Adobe Systems Inc. F2Q10 (Qtr End 06/04/2010) Earnings Call Transcript - TheStreet

Adobe Systems Inc. (ADBE)

F2Q10 (Qtr End 06/04/2010) Earnings Call

June 22, 2010 5:00 p.m. ET


Mike Saviage - VP, IR

Shantanu Narayen - President and CEO

Mark Garrett - EVP and CFO



Mike Saviage

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Good afternoon and thank you for joining us today. Joining me on the call are Adobe's President and CEO, Shantanu Narayen; as well as Mark Garrett, Executive Vice President and CFO. In the call today, we will discuss Adobe's second quarter fiscal year 2010 financial results.

By now, you should have a copy of our earnings press release, which crossed the wire approximately one hour ago. If you need a copy of the press release, you can go to under the Company and Press links to find the electronic copy.

Before we get started, I want to emphasize that some of the information discussed in this call, particularly our revenue and operating model targets, and our forward-looking product plans, is based on information as of today, June 22, 2010, and contains forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the Forward-Looking Statements Disclosure in the earnings press release we issued today as well as Adobe's SEC filings.

During this call, we will discuss GAAP and non-GAAP financial measures. A reconciliation between the two is available in today's earnings release and on our Investor Relations website in the investor data sheet.

Call participants are advised that the audio of this conference call is being broadcast live over the Internet in Adobe Connect and is also being recorded for playback purposes. An archive of the call will be made available on Adobe's Investor Relations website for approximately 45 days and is the property of Adobe Systems. The audio and archive may not be re-recorded or otherwise reproduced or distributed without prior written permission from Adobe Systems.

I would now like to turn the call over to Shantanu.

Shantanu Narayen

Thanks, Mike, and good afternoon. In Q2, we achieved record revenue of $943 million with non-GAAP earnings per share of $0.44. In addition to a successful CS5 launch, we had solid results across all of our businesses and geographies. We continue to execute well against our strategic goals, providing great value to our customers, which is resulting in strong performance.

I'll spend a few minutes discussing Q2 business highlights. Then Mark will provide additional details about the quarter and our financial targets. Following that, I will close with a discussion on our longer-term objectives, and we'll take your questions.

In our Creative Solutions business, positive product reviews, industry buzz and pent-up customer demand drove strong Creative Suite 5 adoption in all major geographic regions in the quarter. Our team has delivered an amazing set of products with new innovative features, performance improvements and workflow enhancements to help customers deliver rich and engaging content across media types, platforms and devices.

Our strategy to drive more Suites adoption and revenue is succeeding. 71% of the CS5 product family revenue we achieved in Q2 was Suites-based, an all-time high. We are also seeing success with our video editing tools, which helped drive strong growth for our video solutions including Master Collection. While early in the cycle, CS5 sales were particularly strong on the Mac.

In Q2, we also made progress against two long-term strategic goals. We achieved record Creative Suite orders on and record revenue in the education market. Based on initial results and feedback from customers, we believe the adoption of CS5 will remain strong through the end of this year and into next year as large customers evaluate and transition to the new release.

Our Omniture business had another solid quarter in Q2 with strong bookings and the addition of more than 100 net new customers. Awareness of the strategic value Adobe can provide across an entire workflow involving creation, delivery and optimization is resonating with our big enterprise customers. In fact, we booked a significant multi-year enterprise win for more than $6 million that spanned all major Adobe products from creative tools to LiveCycle and Omniture solutions.

In our Acrobat business, the strength we experienced in Q4 and Q1 continued through Q2. Enterprise licensing was particularly strong, demonstrating the Acrobat and PDF value proposition continues to resonate with large customers. We are on track to deliver a new version of Acrobat late in Q4 that will focus on enabling knowledge workers and enterprises to collaborate across critical document workflows.

In our Enterprise segment, both Connect and LiveCycle had a strong bookings quarter and continue to gain traction in key vertical markets such as government and financial services. Enabling our customers to deliver engaging experiences across multiple devices remains a focus of the company.

Today, we announced availability of Flash Player 10.1 for mobile devices, which delivers on the promise of enabling access to the full web across desktops and devices. We expect millions of devices to ship with 10.1 in the second half of 2010.

Flash is strategic for Adobe, because it delivers great value to our customers. Approximately 3.5 million Flash designers and developers are working with Flash-based solutions today, and their ranks grew by 59% in 2009. The new release of Flash Player creates a whole new sandbox for these millions of designers and developers to create next-generation content, advertising, games, applications and experiences.

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