Subscriptions On Track to Pass 3.3 Million This Year As CS6 Fades into the Sunset
Another quarter, another big gain in Creative Cloud (CC) subscriptions for Adobe. The company reported that it signed on 502,000 new paid CC users in the quarter ending August 29, bringing the total to 2.8 million. At that rate, the company's current target of 3.3 million CC subscribers by the end of the fiscal year in November remains well within reach.
But subscriptions through Adobe's distribution channel were lower than expected, following strong sales of CS6 in the previous quarter. Adobe Executive VP and CFO Mark Garrett called it a "last hurrah of perpetual revenue" during a conference call with investors today.
* Adobe expects to "slightly exceed" this number, per remarks today by CFO Mark Garrett.
Source: Adobe [PDF]
Adobe posted total revenue of $1.005 billion in the quarter — up slightly from the $995 billion it posted in the same period last year — and said fully 63 percent of revenue came from recurring sources, i.e. subscriptions and term licensing agreements. However, income was down due to increased expenses across the board.
In prepared remarks to investors, Adobe President and CEO Shantanu Narayen said the company is "aggressively converting" its Creative Suite (CS) installed base to the cloud, using trials and promotional pricing to target individual users while direct sales and Adobe's distribution channel work to convert enterprise and team users to CC. He said future efforts will include "tailored offerings" such as the discounted Creative Cloud Photography Program built around Photoshop and Lightroom, but once again didn't say whether the core video applications might be part of such an offering.
"The business is very healthy," Narayen said in response to a question about the retention rate for CC subscribers, noting that the actual numbers are head of the company's initial expectation of 80 percent. "When you think about the number of units we've transacted … that's already ahead of what we were doing steady-state with CS. We continue to think there's headroom in terms of migrating existing customers as well as attracting new customers."
Adobe took pains to assure investors that Creative Cloud is in expansion mode, rather than just looking to convert existing CS6 owners to subscription status. "We will significantly expand the definition of Creative Cloud with mission-critical and valuable services such as mobile apps built on our SDK, training, a marketplace for content, and talent search and acquisition," Narayen said, indicating that more announcements, "particularly in the area of mobile," will be made during Adobe's Max conference, scheduled to be held early next month in Los Angeles. A "financial analyst briefing" will be held following the keynote address on October 6, said Garrett.
Adobe: www.adobe.com
