Analyst Conference Summary

conference date: September 19, 2012 @ 2:00 PM Pacific Time
for quarter ending: August 31, 2012 (Q3, third quarter fiscal 2012)

But I use Adobe products
Forward-looking statements

Overview: Continued slow y/y growth, with sequential decline.

Basic data (GAAP) :

Revenue was $1.086 billion, down 3% sequentially from $1.124 billion, but up 7% from $1.013 billion in the year-earlier quarter.

Net income was $201.4 million, down 10% sequentially from $223.9 million, and up 3% from $195.1 million year-earlier.

Earnings per share (EPS) were $0.40, down 11 % sequentially from $0.45 but up 3% from $0.39 year-earlier.

Guidance:

Fiscal Q4 2012 revenue between $1.075 and $1.125 billion. EPS GAAP $0.34 to $0.39, non-GAAP $0.53 to $0.58. Target for new Cloud subscriptions is 125,000, for total of 325,000.

Conference Highlights:

Adobe believes that the ongoing shift to annual suscriptions from paid full updates of products decreased revenue in the short run, but will increase it is the long run. [Which customers might want to take note of.]

Non-GAAP numbers: $391.8 million operating income, down 3% sequentially from $404.4 million; net income was $291.2 million, down 3% sequentially from $299.6 million, but up 7% from $272.8 million year-earlier; EPS was $0.58, down 3% sequentially from $0.60.

Following the Creative Cloud launch in May, there have been about 200,000 paid subscriptions and 300,000 free memberships. New enhancements continue to be rolled out, including exclusives to the Cloud. Creative Cloud for Teams will be deployed in December, with an Enterprise version in 2013.

Digital Publishing Suite is seeing strong adoption. Digital Marketing Suite y/y growth at 40%. A new social addition to the suite was delivered in early September.

Digital Media Segment revenue was $769.1 million. This included document services of $185.5 million for Acrobat and services. About 100,000 new paid subscriptions in the quarter, with 86% chosing annual subs and 75% choosing the full Creative Cloud.

Digital Marketing revenue was $257.1 million, with $192.4 million from the digital marketing suite and $64.7 million from LiveCycle and Web Conferenced.

New metric: ARR (Annualized Recurring Revenue) was $86 million with average monthly revenue per user of $37.

Product revenue was $$810 million, subscription revenue was $173 million, and services revenue was $97 million.

Cash and short-term investments balance ended at $3.25 billion. Cash flow from operations was $263.3 million. Deferred revenue balance $560.3 million, lower on new product release. Repurchased 2.4 million shares for $76 million.

Currency exchange rates had a negative $9 million impact on revenue y/y.

Revenue by geography: Europe 27%, Americas 52%, Asia 21%.

Cost of revenue was $119.6 million, leaving gross profit of $961.0 million. Operating expenses were $682.7 million, leaving operating income of $278.3 million. Interest and other expense was $15.1 million. Income taxes $61.9 million.

Ended with 10,811 employees, up about 300 in the quarter.

Believes move to subscriptions will accelerate in 2013, building a recurring revenue stream and revenue growth, especially in 2014.

Q&A

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