SAN JOSE, Calif. - June 16, 2005 - Adobe Systems Incorporated (Nasdaq:ADBE) today reported strong financial results for its second quarter ended June 3, 2005.
In the second quarter of fiscal 2005, Adobe achieved record revenue of $496.0 million, compared to $410.1 million reported for the second quarter of fiscal 2004, and $472.9 million reported in the first quarter of fiscal 2005. On a year-over-year basis, this represents 21 percent revenue growth. Adobe’s second quarter revenue target range was $475 to $495 million.
“Adobe’s performance in Q2 reflects our third consecutive quarter of record revenue, demonstrating continued execution against our strategy,” said Bruce Chizen, CEO. “Our planned acquisition of Macromedia will further enhance our ability to deliver an industry-defining technology platform and enable us to offer a wider range of solutions to customers and industries around the world.”
GAAP diluted earnings per share for the second quarter of fiscal 2005 were $0.29. Non-GAAP diluted earnings per share, which excludes the net tax impact of the planned repatriation of certain foreign earnings, and investment losses from the Company’s venture program, were $0.28.
GAAP net income was $149.8 million for the second quarter of fiscal 2005, compared to $109.4 million reported in the second quarter of fiscal 2004, and $151.9 million in the first quarter of fiscal 2005.
Non-GAAP net income, which excludes, as applicable, the net tax impact of the planned repatriation of certain foreign earnings, and investment gains and losses, was $142.9 million for the second quarter of fiscal 2005, compared to $108.8 million in the second quarter of fiscal 2004, and $133.8 million in the first quarter of fiscal 2005.
GAAP diluted earnings per share for the second quarter of fiscal 2005 were $0.29 based on 508.2 million weighted average shares. This compares with GAAP diluted earnings per share of $0.22 reported in the second quarter of fiscal 2004, based on 493.9 million weighted average shares, and GAAP diluted earnings per share of $0.30 reported in the first quarter of fiscal 2005, based on 506.2 million weighted average shares.
Adobe’s GAAP and non-GAAP operating income was $182.2 million in the second quarter of fiscal 2005, compared to $141.8 million in the second quarter of fiscal 2004 and $170.7 million in the first quarter of fiscal 2005. As a percent of revenue, GAAP and non-GAAP operating income in the second quarter of fiscal 2005 were 36.7 percent, compared to 34.6 percent in the second quarter of fiscal 2004 and 36.1 percent in the first quarter of fiscal 2005.
Company Provides Update on Status of Macromedia Acquisition
On April 18, 2005, Adobe announced a definitive agreement to acquire Macromedia (Nasdaq: MACR). Adobe said today the integration planning process between the two companies is well underway and continues to anticipate the acquisition will close in the Fall of 2005. The Company also indicated its pre-merger notification and report form under the Hart-Scott-Rodino Act is currently being reviewed by the Department of Justice, and said it expects to file a registration statement on Form S-4 in the next few weeks.
On June 13, 2005 a stockholder derivative complaint was filed by a purported Adobe stockholder in the Superior Court of the State of California for the County of Santa Clara. The complaint names Adobe and its board of directors as defendants and alleges breach of fiduciary duty in connection with Adobe's plan to acquire Macromedia in light of Macromedia's recent restatement of its financial results for its fiscal years 1999-2004. Adobe management believes the complaint is without merit and intends to defend the matter vigorously.
Adobe is maintaining a Website as an ongoing source of information regarding the Macromedia acquisition here.
Adobe Provides Third Quarter Financial Targets
For the third quarter of fiscal 2005, Adobe announced it is targeting revenue of $470 to $490 million, which represents approximately 16 to 21 percent year-over-year growth. The Company is also targeting gross margin of approximately 94 percent, and GAAP and non-GAAP operating margin ranges of approximately 34 to 36 percent.
As a percent of revenue, Adobe is targeting third quarter expenses as follows:
Research & Development – approximately 20 percent
Sales & Marketing – approximately 29 to 31 percent
General & Administrative – approximately 9 percent
In addition, Adobe is targeting its share count range to be between 511 and 513 million shares in the third quarter of fiscal 2005. The Company also is targeting other income in its third quarter to be approximately $9 to $10 million, and a tax rate of 25 percent. These targets lead to third quarter GAAP and non-GAAP earnings per share target ranges of $0.25 to $0.27.
Adobe currently believes targeted non-GAAP earnings per share and non-GAAP operating margin results will not differ materially from targeted GAAP results.
Forward Looking Statements Disclosure
This press release contains forward looking statements, including those related to revenue, product releases, gross margin, operating expenses, operating margin, other income, tax rate, share count, earnings per share, and timing of the Macromedia acquisition and related integration, which involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: adverse changes in general economic or political conditions in any of the major countries in which Adobe does business, delays in development or shipment of the Company's new products or major new versions of existing products, introduction of new products by existing and new competitors, failure to successfully manage transitions to new business models or markets, failure to anticipate and develop new products in response to changes in demand for application software, computers and printers, intellectual property disputes and litigation, failure to realize the anticipated benefits of past or future acquisitions and difficulty in integrating such acquisitions, changes to the Company's distribution channel, the impact of malicious code, such as worms and viruses, on the Company's computer network and applications, interruptions or terminations in the Company's relationships with turnkey assemblers, risks associated with international operations, fluctuations in foreign currency exchange rates, changes in accounting rules and regulations, unanticipated changes in tax rates, market risks associated with the Company's equity investments, and the Company's inability to attract and retain key personnel. For further discussion of these and other risks and uncertainties, individuals should refer to the Company's SEC filings, including the 2004 annual report on Form 10-K and quarterly reports on Form 10-Q filed in 2005. The Company does not undertake an obligation to update forward looking statements.
Additional Information and Where to Find it
Adobe Systems Incorporated intends to file a registration statement on Form S-4, and Adobe and Macromedia, Inc. intend to file a related joint proxy statement/prospectus, in connection with the merger transaction involving Adobe and Macromedia. Investors and security holders are urged to read the registration statement on Form S-4 and the related joint proxy/prospectus when they become available because they will contain important information about the merger transaction. Investors and security holders may obtain free copies of these documents (when they are available) and other documents filed with the SEC at the SEC’s web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Adobe by contacting Adobe Investor Relations at 408-536-4416. Investors and security holders may obtain free copies of the documents filed with the SEC by Macromedia by contacting Macromedia Investor Relations at 415-252-2106.
Adobe, Macromedia and their directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Adobe and Macromedia in connection with the merger transaction. Information regarding the special interests of these directors and executive officers in the merger transaction will be included in the joint proxy statement/prospectus of Adobe and Macromedia described above. Additional information regarding the directors and executive officers of Adobe is also included in Adobe’s proxy statement for its 2005 Annual Meeting of Stockholders, which was filed with the SEC on March 14, 2005. Additional information regarding the directors and executive officers of Macromedia is also included in Macromedia's proxy statement for its 2004 Annual Meeting of Stockholders, which was filed with the SEC on June 21, 2004 and Macromedia's proxy statement for a Special Meeting of Stockholders, which was filed with the SEC on October 6, 2004. These documents are available free of charge at the SEC's web site at www.sec.gov and from Investor Relations at Adobe and Macromedia as described above.
NOTES TO EDITORS
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About Adobe Systems Incorporated
Adobe is the world’s leading provider of software solutions to create, manage and deliver high-impact, reliable digital content. For more information, visit www.adobe.com.
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