Adobe Inc. (ADBE) Earnings Call Transcript & Summary

[Audio Gap] Just to go through a little bit of a fireside chat. And then after about 25 minutes, I'll open it up to Q&A. Because we're doing this in more of a webinar format, if you want to ask a question, I think either you use your raise hand function and I'll sort of bring you in, or you can use the Q&A function as part of Zoom, which I assume everybody on this is pretty familiar with. So thanks again for joining us, and Happy New Year to all of you out there. So Jonathan, good to see you. I think maybe we'll spend just -- actually, I forgot to ask, but 2 questions for you, we've asked all the participants, and you can answer this from your purview.

But as you go into 2022, maybe what you're most excited about, frankly, from an Adobe perspective? And then I realized you have a different purview versus some of our other speakers this morning. But with all the macro things going on in the world, is there one that you're paying more attention to? Maybe it's inflation, maybe it's hiring. I was just kind of curious, we've been asking everybody, so would love your input on those 2 questions, just to kick it off.

Good place to start. Well, first of all, thanks, Kirk, for having me on. Happy New Year to you. I hope everyone is doing well and safe. When I look forward to 2022, the word that pop right into my mind is optimism. Maybe that's due to the fact that right now, we're in kind of a trying month. I know a lot of people who dealt with COVID over the holidays, we're seeing a lot of noise in the macro environment. And I know a lot of folks in the investment community have had a tough couple of months. I think at Adobe, when we look toward the future, ultimately, we're optimistic about where things are going. We've proven to be really resilient in the storm. But I'm looking forward to getting past the storm. And I think once we're there, the future is certainly bright on a personal level and a professional level, in terms of the ability of digital to change the world for the better. We've seen the way that's been playing out, and I think we'll continue to see that. So ultimately, I feel optimistic about where things are going. If there was one thing in the macro that I'm most focused on, there's so much, but I would actually say probably employment, participation in the workforce. I think we've seen a lot of various impacts of the ways in which people have been opting out of the workforce during the pandemic. And I think that's -- you mentioned jobs or hiring. And certainly, there's been a war on talent as fewer people have been -- look -- out there looking for jobs. So I think as we get back past the pandemic and more people go back to work, that's going to have positive impacts on GDP. It's going to have positive impacts on just broad consumer spending and certainly into enterprises. And so I think that's the one I'm kind of looking at the most.

Okay. That's great. So I guess just jumping into the business, you guys obviously closed everything up in mid-December. Can we just talk about the digital media side? And I guess 2 questions for you on that. If you look at the arc of the year, obviously, it seemed to end up being a little bit stronger in the first half of the year and maybe -- and against at least our expectations, a little bit weaker at the end of the year. How would you -- I think there's a view that things got sort of pulled forward by COVID and now it's sort of slowing down. I think the business is very steady, but kind of how would you characterize where things are on sort of the Creative Cloud side? Because I think people are obviously worried about sort of that ARR number coming in a little bit below the Street in 4Q.

Yes, yes. It was -- we did have higher aspirations in the fourth quarter. And based on what we saw early in the quarter, we were seeing some really strong trends. When I look at the full year, it was a great year for Adobe. When I look at our initial targets, we came in well ahead of them. I feel like, ultimately, it shows a strong growth story, a strong profitability story, and that combination is pretty rare in the world. But I agree with your assessment that the first half of the year, there was more wind in the sales maybe than the second half. The way I think about that is really -- it was a -- it was the tailwinds of reopening that came in really strong. If we think about -- there were some exuberance in the first half of 2021 after vaccines were shown to be effective, broadly rolled out. By June, we were seeing small businesses recover really, really nicely. And so I think when we look at the first half of the year, strong retention patterns from individuals, but really small businesses getting healthy and enterprises coming back and starting to spend again was, I think, the biggest driving force behind the first half of the year for us. And so I think it was kind of a success correlating with reopening. And then the second half of the year, that reopening story or that reopening momentum stalled a bit, as we had the Delta variant kind of come in and slow down just economic activity towards the end of the summer. And then coming into the fall with Omicron and then some macroeconomic concerns, inflation. So kind of the reopening momentum we saw in the year, I think, slowed down a little bit in the second half. But ultimately -- and I think that goes back to why I said when I think about 2022, I definitely feel optimistic about where we're going because I think we've shown that as we get past some of these hurdles and the macro economy improves, that's going to correlate positively with Adobe. There's such a huge opportunity in digital with the way we're powering businesses, the way we're helping people work however and wherever they work. And of course, powering creativity from professionals all the way down to beginners who want to get out there and tell their story.

Yes. When you look at your guidance for this coming year and you adjust for obviously the extra week in the first quarter and then for some FX trends, I mean it still points to a very I think optimistic growth number even on the Creative Cloud side, which is obviously getting bigger and bigger. What gives you confidence? Or when you guys ran through the numbers and thought about the guide, what kind of gave you confidence given the back half of the year, was it perhaps -- to your point, perhaps a little bit lighter than you would have liked to see? I think that's a question that keeps coming out with people, was like, "All right, well, they just had a suboptimal quarter, I'll call it that. Why should I kind of feel confident that they have their hands around the demand environment going into next year?"

Sure. Yes, I think it starts with -- if we just look at our track record and the way we've grown the creative business over the years, it's something that we've -- given our differentiation in our product set and the fact that this market is growing so rapidly, as you see in our TAM, that's kind of where I think it starts with us, which gives us the confidence. And although in the quarterization during 2020 and 2021, the pandemic definitely had some impacts on the normal quarterly patterns we saw. And when we zoom out and look at the fiscal year, I think overall, we came in with a very strong number, almost $2 billion of net new ARR. For this next year, so I would look at the baseline of where we've been, the fact that the category is growing. But we have some new initiatives that are going to be contributing to that net new ARR next year that we didn't have in 2021, namely Creative Cloud Express product. We're very excited about, which we launched in December. And we think it's really going to be the right product for all of these beginners and knowledge workers and students who aren't experts in using a complex tool, like Premiere or Photoshop, but they have a story to tell, and they want to create compelling content. So that's going to be a growth driver for us. And then there's Frame.io, which is a collaboration platform in the cloud for video. Video has been a super explosive media type, and that's a business we're really excited about growing. And so look at the baseline, the momentum we've had, 2 new growth initiatives on top of that. And that gives us a lot of confidence about our ability to go, continue to add net new ARR to that Creative business.

And when we think about sort of the growth of Creative, there's obviously the new subs dimension, then there's pricing dimension. I mean, I think for a long time, I think it's been one of the better things that's been going on is that the subs growth, I think, has surprised all of us for being much more robust for longer than anybody would have thought definitely 3 to 5 years ago. Is it still mainly subs driven? Is there more pricing? And maybe you can sort of when you answer that, also bring into a discussion kind of how you think about pricing for like Creative Cloud Express versus other products and how you're trying to sort of optimize for pricing in general?

Sure. Yes. I think we've said that value, delivery and pricing are how we bundle the products, while that is a driver of growth over the long term, it's not a lever we've pulled a lot recently because we've just been in proliferation mode. We want the next tens of millions or hundreds of millions of communicators out there and consumers and creatives using our tools. So we've really been proliferating. And I would definitely say when we look at 2021, the predominant driver of ARR growth was adding new users. Pricing comes into -- even if we don't raise prices off the shelf, unlike some subscription companies that really have one product, we have a bunch of different offerings from lower-priced mobile offerings to single products on the desktop and then the all apps. And so there's definitely a journey for our users where, over time, a cohort of customers is going to be using more of our products, getting more and more value, using services like Stock, and that's a way we can increase ARPU over time. But we've done that without really moving prices. I think with Creative Cloud Express now, we have a product that's been in development for many, many years, bringing together so much of the science we've done. That is the custom-built product for new users, for beginners, for people who are not experts but want to create content. And Shantanu said on the earnings call, folks may have missed this, but when asked about kind of degrees of freedom with pricing, he said, when you look at some of our advanced products, like the 3D products, which is a higher price today, I think Adobe does have some other products that might be -- we're delivering more value than the price today. In some reason, that's because there's a halo effect where some beginners might buy Photoshop because they've heard of it, right? And we want to make sure it's at a price point where that's something that's on the table. But I think with Creative Cloud Express, where we really think we have the right product that's built for people as an entry point, that does give us more freedom over time to look at pricing optimization or new bundles and making sure we're getting the right value for our more advanced products.

Okay. And so I guess, just to be -- I think this came up on, maybe I recall back with some of the other sell side, but there's no real explicit price increase baked into guidance this year. Is that fair? Or is that more of just you guys aren't going to comment on it? Just sorry, I'm not trying to box you in. I think there's been some folks being like, all right, well, subs are coming down, so there is raising price. I don't think that's the message you're trying to set.

We haven't made any announcement around any kind of pricing. Really, more it's the context of saying, "Hey, this is something we're going to look at as a strategy over time. Because we have added a lot of value." And if you look at the last time we did a broad-based price increase for Creative Cloud, that was only the one time in the decade, I think we announced it back in 2017, it was a modest price increase that was then announced ahead of time and rolled out at renewal points. So in terms of our 2022 ARR target, you're not going to have -- even if there was some pricing in there it couldn't possibly be material just given the way we would do that.

Yes, roll out over time. Okay, that's helpful. I guess the other question comes up more, obviously, is some of the up-and-coming vendors and sort of the lower end of the market per se. When you think about Canva or Figma, how do you -- how should investors sort of frame that? I mean, like, to me, they seem like market expander, sort of they're helping you all expand the market. I don't get the sense that these are competitors and sort of the enterprise or even the sort of group part of your business. So can you just talk about that a little bit? Because obviously, that's been -- I think people are trying to draw conclusions that the ARR performance in the quarter has something to do competitively when I don't think the 2 things are necessarily related.

Yes. I think there's definitely -- when you look overall in the ecosystem in software, there are some things that other companies are doing that validate the explosiveness of these markets that we're competing in, right? And if you look at the TAM for Creative, that -- it's built up of Creative professionals where we said that's growing to $25 billion by 2024. That shows you how much runway there is just in that top end of the Creative professional market. In the communicators bucket, that's growing now to north of $30 billion, and that's due to a number of things, but a lot of knowledge workers -- and like I said, people that just aren't expert in creativity, but have a story to tell, they're turning to creative tools rather than maybe -- they might have turned up to something like PowerPoint before for office presentations. And there are other companies that are expanding the market and kind of validating the enthusiasm and the spending potential for people that want to create content is very real out there. I think until Creative Cloud Express was launched, we saw -- it was definitely more of a complementary situation where we would see people start out on simpler tools. And then when they're ready to do more and advance to high-fidelity content creation, they'd come over to Adobe. We've seen that since Microsoft Paint. We've seen that with simple content editors in social media platforms and on phones and some of these start-ups out there in the world. I think with Creative Cloud Express, Adobe is making more of a strategic decision now to take all of the science that we've built and go down market and really compete, not just be the place they turn to when they're ready to do more, but the place they learn and start as well. And then we're building bridges from the point of entry, making it extremely simple to get started, all the way through much more complex creation like with Video and Premier and After Effects.

Okay. That's helpful. And then lastly, just on Frame, it seems like you guys got off to a really nice start with that. Obviously, I had some -- it seems like good cross-sell from the Adobe reps in the fourth quarter. How should we think about that opportunity in '22, just in terms of the ability to cross-sell? And it seems to me like it's almost like something like Stock when you bought it and had a nice tailwind for a couple of years as you sort of introduced it to a much broader audience. How maybe should we think about dimensionalizing that opportunity over the next 12 to 18 months?

Yes. I think Stock isn't a bad reference for how we think about it. That was an example of us finding a very close adjacency and creativity, something that could be deeply integrated in our apps. And we saw -- we've seen explosive growth from Stock since we acquired it several years ago now. I think Fotolia, which was that acquisition was a little bit larger of a scale than Frame.io was. We mentioned Frame more than anything we thought of it as a product and innovation acquisition and talent acquisition. They're earlier stage in terms of their market reach, but they've got the best product and now we have the best product, we believe, in the industry in terms of cloud collaboration for video, had a tremendous Q4. And we think with our reach, if you just look at Adobe's relationships with enterprises, our enterprise sales force and ability to plug in a product like that with our enterprise selling motion, we're extremely bullish on the opportunity to get that out there. And we think -- we've been talking about the theme of cloud -- of cloud native applications. And we've been talking about the theme of collaboration a lot over the last couple of years. And Frame was just the perfect acquisition for us to accelerate that strategy. So it's definitely -- like I mentioned from the outset, it's something we're excited about as a growth driver for 2022. I think we're even more excited about. If you zoom out and think about where that could go in 5 years, we're 5 years plus beyond the Adobe Stock acquisition, and that has certainly become an important part of our ARR footprint today.

That's great. I'm going to toggle over to the Experience Cloud business. I'm sure folks want to dive back into Digital Media. Just feel free to raise your hand, I'll bring you in the conversation in the next 5, 10 minutes. But the Experience Cloud business, I thought this was a really good year in sort of context for that business, right? I mean I think there was some M&A in prior years. But between Workfront and I think Anil's sort of focus on integrating the platform together, it seemed like -- I think it's one of the stronger years you guys have had in Experience Cloud and a few. Kind of how do you think about the year and sort of expectations for that going into next year? What are obviously, tougher comps perhaps with Workfront lapping. But when we're heading into '22, what sort of gets you excited on the Experience Cloud side?

Yes. I'm very pleased with the year we just finished and the momentum we have in that business. That was a year -- Coming out of 2020, that was a year where enterprises really slowed down their purchasing but we knew Digital First, enabling digital businesses was going to be critically important. So we said a year ago when we gave targets for 2021, we told a story of that you would see gradual re-acceleration through the year of the subscription revenues. And it's always a good thing when you avoid surprises and the year plays out just like expected. And frankly, I would say, once we got to the end of the year, the performance was even better than we expected just in seeing that momentum. I think there's still more work to be done in that business, but everything is moving in the right direction. And I agree with kind of the points you referenced, Workfront, the acquisition we did just over a year ago, performed tremendously in the year, a lot of momentum and just so synergistic with connecting the workflows of content creation through campaign execution and powering businesses and the way they interface with their customers. So Workfront had a great year. But ultimately, it was a year where our strategy of integrating all of our apps through a common data platform that brings data together in milliseconds and makes it actionable, that's really playing out. We shared in Q2 of 2021, that we blue pass the $100 million book of business mark with our new data platform that had only been in market for not even 2 years at the point. We mentioned [indiscernible] $0.25 billion in Q4. So although it's still a small part of the overall enterprise business, tremendous momentum there. And we've said we believe in the future that, that business, that data platform is going to be critical for businesses, and I think a crucial strategic piece of the business we're building. And so we're excited with the momentum. If you saw the RPO number in Q4, really strong year-over-year RPO growth. That's primarily driven by our enterprise business, digital experience. And so just really, really great bookings at the end of the year, I think, strong momentum. And we feel like we have the best data platform in the world that anyone's built. The only company that at scale can integrate customer profiles together in milliseconds, so you can deliver a personalized experience at the very next click at scale. So that's one that we're really excited about, and I think we have a lot of momentum exiting 2021.

Yes. What's the next sort of step forward on that? Is it just -- I mean, the data -- the platform has been integrated now. Is it just now expanding the reach from a sales perspective. I guess if Anil's here, what would he kind of tell us are his real focus items for next year in terms of taking the next step with the Experience Cloud business.

Yes. I mean with an enterprise software business, part of the growth algorithm certainly is investing in sales reps and getting them up to speed and getting them fully productive. And we've talked about we are a growth company. We're going to be hiring and investing for growth. I think on the product side, just investing in deeper integrations, both within our own ecosystem of applications and with our partners is a really important part of how you grow the business. But the biggest takeaway we really wanted to land from our December analyst event, was this theme of how we grow with our customers into what I'll call transformational accounts. And for years, we have sort of broken down what our top 100 customer cohort looked like, but we gave a bunch more data points this year for the first time. We shared what the average ARR for our top 1,000 customers are. That's grown to $2.3 million in this last year. But then we showed the average ARR for the top 25 accounts, which is more than $20 million. And I would call those the transformational accounts. We also added the total TCV, total contract value for our top 10 accounts, more than $700 million. And so when you look at the very top adopters who are using our data platform, they're using all of the apps like campaign, B2B marketing automation, commerce, they're using our content platform, AEM, these are massive investments. They view Adobe as a strategic partner that help -- that is the touch point, the connector between them and their customers in real time. And so I think for Anil, it's really -- the focus is looking at our customer base and working with them as partners to help them achieve their goals to grow their business by showing them how much more they can achieve by adopting our data platform and more of our applications. And there's -- if you just look at within those customer cohorts and imagine how over the years as we graduate customers up into that transformational category, the growth opportunity is immense and then considered new logo acquisition beyond that, and it's a huge opportunity.

And when I think about that business and I think about your business, in particular, given it's a fairly wide portfolio of products, these are evolutionary relationships, not revolutionary. So to the extent people think that this was a part of the market that was pulled forward, I mean, it's almost, by definition, very difficult to pull forward a ton of spend on marketing and then leave it alone, meaning it's something that requires care and feeding and ramping of the technology over time versus sort of something you can ramp up and then ramp down. Am I wrong on that just because I think these are technologies that take -- you're investing over a 3- to 5-year cycle, not over a 6-month cycle. But I don't want to put words in your mouth.

I like the way you said evolutionary rather than revolutionary. I think that's right. And again, think about the problems we're helping enterprises solve, the problem of -- once they have traffic on their website, providing a personalized experience that improves conversion, right? An enterprise -- I haven't met the enterprise that says, we just want to get conversion to 2%, and then we're good, right? I mean they're constantly looking to grow their business and drive efficiencies, gain more customers, drive more purchasing and grow over time. And so when we're selling them products that are really partnering with them to help them grow their business faster, and we can show the value that they're gaining. And every business that I think Anil talks to says, personalization at scale is absolutely required for us. We have to personalize experiences if we're going to win and we're going to grow. And so it doesn't feel discretionary from their point of view, it feels absolutely essential to be a part of what's helping them grow their business. And so I don't see a story of pulling forward. And frankly, when I look at the CDP market, when I look at the data platform market, there are so many enterprises out there that just haven't even matured yet to making those sorts of investments. So I think we're still on a very, very front of wave of this adoption curve that we're going to see play out over the next several years.

That's helpful. I have one more then. Then I do see one question. If you want to be pulled into the conversation, either use the Q&A function on Zoom or just raise your hand. I've talked to Shantanu and Anil about this for a number of years. But to your point on being early days in the CDP world, are you starting to see customers start to make platform decisions now versus point product decisions? Is that sort of shift from point products to platforms or suites, if you will, starting to happen in a bigger way. I think it's been, again, sort of evolutionary on that front, but it feels like you have the technology platform now that maybe allows that evolution to happen at a bit of a faster pace over the next couple of years?

I think it's something that we get to talk to Anil about too. But I think we're still -- I don't want to say we're going from 0 to 60 with a brand-new account where they're just -- you have to say we're going in and saying, buy 5 solutions in the whole platform, let's go. I think we tend to solve the problem that a business really is looking to solve, and that's how you land and that's how you gain credibility. And that -- oftentimes that's how do we manage the content in real time? Or how do we better understand where we're losing customers on our web properties, where is it working, where is it not. There's all -- sometimes it might just be we had a homegrown commerce solution, it's not scaling to our current needs. We need a modern commerce solution that works for B2B and B -- it can be any of a wide variety of problems. Once we get into an account and prove our credibility and solve that problem, then it's really about speeding up the adoption of moving from the initial entry point towards them really adopting the platform. And those transformational accounts, I would refer to those as the companies that are really adopting Adobe as a front office platform. But I think today, it's still early days. And you do see a lot of point solutions and front offices that businesses are having to integrate themselves. And Anil a theme he talks about a lot is, over time, businesses are going to tire of having to be system integrators. They're going to want a software partner like Adobe who has built technology that integrates all those systems. Our data platform is not closed to Adobe applications. It's open and can integrate data from whatever sources, internal databases, other vendors they use. And so really, we want that to be our job of integrating those systems for them. And that's how we win kind of in a platform adoption world.

Okay. That's great. I got a couple of others, but let me -- there was a question I want to get to. So I'll just read it. So for the Creative business, given the DDOM model, you should have pretty good real-time visibility on business trends. If the Black Friday, Cyber Monday situation happened early in the quarter, what are some of the levers you can pull on the marketing side of the equation?

Yes. DDOM, we talk about that a lot, is something that has made Adobe world-class with our ability to adapt to behaviors that we're seeing almost in real time to find -- one way that David Wadhwani has described it really elegantly is it's an ability to do a number of experiments in real time and see the data and understand which ones work and then sort of go all in on those ones. And I think David described when he left Adobe back in 2014, we were maybe running 10 experiments a week. And now we're able to run hundreds of experiments a day. And it might be how we're thinking about different search terms that we're investing in or different cohorts of customers that we're targeting online with different variable marketing spend. I think ultimately, what we saw, it was not just Cyber Monday and Black Friday, but it was those weeks where traditionally, we've had real spikes in net new ARR that have driven really strong Q4s. Given a number of things that we think impacted the macro environment, that wasn't there in the last 2 weeks of the quarter. I described DDOM as an ability to figure out where the fishing is good and then keep casting there. I think there is something to the question where if some of those trends happened earlier in the quarter, maybe we would have been able to -- we certainly would have been aware of them and possibly able to invest more where we were seeing traction and adapt. But ultimately, though, Adobe is a massive company that's going to correlate with some of these macro trends. And what we saw towards the end of the year I think were themes that every company was seeing, in terms of what was happening, especially with consumer spending. And we're not going to overspend on marketing if there's not appropriate return on that investment that's going to benefit our shareholders as well. So it's -- DDOM is immensely effective. It's not magic. But ultimately, we feel like, again, when we look at the quarter and the momentum with Frame.io, it was the biggest ARR we ever put up in the quarter, and we're pleased with the finish.

I want to ask one, just about the Experience Cloud TAM versus kind of where you all are. There's obviously a huge amount of runway there. Historically, you guys have done a lot of M&A in that broader area with Workfront being the most recent. Sort of what's the criteria now for that -- or maybe a better way of asking this is, has the criteria changed at all now that you have a more integrated platform where the things you look at have to be a little bit easier to plug and play, meaning I assume Anil is not dying to go do some huge bolt-ons. But maybe just given this as a market, there is a time value equation that plays into that. So I don't know. I was just kind of curious now that Anil's been there almost 2 years, has the thought process around M&A and Experience Cloud changed at all for you? Or is it still kind of the same lens that you've been using...

I don't know if I would say it changed. I would say Adobe always with our Experience Cloud business, and frankly, any business has a very high awareness of what we would call technical debt. When you bring in an acquisition, there's a debt to pay off in terms of integrating the technology. We want to have the best -- highest functioning products in the world that work for our customers. We don't just want to be a holding company cobbling together different things we can sell enterprises that don't integrate. So I think we've been aware of that in the past, and that continues to be an important part of our thought process. The data platform that we've built, one thing we think that differentiates it and makes it best in the world is it's a technology solution to bringing in data sources from disparate systems and integrating them to be actionable in real time. So the platform itself can actually be a competitive advantage that enables us to integrate technology. And we, in fact, do -- we partner so broadly through broad partner programs where people can come in and connect through APIs with Adobe's Digital Experience products. And so there's a lot of partnering that already happens out there. So I think it's something -- we feel that integrating is a differentiator when people think about us compared to some other enterprise software companies in the world. But it's absolutely an important part of our thought process. We don't just want to -- yes, you call them bolt-ons, just bringing a bunch of different cats and dogs. But for us, it really is about strategy first. It's what our fundamental beliefs are around the problems enterprises are looking to solve and they're looking for Adobe to help them solve. And where are we going to be as a market in 5 years or 10 years. And I think one thing we believe about digital experience -- or customer experience management software, there's always going to be a world where technologies have to partner and integrate together. There's not going to be one company that owns every single set of technologies that a company -- because it's such a complex world. So we want to make sure we own the things that really need to be deeply integrated under Adobe, but absolutely partners are such a critical part of our strategy, and we have partnerships with ServiceNow, Microsoft, Qualtrics, and Medallia, all kinds of companies in that ecosystem. And that's going to be an important part of our strategy for the foreseeable future.

Okay. A couple of other questions. I guess the CDP sales and implement -- I'll ask the question. Is CDP sales and implementation cycle longer than other marketing solutions. I guess the question is just sort of around time to value for CDP for your customers.

I think it's something that is shortening as we go. And as I referred to it as earlier innings. And I think something that's really critical when you have a new technology is finding the right early adopter customers. We -- a year ago, we announced Verizon as one of those early adopter customers for us. We've announced Nike as one of them, a lot of other big companies. The companies that make those initial investments on something new, there's going to be a longer consideration cycle for them. And I think now as we've proven the value proposition, we have a functioning product that's leading and truly differentiated, not just a marketing pitch. We see sales cycles shortening because people don't want to be late adopters, right? And so I think it is complex enterprise-grade software. These are not multiple week sales cycles. They're possibly multiple quarter sales cycles. But I do think they're shortening and that's -- and as we gain momentum, we have the ability to move faster. And we see customers that are motivated to be adopting and getting those solutions implemented so they can reap the benefits.

And how about just the changes on IDFA or iOS privacy? Has that helped, I think, you all from a sort of a CDP perspective, meaning every big company is having to sort of deal with that. Is that a tailwind for you at all? Is it a headwind? I think you can probably do it both ways. It might slow down things, but people are going to have to address it at some point in time.

It's a tailwind. And I would say one of the biggest reasons it's a tailwind is because it's an -- people are constantly asking the question, what do these changes mean. And it's an opportunity for us to get out there and tell our story around how brands need to learn to use first-party data to provide personalized experiences. One thing that Anil has clarified in a number of investor events we've done is, within the industry, the changes that happened with IDFA, the changes that are happening with third-party cookies and browsers, these are things that have been expected and known for many, many years that our engineering teams had been solving for. And so the -- I think the press was kind of a little bit late to the scene and suddenly, wow, a piano just fell out of the sky. And suddenly, these technology changes are happening in the interest of consumer privacy protections. But within enterprise software, we've been envisioning a cookie less world for quite a while. So those things on the horizon were part of the reason we made initial investments in building a data platform to solve for them. So they're not things that happen to us. They're part of why we had the strategy that we had. But now that we're amidst those changes happening and being on the horizon, it's an opportunity. People want to interview Anil and hear him talk about how to use first-party data, what does it mean third-party cookies are going to be going away. And how are those going to change the way businesses think about marketing technologies.

There's a lot of smaller MarTech companies out there. Are we at the point yet where you've seen customers go out, try a solution that maybe has less ability in terms of scale or purview, frankly, in terms of the amount of integrations they can pull and then they come back to you, meaning, is it still so early that frankly, a lot of people might try out a lot of technologies in this area before consolidating back to a bigger solution, if that's generally the way the world is gone. But I think some of those people think these are mutually exclusive trends at the beginning of a longer trend. But I was just kind of curious how you...

At our scale, with a book of business around $4 billion, we -- you see it all. So I mean, certainly, that's something that we've seen. I think it's -- that's probably a little bit on the periphery. Because when Adobe is at the top of the market in terms of the functionality we bring. And so I think it's probably a more common story that we go to a customer offering a set of capabilities, and they'll buy a few of them from us and might go to another smaller vendor for some of those capabilities at a lower price point with lower functionality. And then later come back to us. And when they've seen what they were able to do with our technology and realize this isn't worth the headache, we should just standardize on Adobe. And so I think more -- because enterprise software -- customer experience management software, this is very sticky. The switching costs are high. And so I think more likely that they initially don't buy something from us and then eventually do, versus buy from us, leave to go to a smaller vendor and come back.

Okay. Last one for you of the Zoom. I think it's basically around the fact you obviously have guidance already out for DX for next year. But what would be the drivers? If you have a blowout year, you continue the acceleration from '21, what would you say the drivers of that would have to be? Meaning, is it just -- I mean, it might be a lot of things we've already talked about in terms of just customers going deeper with you, more new land. I mean it's a [ P versus B ] model in software. But if there's anything that maybe stands out to international expansion, I guess, how would you answer that in terms of what would need to happen to have acceleration continue from here?

I mean, ultimately, it might sound like a nonanswer, but I believe this. I think if we're talking about a blowout year in 2022, primarily that's going to come from our existing cohort of customers as they're making deeper investments with us. Those are things that are going to happen faster. And as I mentioned earlier, when you think about new logo acquisition and how we grow with those cohorts of customers over time, I think that the new logos that we land in 2022 are going to benefit the growth in 2023. They're going to benefit the growth in 2025. But ultimately, another thing I would say is a subscription SaaS business like this is extremely predictable because the revenue really flows from the balance sheet. So you saw the RPO number. You'll see that what was unbilled, turned into deferred. So the revenue growth is extremely predictable for a business like this. So it's more -- when we think about a blowout year, it's more our ability to evangelize, to add new bookings for our platform and across our solutions that are going to help us continue to accelerate that revenue growth in the out years.

Before I let you go, I'd be remiss not to ask about Document Cloud because it's done really well. So I think it deserves a little bit of a shout out. I guess the question on that is -- or I guess maybe the question is, what should we be looking at for in Document Cloud next year? I think, obviously, there's always questions around sort of the sign part of that, but there's obviously a lot more goes into that. What should we be thinking about on that front? Obviously, the transition continues on to the cloud side for that business. But anything you would call out on Document Cloud as we go into '22?

Yes. I would say certainly, we had a tremendous year with a lot of momentum, our fastest-growing business. And this is a very profitable business that's been around for a long time as well. I would say, when I think about that business going forward, sometimes we get asked about constituent parts, like what is sign stand-alone, for example. And if you look at our messaging and look at the way we're -- more and more we're talking about sign not as something separate from Acrobat, but as something deeply integrated within Acrobat. And we're trying to advance sign through the integration, sell the entire integrated document platform and get people using signature inside of Acrobat. And so for us, I think more and more of that business is about integrating it and selling the whole offering. And really -- I think there's more opportunity ahead in terms of end-to-end workflows and the way people work. Again, people are now working together, not in the office but across all kinds of distances and not wanting to be e-mailing Microsoft Word documents back and forth. But just working in a cloud environment to collaborate using PDF technology all the way through signatures and authenticating those and storing it in the cloud. It's a massive opportunity ahead, explosive TAM. And we get asked all the time about competition in the sign world. But I think the way we see the future is sign is just one critical component of what you need to do in a document workflow. It's not a separate and a part, sort of, a business. So we're really looking at it all integrated together.

Have you guys changed the go-to-market at all with that? I mean historically, or at least that's my perception has been Acrobat has been sort of owned by the IT department, whereas look, I think there's been a lot of business users that have been making decisions on at least the sign part of the equation. Has that evolved? I mean, I think we've talked before that there's always sort of that opportunity, like sign has been out there. Do you feel like you're sort of targeting people more in the line of business area more specifically at this point in time? Or is it just because you're integrating with Acrobat, it's a little bit easier to go talk to the guy that's already got the Acrobat ELA or owns the relationship with...

Yes. I mean you're hitting on something and it's absolutely a change we made is we've talked about sort of the digital transformation. We're talking to businesses about how they digitally transform, and then we have a PDF solution that we sell IT departments. I mean that might look like the world 3 years ago. One thing that Anil changed in 2020, this is -- he had been at Adobe 6 months maybe at the time was making sure our entire enterprise sales force was enabled to think about PDF as part of digital transformation, and think of signatures as a part of digital transformation. When we're talking to companies about their workflows and how the business operates and how they interface with customers, thinking about PDF, thinking about workflows in that way, and that's something that really accelerated the business over the last 2 years, is being able to add our Document Cloud solutions into any deal where our sales reps see an opportunity.

Actually, I lied. I have one more just because we didn't talk about it. But margins and sort of just the philosophy around that at this point in time, I realized this year is a little bit weird just because there's some catch-up costs coming in and things like that from travel and expense and sort of expenses coming back on to the income statement. But I guess, just philosophically, I mean, you guys already have such high operating margins at sort of -- you're sort of punished by the fact that you're already so profitable to a certain degree. But how should people think about that maybe not on a -- on a multiyear view? I mean you guys have been very consistent about driving top line growth and very strong bottom line growth. I assume that philosophy hasn't changed at all. It's just maybe this next year is a little bit weird just because the comps are different in terms of areas that -- of spend that just have to come back at some point in time. So how would you characterize the thought process on that?

You hear a lot in software about the rule of 40, but you don't hear about the rule of 60, that often, [indiscernible] with our non-GAAP operating margin. I would say the philosophy hasn't changed at all. Again, as you mentioned, the margin artificially was a little bit high because of some of these pandemic savings that you'll see -- as we're now getting back to business travel and facilities used, that does bring the margin down a little bit. But if you look at the implied margin in our '20 -- we don't target a margin, but the margin implied by our targets. Actually, the biggest factor that would bring it down from our 2021 performance is FX. Just the revenue lost to changes in the strengthening dollar is actually the biggest factor. After that, the rest is maybe half Frame.io acquisition and then the other half some of those expense categories where we were saving and the pandemic coming back. So ultimately, I think even the margin implied by our targets is extraordinarily high. And once we're fully out of the pandemic and kind of normalized, there's -- our revenue sources are so overwhelmingly recurring that there's a lot of natural margin expansion motion in our business. So an enterprise software business wants to expand the margin over time as we grow with these cohorts of customers. We've said for the last couple of years, we've been focused on both growth and profitability of our digital experience business. There's a lot more runway ahead there. And so -- and just as we scale and get bigger as a company, you'll see leverage in line items like G&A, which could go lower as a percentage of revenue. So I think long term, there's absolutely a margin expansion opportunity with Adobe. But it is -- there is going to be a little bit of a normalization. And then when we do acquisitions from time to time, you'll see an investment cycle where it might go down and come back up.

Okay. Great. Well, Jonathan, thank you for your time today. Really appreciate it. Thanks, everybody, for joining us, and Happy New Year to everybody. Have a good afternoon.

Thanks, Kirk.

Take care.