10-QPeriod: Q3 FY2008

ADOBE INC. Quarterly Report for Q3 Ended Aug 29, 2008

Filed October 2, 2008For Securities:ADBE

Summary

Adobe Systems Inc. reported solid revenue growth in the nine months ended August 29, 2008, with total revenue increasing by 19% year-over-year. This growth was driven by strong performance across several segments, including Knowledge Worker Solutions (up 14%), Enterprise Solutions (up 27%), Mobile and Device Solutions (up 66%), and Platform (up 69%). While the Creative Solutions segment experienced a revenue decline of 10% for the quarter due to product release timing, it saw an 18% increase over the nine-month period. The company also managed its expenses effectively, with operating income increasing by 30% year-over-year for the nine-month period, demonstrating improved profitability. Financially, Adobe maintained a strong liquidity position with over $2 billion in cash, cash equivalents, and short-term investments. The company actively managed its capital through significant share repurchase programs, which impacted cash flow from financing activities. Despite some headwinds such as a slight decrease in Creative Solutions revenue for the quarter and increased R&D and S&M expenses, Adobe's overall financial health appears robust, supported by consistent revenue growth and a focus on expanding its product offerings in key markets.

Financial Highlights

30 data points
Beta

Revenue

$887.26M

87.5% Gross Margin

Net Income

$191.61M

21.6% Net Margin

EPS (Diluted)

$0.35

Cash & Equivalents

$1.13B

Free Cash Flow

$171.53M

Financial Statements
Beta
Revenue$887.26M
Cost of Revenue$110.85M
Gross Profit$776.41M
Operating Expenses$556.94M
Operating Income$219.47M
Interest Expense$2.39M
Net Income$191.61M
EPS (Basic)$0.36
EPS (Diluted)$0.35
Shares Outstanding (Basic)531.06M
Shares Outstanding (Diluted)541.31M

Key Highlights

  • 1Total revenue increased by 19% year-over-year for the nine months ended August 29, 2008, reaching $2.66 billion.
  • 2Operating income saw a significant increase of 30% year-over-year for the nine-month period, reaching $755 million.
  • 3Knowledge Worker Solutions and Enterprise Solutions segments showed strong double-digit revenue growth (14% and 27% respectively) for the nine months.
  • 4Mobile and Device Solutions and Platform segments experienced substantial revenue growth (66% and 69% respectively) for the nine months, indicating success in newer markets.
  • 5The company maintained a healthy liquidity position with $2.0 billion in cash, cash equivalents, and short-term investments as of August 29, 2008.
  • 6Significant share repurchases were executed, with $747.7 million used for financing activities in the nine months ended August 29, 2008.

Frequently Asked Questions

For the three months ended August 29, 2008, Adobe's total revenue was $887.3 million, a 4% increase compared to $851.7 million in the same period of the prior year. Over the nine months ended August 29, 2008, total revenue grew by 19% to $2.66 billion, up from $2.25 billion in the prior year's nine-month period.

Adobe's profitability showed improvement. For the nine months ended August 29, 2008, operating income increased by 30% to $755.1 million, compared to $581.8 million in the prior year. Net income for the nine months was $625.9 million, up from $501.6 million in the prior year.

Key growth drivers include strong performance in the Knowledge Worker Solutions (driven by Acrobat 9), Enterprise Solutions, Mobile and Device Solutions (Flash Lite adoption), and Platform segments. While Creative Solutions saw a quarterly dip due to product release timing, it grew over the nine-month period.

Adobe maintains a strong financial position with total assets of $5.64 billion and total stockholders' equity of $4.37 billion as of August 29, 2008. Liquidity is robust, with cash and cash equivalents of $1.13 billion and short-term investments of $866.6 million, totaling over $2 billion in readily available funds.