10-QPeriod: Q3 FY2012

ADOBE INC. Quarterly Report for Q3 Ended Jun 1, 2012

Filed June 27, 2012For Securities:ADBE

Summary

Adobe Systems Incorporated (ADBE) reported its financial results for the quarter ended May 31, 2012. The company demonstrated revenue growth driven by its Digital Media and Digital Marketing segments, with the Digital Media segment benefiting from the launch of Creative Suite 6 (CS6) and the Digital Marketing segment showing continued adoption of its Digital Marketing Suite, bolstered by the recent acquisition of Efficient Frontier. While overall revenue increased year-over-year, the company's net income saw a slight decrease compared to the prior year's quarter, impacted by various factors including a higher effective tax rate. Adobe continues to strategically invest in its growth areas and manage its capital effectively, including ongoing stock repurchase programs and a newly established credit facility to support general corporate purposes.

Financial Highlights

54 data points
Beta

Revenue

$1.12B

88.4% Gross Margin

Net Income

$223.88M

19.9% Net Margin

EPS (Diluted)

$0.45

Total Assets

$9.63B

Cash & Equivalents

$1.16B

Free Cash Flow

$573.36M

Financial Statements
Beta
Revenue$1.12B
Cost of Revenue$119.62M
Gross Profit$993.53M
Operating Expenses$682.65M
Operating Income$278.30M
Interest Expense$17.25M
Net Income$223.88M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)494.05M
Shares Outstanding (Diluted)499.76M

Key Highlights

  • 1Total revenue for the three months ended June 1, 2012, increased by 10% to $1.124 billion compared to $1.023 billion in the prior year's quarter.
  • 2Digital Media revenue grew by 9% year-over-year to $818.5 million, largely driven by the launch of Adobe Creative Suite 6 (CS6).
  • 3Digital Marketing revenue saw a significant increase of 17% year-over-year to $250.9 million, fueled by the adoption of the Digital Marketing Suite and contributions from the Efficient Frontier acquisition.
  • 4Net income for the quarter decreased to $223.9 million from $229.4 million in the same period last year, while diluted EPS remained stable at $0.45.
  • 5The company's effective tax rate increased significantly to 24.0% from 11.5% year-over-year, impacting net income.
  • 6Goodwill increased to $4.123 billion from $3.849 billion, primarily due to the acquisition of Efficient Frontier and foreign currency translation adjustments.
  • 7Adobe ended the quarter with a strong liquidity position, with cash and cash equivalents of $951.2 million and short-term investments of $2.047 billion.

Frequently Asked Questions

Adobe's revenue growth was primarily driven by its Digital Media and Digital Marketing segments. The launch of Adobe Creative Suite 6 (CS6) significantly boosted Digital Media revenue, while continued adoption of the Digital Marketing Suite, along with contributions from the Efficient Frontier acquisition, fueled growth in the Digital Marketing segment.

Although revenue increased, net income saw a slight decrease compared to the prior year's quarter. This was largely influenced by a substantial increase in the effective tax rate, which rose to 24.0% from 11.5% in the comparable period last year. Other factors contributing to operating expenses also played a role.

The acquisition of Efficient Frontier, which closed in January 2012, contributed to the growth in Adobe's Digital Marketing segment revenue. It also led to an increase in goodwill on the balance sheet, reflecting the purchase price allocation.

Adobe maintained a strong liquidity position, with cash and cash equivalents totaling $951.2 million and short-term investments amounting to $2.047 billion as of May 31, 2012. The company also reported positive net cash provided by operating activities.