Adobe 2015 Annual Report Download - page 40

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Table of Contents
40
Total Creative ARR exiting fiscal 2015 was $2.60 billion, up from $1.61 billion at the end of fiscal 2014. We exited fiscal
2015 with 6.167 million paid Creative Cloud subscriptions, up 78% from 3.458 million at the end of fiscal 2014.
Our Digital Media segment also includes our Document Cloud products and solutions, including our newly released Acrobat
DC product which helped grow Document Cloud ARR to $397 million exiting fiscal 2015, up from $265 million at the end of
fiscal 2014.
Total Digital Media ARR grew to approximately $3.00 billion at the end of fiscal 2015, up from $1.88 billion at the end of
fiscal 2014, demonstrating the progress we have made with the transformation of our business to a more recurring, ratable and
predictable revenue model. Our reported ARR results in fiscal 2015 are based on currency rates set at the start of fiscal 2015 and
held constant throughout the year. Revaluing our ending ARR for fiscal 2015 using currency rates at the beginning of fiscal 2016,
our Digital Media ARR at the end of fiscal 2015 would be $2.88 billion or approximately $114 million lower than the ARR reported
above.
We are a market leader in the fast-growing category addressed by our Digital Marketing segment. Our Adobe Marketing
Cloud now includes eight solutions which address the expanding needs of marketers. In fiscal 2015, we achieved record Marketing
Cloud revenue of $1.36 billion, which represents 16% year-over-year revenue growth. In addition, we drove strong demand and
bookings growth for our Marketing Cloud solutions, which we expect will positively benefit revenue growth in future quarters.
Financial Performance Summary for Fiscal 2015
• During fiscal 2015, our subscription revenue as a percentage of total revenue increased to 67% from 50% compared
with fiscal 2014, as we transitioned more of our business to a subscription-based model.
• Total Digital Media ARR of approximately $3.00 billion as of November 27, 2015 increased by $1.12 billion, or 60%,
from $1.88 billion as of November 28, 2014. The change in our Digital Media ARR was primarily due to increases in
the number of paid Creative Cloud individual and team subscriptions and continued adoption of our ETLAs, and to a
lesser extent, the adoption of our Document Cloud offering through our ETLAs and increases in Document Cloud
subscriptions.
• Adobe Marketing Cloud revenue of $1.36 billion increased by $188.5 million, or 16%, during fiscal 2015, from $1.17
billion in fiscal 2014. The increases were primarily due to continued adoption of our Adobe Experience Manager
(“AEM”) offering and increases in Adobe Campaign and Adobe Analytics revenue.
• Our total deferred revenue of $1.49 billion as of November 27, 2015 increased by $330.0 million, or 29%, from $1.16
billion as of November 28, 2014, primarily due to increases in Creative Cloud individual and team subscriptions,
ETLAs and new contracts and existing renewals for our Adobe Marketing Cloud services. Also contributing to the
increase in deferred revenue were the increases associated with our stock photography offering from the acquisition
of Fotolia in fiscal 2015.
• Cost of revenue of $744.3 million increased by $122.2 million, or 20%, during fiscal 2015, from $622.1 million in
fiscal 2014. The increases were primarily due to increases in costs associated with compensation and related benefits
driven by additional headcount and costs of professional services driven by the increase in our professional services
business.
• Operating expenses of $3.15 billion increased by $35.8 million during fiscal 2015, from $3.11 billion in fiscal 2014.
The increase is due to higher costs associated with compensation and related benefits driven by additional headcount
and amortization of intangibles from the Fotolia acquisition in fiscal 2015.
• Net income of $629.6 million increased by $361.2 million, or 135%, during fiscal 2015 from $268.4 million in fiscal
2014 primarily due to revenue growth.
• Net cash flow from operations of $1.47 billion during fiscal 2015 increased by $182.0 million, or 14%, from $1.29
billion during fiscal 2014 primarily due to higher net income.