Analyst Conference Summary

conference date: December 15, 2011 @ 2:00 PM Pacific Time
for quarter ending: December 2, 2011 (Q4, fourth quarter fiscal 2011)

But I use Adobe products
Forward-looking statements

Overview: Record revenue quarter with solid growth rate, but profits not as strong.

Basic data (GAAP) :

Revenue was $1.152 billion, up 14% sequentially from $1.013 billion and up 14% from $1.008 billion in the year-earlier quarter.

Net income was $173.7 million, down 11% sequentially from $195.1 million and down 35% from $268.9 million year-earlier.

Earnings per share (EPS) were $0.35, down 10% sequentially from $0.39 and down 34% from $0.53 year-earlier.

Guidance:

Q1 fiscal 2012 revenue between $1.025 and $1.075 billion. GAAP EPS $0.37 to $0.43; non-GAAP EPS $0.54 to $0.59.

For full fiscal year 2012 expects annual revenue growth of 4 to 6%. GAAP EPS $1.70 to $1.83; non-GAAP EPS $2.37 to $2.47.

Conference Highlights:

Company is now focused on two fast growing markets: digital media and digital marketing.

Acquired Nitobi PhoneGap for mobile app creation. Touch applications for use on tablets were introduced. Cloud services also were extended. Auditude acquisition will strengthen ad delivery services.

Digital marketing introduced SocialAnalytics and new Web Experience Management solution. Multi-channel campaign management and media monetization are a focus. Will acquire Efficient Frontier to help with this, particularly for Facebook ads, search marketing, and optimization. Digital marketing is on a trajectory to become a $1 billion annual business.

Full fiscal year revenue was $4.216 billion, up 11% from $3.800 billion in fiscal 2010. Cash flow for the year was $1.5 billion.

Non-GAAP earnings in the quarter were $0.67, $0.55 sequentially. $0.56 year-earlier., $. Operating margin 38.6%. $444.5 million operating income.

GAAP operating margin was 21.4%.

Creative & Interactive revenue $437.2 million. CS5.5 sales were strong.

Digital media revenue $186.4 million.

Digital Enterprise segment revenue was $342.4 million, breaking into: $201.7 million for Knowledge worker, $140.7 million for Enterprise. Acrobat revenue was strong, as was the government market.

Omniture segment $131.1 million revenue, up from $109.0 million year-earlier.

Print & Publishing revenue $55.1 million, about flat y/y.

Revenue by region: 33% EMEA, 19% Asia, 48% Americas.

Cash and equivalents balance ended at $2.91 billion. Cash from operating activities was $496.8 million. Repurchased 2 million shares for $50 million.

Cost of revenue was $116.4 million, leaving gross profit of $1.036 billion. Operating expenses of $789.7 million included: $195.4 million for R&D; $368.3 million sales and marketing; $119.6 million for general and administrative; $94.5 million for restructuring; $11.8 million amortization of purchased intangibles. Leaving operating income of $246.1 million. Interest and other expense $13.0 million. Income taxes $59.5 million.

In 2012 will merge reporting categories into fewer segments.

Q&A

Customer hesitation ahead of cloud and subscription pricing? Clearly it was a really great quarter. Creative CS was strong across channels. Saw no customer hesitation. Customers are looking forward to new offerings including video and HTML5.

In Q1 every segment would be sequentially down due to seasonality. As we become more enterprise oriented we will see more of a Q4 to Q1 seasonal drop.

We had a phenomenal quarter in Europe following some weaker quarters earlier in the year, and see no signs of future weakness there.

New subscription launch for CS will not be until late second quarter of 2012.

Hobbyist products did well.

CS6 launch would be typical in that it would start with freelancers, then move to small to medium businesses and finally enterprises.

Knowledge Worker growth drivers? PDF format growth is strong, and is supported by mobile devices. Strength was in enterprises standardizing on Acrobat. Electronic signatures are a plus.

Buyback has become muted because so much cash is now offshore, and some U.S. cash is needed for acquisitions.

Margins in subscription business? Lower than for a perpetual license product, but higher than typical SAS margins. The cloud will be used to store data, but the programs will download and run on the local computer.

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