Analyst Conference Summary

conference date: December 15, 2009 @ 2:00 PM Pacific Time
for quarter ending: November 27, 2009 (4th quarter fiscal 2009)

But I use Adobe products
Forward-looking statements

Overview: Not improving revenues as fast as many other technology companies; revenues still below year-earlier.

Basic data (GAAP) :

Revenue was $757.3 million, up 9% sequentially from $697.5 million, but down 17% from 915.3 million in the year-earlier quarter.

Net income was negative $32.0 million, way down sequentially from $136.0 million, and down from $245.9 million year-earlier.

Earnings per share (EPS) were negative $0.06, down sequentially from positive $0.26, and also down from positive $0.46 year-earlier.

Guidance:

First quarter fiscal 2010, ending December 31, 2009, target revenue is $800 to $850 million, with $78 to $83 deriving from Omniture. Operating margin 30 to 32% non-GAAP. EPS $0.21 to $022 GAAP, $0.34 to $0.39 non-GAAP.

Conference Highlights:

Quarter results reflected improvement in customer demand "across many of our major business areas and geographies."

Open Screen Project gained momentum in the mobile space. Connect Web conferencing revenue grew 23% y/y.

Omniture acquisition closed in the fourth quarter and generated $26.3 million in revenue, but excludes $8.3 million in deferred revenue. Omniture was the industrial leader in web analytics and online business optimization.

Non-GAAP results: operating income $256.2 million. Net income $206.8 million, down from $320.9 million year-earlier. EPS $0.39. Non-GAAP results exclude $41.7 million in stock-based compensation , $25.4 million in restructuring, and $44.5 million in amortization.

Product revenue was $707.3 million. Services and support revenue was $50.0 million.

Cash, equivalents, and short term investments ended at $1.91 billion. Cash flow from operations was $254 million. Cash decreased due to the Omniture acquisition.

Cost of revenue was $82.3 million, leaving gross profit of $675.0 million. Operating expenses of $521.3 million include $137.9 million for R&D, $257.9 million for sales and marketing, $74.3 million for general and administration, $25.4 million for restructuring, and $25.9 million amortization. Leaving operating income of $153.6 million Non operating income was $6.57 million. Income tax provision $192.3 million.

Creative Suite 4 (CS4) demand increased sequentially. The Creative Solutions segment revenue was $429.3 million, up sequentially from $400.4 million but down from $508.7 million year-earlier. CS5 should ship in fiscal 2010, and will be a "must have" release.

Business Productivity revenue was $212 million, up slightly sequentially from $210 million, but down from $278 million year-earlier.

Print and Publishing revenue was $42.9 million. Platform revenue was $47 million.

By geography, the Americas were 51% of revenue, Europe 32%, and Asia 17%. Europe was a source of strength in the quarter.

Expects strong topline growth in 2010.

Q&A

What is weighing on business productivity revenues compare to CS4? We experienced increased demand in all segments. Creative Suite 4 launched into a poor economy, so we are seeing pent-up demand continuing to convert to revenues. End of year licensing for Acrobat for enterprise was strong.

Omniture will reduce gross margins in 2010 to decrease 2 to 3%, but then should improve over time.

How much of 9% reduction in force will we see in Q1? Op ex might go up $54 million from Q4 to Q1, largely because of Omniture being in for a full quarter. Restructuring expense reductions really mostly occur later in 2010.

CS5 confidence? We are seeing an aging of hardware. Windows 7 upgrades and new hardware, as well as GPU acceleration and multiple screens should all make CS5 more attractive. Also 64-bit transition, particularly for video.

CS4 upgrades failed to occur largely because of the economic environment. As the economy improves, we hope to see further upgrades.

Early betas for CS5 are in the hands of customers. The schedule will not be affected by Omniture acquisition.

Backlog at end of quarter was pretty evenly distributed by product.

In 2010 we should focus more on topline growth rather than further cost reductions.

If the strength we saw at the end of the fourth fiscal quarter continues, revenues for Q1 should be towards the top end of the guidance.

Asia seasonal patterns? Asia seasonality appears to be normal. Piracy continues to be an issue.

Cash use viewpoint? For acquisitions, we will continue to look and have cash to do that since our model generates so much cash. We slowed down buy backs because of the Omniture acquisition, and we still have $60 million in a buy back program. We believe it is the best vehicle for returning excess cash to shareholders.

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

Search

More Analyst Conference Pages: