Adobe Systems Inc. (ADBE)
F3Q2010 Earnings Call Transcript
September 21, 2010 5:00 pm ET
Mike Saviage – VP, IR
Shantanu Narayen – President and CEO
Mark Garrett – EVP and CFO
Brent Thill – UBS
Steve Ashley – Robert W. Baird
Philip Rueppel – Wells Fargo
Philip Winslow – Credit Suisse
Michael Olson – Piper Jaffray
Adam Holt – Morgan Stanley
Walter Pritchard – Citi
Brad Zelnick – Macquarie
Sarah Friar – Goldman Sachs
Heather Bellini – ISI
Ross MacMillan – Jefferies & Company
Daniel Cummins – ThinkEquity
Kash Rangan – Merrill Lynch
Chad Bartley – Pacific Crest Securities
Blair Abernethy – Stifel Nicolaus
Sasa Zorovic – Janney
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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 third 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 adobe.com under the Company and Press links to find an 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, September 21, 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.
Thanks, Mike, and good afternoon. In Q3, we achieved record revenue of $990.3 million with non-GAAP earnings per share of $0.54. We had strong results across all our major business lines, and the increase in revenue resulted in strong profit margins and earnings, which exceeded our target ranges.
I'll spend a few minutes discussing Q3 business highlights. Then Mark will provide additional details about the quarter and our financial targets. Following that, I will provide some closing comments, and we'll take your questions.
In our Creative Solutions business, we are enabling publishers, creative agencies and a broad spectrum of designers and developers to bring their content to the exploding number of screens. Customer feedback for CS5 continues to be overwhelmingly positive. Momentum continued in Q3, which helped to maintain the 15% growth cycle to date performance versus CS4. Our strategy to drive more suite adoption continues to succeed. 71% of the CS5 product family revenue we achieved in Q3 was suites based.
As we moved from the early adopters into large enterprise sales, we are seeing the expected increase in CS5 volume licensing and larger transaction sizes. Customers such as Omnicom and Target entered into multi-year licensing agreements for CS5 during Q3. In addition, we achieved record revenue with Master Collection.
Other Creative highlights include record revenue for Adobe Lightroom, the launch of a new Flash Media Server and momentum with our new CS5 video editing tools. Lightroom Version 3 significantly enhances its capabilities for digital photographers with improved performance and workflow features.
We introduced Flash Media Server 4 at the IBC Conference earlier this month to meet the needs of content owners who want to deliver high quality, network efficient media experiences to reach the broadest possible audience across screens. Premiere Pro maintained its position as the market leader for professional video editing, including adoption of 2000 seats at the BBC during the quarter.
In our Omniture business, we continue to broaden our value proposition to marketers, advertisers and publishers through the online marketing suite and its visitor acquisition and conversion capabilities. Omniture bookings continue to be strong with solid enterprise retention rates. Customer wins in the quarter included Dell, Guess and Home Depot.
In our Acrobat business, we continue to focus on enabling knowledge workers and enterprisers to collaborate across critical document workflows. Enterprise licensing was strong in Q3, demonstrating that Acrobat and PDF continue to be a mission critical desktop standard for large enterprises and governments. We are on track to deliver a new version of Acrobat late this quarter.
In our Enterprise segment, our value proposition for customer experience management is gaining traction. Through our LiveCycle solutions, enterprisers are able to drive adoption of self service across every screen in the customer’s life and provide customer facing employees, the tools and insight they need to deliver better service.