10-QPeriod: Q1 FY2003

ADOBE INC. Quarterly Report for Q1 Ended Feb 28, 2003

Filed April 11, 2003For Securities:ADBE

Summary

Adobe Systems Incorporated (ADBE) reported its first quarter fiscal year 2003 results on April 10, 2003, for the period ending February 28, 2003. The company demonstrated solid revenue growth, driven primarily by its Digital Imaging and Video and ePaper segments. Total revenue increased by 11% year-over-year to $296.9 million. Net income rose to $54.2 million, or $0.23 per diluted share, compared to $49.8 million, or $0.20 per diluted share, in the prior year's comparable quarter. The company also benefited from the adoption of SFAS 142, which eliminated goodwill amortization, resulting in adjusted net income and EPS that were slightly higher than reported figures. Adobe's balance sheet remains strong, with over $650 million in cash, cash equivalents, and short-term investments. Key operational highlights include the successful launch of Adobe Photoshop Album, contributing to the Digital Imaging segment's growth, and continued strength in the ePaper segment, particularly with Acrobat desktop products and server solutions. While the Creative Professional segment saw a slight decline, this was partially attributed to product lifecycle timing and strategic customer migration. The company also highlighted its ongoing efforts in research and development and sales and marketing to support future growth, maintaining these expenses as a significant percentage of revenue. Investors should note the ongoing legal proceedings, which the company believes are without merit but could potentially impact future results.

Key Highlights

  • 1Total revenue increased by 11% year-over-year to $296.9 million for the three months ended February 28, 2003.
  • 2Net income grew to $54.2 million, or $0.23 per diluted share, compared to $49.8 million, or $0.20 per diluted share, in the prior year's quarter.
  • 3The Digital Imaging and Video segment saw a 15% revenue increase, boosted by digital imaging software and the launch of Adobe Photoshop Album.
  • 4The ePaper segment revenue increased by 23%, driven by strong performance in Acrobat desktop products and server solutions.
  • 5Adobe adopted SFAS 142, discontinuing goodwill amortization, which positively impacted reported earnings.
  • 6The company maintained a strong liquidity position with $652.7 million in cash, cash equivalents, and short-term investments.
  • 7Several legal proceedings are ongoing, which Adobe believes are without merit but could materially affect results if an unfavorable outcome occurs.

Frequently Asked Questions

Adobe reported total revenue of $296.9 million for the three months ended February 28, 2003, representing an 11% increase compared to $267.9 million in the same period of fiscal year 2002. Product revenue accounted for 98% of total revenue, with a new Services and Support segment contributing 2%.

Net income increased to $54.2 million for the quarter ended February 28, 2003, from $49.8 million in the comparable period of fiscal year 2002. Diluted earnings per share rose to $0.23 from $0.20. The company also adopted SFAS 142, which eliminated goodwill amortization, resulting in adjusted net income and EPS that were slightly higher than reported figures.

Growth was primarily driven by the Digital Imaging and Video segment, up 15% due to strong digital imaging software sales and the launch of Adobe Photoshop Album. The ePaper segment also performed well, with revenue increasing by 23%, supported by Acrobat desktop products and server solutions. The Creative Professional segment saw a slight decrease, attributed to product lifecycle timing and strategic customer migration.

Adobe maintains a strong financial position with $652.7 million in cash, cash equivalents, and short-term investments as of February 28, 2003. The company anticipates that its current cash reserves and anticipated cash flows from operations will be sufficient to meet its working capital and capital expenditure requirements for the next twelve months. However, management acknowledges potential risks from economic conditions, competition, and product development delays.