Analyst Conference Summary

Adobe
(ADBE)

conference date: September 21, 2010 @ 2:00 PM Pacific Time
for quarter ending: September 3, 2010 (third quarter fiscal 2010)

But I use Adobe products
Forward-looking statements

Overview: Record revenues as Adobe continues to dominate the content generation software industry. Guidance a bit weaker than expected.

Basic data (GAAP) :

Revenue was $990.3 million, up 5% sequentially from $943.0 million and up 42% from $697.5 million in the year-earlier quarter.

Net income was $230.1 million, up 55% sequentially from $148.6 million and up 70% from $135.0 million year-earlier.

Earnings per share (EPS) were $0.44, up 57% sequentially from $0.28 and up 69% from $0.26 year-earlier.

Guidance:

Q4 fiscal 2010 revenue target is $950 million to $1.00 billion. GAAP EPS $0.35 to $0.41 or non-GAAP $0.48 to $0.54.

Conference Highlights:

Record revenue was not quite at the top of Adobe's target range. "We remain bullish about Adobe's long-term role in enabling the transformation of content and applications across industries," said Shantanu Narayen, CEO.

All business lines did well. CS5 adoption was strong, with record Master Collection revenue. Video solutions strong growth. Mac version sales also strong. Flash Media Server 4 introduced. Omniture bookings were strong.

Next Acrobat version will ship in Q4. Connect and LiveCycle had strong bookings.

Platform business: Flash Player 10.1 shipping, plays on many mobile devices. There are about 3.5 million Flash designers and developers.

Non-GAAP numbers: operating income $384.9 million. Net income $284.0 million, up 53% y/y from $186.1 million. Diluted EPS $0.54, up sequentially from $0.44 and up from $0.35 year-earlier.

Margins improved. 30.5% GAAP, 38.9% non-GAAP operating margins.

Cash, equivalents and short term investment balance $2.57 billion. Cash flow from operations $291 million. Repurchased 14.9 million shares for $432 million.

Creative Solutions segment revenue $549.7 million.

Digital Enterprise Solutions revenue was $258.8 million, with $162.6 million from Knowledge Worker and $94.2 million from Enterprise sub-segments.

Omniture segment revenue was $91.0 million. Transaction growth was 10% y/y.

Platform revenue was $40.7 million. Print and Publishing revenue was $52.1 million.

By geography: EMEA 29%, Asia 20%, Americas 51% of revenue. Only Japan was weak.

Cost of revenue (goods sold) was $99.1 million, leaving GAAP gross profit of $891.2 million. Operating expenses of $589.2 million included: research and development $168.3 million; sales and marketing $303.2 million; general and administrative $102.2 million; restructuring negative $2.1 million; amortization of purchased intangibles $17.6 million. Leaving operating income of $302.0 million. Non-operating expense was $5.3 million. Income taxes $66.7 million.

8715 employees at end of quarter, up mainly outside the U.S.

Q&A

Why guide CS5 revenue flat to down when you are only in the second quarter after its introduction? We continue to think CS5 performs well. The customer base is large and diverse. Licensing business is going well. Concerns are Japan, our second largest market, but we might see the return typical of the end of the year. Education was weaker than expectations; taking cautious approach to Q4.

Education business is the largest vertical, but won't share how much that missed Q3 expectations.

CS5 Q4 revenue is education, Japan not weak? Then we would see sequential growth.

Any competitive change for education or Japan? We don't think we are losing share to competitors in either segment. Education grew, just weaker than expected.

Apple allowing Aps from Adobe? The day Apple announced the removal of restrictions we say developers submitting Adobe tool-built aps to the store, but the shortrun effect on Adobe sales was muted.

Day Software acquisition impact? Will close late in quarter, will have minimal impact to revenue and operating expense.

Enterprise segment growth drivers? Focus is on automation of business processes. Customer experience management. Customers are completely revamping their customer experience portals. Continues to be a growth opportunity for Adobe.

For Omniture, you should look at healthy bookings rather than revenue growth.

In both Japan and education, we just need to focus more on sales and marketing. For education, pricing is important.

PC repurchase issues? We believe people are adopting Windows 7 and new Mac, and tend to get new software with new PCs and operating systems.

OpenIcon Analyst Conference Summaries Main Page
Adobe Investor Relations Page
OpenIcon Adobe main page

 

Search

More Analyst Conference Pages:

 
 ADBE
 AKAM
 ALTR
 AMAT
 AMD
 AMGN
 ANSV
 BIIB
 CELG
 CSCO
 DNA
 DNDN
 GILD
 GOOG
 HILL
 HPQ
 INTC
 HNSN
 MCHP
 MRVL
 MSFT
 MXIM
 NOVL
 NVDA
 ORCL
 ONXX
 RACK
 RHT
 TTMI
 XLNX
 YHOO

 

Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2010 William P. Meyers