Adobe Systems Inc. (ADBE)
Q1 2010 Earnings Call Transcript
March 23, 2010 5:00 p.m. ET

Executives

Mike Saviage - Vice President, Investor Relations
Mark Garrett - Executive Vice President and Chief Financial Officer
Shantanu Narayen - President and Chief Executive Officer

Analysts

Steven Ashley - Robert W. Baird & Co., Inc.
Walter H Pritchard - Citigroup
Brent Thill - UBS
Sarah Friar - Goldman Sachs
Adam Holt - Morgan Stanley
Heather Bellini - ISI Group Inc.
Brad Zelnick - Macquarie Research Equities
Philip Rueppel - Wells Fargo Securities, Llc
Jay Vleeschhouwer - Ticonderoga Securities
Michael J. Olson - Piper Jaffray
Sasa Zorovic - Janney Montgomery Scott LLC
David M. Hilal - Friedman, Billings, Ramsey, & Co., Inc.
Ross MacMillan - Jefferies & Company
Kash Rangan - Banc of America/Merrill Lynch

Presentation

Mike Saviage

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 first 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 on this call, particularly our revenue and operating model targets and our forward-looking product plans is based on information as of today, March 23, 2010, and contains forward-looking statements that involve risks and uncertainties. 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 statement disclosure in the earnings press release that 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 Relations 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. And archive of the call will be made available on the 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 will now turn the call over to Mark.

Mark Garrett

Thanks, Mike. For the first quarter of fiscal 2010, Adobe achieved revenue of $858.7 million. This compares to $786.4 million reported in Q1 fiscal 2009, and $757.3 million reported last quarter.

Our Q1 revenue includes $87.7 million in Omniture revenue but excludes $14.9 million in deferred Omniture revenue in accordance with business combination accounting guidelines.

Our Q1 revenue benefited from an extra week in the quarter due to our 52, 53 week financial calendar as we discussed in our December call and which was factored into our financial targets. We estimate the net revenue benefit from the extra week to be approximately $35 million in the quarter.

We entered the first quarter with approximately 9% of reported Q4 revenue in shippable backlog and we exited the first quarter with approximately 6% of reported Q1 revenue in shippable backlog.

Q1 GAAP operating expenses were $592.5 million, compared to $501.1 million reported in Q1 fiscal 2009 and $521.3 million last quarter. Non-GAAP operating expenses in Q1 were $498.7 million, compared to $428.6 million reported for Q1 fiscal 2009, and $428.8 million last quarter.