Software-maker Adobe (ADBE) reported fiscal fourth-quarter results after the close Thursday that showed strong revenue and earnings expansion driven by its digital media and marketing businesses. We are maintaining our above-market fair value estimate for Adobe.
Revenue jumped 14% in the period, to $1.152 billion, exceeding the high end of the company’s guided range. The company generated some nice growth (record volume licensing with enterprise customers) in its flagship desktop product, CS5.5, and received some traction from new applications like Edge and Muse, which are levered to advances in HTML5. Management noted that recurring revenue now represents roughly 20% of total revenue and that it experienced strong demand in all major geographies, including Europe.
Non-GAAP operating income increased nearly 16%, while non-GAAP net income increased 16.4%. Non-GAAP diluted earnings per share came in at $0.67, which compares to $0.56 in the prior-year period and consensus estimates of $0.60. Adobe is an absolute cash-cow, and the firm pulled in nearly $500 million in cash flow from operations during the period and $1.5 billion in free cash flow during its now completed fiscal year.
Looking ahead, the firm is targeting a sequential decline in revenue and non-GAAP earnings per share to the range of $1.025 to $1.075 billion (in-line with consensus forecasts) and $0.54 to $0.59 in its fiscal first quarter (the midpoint slightly below consensus forecasts), respectively. For fiscal 2012, which the firm dubs as a transition year, Adobe expects to achieve top-line expansion as high as 6% and non-GAAP earnings-per-share in the range of $2.37 to $2.47.
In coming periods, we’ll continue to assess the success of Creative Cloud, a subscription offering that provides access to its desktop tools and other applications, and whether management can achieve $1 billion of Software-as-a-Service revenue and double more predictable, recurring revenue as a percentage of sales–its key long-term targets.