Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Good afternoon, and thanks for being with us today. Joining me are Adobe's President and CEO, Shantanu Narayen, along with John Murphy, our Executive Vice President and CFO. This call is being recorded, and we'll be covering Adobe's financial results for the third quarter of fiscal year 2021. Our Q3 press release, plus PDFs of our prepared remarks and financial results, are available on Adobe's Investor Relations website. Everything we discuss on this call, including our financial targets and product plans, reflects information as of today, September 21, and includes forward-looking statements that carry risks, uncertainty and assumptions. Actual results could differ materially from what those statements set forth. To understand these risks, you should review the factors covered in today's press release and in Adobe's SEC filings. During this call, we'll be discussing both GAAP and non-GAAP financial measures. Reconciliations between the 2 can be found in our earnings release and on Adobe's Investor Relations website. I'll now hand the call over to Shantanu.

Thanks, Jonathan. Good afternoon, everyone, and I hope you're all staying safe and healthy. Adobe delivered another outstanding quarter, as people around the world keep embracing new approaches to storytelling, learning and customer engagement in a digital-first environment. During this quarter, we rolled out significant new product innovations, announced the exciting acquisition of Frame.io, and continued to grow customer engagement across an ever-expanding customer base; we're executing on our strategy of unleashing creativity for all, accelerating document productivity and powering digital businesses, as reflected in our strong performance; in Q3, Adobe achieved $3.94 billion in revenue, representing 22% year-over-year growth. For the quarter, GAAP EPS came in at $2.52, while non-GAAP EPS was $3.11. During Q3, our Digital Media business delivered record results, with revenue of $2.87 billion—up 23% from a year earlier. Net new Digital Media ARR reached $455 million, and total Digital Media ARR at the close of Q3 rose to $11.67 billion. Creativity has long been at the heart of what it means to be human. This past year, all of us have seen how creativity carried us through: we sent pictures to family members across continents, taught students gathered at their kitchen tables, and started brand-new ventures online. With decades of leadership behind it, Adobe keeps leading the way in core creative areas like photography and design, and it's also expanding what's possible in a broad set of emerging categories, AR and 3D among them. Video creation and consumption is growing explosively — whether that's the newest streaming+ series people can't stop watching, a social media video that ignites a movement, or a corporate video. In August, we announced an agreement to acquire Frame.io, a top cloud-based platform for video collaboration. Editing video is seldom something one person does alone, and historically it has been very inefficient. Frame.io makes the video production process more efficient, letting editors and key project stakeholders collaborate smoothly through cloud-first workflows. Bringing together our best-in-class video tools — Photoshop, Premiere Pro and After Effects — and Frame.io's cloud-based capabilities for review and approval is going to dramatically speed up how creative work gets done and give customers a complete video platform from start to finish. With Frame.io on board, Adobe sees a chance, working alongside the partner ecosystem, to reach well past video editors into a wider group of customers, teams and enterprises. We're aiming to complete the Frame.io deal in Q4 and can't wait to have the team join Adobe. Coming up next month is Adobe MAX, the biggest creativity conference anywhere. MAX has long been the spot for finding inspiration, linking up with the creative community and getting hands-on with the newest Creative Cloud innovations. This year's event is entirely online, which lets us reach and connect with more members of our worldwide creative community than we ever could before, and the lineup includes celebrated voices such as Oscar-winning writer, director and producer Chloe Zhao, actress Tilda Swinton, and Kenan Thompson, the SNL star and executive producer. Adobe's own custom digital event platform, which runs on Adobe Experience Cloud, will serve as the host for MAX. In Q3, revenue from our Creative segment came to $2.37 billion, driven by healthy gains in new user acquisition, engagement and renewals throughout all Creative products and geographies, with particularly strong momentum in Creative Cloud for Teams. During Q3, Creative Cloud stood out with several notable developments. Our photography tools received fresh services and AI-powered features in Lightroom. Creative Cloud apps now run natively on Apple's M1 silicon chip, bringing a performance gain. We introduced the Adobe Substance 3D Collection, an interoperable set of tools and services built for 3D creativity. We formed partnerships including The Great Untold with Netflix, which helps next-generation creators share their stories. We also recorded significant customer wins with the Department of Education of the Philippines, Facebook, Nike, Rutgers University and the U.S. Department of the Interior. Document Cloud is speeding up document productivity by driving the paper-to-digital shift and making every document action seamless across web, desktop and mobile. Whether it's intricate legal paperwork, sales agreements, or onboarding packages for new hires, documents sit at the heart of how work gets done. By harnessing AI through Adobe Sensei, Document Cloud is streamlining workflows and delivering fresh value across every document-related action. During Q3, Document Cloud posted its highest-ever revenue at $493 million, up 31% compared with the same period a year earlier. Fueling those results were rising unit demand worldwide for Acrobat subscriptions along with particular momentum in the SMB segment. For Q3 in Document Cloud, one highlight is that Adobe Sign keeps getting picked up within Acrobat, with transactions up more than tenfold over the past three years. We also saw expansion in Acrobat web and frictionless PDF, both of which improve the customer journey and capture organic search-driven demand. Adoption and usage of our mobile apps rose as well — Acrobat, Scan and Sign — now exceeding 100 million monthly active users. Liquid Mode, our adaptive and responsive mobile experience, continued to spread, with more than 300 million PDF files reflowed during the past year. Notable customer wins came from Daimler AG, Fujifilm, Micron and PwC. Companies of all sizes, in every category, are putting money into customer experience management. Adobe Experience Cloud provides CXM for B2B and B2C organizations, with applications centered on managing the customer journey, data insights and audiences, content and personalization, commerce, and marketing workflows. Through Adobe Experience Cloud, businesses can deliver digital experiences that are predictive, personalized, and real-time at every touch point of the customer life cycle. In the digital economy, organizations are depending on digital presence and commerce as the primary channels for driving business growth. Per the Adobe Digital Economy Index, from January through August, U.S. consumers spent more than $541 billion in e-commerce, which is 58% more than what we saw two years ago. During Q3, we generated Experience Cloud revenue of $985 million, fueled by strong performance in both subscription and professional services. For the third quarter, subscription revenue came in at $864 million, up 29% compared with a year earlier. With companies worldwide reopening their doors, appetite for Adobe CXM offerings as a top enterprise priority is translating into higher spending across both software and services. Experience Cloud's Q3 standouts include product innovations—for instance, fresh personalization features in Adobe Experience Cloud that assist clients in moving away from third-party cookies and toward first-party data approaches. We additionally observed strong traction with Workfront, which speaks to the demand for workflow and collaboration when running campaigns across the globe, as well as rising customer curiosity about a groundbreaking marketing system of record. Commerce saw important alliances: one with Walmart to bring their omnichannel fulfillment technologies together with ours, and another with PayPal to deliver a robust, secure and integrated payment solution for companies of every size. Industry analysts kept recognizing us too — we were named a leader in the Forrester Wave: Digital Experience Platforms and posted the highest Current Offering score among all participating vendors; Adobe also earned Leader placement in the 2021 Gartner Magic Quadrant for Personalization Engines and in the Gartner Magic Quadrant for Digital Commerce. Customers have embraced Adobe Sensei-powered capabilities in Adobe Experience Cloud strongly, with more than 80% of them now depending on our AI-powered capabilities for data insights and optimizations. We secured significant customer wins with Accor, the Australian government, Bertelsmann, Capital One, CVS Pharmacy, Daimler AG, Facebook, Ford Motor Company, Fidelity Brokerage Services, Honeywell, Real Madrid, and The Gap. Our people have always been the source of Adobe's strength—they're our most vital asset. To our more than 25,000 employees, I want to express gratitude for your commitment and perseverance, and to our customers and partners, thank you for your confidence as we keep steering through a shifting external landscape. It makes me proud that the industry keeps recognizing us as an excellent and fair workplace. During this quarter, Adobe achieved a perfect 100% on the Disability Quality Index recognizing Best Places to Work for Disability Inclusion, and for a fifth straight year we made People Magazine's Companies That Care List. Our Adobe For All virtual conference took place last week, created to unite staff members around the diversity, equity and inclusion values we share. During that gathering, we restated our commitment to pay parity. We keep breaking new ground on opportunity parity so that equal career development and advancement are available to employees across every demographic group. In line with continuing work to attract more diverse talent, Adobe has formed partnerships with Historically Black Colleges and Universities along with Hispanic-serving Institutions. This new initiative is putting $1 million toward donations for schools, scholarships, internships, and career readiness programs. Through these deep, focused partnerships, we aim to give students chances to pick up technology and creative skills. Keeping our employees healthy and safe stays our number one priority. We're gradually reopening offices to fully vaccinated staff who choose to come in voluntarily. Looking toward what the future of work looks like at Adobe, we'll stay hybrid and flexible, and we'll keep doing what serves our employees and our business best. I have no doubt that Adobe's innovative culture, category-defining products, strong brand, and the steadfast commitment of our people will fuel ongoing business success and a strong finish to the fiscal year. John?

Thanks, Shantanu. Our financial results show robust expansion in revenue, Digital Media ARR, Digital Experience subscription revenue, RPO and EPS — proof of how powerful our category-defining products are. In a world that's digital first, Adobe's market opportunity has never been bigger, and we're putting investment behind lasting growth via product innovation and by building awareness and demand for what we offer among customers of every size; through our data-driven operating model, DDOM, we keep using Experience Cloud technology to build personalized experiences for customers in real time, which brings traffic to adobe.com and the app stores and helps us win new customers. Because of that, in Q3 Adobe posted record revenue of $3.94 billion, up 22% year over year. On the business and financial side, we posted GAAP diluted EPS of $2.52 and non-GAAP diluted EPS of $3.11. Digital Media revenue was $2.87 billion, with net new Digital Media ARR of $455 million. Digital Experience revenue came to $985 million. Cash flows from operations were $1.42 billion, RPO stood at $12.63 billion at quarter end, and we repurchased approximately 1.7 million of our shares during the quarter. Inside our Digital Media segment, Q3 growth was 23% year over year, and we ended the quarter with $11.67 billion in Digital Media ARR. As we anticipated, with regions around the world beginning to reopen, Q3 delivered pronounced summer seasonality. That matches what businesses across industries have seen, as Adobe Digital Index data showed June and July were the biggest consumer travel season in 2 years. It lined up with softer web traffic while people took their summer holidays. We are seeing the SMB segment keep recovering as reopening continues. Creative revenue came to $2.37 billion, up 21% year over year, and we added $348 million in net new Creative ARR. Our solid Q3 results show demand for our offerings continues and that execution is guided by DDOM insights. During Q3, Creative's growth came from solid engagement, retention and renewals throughout each creative product line and customer segment; fresh Creative Cloud All Apps user acquisition driven by worldwide marketing efforts; continued improvement in the SMB space via Creative Cloud for Teams, reseller channel included; subscription momentum for flagship offerings such as our desktop and mobile photography and video apps; and adoption of 3D and immersive tools like Adobe Substance. Document Cloud revenue reached $493 million at Adobe, a 31% rise versus the prior year, and net new Document Cloud ARR for the quarter totaled $107 million. Digital documents matter to the way work keeps changing, and the paper-to-digital shift carried on in Q3, with Document Cloud remaining our fastest-growing business. During the third quarter, Document Cloud’s growth was fueled by people adopting Sign in Acrobat as collaboration needs rose in a hybrid workplace; higher unit demand worldwide for Acrobat subscriptions; solid new licensing and renewals for Acrobat for Teams among SMB customers; and ongoing uptake of Acrobat web plus Acrobat mobile. Now to Digital Experience. Q3 revenue came to $985 million, up 26% from a year earlier. Digital Experience subscription revenue came in at $864 million, up 29% from a year ago, and we continue to see that line accelerating as both large and midsized enterprises increase what they spend on customer experience management. Several factors drove Digital Experience results this quarter: healthy deal volume, including a number of sizable Adobe Experience Platform deals; momentum at Adobe Commerce, with solid revenue growth and new customer wins; expansion in merchant services through new strategic partnerships; wider adoption of Workfront and Customer Journey Management; strong retention, reflecting our sharp focus on helping customers realize value; and demand for Adobe’s professional services. Third-quarter operating expenses climbed as we continued strategic investments and expanded our workforce; we began reopening facilities and resumed modest business travel. The majority of our employees remain remote, and the resumption of business travel is expected to build gradually; we also anticipate further acceleration in hiring during Q4. Examining currencies on a quarter-over-quarter basis, FX net of hedging-activity accounting generated a sequential boost to revenue amounting to $10 million. Measured year over year in currency terms, FX net of hedging-activity accounting yielded a currency-driven revenue increase of $80 million. For Q3, Adobe recorded an effective tax rate of 14.5% under GAAP and 16% on a non-GAAP basis. The main reason our GAAP tax rate fell on a quarter-to-quarter basis is that we accrued less U.S. tax on foreign earnings and saw tax benefits related to share-based payments. Trade DSO came in at 36 days, compared with 37 days in the same quarter a year earlier and 35 days in the prior quarter. As we closed Q3, RPO was up 22% from a year ago, reaching $12.63 billion, aided by robust enterprise licensing during the quarter. Our cash and short-term investments totaled $6.16 billion at the end of Q3. Operating cash flow for Q3 was $1.42 billion, lower than Q2 sequentially, reflecting greater prepaid expenses, income tax payments and a reduction in accrued expenses; during the quarter we repurchased about 1.7 million shares for $1 billion. Of the $15 billion authorization we received in December 2020, which remains in effect until 2024, $14.1 billion is still available. Our Q4 goals factor in both the current macroeconomic conditions and the typical seasonal lift at year-end — this includes expected gains in back-to-school spending plus stronger enterprise licensing as the year wraps up. For Adobe overall, we're looking at revenue around $4.07 billion. Digital Media revenue should grow about 20% compared with last year, with net new ARR in that segment of approximately $550 million. Digital Experience revenue is expected to rise roughly 22% year over year, and subscription revenue within Digital Experience should climb about 26% year over year. On taxes, we anticipate a rate of about 17% under GAAP and 16% on a non-GAAP basis. Share count should come in near 480 million shares. GAAP earnings per share should be approximately $2.52, while non-GAAP earnings per share should land around $3.18. Taking into account how Adobe has performed so far this year and these Q4 targets, it's clear we remain on course to surpass the updated annual targets for fiscal 2021 that we gave in March. Given the enormous opportunities in creativity, digital documents and customer experience management, we will keep investing and generating solid business results. I'll hand the call to the operator now for your questions.

Could we maybe dig a bit deeper into the seasonality remarks for the quarter? Because when we look at the beat against guidance on net new Digital Media ARR, at the same time you had what was kind of the weakest beat yet the strongest guide in the last 3 years, which sort of speaks to and backs up some of the seasonality points you raised. But can we just go into it to get a clearer picture of precisely what drove that for the Creative Cloud business? And then separately, what you're seeing on the enterprise adoption side, especially regarding AEP and on the CDP front, that's driving some of that really strong guidance there.

Happy to, Alex. So to start with, regarding your DME question in connection with ARR, on the whole we felt quite good about it. And I believe that really reflects how strong our DDOM is and the insights we gain tied to the business. Going into the quarter, I think we had anticipated that — the consumer would be somewhat more back to normal, as was occurring in the environment. This might have occurred somewhat before the Delta variant hit. We had anticipated a rise in travel, and because summer seasonality and summer holidays represented essentially a two-year break from what people normally do, we saw somewhat reduced web traffic in that area, which was expected. SMB stood out as a bright spot for us. Regarding the SMB segment, which took a somewhat bigger hit, we keep observing positive momentum there; and on your question about guidance, I'd say our confidence, the relevance of what we offer, and digital acting as a tailwind are precisely what lead us to the $550 million figure you mentioned, and that would be the biggest Q4 guide in our history. And stepping back, compared with the roughly $1,750 million ARR guide we provided at the start of the year, or the $1.8 billion we gave in March, we will comfortably surpass every one of those figures. When you look at the individual categories, imaging is still performing very strongly. Video is also continuing to perform well. The Acrobat business, which shows up in both Creative Cloud and Document Cloud, is doing well too. MAX is going to be exciting. So overall, I'd say the growth prospects for that particular business and the growth drivers remain intact, but again, very much in line. And this is what makes us feel good about the insights we're getting on the business. So that answers your question on DME; and again, remember, we have a seasonally strong quarter in Q4 for DME. The enterprise deals tend to be Q4. Education should begin picking up during the fourth quarter, in our view. With luck, that gives you some sense of both Q3 and what we're anticipating for Q4. Turning to DX and your second question: adoption of Adobe Experience Platform along with the applications has genuinely pleased us. On top of that, Adobe Journey Optimizer and Customer Journey Analytics continue to demonstrate considerable momentum. In my view, our platform stands out as fairly distinctive, particularly given the real-time personalization capabilities we bring to customers. To revisit that: given how much attention that particular area—digital transformation along with customer experience management—drew a year ago, I believe it's now clear to people that this has to rank among enterprise spending priorities for any business, regardless of size. That's why, when it comes to Q3 results as well as Q4 goals, we continue to anticipate strong performance from Digital Experience. I hope that addresses things on both counts, Alex.

Nice work on the quarter. Shantanu, I wanted to ask whether you might go into a bit more detail on a couple of the larger Experience Platform deals you closed. Were those wins against competitors at existing customers? And stepping back, what would you say is driving your success in landing these bigger deals? I was also struck that 80% of your clients appear to be using some of the AI-powered capabilities, which looks like a really strong uptake or take rate. So I'm just curious whether you can say more about those larger enterprise Experience Platform deals from this quarter.

Absolutely, Kirk; and ultimately, the macro trend everyone is seeing is that having a digital presence, plus commerce, data, insights, and analytics, is essentially table stakes for any company operating today. So I think everyone began with a website. Everyone began with analytics. But where we've delivered the Adobe Experience Platform and what we discuss around our personalization, that, I believe, is a crucial differentiator. And regardless of whether you're a B2B or a B2C company, you simply have to invest in this area. And I think the team has done an especially strong job, including with messaging across different industries. Health care, for instance, keeps performing well, and there's growing interest around it. Consumer businesses are beginning to show something of a comeback as things become a bit more normal. And so with many of them, we're pursuing existing customers. We're pursuing new logos and selling more; but I'd say it comes down to the strength of the Experience Platform, the capacity to hold these profiles, the behavioral data we gather in real time, the marketing message about telling them they truly need to make their first-party data an asset they could put on their balance sheet, and the nature of what's happening with digital commerce. I think all of those are trends; and then we win the deals thanks to the strength of our offering and the fact that we're a truly pure-play marketing business that is significantly differentiated compared with anyone else.

Alright. Shantanu, I realize you've got just 3 quarters of data so far, but is Workfront pushing up average deal sizes in DX? Is that already coming through?

Great question, Gregg. And perhaps, as I mentioned to Kirk too, I should have brought up the major thing we keep hearing from customers in that area, Gregg — they've got more and more campaigns. They want campaign agility. These are global; and how do they not just have an integrated product suite but how do they make the workflow more efficient, particularly when everyone's working hybrid or from home? So Workfront is certainly assisting us; it's assisting us with existing customers. It's assisting us with deal sizes; and in many respects, it's the glue that enables — if you've got people, technology and processes, it's assisting with the processes piece. But the promise of what we've also stated there regarding this pioneering marketing system of record — that's another area of interest. And I think this was always a great company. I think they were seeking to become more general purpose. I think what Anil and the team has accomplished in really concentrating on marketing workflows and solving it for all the different personas — that's certainly resonating. But in all the large deals we do, Workfront is certainly part of the interest and part of the bill of materials tied to that.

Really strong quarter. And perhaps to go a bit deeper on the M&A side of things; we've certainly been hearing great things about Workfront closing a lot of deals early on. Could you maybe describe how Workfront has performed relative to what you expected and the kind of contribution you're seeing this quarter? Also, on Frame.io, just to clarify, is that reflected in the forward ARR guidance? Is it part of the $550 million for Q4? And then maybe more broadly, on M&A strategy. The last 2 major deals appear to share a common thread around collaboration. Is that just a sell-side analyst connecting 2 data points and drawing a trend line? Is that a specific area of emphasis for Adobe regarding future portfolio additions?

Keith, there are actually three questions bundled in what you asked, so I'll take them one at a time. First, regarding Workfront, we are plainly meeting a real market need; initially we indicated Workfront would bring in roughly $140 million to $150 million of revenue during FY '21; we later noted it was poised to considerably exceed that figure, and that is still true today. When it comes to these bigger transactions, Keith, we don't disclose Workfront separately. That's the way we look at the business overall, and Workfront certainly fits well with that. On your second question regarding Frame.io — no, it isn't included in the ARR guidance. Obviously, we wouldn't include it before the deal closes. When that takes place — and as we've mentioned, we anticipate it happening in Q4 — we'll definitely give you an update on Frame at that point, and we're enthusiastic about it. As for your third question, on collaboration as a team, that's something we've been talking about for some time. As you may recall, regarding XD and its live editing capability, and what we've accomplished with multi-surface apps—our software operating on phones, iPads, tablets, and desktops alike—this connects to a broader pattern: folks are doing their work from various places. More and more, people collaborate with others. That means we're well positioned to deliver real value to the customers we already have while bringing in new ones. With Frame specifically, we're enthusiastic since it greatly widens how many people can potentially take part in the video workflow. I hope you enjoyed the videos shown at the start of this earnings call. Everything in them was produced remotely, and we're pleased with how it turned out. Keith, as you know, we take a careful approach whenever we look at acquisitions—we make sure the circumstances allow us to create meaningful value for both our shareholders and our customers.

Turning to margin, the margins for the year to date now sit above 46%. I believe earlier you mentioned the possibility of a further step down in the second half. So how should we view the margin profile at this point? And are there any benefits you would highlight that could normalize, assuming more of a return to normal?

John, would you like to begin, and then I can add?

Yes, that would be excellent. Yes, you're correct — margins came in at 46% for this quarter. We had said that as reopening spread across various regions, our facilities would begin coming back online, business travel would return, and our hiring ramp would certainly keep going. The Delta variant likely slowed that somewhat, and that played a part in the margin expansion you saw in Q3. Still, all in all, it was an outstanding quarter across every one of our businesses. What we've stated is that the long road — the route toward margin expansion — really runs through revenue growth, given the leverage in our model. And beyond what revenue performance contributed this quarter, plus the continued expense savings I just mentioned, those things together drove the overall performance. That said, we expect those expenses to return in a phased reentry now, perhaps a bit slower than we originally thought back when we discussed the second half; even so, when I look at our original targets in December, they implied margin expansion. When we set our updated targets in Q1, the margin expansion was even larger than what we saw. But we're executing against these enormous market opportunities, and we'll keep doing so while keeping an eye on continued top line growth — such as the area Shantanu touched on, which is 3D and immersive Adobe Experience Platform, Sign and Stock mobile, all of that.

Thanks, John — good points. Perhaps the one other thing I’d mention is that, clearly, with certain T&E or facilities costs, what’s going on with expenses is somewhat artificial; however, our core stance is that when you’re looking at a $100-plus billion addressable market, driving profitable growth is our focus, and that’s why John also noted that we remain in the market hiring talent so we can keep addressing all the market opportunities before us. So our focus is on driving profitable growth.

Shantanu, starting with you, since I'm certain you remember that across the past several years—especially at an event such as MAX—we've discussed the integration in numerous ways, the distinctive integration between Digital Media and the DX business. And as you'll remember, it has been known by a particular acronym over the years. My question is whether you can quantify, or at least describe in some manner, the business impact of that combination—even reaching back to the old DPS era—of how this mutual relationship actually assists you in generating business via integration spanning the 2 segments. On a related note, regarding DX in particular, as you'll remember, during the past several years the company has frequently said that you had roughly 4 dozen use cases you were pursuing for DX; and that was several years back; so maybe you could discuss how the count of targeted use cases for DX has grown over the past several years, especially now that payment services and other new capabilities have been introduced.

Certainly, Jay. First, I believe when it comes to your question about integration among the clouds, as you know, let's begin by discussing Acrobat itself, correct? Since such a large portion of the Acrobat business appears in both Creative Cloud and Document Cloud; and that is one quite concrete illustration of how we have integrated the clouds. Taking a broader view, the area I would describe as drawing the greatest customer interest at present is what we've previously also called content velocity—meaning people are producing more digital assets; they're investing more in content and in how they guarantee that all of that content is distributed seamlessly, whether it's a marketing campaign, whether it's something appearing on a mobile application, whether it's something appearing on the website. And so I believe that's the difficult problem we've managed to help make easier for our customers—producing all of this content and ensuring that its delivery is sped up through marketing campaigns—which is an area of genuine integration between DME and DX as well; and the place where that also appears in revenue is the ongoing expansion of AEM and AEM assets in particular, because that's where the assets genuinely move between these 2 solutions. So hopefully, that provides you with a bit of the sense of it. Regarding the earlier questions that Gregg and others and Kirk had posed, I mean it also concerns the workflow. That's when people examine it and say, "Wow, if my freelancers have produced content, how is that now being reflected in the DX?" So that's my response to your first question. As for the DX use cases, and we should definitely provide an update, the number has risen extremely sharply. What I'd perhaps point to as a highlight would be the B2B use cases — the quantity of big B2B firms approaching us and telling us, "Hey, we understand that whether it's for generating leads, whether it's for identifying customers, whether it's even for conducting commerce, that's been a pretty significant driver." I'd mention regulated industries — the initial focus around customer experience management was B2C and consumer-oriented businesses, and now, I believe, you're seeing far more of those workflows and use cases within regulated industries. So that's another one I'd bring up. I'd point to the global dimension of this, which is that you have companies — whether you're an automotive business or a fast food business — and you want to do this on a global scale; I think that's a use case where we've witnessed a fairly dramatic rise; but — so hopefully, that gives you one. And then this is where the partner ecosystem, frankly, is also driving so much more. And so the partner ecosystem is likewise building plenty of their value-added solutions on top of our horizontal platform; so overall, I'd say it doesn't matter what business you are, what size you are. Part of DX is relevant to what you need to do in order to engage with your customers.

All right, great. John, perhaps for you — just to shift topics a little. I was curious whether you might speak to seasonality within the Document Cloud business in particular. Historically, I believe net new ARR there has tended to move up and to the right throughout the year. The question, I suppose, is whether that business is reaching a stage where seasonality might begin to resemble Creative a bit more. Or is there anything worth taking into account regarding Document Cloud ARR seasonality for this quarter?

Yes. When we consider the circumstances we've faced, with the pandemic and the push for greater paper-to-digital transformation, that's affecting not only enterprises and institutions — where obviously we've seen strong growth — but individuals too, as they interact with the services they rely on. As we mentioned, looking at the individual offerings across Creative and Document Cloud, we saw traffic there come in slightly lower, though we believe that ties to people enjoying their holidays. It's fairly telling, based on our own Adobe Digital Index data, which showed June and July were the highest travel months in 2 years. So I think that seasonality is having some effect. Still, we have such a strong presence across institutions, educational, government and enterprises on Document Cloud that we continue to see solid growth and strength. That's shown in the ongoing expansion of that business, which is our fastest-growing business at present.