially increase the cost of compliance and doing business, risks associated with participating in international markets (including, but not limited to, foreign policies, market instability, exchange rate fluctuation, and regulations in the applicable foreign countries), quarterly fluctuations of the Company’s operating results, the Company’s dependence on distributors and resellers, the risk of product returns, the challenges faced in protecting the Company’s intellectual property within and outside the U.S., the risks associated with potential litigation and intellectual property ownership claims against the Company and others in the industry, volatility of the Company’s stock, and other risks detailed from time to time in the Company’s filings with the SEC, including without limitation, its annual report on Form 10-K, and its quarterly reports on Form 10-Q, as they may be updated or amended with future filings. The actual results the Company achieves may differ materially from any forward looking statements due to such risks and uncertainties.
Non-GAAP Financial Measures
Macromedia prepares its financial statements in accordance with accounting principles generally accepted in the United States (GAAP) and adjusts some of its GAAP measures to create non-GAAP financial measures. For purposes of presenting our non-GAAP net income, we exclude certain merger-related costs and apply a non-GAAP annual tax rate of 20% reflecting our estimated tax expense on our core operations. Our non-GAAP financial measures may be considered in addition to, but are not to be used as a substitute for the GAAP information contained in our financial reporting. The non-GAAP
financial measures we use are likely to be different from, and not comparable to, non-GAAP financial measures used by other companies.
Macromedia’s management uses non-GAAP financial measures for its internal performance management and budgeting processes. Macromedia believes that the non-GAAP financial measures provide useful insight into the performance of the business by eliminating the impact of non-recurring and unusual items that are recorded under GAAP. The non-GAAP financial measures have limitations compared to GAAP measures because they exclude charges that often have a material impact on the Company’s GAAP operating expenses, net earnings and diluted earnings per share calculations. To compensate for these limitations, Macromedia’s management typically uses non-GAAP measures in conjunction with GAAP results.
Macromedia believes that presenting the non-GAAP results with an accompanying reconciliation to GAAP results provides investors with an additional tool for evaluating the ongoing performance of our business, without the influence of certain non-recurring expenses. Macromedia believes the non-GAAP financial measures may be useful to investors in helping them understand the financial condition of Macromedia by focusing on the performance of the Company’s core operations. The non-GAAP financial measures are presented by Macromedia to give investors further information about historical and expected results and increase their ability to compare financial information from period to period.
MACROMEDIA, INC. Condensed Consolidated Statements of Income Impact of Non-GAAP Adjustments on Reported Net Income (In thousands, except percentages and per share data) (unaudited) | ![]() |
Three Months Ended September 30, 2005 | Three Months Ended September 30, 2004 | |||||||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
Net revenues | $ | 127,884 | $ | — | $ | 127,884 | $ | 107,924 | $ | — | $ | 107,924 | ||||||||||||
Cost of revenues: | ||||||||||||||||||||||||
Cost of net revenues | 9,868 | — | 9,868 | 7,538 | — | 7,538 | ||||||||||||||||||
Amortization of acquired developed technology | 744 | 744 | 744 | 744 | ||||||||||||||||||||
Total cost of revenues | 10,612 | — | 10,612 | 8,282 | — | 8,282 | ||||||||||||||||||
Gross profit | 117,272 | — | 117,272 | 99,642 | — | 99,642 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Sales and marketing | 48,742 | — | 48,742 | 44,733 | — | 44,733 | ||||||||||||||||||
Research and development | 26,120 | — | 26,120 | 25,100 | — | 25,100 | ||||||||||||||||||
General and administrative | 13,433 | — | 13,433 | 10,812 | — | 10,812 | ||||||||||||||||||
Amortization of intangible assets | 188 | — | 188 | — | — | |||||||||||||||||||
Restructuring and other | 1,435 | — | 1,435 | 242 | 242 | |||||||||||||||||||
Merger-related | 3,003 | (3,003 | )(A) | — | — | — | — | |||||||||||||||||
Total operating expenses | 92,921 | (3,003 | ) | 89,918 | 80,887 | — | 80,887 | |||||||||||||||||
Operating income | 24,351 | 3,003 | 27,354 | 18,755 | — | 18,755 | ||||||||||||||||||
Other income: | ||||||||||||||||||||||||
Interest income, net | 3,487 | — | 3,487 | 1,113 | — | 1,113 | ||||||||||||||||||
Other, net | 327 | — | 327 | (102 | ) | — | (102 | ) | ||||||||||||||||
Total other income | 3,814 | — | 3,814 | 1,011 | — | 1,011 | ||||||||||||||||||
Income before income taxes | 28,165 | 3,003 | 31,168 | 19,766 | — | 19,766 | ||||||||||||||||||
Provision for income taxes | (7,830 | ) | 1,596 | (B) | (6,234 | ) | (5,300 | ) | 1,347 | (B) | (3,953 | ) | ||||||||||||
Net income | $ | 20,335 | $ | 4,599 | $ | 24,934 | $ | 14,466 | $ | 1,347 | $ | 15,813 | ||||||||||||
Net income per common share: | ||||||||||||||||||||||||
Basic | $ | 0.27 | $ | 0.21 | ||||||||||||||||||||
Diluted | $ | 0.25 | $ | 0.30 | $ | 0.20 | $ | 0.22 | ||||||||||||||||
Weighted average common shares outstanding used in net income per common share calculation: | ||||||||||||||||||||||||
Basic | 76,000 | 69,510 | ||||||||||||||||||||||
Diluted | 81,960 | 81,960 | 73,480 | 73,480 | ||||||||||||||||||||
Gross Margin | ||||||||||||||||||||||||
Gross profit as a percentage of net revenues | 92 | % | 92 | % | 92 | % | 92 | % | ||||||||||||||||
Selected operating expenses as a percentage of net revenues: | ||||||||||||||||||||||||
Sales and marketing | 38 | % | 38 | % | 41 | % | 41 | % | ||||||||||||||||
Research and development | 20 | % | 20 | % | 23 | % | 23 | % | ||||||||||||||||
General and administrative | 11 | % | 11 | % | 10 | % | 10 | % | ||||||||||||||||
Operating Margin: | ||||||||||||||||||||||||
Operating income as a percentage of net revenues | 19 | % | 21 | % | 17 | % | 17 | % |
The financial results include non-GAAP financial measures of operating expenses, operating income, income before income taxes, provision for income taxes, net income and diluted earnings per share. These non-GAAP financial measures exclude the following non-recurring items:
(A) | Certain expenses related to our pending merger with Adobe Systems Incorporated which are comprised primarily of professional fees for legal services. |
(B) | For purposes of presenting our non-GAAP net income, we apply an annual income tax rate of 20% reflecting our estimated tax expense on our core operations. |
This rate of 20% is less than the U.S. federal statutory rate of 35% due to taxes on foreign earnings at tax rates lower than the U.S. statutory rate and the expected benefits to be realized from deferred tax assets and net operating losses.
MACROMEDIA, INC. Condensed Consolidated Statements of Income Impact of Non-GAAP Adjustments on Reported Net Income (In thousands, except percentages and per share data) (unaudited) | ![]() |
Six Months Ended September 30, 2005 | Six Months Ended September 30, 2004 | |||||||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
Net revenues | $ | 244,705 | $ | — | $ | 244,705 | $ | 211,478 | $ | — | $ | 211,478 | ||||||||||||
Cost of revenues: | ||||||||||||||||||||||||
Cost of net revenues | 17,831 | — | 17,831 | 15,012 | — | 15,012 | ||||||||||||||||||
Amortization of acquired developed technology | 1,488 | 1,488 | 1,488 | 1,488 | ||||||||||||||||||||
Total cost of revenues | 19,319 | — | 19,319 | 16,500 | — | 16,500 | ||||||||||||||||||
Gross profit | 225,386 | — | 225,386 | 194,978 | — | 194,978 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Sales and marketing | 97,735 | — | 97,735 | 88,825 | — | 88,825 | ||||||||||||||||||
Research and development | 50,296 | — | 50,296 | 48,818 | — | 48,818 | ||||||||||||||||||
General and administrative | 28,814 | — | 28,814 | 21,961 | — | 21,961 | ||||||||||||||||||
Amortization of intangible assets | 376 | — | 376 | 483 | 483 | |||||||||||||||||||
Restructuring and other | 1,435 | — | 1,435 | — | — | |||||||||||||||||||
Merger-related | 7,254 | (7,254 | )(A) | — | — | — | — | |||||||||||||||||
Total operating expenses | 185,910 | (7,254 | ) | 178,656 | 160,087 | — | 160,087 | |||||||||||||||||
Operating income | 39,476 | 7,254 | 46,730 | 34,891 | — | 34,891 | ||||||||||||||||||
Other income: | ||||||||||||||||||||||||
Interest income, net | 6,183 | — | 6,183 | 2,054 | — | 2,054 | ||||||||||||||||||
Other, net | 935 | — | 935 | (64 | ) | — | (64 | ) | ||||||||||||||||
Total other income | 7,118 | — | 7,118 | 1,990 | — | 1,990 | ||||||||||||||||||
Income before income taxes | 46,594 | 7,254 | 53,848 | 36,881 | — | 36,881 | ||||||||||||||||||
Provision for income taxes | (11,038 | ) | 268 | (B) | (10,770 | ) | (9,453 | ) | 2,077 | (B) | (7,376 | ) | ||||||||||||
Net income | $ | 35,556 | $ | 7,522 | $ | 43,078 | $ | 27,428 | $ | 2,077 | $ | 29,505 | ||||||||||||
Net income per common share: | ||||||||||||||||||||||||
Basic | $ | 0.47 | $ | 0.40 | ||||||||||||||||||||
Diluted | $ | 0.43 | $ | 0.52 | $ | 0.37 | $ | 0.40 | ||||||||||||||||
Weighted average common shares outstanding used in net income per common share calculation: | ||||||||||||||||||||||||
Basic | 75,960 | 69,140 | ||||||||||||||||||||||
Diluted | 82,340 | 82,340 | 73,790 | 73,790 | ||||||||||||||||||||
Gross Margin | ||||||||||||||||||||||||
Gross profit as a percentage of net revenues | 92 | % | 92 | % | 92 | % | 92 | % | ||||||||||||||||
Selected operating expenses as a percentage of net revenues: | ||||||||||||||||||||||||
Sales and marketing | 40 | % | 40 | % | 42 | % | 42 | % | ||||||||||||||||
Research and development | 21 | % | 21 | % | 23 | % | 23 | % | ||||||||||||||||
General and administrative | 12 | % | 12 | % | 10 | % | 10 | % | ||||||||||||||||
Operating Margin: | ||||||||||||||||||||||||
Operating income as a percentage of net revenues | 16 | % | 19 | % | 16 | % | 16 | % |
The financial results include non-GAAP financial measures of operating expenses, operating income, income before income taxes, provision for income taxes, net income and diluted earnings per share. These non-GAAP financial measures exclude the following non-recurring items:
(A) | Certain expenses related to our pending merger with Adobe Systems Incorporated which are comprised primarily of professional fees for legal and investment banking services. |
(B) | For purposes of presenting our non-GAAP net income, we apply an annual income tax rate of 20% reflecting our estimated tax expense on our core operations. |
This rate of 20% is less than the U.S. federal statutory rate of 35% due to taxes on foreign earnings at tax rates lower than the U.S. statutory rate and the expected benefits to be realized from deferred tax assets and net operating losses.
MACROMEDIA, INC. Condensed Consolidated Balance Sheets (In thousands) (unaudited) | ![]() |
September 30, 2005 | March 31, 2005 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash, cash equivalents and short-term investments | $ | 441,561 | $ | 378,278 | ||
Accounts receivable, net | 76,205 | 57,582 | ||||
Prepaid expenses and other current assets | 31,219 | 23,674 | ||||
Total current assets | 548,985 | 459,534 | ||||
Property and equipment, net | 106,453 | 109,509 | ||||
Goodwill, purchased and other intangible assets, net | 240,286 | 240,801 | ||||
Deferred income taxes, non-current | 23,891 | 22,272 | ||||
Other assets | 11,859 | 11,765 | ||||
Total assets | $ | 931,474 | $ | 843,881 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 5,105 | $ | 5,355 | ||
Accrued liabilities and income taxes payable | 86,881 | 83,070 | ||||
Accrued restructuring | 7,594 | 9,151 | ||||
Deferred revenues | 54,435 | 42,604 | ||||
Total current liabilities | 154,015 | 140,180 | ||||
Accrued restructuring, non-current | 18,695 | 20,171 | ||||
Deferred revenues, non-current | 9,996 | 9,413 | ||||
Other liabilities, non-current | 4,995 | 3,870 | ||||
Total liabilities | 187,701 | 173,634 | ||||
Total stockholders’ equity | 743,773 | 670,247 | ||||
Total liabilities and stockholders’ equity | $ | 931,474 | $ | 843,881 | ||
MACROMEDIA, INC. Selected Financial Data (In millions, except percentages) (unaudited) | ![]() |
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||
Selected Cash Flow Information: | ||||||||||||
Depreciation and amortization | $ | 6.5 | $ | 6.5 | $ | 13.0 | $ | 12.1 | ||||
Purchase of property and equipment | $ | 2.3 | $ | 5.6 | $ | 9.4 | $ | 43.7 | ||||
Proceeds from employee stock purchase and stock option plans | $ | 17.4 | $ | 6.1 | $ | 32.5 | $ | 19.9 | ||||
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||
Earnings before interest, taxes, depreciation and amortization - EBITDA: | ||||||||||||
GAAP operating income | $ | 24.4 | $ | 18.8 | $ | 39.5 | $ | 34.9 | ||||
Add: Depreciation and amortization | 6.5 | 6.5 | 13.0 | 12.1 | ||||||||
GAAP Basis EBITDA | 30.9 | 25.3 | 52.5 | 47.0 | ||||||||
Add: Merger-related expenses | 3.0 | — | 7.3 | — | ||||||||
Non-GAAP Basis EBITDA | $ | 33.9 | $ | 25.3 | $ | 59.8 | $ | 47.0 | ||||
We believe EBITDA provides useful information to investors because it is an indicator of the performance of our ongoing business operations, including our ability to fund future operating expenses, capital expenditures, acquisitions and other investments. While depreciation and amortization are considered operating expenses under U.S. Generally Accepted Accounting Principles (“GAAP”), they primarily represent non-cash current period allocations of costs associated with long-lived assets acquired in prior periods.
Three Months Ended September 30, | % Change | Six Months Ended September 30, | % Change | |||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||
Net Revenues by Geography: | ||||||||||||||||||||||||||||||
North America | $ | 74.0 | 58 | % | $ | 62.0 | 57 | % | 19 | % | $ | 137.7 | 56 | % | $ | 119.6 | 57 | % | 15 | % | ||||||||||
Europe | 25.1 | 20 | % | 22.9 | 21 | % | 10 | % | 55.1 | 23 | % | 48.2 | 23 | % | 14 | % | ||||||||||||||
Asia Pacific and Other | 28.8 | 22 | % | 23.0 | 22 | % | 25 | % | 51.9 | 21 | % | 43.7 | 20 | % | 19 | % | ||||||||||||||
International | 53.9 | 42 | % | 45.9 | 43 | % | 17 | % | 107.0 | 44 | % | 91.9 | 43 | % | 16 | % | ||||||||||||||
Net Revenues | $ | 127.9 | 100 | % | $ | 107.9 | 100 | % | 18 | % | $ | 244.7 | 100 | % | $ | 211.5 | 100 | % | 16 | % | ||||||||||
Three Months Ended September 30, | % Change | Six Months Ended September 30, | % Change | |||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||
Net Revenues by Market: | ||||||||||||||||||||||||||||||
Designer and Developer | $ | 96.0 | 75 | % | $ | 86.6 | 80 | % | 11 | % | $ | 181.4 | 74 | % | $ | 171.6 | 81 | % | 6 | % | ||||||||||
Business User | 16.9 | 13 | % | 11.4 | 11 | % | 48 | % | 33.9 | 14 | % | 22.3 | 11 | % | 52 | % | ||||||||||||||
Consumer | 13.1 | 10 | % | 8.1 | 8 | % | 61 | % | 26.1 | 11 | % | 14.7 | 7 | % | 78 | % | ||||||||||||||
Other | 1.9 | 2 | % | 1.8 | 1 | % | 2 | % | 3.3 | 1 | % | 2.9 | 1 | % | 15 | % | ||||||||||||||
Net Revenues | $ | 127.9 | 100 | % | $ | 107.9 | 100 | % | 18 | % | $ | 244.7 | 100 | % | $ | 211.5 | 100 | % | 16 | % | ||||||||||