Adobe closes year with solid Q4 earnings; keeps focus on digital media

Adobe's CEO attributes fourth quarter success to focusing on digital media and marketing businesses.

Adobe managed to exceed both Wall Street and even its own expectations to close out the year with high fourth quarter earnings and revenue growth for 2011 overall.

Adobe reported fourth quarter a net income of $173.7 million with earnings of 35 cents a share (statement). Non-GAAP earnings were 67 cents a share on a revenue of $1.152 billion, up 14 percent in year-over-year revenue growth. Wall Street was expecting earnings of 60 cents a share on revenue of $1.086 billion.

Adobe was previously hoping for something in the range of $1.075 billion to $1.125 billion.

For 2011, Adobe achieved a revenue of $4.216 billion -- an 11 percent year-over-year growth and much more impressive when compared to $3.800 billion in 2010. In fact, it exceeded the company’s target of ten percent growth provided at the outset of the year.

GAAP diluted earnings per share for fiscal 2011 were $1.65 (compared to $1.47 in 2010), while non-GAAP diluted earnings per share for fiscal 2011 were $2.35 (up from $1.93 in 2010.)

Perhaps the drive away from Flash towards HTML5 is just the strategy that Adobe needs to follow through on.

Adobe CEO and president Shantanu Narayen explained in prepared remarks:

Adobe’s record results in Q4 and fiscal 2011 were driven by strong performance in our digital media and digital marketing businesses. We intend to be the market leader in these two large categories, which will drive strong revenue and earnings growth.

For the outlook, Adobe is predicting a revenue of $1.025 billion to $1.075 billion at the end of Q1 2012 with non-GAAP earnings between 54 to 59 cents a share.

For the first quarter ending Feb. 28, Wall Street is expecting 58 cents a share on revenue of $1.05 billion.

For fiscal 2012, Adobe is targeting an annual -- and modest -- revenue growth of four to six percent. Adobe is also predicting earnings to fall within the range of $1.70 to $1.83 on a GAAP basis, and $2.37 to $2.47 on a non-GAAP basis.

By the numbers:

  • 2011 net income was $832.8 million on a GAAP-basis.
  • Q4 cash flow from operations was $496.8 million. Adobe generated $1.5 billion in cash flow in 2011.
  • The company repurchased 21.8 million shares during the year, returning approximately $695 million to stockholders.