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MACROMEDIA REPORTS FOURTH QUARTER AND FISCAL YEAR 2005 FINANCIAL RESULTS

Delivers 18% Annual Revenue Growth

Macromedia, Inc. (Nasdaq: MACR)
Summary Financial Results
(in millions, except per share data)

Three Months Ended March 31

Year Ended March 31

  2005 2004 2005 2004
Net Revenues $116 $102 $436 $370
Net income (loss) per diluted share – GAAP $(0.03) $0.19 $0.55 $0.54
Net income per diluted share – pro forma $0.23 $0.22 $0.85 $0.65

Download Q405 Financials - Excel file (65K)

San Francisco, CA—May 3, 2005—Macromedia (Nasdaq: MACR) today reported financial results for its fiscal fourth quarter and fiscal year ended March 31, 2005. Net revenues for the quarter were $116.1 million, a 14 percent increase compared to the $102.0 million reported for the same period last year. Net revenues for fiscal year 2005 were $436.2 million, an 18 percent increase compared to the $369.8 million for fiscal year 2004.

"Macromedia has delivered an outstanding quarter and fiscal year highlighted by strong growth and solid profitability," said Stephen Elop, CEO, Macromedia. "We are equally proud of the strategic progress that we have made. In the last 90 days alone, we have chalked up major strategic wins in each of our growth agendas, including mobile, Flex, and Breeze."

Net loss for the fiscal fourth quarter was $2.3 million, or $0.03 per diluted share, compared to net income of $13.5 million, or $0.19 per diluted share, for the same quarter a year ago. Pro forma net income for the three months ended March 31, 2005 was $18.2 million, or $0.23 per diluted share, compared to $15.5 million, or $0.22 per diluted share, for the comparable quarter a year ago.

Net income for the year ended March 31, 2005 was $42.5 million, or $0.55 per diluted share, compared to $37.4 million, or $0.54 per diluted share, for the prior fiscal year. Pro forma net income for fiscal year 2005 was $65.2 million, or $0.85 per diluted share, compared to a pro forma net profit of $45.0 million, or $0.65 per diluted share, for fiscal year 2004.

The Company's cash, cash equivalents, and short-term investments were $378.3 million as of March 31, 2005, a $37.4 million and $95.6 million increase from December 31, 2004 and March 31, 2004, respectively. Deferred revenue was $52.0 million as of March 31, 2005, a $2.8 million and $14.6 million increase from December 31, 2004 and March 31, 2004, respectively.

Pro Forma Results

Macromedia's pro forma operating results for the three months and fiscal year ended March 31, 2005 and 2004 differ from corresponding results reported under U.S. GAAP due to adjustments for the following items reported in its consolidated results from operations:

  • The amortization and impairment of acquired developed technology and intangible assets and the write-off of in-process research and development.
  • A decrease in expenses resulting from a reduction in the estimated fair value of contingencies assumed in our acquisition of eHelp Corporation in FY04.
  • A restructuring charge to reflect costs associated with exiting leased facilities.
  • Gains on investments in privately-held companies.
  • The application of a 20 percent tax rate to pro-forma net income.

See the attached reconciliation of GAAP and pro forma results.

Business Outlook

The following statements are based upon current expectations and exclude any impacts resulting from the Company’s announced plans to be acquired by Adobe Systems Incorporated. These forward looking statements are subject to risks and uncertainties discussed below. Actual results may differ materially.

For the fiscal year ending March 31, 2006, the Company reiterated its guidance for net revenues to exceed $500 million, with gross margin between 91 percent and 92 percent of revenue, and operating profit margin trending towards 20 percent over the course of the year.

For the quarter ending June 30, 2005, Macromedia expects net revenues to be flat to slightly down from its March quarter, with gross margins in the 92 to 93 percent range, and an operating profit margin between 15 and 17 percent.

Restatement For A Non-Cash Operating Expense Item and Income Taxes

On May 2, 2005 the Company determined that at March 31, 2004, it had understated by $6.1 million a liability related to the accrued benefit of an employee sabbatical leave program adopted in fiscal year 1999 which provides paid time-off to employees based on years of employment. The Company believes that the appropriate manner in which to correct the cumulative effect of this non-cash error is to restate previously issued financial statements for fiscal years ended March 31, 2004, 2003, 2002, 2001, 2000, and 1999. Additionally, the Company’s previously reported results for the three and nine-month periods ended December 31, 2004 included a cumulative adjustment to its income tax provision of $2.0 million related to periods prior to April 1, 2004, in order to properly remeasure the Company’s net foreign-currency denominated tax liabilities to U.S. dollars. Because Macromedia will be restating its previously issued financial statements for the employee sabbatical leave program, the Company has also restated its previously issued financial statements for fiscal years 2004, 2003, and 2002 to properly apply the provisions of Financial Accounting Standard No. 109, Income Taxes. The Company intends to file the restated audited financial statements and related auditor’s report by amending its Form 10-K for the fiscal year ended March 31, 2004. The impact of correcting prior period financial statements for these non-cash items is summarized in the supplemental schedules attached to the related Form 8-K we filed today, which may be accessed through the SEC's web site at www.sec.gov or our investor relations website at http://www.macromedia.com. We expect to file an amended Form 10-K for fiscal year 2004 within the next several weeks.

Conference Call

Macromedia's fourth quarter and fiscal year 2005 financial results will be discussed in a Macromedia Breeze presentation available after the close of market on Tuesday, May 3, 2005 at http://www.macromedia.com/MACR/. In addition, a teleconference is scheduled to begin at 2 p.m. Pacific Time / 5 p.m. Eastern Time on Tuesday, May 3, 2005. After the conclusion of the teleconference, a replay of the conference call will be available on the Company's website.

About Macromedia

Experience matters. Macromedia is motivated by the belief that great experiences build great businesses. Our software empowers millions of business users, developers, and designers to create and deliver effective, compelling, and memorable experiences - on the Internet, on fixed media, on wireless, and on digital devices.

Cautionary Note About Forward Looking Statements

Matters discussed in this news release may be considered forward looking statements, including those under the heading "Business Outlook" that relate to expected future financial results which involve risks and uncertainties.

Such risks and uncertainties include impacts resulting from Adobe's proposed acquisition of the Company (including but not limited to canceled or postponed purchases of the Company's products, reduced interest in adopting and deploying the Company's technology, reduced support for marketing and distributing of the Company's products, and failure to attract or retain key Company personnel), customer acceptance of new products and services and new versions of existing products, the impact of competition, risks associated with integration of acquired companies and their employees, products, and technologies, the risk of adequately evolving and operating our internal systems and processes in a dynamic business environment, the risk of delays in product development and release dates, the risk of not attracting and retaining key personnel, new regulations and other government actions that may materially increase the cost of compliance and doing business, risks associated with participating in international markets (including, but not limited to, foreign policies, market instability, exchange rate fluctuation, and regulations in the applicable foreign countries), the economic condition in the domestic and significant international markets in which the Company operates, dependence on the growth of the Internet, quarterly fluctuations of the Company’s operating results, the Company's dependence on distributors and resellers, the risk of product returns, the challenges faced in protecting the Company’s intellectual property within and outside the U.S., the risks associated with potential litigation and intellectual property ownership claims against the Company and others in the industry, volatility of the Company's stock, and other risks detailed from time to time in the Company's filings with the SEC, including without limitation, its annual report on Form 10-K, and its quarterly reports on Form 10-Q, as they may be updated or amended with future filings. The actual results the Company achieves may differ materially from any forward looking statements due to such risks and uncertainties.