10-QPeriod: Q2 FY2011

ADOBE INC. Quarterly Report for Q2 Ended Mar 4, 2011

Filed April 8, 2011For Securities:ADBE

Summary

Adobe Systems Incorporated (ADBE) reported strong financial results for the fiscal quarter ending March 4, 2011, with total revenue reaching $1.03 billion, a significant 20% increase year-over-year. This growth was primarily driven by robust performance in the Creative and Interactive Solutions segment, which saw a 28% increase, fueled by the adoption of the Adobe Creative Suite 5 (CS5) family of products. The company also experienced healthy growth across its Digital Media Solutions, Knowledge Worker, Enterprise, and Omniture segments, indicating broad-based demand for its diverse product offerings. Net income surged to $234.6 million, up from $127.2 million in the prior year's quarter, resulting in a substantial improvement in earnings per share to $0.46 on a diluted basis. The company maintains a strong balance sheet with over $2.6 billion in cash, cash equivalents, and short-term investments, providing ample liquidity. Adobe continues to invest in research and development and execute its strategic growth initiatives, positioning itself for sustained future growth. Investors should note the positive revenue trends, improved profitability, and solid cash position as key takeaways from this report.

Financial Highlights

53 data points
Beta

Revenue

$1.03B

89.5% Gross Margin

Net Income

$234.59M

22.8% Net Margin

EPS (Diluted)

$0.46

Total Assets

$8.31B

Cash & Equivalents

$900.16M

Free Cash Flow

$299.68M

Financial Statements
Beta
Revenue$1.03B
Cost of Revenue$107.64M
Gross Profit$920.07M
Operating Expenses$617.73M
Operating Income$302.33M
Interest Expense$17.02M
Net Income$234.59M
EPS (Basic)$0.47
EPS (Diluted)$0.46
Shares Outstanding (Basic)504.13M
Shares Outstanding (Diluted)511.35M

Key Highlights

  • 1Total revenue reached $1.03 billion, a 20% increase year-over-year, driven by strong product adoption.
  • 2Net income significantly increased to $234.6 million, leading to diluted EPS of $0.46, up from $0.24 in the prior year.
  • 3The Creative and Interactive Solutions segment showed exceptional growth of 28%, largely due to the success of Adobe Creative Suite 5 (CS5).
  • 4The company maintains a strong liquidity position with $2.64 billion in cash, cash equivalents, and short-term investments.
  • 5Investments in Research and Development and Sales and Marketing increased to support future growth initiatives.
  • 6Acquisitions, such as Day Software Holding AG and Demdex, are contributing to growth, particularly in the Enterprise segment.
  • 7Adobe demonstrated effective cost management, with total cost of revenue and operating expenses increasing at a slower pace than revenue.

Frequently Asked Questions

Adobe's total revenue for the quarter ending March 4, 2011, was $1.03 billion, representing a 20% increase compared to the same period last year. The primary growth driver was the strong performance of the Creative and Interactive Solutions segment, which grew by 28% due to the successful adoption of Adobe Creative Suite 5 (CS5). Growth was also supported by healthy performance in Digital Media Solutions, Knowledge Worker, Enterprise, and Omniture segments.

Profitability saw a significant improvement. Net income rose to $234.6 million for the quarter ended March 4, 2011, a substantial increase from $127.2 million in the prior year's quarter. This translated into a diluted Earnings Per Share (EPS) of $0.46, up from $0.24 in the prior year. The effective tax rate also decreased from 23.5% to 18.0%, contributing to the enhanced net income.

Adobe maintains a strong financial position. As of March 4, 2011, the company had $900.2 million in cash and cash equivalents and $1.74 billion in short-term investments, totaling over $2.6 billion in highly liquid assets. Working capital was $2.37 billion, and total stockholders' equity stood at $5.43 billion, indicating a robust balance sheet and ample resources for ongoing operations, investments, and strategic initiatives.

Yes, Adobe completed the acquisition of Demdex, a data management platform company, in January 2011. Additionally, the acquisition of Day Software Holding AG in October 2010 is noted as contributing to the growth in the Enterprise segment. While the impact of Demdex was not material to the consolidated balance sheet and results, these strategic acquisitions are part of Adobe's growth strategy, particularly in expanding its Enterprise offerings.