10-QPeriod: Q2 FY2002

ADOBE INC. Quarterly Report for Q2 Ended Mar 1, 2002

Filed April 11, 2002For Securities:ADBE

Summary

Adobe Systems Incorporated reported its first quarter fiscal year 2002 financial results ending March 1, 2002. The company experienced a notable decline in revenue, down 19% year-over-year to $267.9 million, primarily driven by softer demand in the Graphics and Cross-media Publishing segments, attributed to product lifecycle timing and economic headwinds. Despite the revenue decrease, gross margin remained robust at 92.2%. Operating expenses were managed effectively, with a decrease in Sales and Marketing and General and Administrative costs, though Research and Development expenses saw an increase to support product development. The company also recorded $5.4 million in acquired in-process research and development related to the Fotiva acquisition. Net income for the quarter was $49.8 million, or $0.20 per diluted share, compared to $69.8 million, or $0.28 per diluted share, in the prior year. Adobe's balance sheet remains strong, with total assets increasing to $989.9 million and cash and short-term investments growing to $620.8 million. The company continues to focus on strategic investments and product development, while navigating a challenging economic environment, and is progressing with its proposed acquisition of Accelio Corporation.

Key Highlights

  • 1Revenue decreased by 19% to $267.9 million compared to the prior year's first quarter ($329.0 million), largely due to product cycle timing and market weakness in Graphics and Cross-media Publishing segments.
  • 2Gross margin remained strong at 92.2% of revenue.
  • 3Net income declined to $49.8 million from $69.8 million in the prior year's quarter, resulting in diluted EPS of $0.20 compared to $0.28.
  • 4The company recognized $5.4 million in acquired in-process research and development related to the acquisition of Fotiva, Inc.
  • 5Adobe's cash, cash equivalents, and short-term investments increased by 7% to $620.8 million, indicating a healthy liquidity position.
  • 6The company is actively managing operating expenses, with decreases in Sales & Marketing and General & Administrative costs year-over-year.
  • 7Adobe is progressing with its proposed acquisition of Accelio Corporation, targeting an April 2002 closing, which is expected to be dilutive to EPS by approximately $0.02 in fiscal year 2002.

Frequently Asked Questions

The primary reason for the revenue decline was a decrease in licensing of products across the Graphics, Cross-media Publishing, and OEM PostScript and Other segments. This was influenced by product lifecycle timing, particularly for key products like Photoshop and Illustrator, and broader economic weakness impacting customer spending.

Adobe has demonstrated effective cost management by decreasing sales and marketing expenses by 14% and general and administrative expenses by 16% compared to the prior year's quarter. However, research and development expenses increased by 6% to support ongoing product development efforts.

Adobe is progressing with the proposed acquisition of Accelio Corporation, a provider of web-enabled solutions for managing electronic forms. The transaction, initially expected to close in March 2002, is now targeted for April 2002, pending regulatory clearance and customary closing conditions. The acquisition is expected to be dilutive to pro forma earnings per share by approximately $0.02 in fiscal year 2002.

Adobe maintains a strong financial position with total assets of $989.9 million and stockholders' equity of $689.5 million as of March 1, 2002. The company's liquidity is robust, with cash, cash equivalents, and short-term investments totaling $620.8 million, an increase from the previous fiscal year-end.