Private Equity Solutions

Macromedia Reports First Quarter Fiscal Year 2005 Results

Revenues up 25 percent and net income more than doubles year-over-year

SAN FRANCISCO--(BUSINESS WIRE)--July 28, 2004--Macromedia (Nasdaq:MACR) today reported financial results for its fiscal first quarter ended June 30, 2004. Net revenues for the quarter were $103.6 million, a 25 percent increase compared to the $83.1 million reported for the same period last year.
Macromedia, Inc. (Nasdaq:MACR) Three Months Ended
---------------------------------------------- June 30,
Summary Financial Results
----------------------------------------------
(in millions, except per share data)
---------------------------------------------- ----------------------
2004 2003
---------------------------------------------- ----------- ----------
Net Revenues $103.6 $83.1
---------------------------------------------- ----------- ----------
Net income per diluted share - GAAP $0.19 $0.10
---------------------------------------------- ----------- ----------
Net income per diluted share - pro forma $0.20 $0.11
---------------------------------------------- ----------- ----------


Net income for the three months ended June 30, 2004 was $13.9 million, or $0.19 per diluted share, compared to $6.7 million, or $0.10 per diluted share, for the same quarter a year ago. Pro forma net income for the three months ended June 30, 2004 was $14.7 million, or $0.20 per diluted share, compared to $7.1 million, or $0.11 per diluted share, for the same quarter a year ago.

"This was a good solid quarter, made so by our continuing leadership in web design and our terrific growth in mobile and business solutions," said Rob Burgess, chairman and CEO, Macromedia. "The Internet is changing yet again as non-PC devices like phones, TVs, and other interesting machines play an increasingly important role in the networked world. Macromedia is well positioned and totally excited to help enable these experiences to be the best they can possibly be. We are looking forward to lighting up the new digital world."

Business Outlook - Second Quarter Fiscal Year 2005

For the quarter ending September 30, 2004, Macromedia expects net revenues to be in the range of $103 to $108 million, with pro forma gross margins in the 91 to 93 percent range, and a pro forma operating profit margin between 16 and 18 percent. These forward looking statements are subject to risks and uncertainties discussed below and actual results may differ materially.

Pro Forma Results

Macromedia's pro forma results for the three months ended June 30, 2004 and 2003, differ from corresponding results reported under Generally Accepted Accounting Principles (GAAP) in the U.S. due to adjustments for the following items reported in its consolidated results from operations:

Non-cash charges for:

-- The amortization of acquired developed technology and intangible assets.

Cash gains:

-- Cash gains realized on an equity investment which had no carrying value due to write-downs recorded in a prior period.

Pro forma results for the three months ended June 30, 2004 and 2003 reflect an assumed tax rate of 20 percent, reflecting U.S. federal and state income taxes and foreign taxes at rates other than U.S. statutory rates. See the attached reconciliation of GAAP and pro forma results.

Conference Call

Macromedia's first quarter of fiscal year 2005 financial results will be discussed in a Macromedia Breeze presentation available 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 Wednesday, July 28, 2004. 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 those related to customer acceptance of new products and services and new versions of existing products, the impact of competition, risks associated with integration of acquired products and technologies, the risk of adequately evolving our internal systems and processes in a dynamic business environment, the risk of delays in product development and release dates, 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, 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 operating results, the Company's dependence on distributors, the risk of product returns, 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.

Copyright 2004 Macromedia, Inc. All rights reserved. Macromedia and the Macromedia logo, are trademarks or registered trademarks of Macromedia, Inc., which may be registered in the United States and internationally. Other product or service names mentioned herein are the trademarks of their respective owners.

MACROMEDIA, INC.
Condensed Consolidated Statements of Income
Impact of Pro Forma Adjustments on Reported Net Income
(In thousands, except percentages and per share data)
(unaudited)

Three Months Ended
June 30, 2004
-----------------------------------
GAAP Adjustments Pro Forma
--------- ----------- ---------
Net revenues $103,554 $- $103,554
Cost of revenues:
Cost of net revenues 7,470 - 7,470
Amortization of acquired
developed technology 744 (744) -
--------- ----------- ---------
Total cost of revenues 8,214 (744) 7,470
--------- ----------- ---------
Gross profit 95,340 744 96,084
--------- ----------- ---------
Operating expenses:
Sales and marketing 44,008 - 44,008
Research and development 23,615 - 23,615
General and administrative 11,119 - 11,119
Amortization of intangible
assets 241 (241) -
--------- ----------- ---------
Total operating expenses 78,983 (241) 78,742
--------- ----------- ---------
Operating income 16,357 985 17,342
--------- ----------- ---------
Other income (expense):
Interest income, net 941 - 941
Gain on investments - - -
Other, net 37 - 37
--------- ----------- ---------
Total other income 978 - 978
--------- ----------- ---------
Income before income taxes 17,335 985 18,320
Provision for income taxes (3,418) (246) (B) (3,664)
--------- ----------- ---------
Net income $13,917 $739 $14,656
========= =========== =========

Net income per common share:
Basic $0.20
Diluted $0.19 $0.20
Weighted average common shares
outstanding used in net income
per common share calculation:
Basic 68,830
Diluted 74,180 74,180

Gross Margin
Gross profit as a percentage of
net revenues 92% 93%

Selected operating expenses as a
percentage of net revenues:
Sales and marketing 42% 42%
Research and development 23% 23%
General and administrative 11% 11%

Operating Margin:
Operating income as a
percentage of net revenues 16% 17%


Three Months Ended
June 30, 2003
-----------------------------------
GAAP Adjustments Pro Forma
--------- ----------- ---------
Net revenues $83,064 $- $83,064
Cost of revenues:
Cost of net revenues 7,189 - 7,189
Amortization of acquired
developed technology 319 (319) -
--------- ----------- ---------
Total cost of revenues 7,508 (319) 7,189
--------- ----------- ---------
Gross profit 75,556 319 75,875
--------- ----------- ---------
Operating expenses:
Sales and marketing 34,676 - 34,676
Research and development 23,300 - 23,300
General and administrative 9,702 - 9,702
Amortization of intangible
assets 247 (247) -
--------- ----------- ---------
Total operating expenses 67,925 (247) 67,678
--------- ----------- ---------
Operating income 7,631 566 8,197
--------- ----------- ---------
Other income (expense):
Interest income, net 891 - 891
Gain on investments 65 (65) (A) -
Other, net (174) - (174)
--------- ----------- ---------
Total other income 782 (65) 717
--------- ----------- ---------
Income before income taxes 8,413 501 8,914
Provision for income taxes (1,683) (99) (B) (1,782)
--------- ----------- ---------
Net income $6,730 $402 $7,132
========= =========== =========

Net income per common share:
Basic $0.11
Diluted $0.10 $0.11
Weighted average common shares
outstanding used in net income
per common share calculation:
Basic 61,670
Diluted 65,480 65,480

Gross Margin
Gross profit as a percentage of
net revenues 91% 91%

Selected operating expenses as a
percentage of net revenues:
Sales and marketing 42% 42%
Research and development 28% 28%
General and administrative 12% 12%

Operating Margin:
Operating income as a
percentage of net revenues 9% 10%


Reclassifications

Historical amounts have been reclassified to reflect amortization of
acquired developed technology as a component of cost of revenues.

Macromedia's pro forma results for the three months ended June 30,
2004 and 2003 differ from results reported under Generally Accepted
Accounting Principles in the U.S. due to adjustments for the
amortization of acquired developed technology and intangible assets
and the following items reported in its unaudited Condensed
Consolidated Statements of Income:

(A) A cash gain realized on an equity investment which had no carrying
value due to write-downs recorded in a prior period.

(B) Pro forma results for the three months ended June 30, 2004 and
2003 reflect an assumed tax rate of 20 percent, reflecting U.S.
federal and state income taxes and foreign taxes at rates other
than U.S. statutory rates.


MACROMEDIA, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)

ASSETS June 30, March 31,
2004 2004
---------- ----------
Current assets:
Cash, cash equivalents and short-term
investments $268,397 $282,691
Accounts receivable, net 46,099 38,210
Restricted cash 8,019 16,363
Prepaid expenses and other current assets 17,614 15,581
---------- ----------
Total current assets 340,129 352,845
Property and equipment, net 82,704 45,512
Goodwill and other intangible assets, net 249,747 250,789
Restricted cash, non-current 7,022 7,022
Deferred income taxes, non-current 16,521 16,062
Other assets 8,462 9,658
---------- ----------
Total assets $704,585 $681,888
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,764 $5,311
Accrued liabilities and income taxes
payable 63,064 70,623
Accrued restructuring 6,360 6,934
Deferred revenues 36,559 32,215
---------- ----------
Total current liabilities 111,747 115,083
Accrued restructuring, non-current 10,175 11,657
Deferred revenues, non-current 5,662 5,173
Other liabilities, non-current 4,986 5,024
---------- ----------
Total liabilities 132,570 136,937

Total stockholders' equity 572,015 544,951
---------- ----------
Total liabilities and stockholders'
equity $704,585 $681,888
========== ==========


Selected Financial Data
(unaudited)

Three Months Ended June 30,
---------------------------
2004 2003
------------ ----------
Selected Cash Flow Information: (In millions)
Depreciation and amortization $3.6 $4.4
Amortization of acquired developed
technology and other intangible
assets $1.0 $0.6
Purchase of property and equipment $(38.1) $(1.4)
Proceeds from exercise of stock options $13.8 $16.8

Earnings before interest, taxes,
depreciation and amortization:
Net income $13.9 $6.7
Interest income (0.9) (0.9)
Tax expense 3.4 1.7
Depreciation and amortization 3.6 4.4
Amortization of acquired developed
technology and other intangible
assets 1.0 0.6
------------ ----------
EBITDA $21.0 $12.5
============ ==========


Three Months Ended June 30,
-----------------------------------------
2004 2003 % Change
------------ ------------ -----------
Net Revenues by Geography: (In millions, except percentages)
North America $57.6 $46.2 25%
------------ ------------
% of total net revenues 56% 56%

Europe 25.3 19.0 33%
Asia Pacific and Other 20.7 17.9 15%
------------ ------------
International 46.0 36.9 25%
------------ ------------
% of total net revenues 44% 44%

------------ ------------
Net Revenues $103.6 $83.1 25%
============ ============


Three Months Ended June 30,
------------------------------------
2004 2003 % Change
------------------ ---------------- ---------
$ % $ %
------------ ---- ---------- ----
Net Revenues by Market: (In millions, except percentages)
Designer and Developer $85.0 82% $72.1 87% 18%
Business User 10.8 10% 2.9 3% 280%
Consumer 6.5 6% 6.4 8% 2%
Other 1.3 2% 1.7 2% (31%)
------------ ---- ---------- ----
Net Revenues $103.6 100% $83.1 100% 25%
============ ==== ========== ====




Contacts


Macromedia, Inc.
Eileen Stanley Conway, 415-252-4035 (Media Contact)
econway@macromedia.com
Michael Look, 415-832-5995 (Investor Relations)
mlook@macromedia.com

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