Breaking News Bar

Business News and Information

Adobe Systems Reports First Quarter Results

Adobe Systems Incorporated (Nasdaq:ADBE) today reported financial results for its first quarter ended March 2, 2007.

In the first quarter of fiscal 2007, Adobe achieved revenue of $649.4 million, compared to $655.5 million reported for the first quarter of fiscal 2006 and $682.2 million reported in the fourth quarter of fiscal 2006. Adobes first quarter revenue target range was $640 to $670 million.

Q1 was a solid quarter for Adobe, as we came in at the high end of our earnings target range and were within our targeted range for revenue, said Bruce Chizen, chief executive officer of Adobe. As Adobe prepares for the biggest product launch in our history, we are excited about our opportunities and bullish about our prospects for another year of strong performance.

GAAP Results

Adobes GAAP diluted earnings per share for the first quarter of fiscal 2007 were $0.24, based on 604.2 million weighted average shares. This compares with GAAP diluted earnings per share of $0.17 reported in the first quarter of fiscal 2006, based on 621.8 million weighted average shares, and GAAP diluted earnings per share of $0.30 reported in the fourth quarter of fiscal 2006, based on 602.2 million weighted average shares. Adobes first quarter of fiscal 2007 GAAP earnings per share target range was $0.17 to $0.20.

GAAP operating income was $146.3 million in the first quarter of fiscal 2007, compared to $130.0 million in the first quarter of fiscal 2006 and $163.4 million in the fourth quarter of fiscal 2006. As a percent of revenue, GAAP operating income in the first quarter of fiscal 2007 was 22.5 percent, compared to 19.8 percent in the first quarter of fiscal 2006 and 23.9 percent in the fourth quarter of fiscal 2006.

GAAP net income was $143.9 million for the first quarter of fiscal 2007, compared to $105.1 million reported in the first quarter of fiscal 2006, and $183.2 million in the fourth quarter of fiscal 2006.

Non-GAAP Results

Non-GAAP diluted earnings per share for the first quarter of fiscal 2007 were $0.30. This compares with non-GAAP diluted earnings per share of $0.32 reported in the first quarter of fiscal 2006, and non-GAAP diluted earnings per share of $0.33 reported in the fourth quarter of fiscal 2006. Adobes first quarter non-GAAP earnings per share target range was $0.28 to $0.30.

Adobes non-GAAP operating income was $222.5 million in the first quarter of fiscal 2007, compared to $252.4 million in the first quarter of fiscal 2006 and $255.8 million in the fourth quarter of fiscal 2006. As a percent of revenue, non-GAAP operating income in the first quarter of fiscal 2007 was 34.3 percent, compared to 38.5 percent in the first quarter of fiscal 2006 and 37.5 percent in the fourth quarter of fiscal 2006.

Non-GAAP net income was $182.3 million for the first quarter of fiscal 2007, compared to $197.5 million in the first quarter of fiscal 2006, and $198.3 million in the fourth quarter of fiscal 2006.

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 2007 Financial Targets

For the second quarter of fiscal 2007, Adobe announced it is targeting revenue of $700 million to $740 million. The Company also is targeting a GAAP operating margin of approximately 23 to 25 percent in the second quarter. On a non-GAAP basis, the Company is targeting a second quarter operating margin of approximately 36 to 37 percent.

In addition, Adobe is targeting its share count to be between 605 million and 607 million shares in the second quarter of fiscal 2007. The Company also is targeting other income in its second quarter to be approximately $23 million to $24 million, with a GAAP tax rate of approximately 24 to 26 percent and a non-GAAP tax rate of approximately 25 to 27 percent.

These targets lead to a second quarter GAAP earnings per share target range of approximately $0.23 to $0.26. On a non-GAAP basis, the Company is targeting earnings per share of approximately $0.34 to $0.36.

For fiscal year 2007, Adobe announced it is reaffirming its annual revenue growth target of approximately 15 percent. The Company also reaffirmed it is targeting a GAAP operating margin of approximately 25 to 27 percent, and a non-GAAP operating margin of approximately 37 to 38 percent.

A reconciliation between GAAP and non-GAAP 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 and earnings per share, 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 Adobes new products or major new versions of existing products, introduction of new products by existing and new competitors, failure to successfully manage transitions to new business models and markets, 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 anticipate and develop new products in response to changes in demand for application software, computers, printers, or other non PC-devices, costs related to intellectual property acquisitions, disputes and litigation, inability to protect Adobes 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 Adobes distribution channel, disruption of Adobes business due to catastrophic events, interruptions or terminations in Adobes relationships with turnkey assemblers, risks associated with international operations, fluctuations in foreign currency exchange rates, changes in, or interpretations of, accounting principles, impairment of Adobes goodwill or intangible assets, unanticipated changes in, or interpretations of, Adobes effective tax rates, Adobes inability to attract and retain key personnel, and market risks associated with Adobes equity investments. For further discussion of these and other risks and uncertainties, individuals should refer to Adobes 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 Adobes Quarterly Report on Form 10-Q for the first quarter ended March 2, 2007, which the company expects to file in April, 2007. 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.

© 2007 Adobe Systems Incorporated. All rights reserved. Adobe, Macromedia, 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
March 2,

2007

March 3,

2006

Revenue:
Products. $ 620,298  $ 636,826 
Services and support. 29,109  18,652 
Total revenue. 649,407  655,478 
Total cost of revenue:
Products 53,815  62,849 
Services and support. 18,448  14,897 
Total cost of revenue. 72,263  77,746 
Gross profit 577,144  577,732 
Operating expenses:
Research and development 137,129  137,543 
Sales and marketing. 214,678  213,816 
General and administrative. 62,583  60,297 
Restructuring and other charges (1,308) 18,984 
Amortization of purchased intangibles 17,725  17,112 
Total operating expenses. 430,807  447,752 
Operating income. 146,337  129,980 
Non-operating income, net:
Investment gain (loss) 5,601  (1,265)
Interest and other income. 22,464  15,542 
Total non-operating income. 28,065  14,277 
Income before income taxes. 174,402  144,257 
Income tax provision. 30,551  39,185 
Net income. $ 143,851  $ 105,072 
Basic net income per share. $ 0.24  $ 0.18 
Shares used in computing basic net income per share 587,969  598,451 
Diluted net income per share. $ 0.24  $ 0.17 
Shares used computing diluted net income per share 604,249  621,839 

Condensed Consolidated Balance Sheets

(In thousands, except per share data; unaudited)

March 2,December 1,
20072006
ASSETS
Current assets:
Cash and cash equivalents $ 526,030  $ 772,500 
Short-term investments 1,756,370  1,508,379 
Trade receivables, net 304,748  356,815 
Other receivables 63,511  51,851 
Deferred income taxes 164,264  155,613 
Prepaid expenses and other current assets 42,077  39,311 
Total current assets 2,857,000  2,884,469 
Property and equipment, net 258,899  227,197 
Goodwill 2,134,058  2,149,494 
Purchased and other intangibles, net 464,338  506,405 
Investment in lease receivable 126,800  126,800 
Other assets 63,089  68,183 
Total assets $ 5,904,184  $ 5,962,548 
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Trade and other payables $ 46,867  $ 55,031 
Accrued expenses 270,515  303,550 
Accrued restructuring 8,066  10,088 
Income taxes payable 190,384  178,368 
Deferred revenue 139,692  130,310 
Total current liabilities 655,524  677,347 
Other long-term liabilities
Deferred revenue 30,847  32,644 
Deferred income taxes 78,368  70,715 
Accrued restructuring 19,120  21,984 
Other long-term liabilities 12,250  7,982 
Total liabilities 796,109  810,672 
Stockholders equity:
Common stock, $0.0001 par value 61  61 
Additional paid-in-capital 2,429,251  2,451,610 
Retained earnings 3,461,637  3,317,785 
Accumulated other comprehensive income 7,103  6,344 
Treasury stock at cost, net of re-issuances (789,977) (623,924)
Total stockholders equity 5,108,075  5,151,876 
Total liabilities and stockholders equity $ 5,904,184  $ 5,962,548 

Condensed Consolidated Statements of Cash Flows

(In thousands; unaudited)

March 2,
2007
March 3,
2006
Cash flows from operating activities:
Net income $ 143,851  $ 105,072 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion 68,488  78,350 
Stock-based compensation expense, net of tax 46,285  51,079 
Changes in deferred revenue 7,585  12,263 
Changes in other operating assets and liabilities 10,144  (70,497)
Non-cash restructuring charges 18,984 
Net investment (gains) losses (5,835) 1,310 
Net cash provided by operating activities 270,518  196,561 
Cash flows from investing activities:
Purchases of short term investments, net of sales and maturities (249,540) (194,112)
Purchases of capital and long term investments, net of sales (57,215) (16,856)
Acquisitions, net of cash (3,094) 478,787 
Net cash (used for) provided by investing activities (309,849) 267,819 
Cash flows from financing activities:
Purchases of treasury stock, net of reissuances (207,435) (270,104)
Excess tax benefits from stock-based compensation 1,556  18,823 
Proceeds from issuance of common stock 306 
Net cash used for financing activities (205,879) (250,975)
Effect of exchange rate changes on cash (1,260) 963 
Net increase (decrease) in cash and cash equivalents (246,470) 214,368 
Cash and cash equivalents at beginning of period 772,500  420,818 
Cash and cash equivalents at end of period $ 526,030  $ 635,186 

Non-GAAP Results

(In thousands, except per share data)

The following table shows Adobes non-GAAP results reconciled to GAAP results included in this release.

March 2,

2007

March 3,

2006

Dec. 1,

2006

GAAP operating income $ 146,337  $ 129,980  $ 163,372 
SFAS 123R stock-based compensation 24,935  23,031  30,006 
Amortization of Macromedia deferred compensation 6,917  23,451  9,505 
Restructuring and other charges (1,308) 18,984  (518)
Amortization of purchased intangibles and incomplete technology

45,644 

56,955 

53,484 

Non-GAAP operating income $ 222,525  $ 252,401  $ 255,849 
GAAP net income $ 143,851  $ 105,072  $ 183,244 
SFAS 123R stock-based compensation, net of tax 18,234  18,220  17,133 
Amortization of Macromedia deferred compensation, net of tax

5,058 

17,283 

5,427 

Restructuring and other charges, net of tax (1,766) 13,991  (296)
Amortization of purchased intangibles and incomplete technology, net of tax

32,908 

41,976 

30,539 

R&D tax benefit, net of tax (12,330)
Investment (gain) loss, net of tax (3,638) 932  (37,672)
Non-GAAP net income $ 182,317  $ 197,474  $ 198,375 
Diluted net income per share:
GAAP net income $ 0.24  $ 0.17  $ 0.30 
SFAS 123R stock-based compensation, net of tax 0.03  0.03  0.03 
Amortization of Macromedia deferred compensation, net of tax

0.01 

0.03 

0.01 

Restructuring and other charges, net of tax 0.00  0.02  (0.00)
Amortization of purchased intangibles and incomplete technology, net of tax

0.05 

0.07 

0.05 

R&D tax benefit, net of tax (0.02)
Investment (gain) loss, net of tax (0.01) 0.00  (0.06)
Non-GAAP net income $ 0.30  $ 0.32  $ 0.33 
Shares used computing diluted net income per share 604,249  621,839  602,175 

The following table shows the Companys reconciliation of non-GAAP to GAAP operating expense for the quarters ended March 2, 2007, March 3, 2006, and December 1, 2006.

March 2,
2007

March 3,
2006

Dec. 1,
2006

GAAP operating expenses $ 430,807  $ 447,752  $ 439,178 
SFAS 123R stock-based compensation (24,488) (22,528) (29,255)
Amortization of Macromedia deferred compensation (6,194) (20,902) (8,372)
Restructuring and other charges 1,308  (18,984) 518 
Amortization of purchased intangibles and incomplete technology

(17,725)

(22,912)

(18,762)

Non-GAAP operating expenses $ 383,708  $ 362,426  $ 383,307 

The following table shows the Companys reconciliation of non-GAAP to GAAP operating margin for the quarter ended March 2, 2007, March 3, 2006, and December 1, 2006.

March 2,
2007

March 3,
2006

December 1,
2006

GAAP operating margin 22.5% 19.8% 23.9%
SFAS 123R stock-based compensation 3.8  3.5  4.4 
Amortization of Macromedia deferred compensation 1.1  3.6  1.4 
Restructuring and other charges (0.2) 2.9  (0.1)
Amortization of purchased intangibles and incomplete technology

7.1 

8.7 

7.9 

Non-GAAP operating margin 34.3% 38.5% 37.5%

The following table shows the Companys reconciliation of non-GAAP to GAAP effective tax rate for the quarter ended March 2, 2007.

March 2,
2007

GAAP effective income tax rate 17.5%
SFAS 123R stock-based compensation 0.4 
Amortization of Macromedia deferred compensation 0.1 
Investment gain (0.1)
R&D tax benefit for carryover of 2006 tax benefit 7.1 
Amortization of purchased intangibles and incomplete technology 0.6 
Non-GAAP effective income tax rate 25.6%

Second Quarter and Fiscal Year 2007 Non-GAAP Financial Targets

The following tables show Adobes non-GAAP financial targets reconciled to GAAP financial targets included in this release.

Second Quarter

Fiscal 2007

Low High
GAAP operating margin 23 % 25 %
Amortization of purchased technology
Amortization of purchased intangibles
SFAS 123R stock-based compensation
Amortization of Macromedia deferred compensation
Non-GAAP operating margin 36 % 37 %
Diluted net income per share:
GAAP net income per share $ 0.23  $ 0.26 
Amortization of purchased technology 0.03  0.03 
Amortization of purchased intangibles

0.02 

0.02 

SFAS 123R stock-based compensation, net of tax 0.05  0.04 
Amortization of Macromedia deferred compensation, net of tax 0.01  0.01 
Non-GAAP net income per share $ 0.34  $ 0.36 
Shares used in computing diluted net income per share 607.0  605.0 
GAAP effective income tax rate 24.0 % 26.0 %
SFAS 123R stock-based compensation 0.4  0.4 
Amortization of Macromedia deferred compensation 0.1  0.1 

Investment gain

(0.1)

(0.1)

Amortization of purchased intangibles and incomplete technology

0.6 

0.6 

Non-GAAP effective income tax rate 25.0 % 27.0 %

The following table shows Adobes non-GAAP operating margin targets reconciled to GAAP operating margin targets included in this release for fiscal year 2007.

Low High
GAAP operating margin 25% 27%
Amortization of purchased technology
Amortization of purchased intangibles and Macromedia deferred compensation

SFAS 123R stock-based compensation
Non-GAAP operating margin 37% 38%

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. Adobes 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 Adobes operating results in a manner that focuses on what Adobe believes to be its ongoing business operations. Adobes management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes the stock compensation impact of SFAS 123R, restructuring and other charges, amortization of purchased intangibles and incomplete technology, amortization of Macromedia deferred compensation, investment gains and losses, tax differences related to the timing and deductibility of the Macromedia acquisition and related charges and SFAS 123R stock-based compensation, the net tax impact of the R&D tax benefit, and the non-GAAP measures that exclude such information in order to assess the performance of Adobes 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.

For the first quarter of fiscal year 2007 and for fiscal year 2006, Adobes GAAP financial information and targets include the stock compensation impact of SFAS 123R, restructuring and other charges, amortization of purchased intangibles and incomplete technology, amortization of Macromedia deferred compensation, tax differences related to the timing and deductibility of the Macromedia acquisition and related charges and SFAS 123R stock-based compensation and the net tax impact of the R&D tax benefit. Also, in accordance with GAAP, Adobe incurs investment gains and losses from its venture program. These charges are otherwise unrelated to Adobes ongoing business operations and are excluded from its non-GAAP financial information and targets.

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
 
bottom clear