Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Hello, and good morning to everyone. Thank you for being here with us today. My name is Jonathan Vaas. I'd like to welcome you to our meeting for financial analysts. You ought to have a copy of the press release we filed earlier today at around 5 A.M. Pacific Time, along with a copy of the slides we put up on the Investor Relations Web site. It's my hope that I'll get the chance to see many of you face to face during this year. For the moment, I'm truly happy to be here alongside Adobe's leadership team, interacting with all of you virtually once more, and we've prepared an excellent program for today. Given the webcast format, the live presentation we're giving today will be a condensed take on the extensive information we published to the Investor Relations Web site, which contains everything you normally expect from Adobe. So we'll walk through some of those slides today, and afterward we'll move on to Q&A at the conclusion. Let's briefly review the agenda. Shantanu is going to open with a short welcome, and following that, Ann will lay out Adobe's vision and strategy looking ahead. Anil will walk through our digital experience strategy, and David will then address digital media strategy. After that, Dan Durn, who came aboard in October as Adobe's Chief Financial Officer, will give a thorough financial summary and also talk about Adobe's long-term strategy; then Shantanu will close things out by sharing his view of the long-term opportunity, and we'll move to live Q&A. Before we begin, just a reminder that a portion of what we share includes forward-looking statements that carry risk and uncertainty. Actual results could end up differing from those statements, and we suggest you look over the risk factors in our SEC filings for additional details. On top of that, we'll be presenting both GAAP and non-GAAP financial metrics. Reconciliations between the two can be found on Adobe's Investor Relations Web site. I'll hand things over now to Adobe's Chairman and CEO, Shantanu Narayen.

Good morning, and thank you, Jonathan. It's great to have everyone here for the Virtual 2022 Financial Analysts Meeting. In 2021, Adobe enjoyed yet another remarkable year. I feel tremendous pride in how Adobe's 25,000 employees worldwide showed dedication and resilience, bringing breakthrough technologies to our customers. Let me begin by reviewing the enormous achievements we made on every front during 2021. As someone who's a product geek at heart, I'm deeply proud that our team drove hundreds of innovations spanning Adobe Creative Cloud, Document Cloud, and Experience Cloud. This week, we unveiled Creative Cloud Express, which lets anyone express their ideas in a simple and beautiful way. Creative Cloud Express represents the beginning of a completely new journey — one that introduces first-time creators to Adobe Creative tools while delivering substantial value to everyone who currently subscribes to Creative Cloud. In my view, it signals a new chapter for creation, collaboration, and sharing on the web, and it takes advantage of the distinctive technology and capabilities found in Adobe's flagship products. It also extends the collaboration capabilities we launched at MAX, such as Illustrator and Photoshop on the web, Creative Cloud Spaces, and Creative Cloud Canvas. By adding Frame.io, we are now bringing in review and approval functionality, giving customers a powerful collaboration platform for end-to-end video collaboration. What's more, we keep adding magic to our flagship applications, and we're making it possible for them to run natively on new hardware, including Apple's M1 chip along with Microsoft Windows Surface and Pen; in Document Cloud, Acrobat Web now supports 21 frictionless verbs — create, export, extract, and edit — for both text and images and PDF. Acrobat online has grown tremendously, since people turn to our powerful, free, browser-based document tools for handling important tasks on the fly, with no need to download any software. Beyond that, we achieved outstanding progress with PDF support inside both the Chrome and Edge browsers. And on the Experience Cloud platform, we brought our real-time customer data platform to B2B customers, uniting individual and account profiles across systems so B2B companies get a single view of their customer for the very first time. We introduced Adobe Journey Optimizer, drawing on more than 20 years of industry-leading e-mail, marketing, and cross-channel campaign management expertise to help brands design and deliver personalized experiences throughout the entire customer journey within one application; through the new acquisition of Adobe Workfront, we're now helping companies optimize business outcomes by connecting creative and marketing professionals so they can manage all creative workflows across the whole marketing lifecycle. Additionally, we've strengthened our industry leadership in key areas throughout our portfolio. Clearly, the magic and power of Adobe Sensei — our artificial intelligence and machine learning framework — underpins our three clouds, serving as a major differentiator for Adobe and an enabler of more rapid innovation. We kept putting money into the Adobe Experience platform, since it serves as the base layer delivering robust governance tools throughout our Experience Cloud operation, speeding up breakthroughs such as real-time customer data platform and Adobe Journey optimizer worldwide; we treat our duty toward the creative community with the utmost seriousness. Additionally, through the content authenticity initiative, we released a drop specification as an open standard aimed at fighting online disinformation. Our staff's resilience truly astonishes me, and we broke new ground in digital event experiences through Adobe Summit and Adobe MAX, broadening our reach and connecting with millions globally. Furthermore, I feel enormous pride in the ongoing industry accolades for our brand, our workplace, our culture, and our practices. To offer just a handful of illustrations, we once more earned a spot as a top riser on Interbrand's Best Global brands list. We appeared on Fortune's 100 Best Companies to Work For, marking the 21st year, People Magazine's Companies That Care list for the fifth year, and Fast Company's Brands that Matter list. Moreover, something I consider even more meaningful for many investors going forward: the Dow Jones Sustainability Index for the fifth year, plus one achievement I'm especially proud of — a 100% score for being the best place to work for disability inclusion. Looking at our financial results, it places us in an exceptionally uncommon position within the industry. Few companies are able to achieve growth on both the top line and bottom line while maintaining such an impressive margin as we do. We surpassed $15 billion in 2021, and during Q4 we hit several notable milestones: our first $1 billion digital experience revenue quarter, our first $3 billion digital media, and $2 billion in cash flow; simply some remarkable financial figures. Dan Durn, our new CFO, will walk through our Q4 along with our FY'21 results in more depth. Ever since he came aboard at Adobe in October, I've genuinely valued his expertise and collaboration, and I anticipate him offering his viewpoint while also making a major mark on Adobe's growth over the coming decade. I'm also thrilled to share that Anil Chakravarthy and David Wadhwani have each been elevated to President of the Digital Experience and Digital Media Businesses, correspondingly. I appreciate their leadership and contributions, and they'll provide additional detail regarding each of our businesses. Though 2021 was fantastic, I'm honestly most enthusiastic about what lies ahead for 2022 and beyond across the more than 20 years I've spent at Adobe. We hold this enormous market opportunity. We possess an extraordinary technology innovation roadmap and the finest leadership team of any company on earth; and I believe what we've delivered is 2022 targets that showcase the underlying business's strength, three remarkably vast expanding opportunities spanning our clouds, and sustained emphasis on execution in light of the present economic climate. One shift all of us are seeing is that once the business moves past $15 billion, FX expectations become something we must watch too, especially with the U.S. dollar having strengthened lately. Yet while discussing 2022 is something I'm eager to do, what today is really about is telling Adobe's amazing growth story and explaining how we will fuel growth through the coming decade, since that is exactly what supports the expansion of our more than $200 billion addressable market opportunity. Our leadership team will walk you through it over the course of the day, and our growth rests on five central pillars: our demonstrated history and the way we concentrate on building and heading up categories; the constantly growing and widening group of customers we serve, ranging from consumers to creative professionals to first-time creators, to small and medium businesses, to the biggest enterprises on earth; our capacity to provide remarkable technology platforms that make entirely new kinds of applications possible and speed up our pace of innovation. There's an important transition we keep making, moving from creating applications toward enabling fresh business models, apps, services, artificial intelligence and platforms, and that is producing returns; and finally, a phenomenal worldwide partner ecosystem reaching across the whole customer lifecycle, from experience creation and marketing through to delivery and continued support; and the takeaway for you as investors, I believe, is that in each dimension and each business, our ambitions sit higher and our thinking has gotten bigger. A remarkable opportunity that comes along once in a lifetime stretches out before us, and I believe our position to seize it is unlike anyone else's. So to give you detail on the strategy for how we will broaden markets and categories, I want to bring in Ann Lewnes, who just marked her 15th year with Adobe, our fantastic Chief Marketing Officer, who has also picked up added responsibility for corporate strategy. Ann?

Thanks, Shantanu, and good morning to all of you. During the last two years, we have seen a sweeping worldwide move toward everything digital. Everybody — from learners to mom-and-pop shops to the biggest brands on the planet — has needed to make that striking pivot. Advances in technology, the spread of new devices and platforms, plus a growing wish and capacity for just about anyone to build and ship excellent digital experiences, have each sped up the shift toward a genuinely digital world; and that shift won't reverse. Be it via a phone, tablet or PC, just about anyone, anywhere can readily create, work, learn, connect, shop, relax, and start and scale companies. Even as enormous difficulties persist around the globe, digital has likewise given us power through creativity becoming democratized, the creation of abundant digital experiences, the capacity to work and learn from home, to buy and sell goods online or to reach the people you care about; society keeps advancing. Everything has been fundamentally reshaped by digital. Per Adobe Analytics, online spending across the 2021 holiday season is expected to hit $200 billion, while total e-commerce spending is forecast to arrive at $1 trillion in 2022. Plainly, digital is now a prerequisite for running a business. From the neighborhood eatery you love most to Fortune 500 enterprises, in every nation and every sector, today's companies run on digital. Firms are automating mission-critical document processes such as HR and legal to achieve greater efficiency and agility. Meanwhile, customers today look for abundant, tailored digital experiences that feel relevant, engaging and consistent no matter the device. It is widely established that businesses operating digital first generate stronger long-term growth and customer loyalty. And at Adobe, our very own technology has let us turn into a digital first business. Organizations such as Adobe track each and every customer interaction, to grasp behavior, intent, and in the end to generate business impact. We accomplish that by delivering personalized digital experiences at scale via adobe.com, throughout all of our digital channels, and more and more through our products. Digital has altered not just how we live and work, but also how we link up with each other. Just about anyone can start or join an online community, be it with your family, friends, colleagues, or people who share your interests and passions. And as the creator economy has emerged, enterprising content creators can now build a sizable following and earn money from their passions, products or services. At present there appears to be an endless supply of social platforms and methods for engaging one's intended audience. The simplicity of sharing, promoting and monetizing content, products, and services has unlocked an entirely new degree of connection and commerce. We are also discovering fresh approaches to collaborating even while separated, thanks to the spread of collaboration solutions, such as Frame.io, which we bought in Q4. Adobe's mission to change the world through digital experiences matters more now than it ever has. The digital realm depends on Adobe's platforms and solutions, and thanks to our unmatched ability to innovate, our creativity, our scale, and a sophisticated operating model driven by data, we keep fueling the expansion of digital. Every day, hundreds of millions of individuals around the world engage with what we make, and we touch every part of society. Adobe remains in a singular position to take the lead in this coming digital age. Our three cloud products, each a leader in its industry, are essential across all geographies and all audiences. Through Creative Cloud, we set creativity free for everyone, providing people anywhere with what they need to express themselves creatively. Through Document Cloud, we speed up document productivity, transforming the way people look at, distribute, and interact with documents. And through Experience Cloud, we drive digital companies of every size, supplying all they require to craft and provide outstanding customer experiences. The force behind all three clouds is Adobe Sensei, our sophisticated AI/ML framework, which lets us keep delivering a constant flow of unmatched innovation. During the past year, we have witnessed how vital creativity has been to the world. Creative Cloud gives power to everybody, from a high school pupil to a social media influencer to the most exacting creative professional, to share their story. The Creative Cloud TAM should reach roughly $63 billion in 2024. $25 billion of that TAM originates from our established core of creative professionals who buy Creative Cloud applications and services such as Adobe Stock. Fresh growth engines in this segment cover 3D along with other immersive experiences, plus web-first collaboration tools such as Frame.io. $13 billion of the TAM stems from communicators, non-professional creators, among them small businesses, students and marketers. As David will tell you, plenty of communicators already rely on Creative Cloud, and we aim to serve even more of them through products such as Creative Cloud Express, which we launched on Monday. The leftover $7 billion of TAM stems from consumers, among them hobbyists and social media users. The largest growth engines here are mobile applications in areas like video and imaging, for example Adobe's Photoshop Express. Digital documents sit at the heart of the future of work. PDFs and document workflows give everyone, from individuals to the biggest enterprises, the ability to stay productive at any time, in any place. We are thrilled about the Document Cloud strategy and the sizable addressable market, which should expand to $32 billion by 2024. $10 billion of that TAM originates from knowledge workers, business professionals who generally use our core Acrobat desktop subscription offerings. Growth should arrive through the widening of digital document use cases, e-signatures and greater collaboration capabilities. $8 billion of the TAM stems from communicators who rely on Acrobat web and mobile applications to create, scan, and edit PDF files for business as well as personal purposes. Growth in this segment should arrive from broadening the premium PDF base and seizing demand from new funnels with offerings built for web and mobile use cases. And then, $14 billion within that TAM originates from enterprise customers. Those organizations rely on document services — Acrobat, e-signature tools — plus APIs that developers leverage to connect smoothly with essential line-of-business systems. Within this segment, the forces propelling growth are APIs that enable robust document workflows alongside broader use cases. Regardless of whether we're talking B2B or B2C, companies large and small in every vertical are putting money into customer experience management. With Adobe Experience Cloud, organizations gain the ability to produce predictive, personalized, real-time digital interactions throughout each stage of the customer lifecycle. We estimate our total addressable market for Adobe Experience Cloud at $110 billion in 2024. From the data insights and audiences category, $33 billion of that TAM is derived — this covers Adobe Experience Platform, real time CDP, and Adobe Analytics, our new customer journey analytics offering included. Growing demand for a single unified customer profile, along with personalization at scale, represents future growth drivers. Another $49 billion of TAM stems from the content and commerce category, encompassing our Adobe Experience Manager and Adobe Commerce products. Businesses today require an exploding volume of content to reach customers at every touchpoint.

The speed at which this has to be rolled out keeps rising, and demand for a commerce capability that's seamlessly integrated is climbing just as quickly; customer journeys account for $18 billion of the TAM, a category spanning Adobe Campaign, Marketo Engage, and Adobe Journey Optimizer, our newly launched product. Expected growth in that segment stems from companies' ongoing requirement to connect with their customers over a constantly expanding set of channels. Making its debut in the TAM this year is the marketing workflow category at $10 billion, which takes in Adobe Workfront, acquired last year. Anticipated growth there comes from teams' growing need to plan, track and execute marketing campaigns efficiently. At Adobe, we've never stopped being relentlessly focused on seeing around the corner, creating fresh growth opportunities and delivering growth successfully inside our current businesses; we have pioneered and now lead three enormous categories, creativity, digital documents, and customer experience management; this week brought the announcement of Creative Cloud Express, our thrilling new unified web and mobile offering, ideal for anyone who wants to make and share standout content quickly and easily. Creative Cloud Express suits first time creators and communicators, while also delivering value to our existing Creative Cloud subscribers. It's a superb illustration of how we keep widening our customer base and expanding our TAM; we prevail by building enduring technology platforms from Sensei to the Adobe Experience platform; these serve as the basis for product innovation along with our industry leading applications and services. Since we moved Creative Cloud to a subscription model 10 years ago, we've kept innovating our business models, developing applications, services and platforms so value reaches the market faster, new customers are served better, and new monetization models get leveraged. Doing all of this by ourselves would be impossible. We've assembled a vast partner ecosystem, ranging from agencies to solution integrators to ISPs, that tailor and extend our solutions to match what our joint customers need. We keep seeing enormous opportunities from Creative Cloud, Document Cloud and Experience Cloud, and with the market tailwinds, our world-class innovation and the best employees in the world, we believe we're well positioned for our next decade of growth; and now, I'd like to introduce Anil Chakravarthy, President of our Digital Experience business. Advertisement

Thanks, Ann. Hi, everybody. It's great to be here with all of you. I'm eager to talk through more about the momentum we have, the opportunity ahead, and our strategy for the Digital Experience business. As Ann mentioned, this is truly an exciting moment for us. Let me start with a few Q4 highlights. Performance was strong right across the board. For the first time, our segment revenue went past a $1 billion, with 23% growth year-over-year. Subscription revenue rose to $886 million, up 27% year-over-year, and in Q4 our subscription bookings were up 50% year-over-year. Because of that, for full-year FY'21 we were up over 40% year-over-year. A big part of that came from how well the Adobe Experience platform and the native apps built on top of it have performed; for our Digital Experience business, it serves as a cornerstone. We put money into this platform early on, and since its 2019 launch, we've enjoyed a substantial lead over competitors. The pace of our growth has picked up. We shared earlier in the year that revenue had gone beyond $100 million, and by the close of Q4, our book of business had exceeded $250 million. On top of that, customer count has grown 300% compared with the same period a year ago. We're operating at a massive production scale — over 21 trillion segment evaluations daily — and with more than 300 partner integrations, our ecosystem is incredibly broad. And like Shantanu and Ann both said, we've really sped up our innovation during the last 18 months with new native applications and services powered by Sensei. Major League Baseball is a great example of this; they're using digital to transform their customers' experiences, with an emphasis on connecting with the next generation of fans. They're doing this throughout every channel those fans use — whether they're at home, out and about, or looking at the menu inside the ballpark. What they care about is personalization at scale: getting the correct experience to each fan at the correct moment through the correct channel. Major League Baseball isn't the only place you see this — clearly, digital has become central to virtually every business, and staying on top requires handling the way customers interact with what you offer. The tailwinds that showed up during the pandemic are not disappearing, and that has built genuine momentum behind our Digital Experience segment. Here are a couple of examples: within our Top 1125 accounts, average annual recurring revenue is expanding in a way that stands out. Growth has been robust for every account sitting above a million dollars in ARR, and each of our customers is forming lasting partnerships with us. To illustrate, our ten biggest customers together hold contracts worth $760 million — triple what those agreements amounted to when fiscal 2019 closed. And regarding managing how customers interact with a brand, no business nowadays can afford to skip delivering tailored experiences across huge customer bases. That's the way they connect with and involve every one of their clients globally; and doing so is essential for them, so they can bring about that following stage of expansion in digital business; everything revolves around individualized experiences crafted for each person, provided instantly, and offered without interruption through both digital and physical touchpoints, grounded in first-party data, while also ensuring they respect what customers prefer and their privacy. And that's the area we concentrate on, our approach has proven itself in practice and assists organizations everywhere in attaining personalization at scale. We provide clients with the finest of both options, unified, AI driven all-encompassing applications, running on a cloud platform built for real time scale; we've got solid traction with Workfront, which can consolidate marketing processes, and boost marketing nimbleness for every client. And we serve as the strategic ally for managing customer experiences; I hear this from clients globally on a daily basis. Plus our partner network is broad, boasting more than 4,000 partners as Ann pointed out spanning ISVs, technology collaborators, systems integrators, and agencies. That's the method by which we deliver this for our clients via the Adobe Experience Cloud. Our focus is on four core areas: content and commerce, data insights and audiences, customer journeys, and marketing workflow. Each one is delivered through a common foundation called the Adobe Experience platform. Over the last 18 months, we've maintained a strong pace of innovation, and that continues across both the application and platform sides, with AI and machine learning capabilities built into the platform and powered by Adobe Sensei. Given our combination of a wide range of applications and one unified platform, this gives us a huge competitive edge. In closing, I'm extremely excited about the opportunity we have in the Digital Experience segment. We have strong momentum, and we are clearly the leader in the Customer Experience Management space. There's a big opportunity ahead of us to help every company bring personalized experiences to millions of customers around the globe, at scale. And through our Adobe experience platform along with the native applications, we have the strongest technology out there, plus the ability to scale quickly, which we've shown over the last 2 years. That said, I'm happy to turn it over to David for the Digital Media portion. David?

Alright. Thank you, Anil, and greetings to everybody. I've now been with Adobe again for roughly 6 months, and what I'm seeing genuinely excites me. Some of you are aware that I led the Digital Media operation through the shift to Creative Cloud, and although the business has definitely grown more mature since those early days of that transition, certain things remain the same. Our product groups continue to produce amazing innovation, and our business keeps demonstrating powerful momentum; now, before we get into what I'm personally enthusiastic about for FY'22 and past that, I want to touch on a few Q4 highlights. During the quarter, our Digital Media operation generated $571 million of net new ARR altogether. So because of that, Creative Cloud crossed the $10 billion mark for ARR. We saw continued momentum in our Creative Cloud products, and on top of that, substance grew beyond expectations, up 100% compared with the prior year, fueled by greater need for 3D along with the developing Metaverse platforms. Our mobile apps also delivered exceptional growth, rising more than 55% versus a year earlier. As of now, those mobile apps have generated more than 400 million mobile IDs in total. For our business, this has been an incredible channel for bringing in new users. Turning to Document Cloud, we grew ARR 31% across the year, ending at $1.9 billion. To give you some context for those numbers: we've reached 2.5 billion mobile and desktop devices that have reader or Acrobat on them. Acrobat Web is expanding at an explosive rate — monthly active users are up more than 100% compared to a year ago. And it's clear that our strategy of bringing Adobe Sign and Acrobat together is delivering results, since Adobe Sign transactions within Acrobat rose 85% year over year. All told, we ended the year at roughly 12.2 billion in ARR, and although FY'21 was a strong year for us, there are even more exciting opportunities waiting ahead. Let's turn now to talking a bit about Creative Cloud. What's happening broadly is that we've entered an era in which creativity, content, and design carry greater worth than ever before — content now powers the worldwide economy, digital consumption keeps surging, and practically every company needs some kind of digital footprint. We're also in a world where schools treat creative expression as a skill for the 21st century. Meanwhile, newer immersive and 3D technologies, the Metaverse among them, are generating appetite for entirely new categories of content. Every one of these forces continues to produce extraordinary tailwinds for Creative Cloud. I do want to take a moment, specifically, to talk about how the creator economy is growing. More and more people — individuals, solopreneurs, and owners of small businesses — are building ventures around what they love and earning money online from their content, their products, or the services they offer. This creator economy is already substantial: social media hosts close to 100 million small businesses, and most of them report that having a presence online matters more to their success than having one in the physical world. Sizable as this market already is, its expansion continues at a striking pace — in the U.S. alone, roughly 4.5 million new companies came into existence over the past year, a figure unmatched at any prior point. That trend has played a large role in what we've achieved, and it has also been a big factor behind the more than 600 million monthly active users, both free and paid, across our Digital Media offerings, people who aren't regarded as creative professionals; naturally, an opportunity this broad calls for an expansive approach that advances our mission of creativity for all. Over the next few minutes, I'll explain how Adobe can serve anybody eager to express themselves creatively, whether that's a small business owner or the most sophisticated production house. Whatever their needs, Adobe has an answer, thanks to the five key areas we've invested in; and given that Creative Cloud Express just became available, I'd like to begin with how we enable the world through content-first, task-based creativity. Let's go ahead and begin with a video showing Creative Cloud Express and its capabilities. Advertisement Creative Cloud Express comes out of years of learning within the market from our web and mobile offerings; and four key pillars form its foundation. First, every obstacle to adoption gets eliminated. To begin with, there's zero cost to get going and nothing to install on a computer because everything runs through the browser and on phones. There's virtually no learning needed, and within just a few minutes someone can create an account and have content live. Next, the content library it provides has no real competitor. What that means is that even beginners can quickly make eye-catching graphics, social posts, digital flyers, and a lot more. The offering includes 175 stock images courtesy of Adobe Stock, along with 20,000 fonts plus 1,000 templates and design assets. A universal search feature drives the whole experience, surfacing the right content and suggestions right when they're required. And third, it benefits from many decades of product innovation at Adobe. Of course, our Creative Cloud apps come with great workflows, and on top of that, there are many quick actions powered by Sensei that simplify creating and editing images, videos, and PDFs more than ever before. Fourth, we know that when someone makes content, they want to get it out there, so Creative Cloud Express has integrations that let you publish to social media services with just one click. Also, expect that with our recent acquisition of ContentCal, CCX users will soon gain even stronger abilities for planning and publishing on social platforms. With Creative Cloud Express, getting started is easy and so is using it. People can accomplish quite a bit without paying anything, and there's also the option of premium features and content for a reasonable monthly fee. Most existing CC plans already come with CCX as part of the package, and we expect that to drive more engagement and better retention within our core Creative Cloud user base. As for how we take it to market, that approach feels very familiar. Our digital acquisition funnels will be combined with our product led growth motion, which has been tuned for both web and mobile. There's an opportunity here to continue refining and enhancing the way users progress through their journeys, while at the same time growing this business in a steady way. Additionally, we intend to take advantage of the presence we already have in education, reseller, and enterprise to expand it. Having Creative Cloud Express available now is something we're delighted about — watching what individuals are able to create with it has been incredible. Honestly, there's no way we could be more enthusiastic about this point in time and what it signifies as the beginning of an entirely fresh path for Adobe. So, past Creative Cloud Express, there's plenty happening throughout Creative Cloud overall; we're pushing forward the cutting edge in imaging, video, and design, among other areas, by developing new features spanning desktop, web, and mobile. As an example, during Adobe MAX, we introduced web versions of Photoshop and Illustrator, and we also rolled out several new AI and ML capabilities driven by Sensei, including neural filters and auto masking in Photoshop, as well as auto captioning in Premiere, to name just a few. In addition, we remain focused on — we keep pushing to make 3D and immersive technology reachable for all users. Substance 3D currently supports complete 3D processes from start to finish, meaning people can create parametric 3D assets, while designers can compose and render virtual scenes in Stager, add texture, color, and effects in Painter, and construct 3D materials with Sampler.

With this, a completely virtual photo shoot becomes possible, which saves businesses significant amounts of cash and hours while accelerating how quickly assets and scenes get built for use in games, videos, and the new Metaverse platforms. Another major priority for us is collaboration. We are building — we are weaving collaboration straight into our applications and the creative workflows people already use. The Frame.io purchase has us quite thrilled, and we foresee enormous potential spanning individual, corporate, and media workflows thanks to that product; at MAX we released a public beta of share for review work workflows, and we showed off spaces on canvas, which we think will let teams arrange their creative assets and run live working sessions. Finally, and definitely not least, we keep making content that motivates and teaches our users via offerings such as Adobe Live. Through offerings such as Adobe Stock, we assist users in earning money from their work, and via offerings such as Behance, which is now approaching nearly 29 million members, we assist them in connecting with and motivating one another; these 5 strategic pillars operate in concert to guarantee that anybody with creative needs can locate a solution at Adobe, whether that person is a creative professional attempting to match rising content demand, or a communicator taking part in the creator economy, or a consumer hoping to improve their photography abilities, or a student building 21st century skills; through our data driven operating model DDOM, we engage them as they reveal their interests online, maybe by searching for something such as compositing in Photoshop or designing a Twitter post. Depending on what they intend, we then send them toward one of our Creative Cloud apps, one of our mobile apps, or one of our frictionless web quick actions. We guarantee they achieve early success, and we acquaint them with additional capabilities in Creative Cloud or Creative Cloud Express prior to converting them into a paid user and keeping them engaged. This digital motion, together with our reseller partners and our direct sales teams, provides us with an incredible worldwide footprint and reach; so to sum up, all things are moving toward digital, and content exists to power the digital economy. The outcome is a huge and expanding TAM for Creative Cloud, as Ann mentioned previously, and our offerings, which now encompass Creative Cloud Express, keep growing to satisfy market demand from both professionals and non-professionals. We are more excited than we can say about what lies ahead for the creative business. And as you are aware, the other portion of the Digital Media business is, naturally, our Document Cloud, which is likewise enjoying considerable tailwinds. Demand for PDF has never been higher; indeed, web searches for PDF have doubled over the last decade, and we think this happens because PDF has turned into the de facto format for unstructured data. PDF has long served as the default format for B2B collaboration, and nowhere is that clearer than in e-signatures. That reality makes PDF a cornerstone of efforts to modernize workflows in any organization, and Adobe holds a distinctive advantage in capitalizing on it. More than 2.5 billion devices run our applications, and inside them we have accessed or generated 320 billion PDFs during just the past 12 months. We remain a top place people go to view PDFs, and across the prior year we recorded 100 million signups, both free and paid. We also recognize that Acrobat can serve as an entry point to connected offerings. As noted earlier, Adobe Sign transactions completed within Acrobat climbed 85% compared with a year ago, reflecting our ongoing work to tighten links between those two products. Clearly our approach is delivering results, and to sustain that we are putting investment behind five main initiatives. To begin, our document verb approach has proven highly successful. Today we offer 21 verbs in market — spanning things like edit PDF, convert PDF, and rotate PDF — and we keep refining how we acquire users digitally while growing our visibility across the 80 million searches tied to PDF that occur monthly. Next, we are expanding e-signatures by embedding them in Acrobat everywhere: desktop, web, and mobile. Because of the progress achieved during the past year, expect us to keep drawing these offerings even closer in future years. Third, we stay dedicated to giving PDF greater intelligence, whether for reading or interacting. With liquid mode, Adobe is reimagining how PDFs are viewed on mobile; through automated detection of form fields we are speeding up document productivity; and by means of our AI and ML driven extract capability, we assist in turning unstructured data into structured, actionable information. Fourth, our PDF and sign APIs allow us to open up business workflows, giving developers the tools to create document automation solutions that reshape how their companies operate. Finally, we draw on our varied go-to-market approaches to serve anyone who needs a document. Thanks to our worldwide resellers and inside sales organization, we enjoy remarkable reach into a wide base of business demand. Through our enterprise sales force, we can sell top-down to CIOs pursuing business transformation. And arguably most crucially, our digital funnel keeps channeling individual users into our conversion paths. Whether knowledge workers, communicators, IT decision makers, or developers, all find seamless onboarding routes. Our data-driven operating model helps customers find Adobe technology when they search for PDF related verbs, and we interact with them in ways that deliver fast wins on web, mobile, and desktop, before upgrading them to premium features, products, services, or APIs that expand their involvement with Adobe as time goes on. Put simply, Document Cloud is remarkably well positioned for what lies ahead. I trust this conveys why we feel enthusiastic about both the creative and document sides of our business. To wrap up, each of our segments is enjoying considerable favorable momentum, and that momentum is supporting their sizable and expanding addressable markets. Both are also capitalizing on marketplace advantages by drawing on the tremendous recognition our brand has, the reach of how we bring offerings to market, and the remarkable stream of new products we have coming. On top of that, each segment can accelerate the data-centric way it already runs operations by combining that with a strategy where the product itself drives adoption, since more and more of what we offer gets used through browsers and phones. So we're genuinely looking forward to what's coming in the next 12 months. Having said all that, I'd like to hand things over to Dan.

Thank you, David. Also, before I begin, I want to express my appreciation to him for letting me borrow his sweater today. I'll say straight away that I'm thrilled to be here and to be a member of this amazing Adobe team. Having joined just a few months ago, I can already see how special this company is, and I'm very excited about the future. Now, let me turn to Adobe's Q4 results. Adobe's revenue came in at $4.11 billion, an important milestone that represents 20% growth from the prior year. GAAP diluted EPS was $2.57, and non-GAAP diluted EPS was $3.20. The Digital Media segment's revenue hit $3.01 billion — the first time that business has ever reached $3 billion in a quarter — which was up 21% year over year, with net new digital media ARR of $571 million. Digital Experience achieved its first billion dollar quarter, with 23% year-over-year growth. Subscription revenue for Digital Experience was $886 million, an increase of 27% year over year. We delivered record cash flows from operations of $2.05 billion for the quarter and repurchased about 1.6 million shares of our stock. Turning to our three strategic clouds — this was a wonderful way to finish the year. During Q4, Adobe generated $2.48 billion in Creative revenue and added $430 million of net new Creative ARR. We ended the year with more than $10 billion in ending Creative ARR, with strong performance throughout the year. Growth drivers this quarter included new user acquisition on adobe.com, momentum in our teams offering, the usual seasonal Q4 strength in enterprise, and successful co-selling of frame.io alongside our Creative Cloud Enterprise offerings; that said, although demand for offerings rose during the Black Friday and Cyber Monday weeks, the typical spikes we've seen in past years didn't materialize. That matches this year's industry patterns, consistent with e-commerce holiday shopping data from the Adobe Digital Economy Index. Adobe Document Cloud brought in $532 million in Q4, and revenue continues to be — and remains — our fastest growing business. We added a record $141 million of net new Document Cloud ARR this quarter, with ending ARR of $1.93 billion, up 31% year over year. Our Integrated Document platform clearly resonates with customers worldwide; we keep seeing momentum among enterprises, small businesses, and individuals adopting web and mobile first tools; in Digital Experience, we hit our first billion dollar revenue quarter. Demand is strong for our real time experience platform and app services, as large enterprises invest in Adobe to power customer experience management and personalization at scale. We drove record Q4 net subscription bookings, and across the full fiscal year, net ASP grew more than 40% year over year. Let's take a quick look at the annual figures. Adobe's financial performance this year was outstanding, with both top line acceleration and margin expansion, producing more than $7 billion of operating cash flow, while remaining performance obligations climbed 23% year over year to nearly $14 billion — absolutely world class performance. Now let's discuss the reasons Adobe stands out as a truly unique investment prospect. Several of Adobe's remarkable qualities have left me excited about this opportunity, and those qualities are precisely what brought me here in the first place. A deep transformation is underway in digitization, and it's accelerating across the globe. From where I sit, no other company is better positioned than Adobe to capitalize on what these possibilities offer. Combine that with Adobe's track record of financial performance, plus products and platforms that define the industry standard, and what emerges is an enormous growth runway ahead for this business. Let me elaborate on how I view this opportunity. In the years ahead, every part of our lives will undergo dramatic change, all of it driven by digital technology. More and more, digital enablement will shape and dictate how we live, how we create, how we communicate, how we collaborate, how companies serve their customers, how companies compete, and how economies function. These changes are powerful and they reach far. I call this the digitization of everything. The digitization of everything is accelerating. And from my perspective, what happens over the next 10 years will determine the rest of the century, much as the Industrial Revolution did. The distinction being that digital content and data will now act as the fuel of the digital economy. This opportunity arrives once in a generation. And what we're talking about is unlocking trillions of dollars in economic value throughout the global economy. Look at Adobe's core strengths, and you'll see that very few companies are as well leveraged to the digitization of the global economy as we are. From how people create and communicate, to the future of productivity and digital collaboration in a distributed work setting, to the digitization of businesses, driving customer engagement through data driven insights to personalize customer experiences, but doing so at massive scale, to AI and machine learning. Worldwide digitization trends intersect with Adobe's distinctive strengths in so many ways. Once again, digital content and data serve as the fuel of the digital economy, a market worth $2.4 billion. And from my perspective, nobody is better positioned than Adobe to serve as the digital enabler of the world. How many companies anywhere have this kind of profile? How many companies have this kind of opportunity? Not very many. When I weigh our near-term strengths against our long-term opportunities, there's something unique here that is tremendously exciting. Let's examine the company's financial performance more closely and take a deeper look at what I mean. Starting with revenue growth, you can see steady, sustained revenue growth across the last four years, with the company having grown subscription revenues at a 24% CAGR. That has been the strategy: continuing to grow while generating a revenue stream that is even more ratable and predictable. I have to say, I'm incredibly impressed by the sharpness of this team, by everything they've been able to pull off, and by how much newer initiatives are adding to revenue growth — including Adobe Stock, Substance 3D, Acrobat Web, Sign, Creative Cloud mobile apps, and the Adobe Experience platform. This financial result is built on an exceptionally diverse business — reaching a broad customer base, a range of products and platforms, many different business models, and distribution that spans every region. Because income sources keep widening and diversifying, the company has increased its profitability over the last 4 years while accelerating revenue growth. Adobe's disciplined execution and tight control over spending have enabled it to balance long-term investment with attention to the bottom line. During that period, several strategic acquisitions were also integrated — Magento, Marketo, Algorithmic, Workfront, Frame.io — and it's remarkable how Adobe has managed to combine higher profitability with strong, lasting top-line growth and the absorption of M&A, all while generating $2.4 billion. Let's now discuss RPO, the contractually committed future revenues that make Adobe's forthcoming results highly predictable and reliable. When fiscal year 2021 ended, RPO rose 23%, driven by our Enterprise bookings. RPO consists of deferred revenue plus unbilled backlog, and the current portion is expected to turn into revenue over the next 12 months. One more important thing: most of our adobe.com subscriptions are billed monthly and never show up as deferred revenue — the remaining contractual obligations connected to those subscriptions, which average about six months in length at any given time, are included in unbilled backlog.

When it comes to cash flow, the results tell the story on their own — you can see how our operating cash flows have picked up speed across the past 2 fiscal years. Achieving sustained growth and profitability at scale is no small feat. Adobe's momentum is strong, and our first quarter with $2 billion in operating cash flows proves it. A solid capital structure, backed by a robust investment grade credit rating, puts us in position to keep driving growth and gives us flexibility that keeps access to capital affordable for Adobe. Now let's turn to our capital allocation strategy. Number one, we concentrate on investing in the business to fuel long-term growth. Given all the big chances in front of us, a few of our newer innovative R&D efforts include our next-gen data platform, along with Creative Cloud Express, which we shared earlier this week. We'll continue putting money into sales and marketing so those businesses can scale worldwide. Second, the cash and investments we hold, together with our ability to take on debt, create room for inorganic growth possibilities. You've watched us speed up growth and complete a creative strategic addition during the past fiscal year through Workfront and Frame.io. Last, and this matters, we stay focused on giving capital back to our shareholders. Our repurchase program is paid for by the cash we generate from operations, and the past four years show just how well we've shrunk the average count of shares outstanding. Roughly $12 billion has gone back to shareholders via buybacks since 2018. As we came out of Q4, authorization remaining for repurchases totaled $13.1 billion, available until the close of fiscal 2024. A truly great technology company is marked by ongoing innovation that creates entirely new product categories. That's what Adobe has accomplished in every one of its businesses, and we'll examine each one next to break down what's fueling performance. Starting with creative: the company has achieved steady ARR and revenue expansion, with the pace picking up between fiscal 2020 and fiscal 2021. I want to walk you through the data-driven operating model that sits underneath these results. Innovation is where everything begins, along with the broadest and most industry-defining product lineup out there. Through our excellent marketing efforts, people become aware of what Adobe offers, and we bring traffic to adobe.com so customers engage — trying, purchasing, using, and renewing; the whole idea is guiding creators along a journey. That starts with easier-to-use tools, such as our apps for mobile, tablet, and web, linking creators to lively creative communities, and after that we offer paths that let them accomplish more as they grow, including offerings such as Adobe Stock, Cloud libraries, and features for collaboration. So with Frame.io and Creative Cloud Express now part of the mix, we keep expanding the business — widening our reach to bring in additional creators and stakeholders who will drive the world's content. Document Cloud continues to deliver solid growth. Once again, you can see that reflected in steady revenue increases, with ARR climbing at an even quicker pace, since the business keeps migrating toward subscriptions — roughly 90% of Document Cloud revenues in FY 2021 now come from subscription. The main engine behind Document Cloud's growth remains new users signing up. Acrobat is showing strong gains on adobe.com globally, along with momentum on the web and mobile, and early-stage growth among enterprise accounts. For how people now work and collaborate in a digital-first environment, PDF and doc workflows sit at the mission-critical core. There's an enormous opportunity for growth inside our large-customer cohort, as Anil said before. Our attention is on cross-selling and guiding those accounts up the maturity curve, toward transformational adoption of the full platform rather than customer experience management solutions. Looking at average ARR and total contract value among our biggest customers shows just how big that opening is. Growth comes both from bringing new logos into the customer base and from expanding within those accounts — a journey spanning multiple years. Impressive as this company's track record may be, my belief is that even greater growth lies ahead. I genuinely believe Adobe has a shot at a trillion-dollar market cap. We just passed $15 billion in revenue — so how do we get to $30 billion? And then, what takes us to $45 billion? We start from a TAM we estimate at $205 billion, plus a huge ecosystem that has formed around our products and services, which lead the market. What's the route? Keep broadening who we appeal to, reaching more customers, and keep existing customers engaged and with us everywhere. On top of that, we grow by innovating and investing, moving into new categories that both add to and stretch our growth path, while doing more to help customers in the digital era. If we carry out that plan over the coming ten years, leveraging our size and our track record, Adobe will join a tier that just a small number of software firms have ever entered. Having crossed the $15 billion revenue threshold, we plan to start reporting revenues in constant currency, because of what foreign exchange movements could do. That comes after a year in which FX served as a tailwind to reported revenues. The recent strengthening of the U.S. dollar is anticipated to turn into a headwind for our reported revenue and growth rates in fiscal year 2022. Consistent with what we do each year, we have revalued the digital media ARR balance to capture FX rate movements; as for operating expenses, we are still saving on travel and facilities in fiscal year 2021. A lot of our staff are still telecommuting, so those costs should build up over the course of FY 2022. On top of that, we intend to put money into adding more workers as Frame.io becomes part of the company. In our view, these investments matter a great deal — they're essential commitments on our part, and our attention will stay fixed on the natural expansion chances that lie before us. One more thing: FY 2021 had 53 weeks, meaning Q1 contained one additional week. That bonus week added about $267 million to revenue and brought in $25 million of net new digital media ARR. Once you account for the shift back to a 52-week fiscal year, it ought to create a two-point drag on our growth rates for the whole of FY'22, and a seven-point drag during Q1. Now for Adobe's fiscal year 2022 annual targets. For our segment growth targets, we're showing them in three ways: actual, adjusted, and constant currency, which takes into account the extra week that fell in the prior year. Let me walk through the figures. We're aiming for total Adobe revenue of about $17.9 billion. Net new digital media ARR should come in around $1.9 billion. For the digital media segment, revenue growth is expected to be about 14% compared to last year, and on an adjusted basis that's 17%. The digital experience segment should also see revenue growth of roughly 14% year-over-year, or 17% adjusted. Within digital experience, subscription revenue growth is projected at about 16% year-over-year, which becomes 19% on an adjusted basis. Turning to tax, we expect a rate of approximately 17.5% under GAAP and 17% on a non-GAAP basis. Finally, earnings per share should land near $10.25 on a GAAP basis and about $13.70 on a non-GAAP basis. When it comes to the first quarter of fiscal 2022, our revenue goal sits at approximately $4.23 billion.

We're looking at roughly $400 million in net new digital media ARR. Revenue for the digital media segment rose about 8% compared with a year earlier, or 17% adjusted. Digital experience segment revenue was up around 11% year-over-year, or 18% adjusted. Within that, digital experience subscription revenue grew approximately 13% year-over-year, or 20% adjusted. The tax rate came in near 16% on a GAAP basis and 17% non-GAAP. GAAP earnings per share landed at about $2.63, while non-GAAP earnings per share were roughly $3.35. To wrap up, I'd like to walk through what this company has accomplished across the past four years — from top-line growth and profits to remarkable cash flow generation and returns to shareholders, Adobe's record shows exactly why it stands apart from everyone else. My conviction is strong that our finest days still lie ahead. Thank you very much for spending time with us today. I'll hand things over to Shantanu now.

Thanks, Dan. I also want to thank Ann, Anil, and David for joining and for walking us through the possibilities in each of our three industry-leading clouds. Like I mentioned before, I have enormous enthusiasm for what lies ahead at Adobe and for our capacity both to stay in front and to invent entirely new categories. If you pull back and view things through a broad macro lens, it's obvious that across the globe digital technology is giving power to people, reshaping enterprises, and bringing communities together; and honestly, going forward digital will have a far greater influence on work, life, and entertainment; we've witnessed the emergence of the creator economy along with creativity becoming democratized. Both work and education have taken on a hybrid form and will remain that way. Progress in cloud and web technologies is delivering real time collaboration at levels never seen before. Increasingly, document workflows will be handled through automation; and for any digital business, the central obligation has never been more pressing, since customers today anticipate digital first experiences that are contextual and personalized at the same time. Growth in e-commerce continues to build upon the record highs reached while the pandemic was ongoing. Looking at the technology foundation, artificial intelligence and machine learning are now essential enablers of everyday existence. So in summary, I'd say digital technologies let more people than at any prior point create, collaborate, learn, work, be productive, and earn a livelihood. Our mission means a great deal to me, and the chance to transform the world via digital experiences places us at the center of every one of these trends; we are in an extremely strong position to generate meaningful impact throughout every part of society, and that will serve billions of people worldwide in the years ahead. When we consider Adobe as a company, we hold the view that what we do matters, but equally so does how we do it. Right from the start, our founders John Warnock and Charles Geschke were dedicated to creating an organization that acts correctly; and that feeling of purpose has shaped how we have evolved and grown across the last four decades. I believe all of us are seeing a change in the part companies must play regarding social issues, along with what stakeholders and investors now expect from corporations. When you consider the way companies answered the COVID-19 pandemic, it stands out; alongside that, stakeholders everywhere are expecting the private sector to take a more active role in social issues. And individuals are choosing which products to purchase and which workplaces to join according to where companies take their stand. Since our offerings are now everywhere, and we've assisted a lot more businesses in tapping into the revolutionary potential of our digital solutions, the duty we bear and our dedication to being a good corporate citizen have expanded enormously too. In my view, the topics where Adobe has a one-of-a-kind chance to create change involve Adobe for all—ensuring we build a varied and welcoming environment for our staff, and also establish that for the people we serve and our partners. Based on the conviction that tech will bring transformation, and beyond just supplying tech, we must grasp what that entails. And I think the single most crucial thing is enabling anyone with a tale to share it—the idea of creativity for everyone. The truth is, we've already been pushing hard in these areas. Moreover, what we're doing is generating genuine results throughout the firm and the communities of customers we serve for a number of years. Yet I think this mission is what drives our staff to aim for greater influence and, honestly, to create what comes next. I'm delighted that our approach has stayed fairly steady over the last 10 years. Our plan to unlock creativity for everyone, to speed up document output, and to fuel digital enterprises matters more urgently now than it ever has. Honestly, I think the majority of firms would be delighted to possess even one of these chances to grow. And we're lucky enough to hold three operations that sit squarely at the point where the planet requires tech to take on a bigger role. We possess the correct approach. It's matched to a remarkable and expanding prospect. Thus, opportunity is not a constraint for us at all. I'll wrap up the way I began. In my view, Adobe holds a one-of-a-kind place to fuel the coming 10 years of expansion; we have demonstrated skill at building and heading up categories, and we constantly peer around the bend toward the open space that's there, which will yield fresh prospects for Adobe. We're considering each portion of our operations on a grander scale—how we grow and how we bring in more of the clients we cater to. We keep zeroing in on innovation, providing top-tier products, services, and platforms while we make use of artificial intelligence and machine learning; we're always pondering new ways to innovate in business models too, so we can swiftly hand over added value to a bigger group of clients, seize worldwide chances to grow, and switch on fresh ways to make money that are cropping up. And ultimately, our tech underpins a lively, expanding network of partners who build, tailor, and broaden our offerings to fit the particular requirements of the clients we share. Yet ultimately, our biggest strength as an intellectual property firm—and the real engine behind our expansion—is our deeply committed worldwide workforce, which numbers more than 25,000, and for whom I feel endless appreciation. Once more, thank you for being with us today. In my view, 2021 was an outstanding year, and we plainly anticipate that drive carrying on through 2022 and past it. With our 40th anniversary coming up next year, Adobe is sitting in a spot many would envy: a strong history of innovation, leadership in our categories and brand, solid financial results, and plenty of chances to grow. Add in a market that keeps expanding, the strength of our technology platforms, and a workforce that's driven, and I truly feel Adobe's finest days still lie ahead. So with that, we'll play a video while the management team gets ready for Q&A. Advertisement Alright, are we ready for Q&A? Great, I know we're ready for Q&A. Before we begin, let me bring up two other Executive team members who are with us to take your questions. Gloria Chen, our Chief Human Resources Officer, who has also led strategy previously, for anything people want to ask about the pandemic, or what we're doing with employees around the world, how we keep making sure we have the most talented and motivated people, and Scott Belsky, our Chief Product Officer of Creative Cloud, honestly the visionary behind all the great innovation we're delivering across desktop, mobile collaboration, including the new web related functionality we showed at MAX as well as what we did with Creative Cloud Express; so with that, I'll hand it to Jonathan to help guide the Q&A.

Appreciate that, Shantanu. We've covered quite a bit of ground in today's session, and it's obvious how excited the team is about what lies ahead in terms of growth. At this point, we'd like to open things up and hear from you. For those of you joining by phone, if you haven't done so yet, please get in line to ask a question. A quick note: we ask everyone to stick to a single question each, which lets us reach as many people as we can. With that said, I'll hand things over to the operator. Operator, may we please take the first question?

Alright, sounds good. Hi everyone, appreciate you letting me ask something today, and congratulations to Anil and David on the promotions, plus a warm welcome to Dan.

Thanks.

Perhaps to kick things off, I'd really appreciate it if we could talk about the digital media net new ARR for the quarter, especially in Creative. Dan, I believe you said we hadn't observed spikes that were possibly as large as what we've typically witnessed around Cyber Monday and Black Friday. Could the team dig a bit further into how the result compared with the guide, and perhaps also offer some thoughts on how the competitive landscape looks within Creative in particular?

Let me take that first, Saket, and then I'll definitely have other people chime in. When we examine the Digital Media ARR achievement for the quarter, first of all, it was a record quarter and a record year too. Regarding our Digital Media guidance, we definitely anticipated that Frame would close during the quarter, and it actually closed quite early on. So our approach is to consider a variety of possible outcomes and their impact; we also certainly wanted to keep our attention on Frame, though it likely wasn't explicitly built into the quarter. Looking at it by customer segment, the Team business truly did very well throughout the entire quarter. So the Teams offering and the momentum in small and medium business were excellent. On Enterprise, we deliberately redirected and pivoted the team toward video and Frame and how we kept selling it continuously, and as I noted, it closed early in the quarter. Enterprise therefore also had the usual Q4 strength that we generally anticipate. Individual demand was in fact quite robust all year long. As Dan said, the one modest difference might be that when you consider what's going on with online shopping, although we keep seeing demand trending upward, we may not have experienced as big a spike as you'd traditionally have observed during either the Black Friday or Cyber Monday weeks; other than that, the strength and demand remain solid. And obviously, we incorporated that into our fiscal 2022 guidance, which is the most robust ARR guide we have ever provided. On the product and differentiation side, perhaps I'll let Scott address that, and then David can certainly speak to other matters in the business.

Absolutely. When it comes to standing out with Creative Cloud, what a remarkable 12 months it's been. Across our Pro offerings, we rolled out several pieces of astonishing Adobe Magic — neuro filters in Photoshop being one instance — along with plenty of collaboration capabilities, and we made a clear declaration that from here on, Creative Cloud will be just as focused on working together as it is on creating, which, when you stop to consider it, brings a far larger group of creativity's stakeholders into the picture. That's exactly what we're witnessing throughout our enterprise customers and small businesses alike. Everybody wants a seat at the table, wants their voice heard, wants to be able to step in and offer feedback; therefore we're designing our products for what's ahead so that becomes possible. Naturally, I should also note that last week brought the launch of Creative Cloud Express — this is merely the beginning of an incredible new chapter for us. We've placed quite a few products into the market from our incubation zone. That's what we call it while we figure out how to genuinely achieve our mission of creativity for all. And at this point we've brought together every learning, every signal. We simply couldn't be more thrilled about this new journey we've embarked on, especially with that particular product.

And I'd love to contribute a bit more from the business angle too, along with all the innovation Scott mentioned and has been spearheading. Something crucial to keep in mind is that this is genuinely what's fueling the TAM expansion Ann brought up before, whether it's widening the pool of individuals we can reach through something like Creative Cloud Express, or boosting the worth we deliver to our Creative Pro audience. So when you begin examining where the business is headed, we're capitalizing on that momentum — as we mentioned, we brought in nearly $2 billion in net new ARR during FY'21, and our guidance was the strongest it's ever been, which really rests on that foundation. Another point about Creative Cloud Express and how it will unlock opportunity for us: it can begin by bringing in a large number of fresh users to the franchise — something we've done an outstanding job at, and I believe this extends it — attracting new people to Adobe, helping them succeed at whatever they're doing, and then gradually moving them up the value curve into a Creative Cloud subscription or, now, a Creative Cloud Express subscription. But beyond that, we're making this accessible to every Creative Cloud customer; it's something where we notice many Creative Cloud customers sometimes prioritize speed and content-first creation; for those individuals, we see a chance to genuinely push engagement and retention higher, even past where we currently stand. And once you have additional plans tailored to the specific things people want to accomplish, that opens the door for us to pursue greater price optimization throughout the offerings as well. So we're thrilled about the direction we're taking and what this truly contributes to the mix we already have.

Got it. Thanks so much, everybody. That's genuinely helpful.

Hi, all, I appreciate you taking my question. I might take things in a slightly different direction, given how many inquiries we've been getting from investors. Looking at the guidance, and looking at how Digital Media did over the year, and assuming Frame.io wasn't part of the guide, this seems to be the first time — ever, as far as I can tell — that you actually didn't exceed your guidance for the quarter. So I do understand there were certainly some Q4 issues that might have played a role in that. Could you walk us through the composition — what did it look like? Let's revisit the impact of COVID during the first and second halves, plus the holiday period. Given that history, how much confidence should we place in your forecast for the coming year, compared with your usual rhythm, past trends, and seasonal tendencies?

Sure, Alex, I'll handle that. Consider this: to start, anyone who has tracked us over the years understands that guidance is something we treat with great seriousness. Perhaps I should step back briefly and discuss what we achieved in 2020, then explain how we approached our 2021 guidance. When we kicked off 2021, our initial steer was somewhat under the 2020 target, and in terms of digital media ARR results for that year, we clearly beat what we'd set out. Then, looking at the way we've framed 2022, the starting point sits a bit nearer to where our 2021 guide stood. So it's obvious we remain hugely positive about how solid the business fundamentally is — demand for creativity keeps growing — and we reject entirely any notion that demand got pulled forward, which I realize has been the case elsewhere; what we keep witnessing is durable, secular momentum. Turning to a few of the fresh efforts we've got going. Essentially, we've redirected the group's focus toward enterprise and video; with Creative Cloud Express, adoption should rise sharply, and we already hold the biggest communicator business, I believe, within the Creative community. So our outlook on that business is extremely positive. Then, thinking about it in terms of quarterly phasing, let's revisit the guidance we gave in Q1 of 2021 — as you're aware, the figure we guided to incorporated the $24 million we described, which was an extra piece of what we delivered related to the 13-week versus 14-week comparison. When you examine it that way, things match up quite well. Put differently, what we're seeing is that the business's momentum keeps going, and so does the positive sentiment around it. That's the way I'd frame it, Alex.

That's really useful, and perhaps just one for Anil regarding CDP. When we last discussed the CDP offerings, I believe you mentioned that you were exceeding $100 million in ARR margins, and clearly from what you've said it seems like things are going extremely well; and it truly broke down for the whole digital experience. What's the status of that business now, if there's any way to give some dimension to the work on the project from an ARR standpoint?

We're seeing a great deal of momentum, the market clearly has customers who look at us and say they have the right vision. And we have the right product to genuinely consider a variety of use cases that the Adobe Experience platform supports, and we've done a very good job of connecting our applications with the Adobe Experience platform, so that you can populate the data from our analytics platform, and then utilize that data for activation across every kind of channel. So, when it comes to scale, when it comes to performance, when it comes to the variety of use cases, data governance, and so on, it's genuinely enterprise ready at this point. And enterprises are starting to see that this sits at the heart of their Digital Experience and their digital customer engagement. So we feel like we're in a very good position at this moment with that.

Great, thanks.

Thanks so much for taking our questions. I'd like to explore a bit — David, I believe you began touching on this — regarding how Express is positioned and what we ought to make of it. In what way does Express's positioning connect to what you were attempting with Spark and those mobile products as a way to enter the market? Would it be fair to place it somewhere between the two? How much should we view this as a defensive move against some of the newer rivals gaining traction in the market? Also, could there be a danger that current Creative Cloud subscribers who want something less heavy-duty might shift downward, since a more affordable option now exists? Do you foresee any possibility of downgrading among your base as people try to get the best price, or on the flip side, does this let you push pricing higher on the main Creative Cloud offering? Could you walk us through those sorts of considerations regarding how the portfolio is now positioned?

All right. Keith, perhaps I'll kick things off, and then David, please feel free to chime in. Looking at the bigger picture, this really highlights the massive opportunity out there for creators. Keith, considering the products we already provide, we have a remarkable variety. We've got Photoshop Express for mobile, which is performing very well when it comes to ARR. We also have the Creative Cloud offering, which now includes the Substance 3D products — that's likely the priciest one. So with online and our DDOM, we're now fully capable of targeting and tailoring what we offer to a wider range of customers, ensuring the outcome is net positive — both in terms of customer satisfaction and the ARR we generate. A few more points: first, our creative business, together with the Communicator segment, is already the biggest creative business globally. Consider what's going on with Photoshop, Lightroom, or the Express lineup — and I believe what Express truly accomplishes is adding value for each and every Creative Cloud subscriber. These are Creative Cloud subscribers who are highly skilled in video but occasionally need to make a fast flyer to go with it. So this draws more and more people in; honestly, it mirrors what we've achieved with Document Cloud, considering the organic demand we've built for PDF. So all things considered, I'd say this is an inventive step, and then I'll pass things to David so he can get into the specifics of how it could be introduced, but really it serves as something that enables us, and honestly it brings together all the separate creative options we already offered for the Communicator segment.

Yeah, and to build on that point — we see this as a genuinely critical juncture when it comes to meeting a demand we're certain our customer base has. Going back to what was mentioned before, there are already 400 million IDs set up on mobile devices. Across our Digital Media offerings, we have 600 million monthly active users who aren't creative professionals, and Creative Cloud Express is a chance to hand every one of them something we're able to bring on board effectively. As Shantanu mentioned too, something we find truly thrilling here is that our Creative Cloud subscriber base is also searching for — often they want the power and precision that our flagship creative apps deliver, yet other times what they're after is a content-first, velocity-driven model of creating, version two. And since we're providing Creative Cloud Express to most of our Creative Cloud plans, we anticipate driving engagement and retention there even higher. One final thing I'd like to mention: this broadens in a fundamental way the way we think about our go-to-market motion. For the last many years we've discussed our data-driven operating model and how it fuels our capacity to pull in and acquire users, bringing them into our acquisition funnels through product-led growth, and thanks to our growing investment in mobile and web, we're able to iterate quickly far more and fine-tune the user journeys, so that conversion of those 600 million into paying and premium customers, along with their engagement, keeps going. And the very last thing I'll add: I don't believe you can view this market as split between non-professionals and professionals. Plenty of non-professionals genuinely want to use Creative Cloud's power and precision; so we see this as an ongoing, seamless journey starting from the first time you arrive, you want to do something involving creative expression, and you can do that at no cost with Creative Cloud Express. Then we advance you along that chain, so you get premium content along with access to premium features and content through the Creative Cloud Express paid plan; and after that we see people who are actually able to go all the way up to Creative Cloud's power and precision. So it truly is a seamless end-to-end journey.

Understood. Is that what you meant by price optimization? Does it simply involve adding more tiers to the pricing structure?

Yes, absolutely. Keith, we've discussed price optimization in those terms. I mean, with the 3D products, as you observed, for the first time we didn't include them among all Creative Cloud applications, given their value. Yet I do think that once we gain a clearer sense of all the various offerings we have, certain ones are likely priced below what they're worth relative to the value delivered. But our emphasis remains on drawing more users to the platform and providing greater product value. Scott, would you like to add anything regarding Creative Cloud?

No, I was simply going to add that, David, you already addressed, of course, the chance that Creative Cloud Express represents for the wider franchise. But something quite thrilling we've discovered during the past several years concerns the specific customer requirements that honestly Spark, Photoshop Express, and the other things we were doing, plus competing tools available out there, simply don't serve. And I felt it was worth mentioning a handful of these, since I believe they matter a great deal. To begin with, many of these customers arrive wanting to build something from a template, and they wish to push it further. That's why our product team feels genuinely enthusiastic about the possibility of someone creating something and then elevating it through one of our more professional-style apps, such as Photoshop or Illustrator, along with the appetite for artificial intelligence. Plenty of customers arrive from small businesses, and so on, and they know what they'd like to create, yet they need help producing something outstanding; they'd like font suggestions. They'd like colors that perform better on social media. So there's a chance for us there. Lastly, the notion of a multimedia editor stood out as another key insight while we developed Creative Cloud Express. What we found is that although many customers enter via the top of the funnel, since they wish to create a flyer, edit a video, or edit an image, once inside they actually realize, I'll put in some animation. Perhaps I'll put in some sound. And suddenly, it has become a multimedia creation. So we are building Creative Cloud Express very much not only for where the customer stands today, but for where we expect the market to head, since people will want their media to stand out; and I think Adobe is uniquely positioned to provide that through this product.

Excellent, that's really useful, everyone. Appreciate it.