After market close yesterday, Adobe Systems Incorporated (NASDAQ:ADBE) announced its third quarter 2012 financial results. Results were at the low end or below most analysts’ expectations, but part of that was due to the strength of the U.S. dollar.
On the bright side, migration to the company’s “Creative Cloud” offering is proceeding faster than expected. The importance of this to Adobe is that as a subscription service, revenues from new customers are spread over time, rather than being received lump sum at the time of purchase.
Quote from Adobe’s press release: “We’re on a path to drive millions of subscribers to our Creative Cloud offering, as well as build a billion dollar SaaS business in Digital Marketing,” said Mark Garrett, executive vice president and CFO of Adobe. “This will drive higher long-term growth and create a large recurring revenue stream.”
In after-hours trading, the share price of ADBE initially dropped sharply, but quickly recovered and finished over 1% higher than Wednesday’s close.
The following is a portion of Adobe’s press release as distributed by Business Wire. This release reflects the views of the issuing entity and was not reviewed or edited by the USA Stock Report staff, except that detailed financial data was omitted.
To see the entire press release, please click here.
Source: Adobe Systems
Adobe Reports Third Quarter Fiscal 2012 Financial Results
September 19, 2012 04:03 PM Eastern Daylight Time
Creative Cloud Subscriptions Accelerate and Digital Marketing Suite Revenue Grows 40 Percent Year-Over-Year
SAN JOSE, Calif.–(BUSINESS WIRE)–Adobe Systems Incorporated (Nasdaq:ADBE) today reported financial results for its third quarter of fiscal year 2012 ended Aug. 31, 2012.
Adobe achieved revenue in Q3 FY2012 of $1.081 billion, within its targeted range of $1.075 billion to $1.125 billion. During the quarter, the Company drove faster adoption of Creative Cloud subscriptions than originally projected. As Adobe customers migrate from a legacy Creative Suite perpetual licensing model to new Creative Cloud subscriptions, revenue is recognized over time as opposed to at the time of purchase. This overachievement in subscriptions during the third quarter effectively transitioned approximately $29 million more perpetual revenue than expected to Creative Cloud.
In addition, the effect of currency impacted Q3 revenue negatively by approximately $9 million. Adjusting for these amounts in Adobe’s reported results would have enabled the Company to achieve third quarter revenue towards the high-end of its targeted range.
Other Third Quarter Financial Highlights
Diluted earnings per share were $0.40 on a GAAP-basis, and $0.58 on a non-GAAP basis.
Operating income was $278.3 million and net income was $201.4 million on a GAAP-basis. Operating income was $391.8 million and net income was $291.2 million on a non-GAAP basis.
Cash flow from operations was $263.3 million.
Adobe Creative Cloud paid subscriptions grew to approximately 200,000 in the third quarter. Adobe added approximately 8,000 Creative Cloud subscriptions per week during the quarter, exceeding the addition of 5,000 subscriptions per week that was assumed in its third quarter financial targets.
Digital Marketing Suite achieved record quarterly revenue with 40 percent year-over-year growth.
A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.
“Customers globally are adopting our new Creative Cloud subscription offering more quickly than we projected,” said Shantanu Narayen, president and CEO of Adobe. “We are the leader in the fast-growing Digital Marketing category with 40 percent year-over-year Digital Marketing Suite revenue growth this quarter.”
“We’re on a path to drive millions of subscribers to our Creative Cloud offering, as well as build a billion dollar SaaS business in Digital Marketing,” said Mark Garrett, executive vice president and CFO of Adobe. “This will drive higher long-term growth and create a large recurring revenue stream.”
Adobe provided financial targets for the fourth quarter of fiscal 2012. These targets reflect the effect of higher migration of customers to Creative Cloud than forecast earlier in the year.
For the fourth quarter of fiscal 2012, Adobe is targeting revenue of $1.075 billion to $1.125 billion. On a diluted earnings per share basis, the company is targeting a range of $0.34 to $0.39 on a GAAP basis, and $0.53 to $0.58 on a non-GAAP basis. These targeted ranges factor in the addition of 125,000 new Creative Cloud subscriptions in the quarter, which represents approximately $94 million in Q4 perpetual revenue which would effectively move to subscription and ratable monthly recognition.
Adobe is targeting its Q4 share count to be between 500 million and 502 million shares, and it is targeting non-operating expense between $18 million and $20 million. Adobe’s tax rate is expected to be approximately 23.5 percent on a GAAP basis and 22.5 percent on a non-GAAP basis.
About Adobe Systems Incorporated
Adobe is changing the world through digital experiences. For more information, visit www.adobe.com.
© 2012 Adobe Systems Incorporated. All rights reserved. Adobe, Creative Cloud, Creative Suite and the Adobe logo are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners.