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Adobe Systems (ADBE)
Q3 2011 Earnings Call
September 20, 2011 5:00 pm ET
Mike Saviage - Former Vice President of Investor Relations
Mark Garrett - Chief Financial Officer and Executive Vice President
Shantanu Narayen - Chief Executive Officer, President and Director
Brent Thill - UBS Investment Bank, Research Division
Adam H. Holt - Morgan Stanley, Research Division
Mark L. Moerdler - Sanford C. Bernstein & Co., Inc., Research Division
Daniel T. Cummins - ThinkEquity LLC, Research Division
Michael J. Olson - Piper Jaffray Companies, Research Division
Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division
Brad A. Zelnick - Macquarie Research
Chad Bartley - Pacific Crest Securities, Inc., Research Division
David M. Hilal - FBR Capital Markets & Co., Research Division
Ross MacMillan - Jefferies & Company, Inc., Research Division
Jay Vleeschhouwer - Griffin Securities, Inc., Research Division
Previous Statements by ADBE
» Adobe Systems' CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Adobe Systems' CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Adobe Systems CEO Discusses F4Q2010 Results – Earnings Call Transcript
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 2011 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 News Room links to find an electronic copy.
Before we get started, I wanted 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 20, 2011, 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 2 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 rerecorded or otherwise reproduced or distributed without prior written permission from Adobe Systems.
I will now turn the call over to Shantanu.
Thanks, Mike, and good afternoon. In Q3, we delivered revenue and earnings within our targeted ranges. Revenue in the quarter was $1,013,000,000 with non-GAAP earnings per share of $0.55. Highlights in the quarter include record education revenue, strong growth in our digital video products, solid performance with Acrobat, continued bookings momentum in digital marketing and non-GAAP earnings at the high end of our targeted range.
In today's call, Mark will first review our financial results in the quarter and provide our Q4 outlook. Following that, I will spend some time outlining some important strategic shifts we are making as a company.
Thanks, Shantanu. In the third quarter of fiscal 2011, Adobe achieved revenue of $1,013,000,000. This compares to $990.3 million reported in Q3 fiscal 2010 and $1,023,000,000 reported last quarter. Q3 GAAP operating expenses were $634.4 million compared to $589.2 million reported in Q3 fiscal 2010 and $637.3 million last quarter. Non-GAAP operating expenses in Q3 were $560.1 million compared to $524.7 million reported for Q3 fiscal 2010 and $556.7 million last quarter.
GAAP operating income in Q3 fiscal 2011 was $274.1 million or 27.1% of revenue. This compares to GAAP operating income of $302 million or 30.5% of revenue in Q3 fiscal 2010 and $276.7 million or 27% of revenue last quarter. Non-GAAP operating income in Q3 fiscal 2011 was $366.1 million or 36.1% of revenue. This compares to non-GAAP operating income of $384.9 million or 38.9% of revenue in Q3 fiscal 2010 and $376.4 million or 36.8% of revenue last quarter.
Adobe's effective GAAP tax rate in Q3 was 24%, and the effective non-GAAP tax rate was 22%. The difference between the GAAP and non-GAAP tax rates is due to our acquisition of EchoSign during the quarter. GAAP diluted earnings per share for Q3 fiscal 2011 were $0.39. This compares with GAAP diluted earnings per share of $0.44 reported in Q3 fiscal 2010 and GAAP diluted earnings per share of $0.45 reported last quarter.
Non-GAAP diluted earnings per share for Q3 fiscal 2011 were $0.55. This compares with non-GAAP diluted earnings per share of $0.54 in Q3 fiscal 2010 and $0.55 reported last quarter. I'll now discuss Adobe's results in Q3 by business segment.
Creative and Interactive Solutions segment revenue in Q3 was $417.9 million compared to $416.9 million in Q3 fiscal 2010 and $433.1 million last quarter. Digital Media Solutions Q3 revenue was $151.1 million compared to $157.7 million in Q3 fiscal 2010 and $136.7 million last quarter.