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Adobe Reports Record Q1 Financial Results

Thursday, March 23, 2006

Press release from the issuing company

SAN JOSE, Calif.--March 22, 2006-- Adobe Systems Incorporated today reported record financial results for its first quarter ended March 3, 2006. The Company's Q1 results reflect the recent acquisition of Macromedia, and are compared to pre-acquisition results of prior fiscal periods. In the first quarter of fiscal 2006, Adobe achieved record revenue of $655.5 million, compared to $472.9 million reported for the first quarter of fiscal 2005 and $510.4 million reported in the fourth quarter of fiscal 2005. On a year-over-year basis, this represents 39 percent revenue growth. Adobe's first quarter revenue target range was $630 to $660 million. "Adobe's business continues to perform well, driven by strong demand for our creative solutions and Acrobat," said Bruce R. Chizen, Adobe chief executive officer. "In addition to our strong financial results, we are making rapid progress integrating the Macromedia business and remain excited about our prospects for future growth." GAAP diluted earnings per share for the first quarter of fiscal 2006 were $0.17. Non-GAAP diluted earnings per share, which excludes Macromedia acquisition costs, restructuring charges related to the Macromedia acquisition, a charge for incomplete technology related to a small acquisition, stock-based compensation, the net tax impact of the repatriation of certain foreign earnings, tax differences due to the timing and deductibility of the Macromedia acquisition costs and related charges and stock-based compensation, and investment gains and losses, were $0.32. GAAP net income was $105.1 million for the first quarter of fiscal 2006, compared to $151.9 million reported in the first quarter of fiscal 2005, and $156.3 million in the fourth quarter of fiscal 2005. Non-GAAP net income, which excludes, as applicable, Macromedia acquisition costs, restructuring charges related to the Macromedia acquisition, a charge for incomplete technology related to a small acquisition, stock-based compensation, the net tax impact of the repatriation of certain foreign earnings, tax differences due to the timing and deductibility of the Macromedia acquisition costs and related charges and stock-based compensation, and investment gains and losses, was $197.5 million for the first quarter of fiscal 2006, compared to $133.8 million in the first quarter of fiscal 2005, and $151.5 million in the fourth quarter of fiscal 2005. GAAP diluted earnings per share for the first quarter of fiscal 2006 were $0.17 based on 621.8 million weighted average shares. This compares with GAAP diluted earnings per share of $0.30 reported in the first quarter of fiscal 2005, based on 506.2 million weighted average shares, and GAAP diluted earnings per share of $0.31 reported in the fourth quarter of fiscal 2005, based on 508.6 million weighted average shares. Adobe's GAAP operating income was $130.0 million in the first quarter of fiscal 2006, compared to $170.7 million in the first quarter of fiscal 2005 and $191.9 million in the fourth quarter of fiscal 2005. As a percent of revenue, GAAP operating income in the first quarter of fiscal 2006 was 19.8 percent, compared to 36.1 percent in the first quarter of fiscal 2005 and 37.6 percent in the fourth quarter of fiscal 2006. Adobe's non-GAAP operating income, which excludes, as applicable, Macromedia acquisition costs, restructuring charges related to the Macromedia acquisition, a charge for incomplete technology related to a small acquisition, and stock-based compensation was $252.4 million in the first quarter of fiscal 2006, compared to $170.7 million in the first quarter of fiscal 2005 and $191.9 million in the fourth quarter of fiscal 2005. As a percent of revenue, non-GAAP operating income in the first quarter of fiscal 2006 was 38.5 percent, compared to 36.1 percent in the first quarter of fiscal 2005 and 37.6 percent in the fourth quarter of fiscal 2005. Adobe Provides Second Quarter FY2006 Financial Targets and Reaffirms FY2006 Annual Revenue Target For the second quarter of fiscal 2006, Adobe announced it is targeting revenue of $640 million to $670 million. The Company also is targeting a GAAP operating margin of approximately 22 to 24 percent in the second quarter. On a non-GAAP basis, which excludes acquisition-related costs and stock-based compensation, the Company is targeting a second quarter operating margin of approximately 37 to 38 percent. In addition, Adobe is targeting its share count to be between 620 million and 622 million shares in the second quarter of fiscal 2006. The Company also is targeting other income in its second quarter to be approximately $15 million to $16 million, with a GAAP tax rate of 27 percent and a non-GAAP tax rate of 26 percent. The difference between the two rates is related to the timing and deductibility of the Macromedia acquisition and related charges and stock-based compensation. These targets lead to a second quarter GAAP earnings per share target range of approximately $0.18 to $0.21. On a non-GAAP basis, which excludes acquisition-related costs, stock-based compensation, and tax differences related to the timing and deductibility of the Macromedia acquisition and related charges and stock-based compensation, the Company is targeting earnings per share of approximately $0.30 to $0.32. For fiscal year 2006, Adobe reaffirmed its annual revenue target of approximately $2.7 billion.

 

 

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