Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Great. Thanks, everyone, for joining. Welcome, everyone to the 2022 Virtual Bus Tour -- the BofA Bus Tour. Delighted to kick it off today with Jonathan Vaas, Vice President of Investor Relations at Adobe. Jonathan, thanks so much for joining and helping us kick off the bus tour.

It's my pleasure. Thanks, Brad, for inviting me.

Absolutely. And you guys have been on the bus tour, I think, every year since I've been on the platform. So appreciate you participating and looking forward to a good conversation here.

Yes. Likewise, this was supposed to be the one where there was a real bus and we were meeting in person. But here, we are once again on the screen. So maybe the next time.

That's right. Yes. We were committed to doing a hybrid concept this year with some physical and some virtual, but hopefully, we'll see where things end up next year, but we're delighted to do it this way this year. And just for folks on the line, we will not be opening the zoom up for a question. So there won't be a raise-your-hand feature, but if you do want to ask a question, we'll save some time at the end, 10 or 15 minutes to go through any questions you might have. So if you do have any questions, feel free to e-mail me at [email protected]. So we can get to your questions that way.

Awesome. Okay. Great. Well, Jonathan, thanks again for joining. Delighted to have you and kick off the bus tour here. Why don't we just start with a recap of the last 12 months. You now have the fiscal year behind you. A lot of moving parts, a lot of success that you saw over the course of the year and some moving parts as well. Maybe if you could just sum up the year in a few bullets. How would you do that?

Yes. That's a good place to start. I was actually reflecting on what's my high-level kind of thoughts on the fiscal year just completed. And I was looking at the financials this morning before we met. And fiscal 2021 for Adobe, it ended up being another pandemic year. We now -- and everyone listening in the investment world, we've now had 2 back-to-back years in the market that there's no denying were impacted by this global pandemic unlike anything we've ever seen. And for Adobe, I was actually looking at the revenues and the operating profits. In 2019 before the pandemic, we were an $11 billion revenue company with about $3 billion of operating income. And here we are having just completed a second year of this global pandemic that's absolutely impacted everything about the way we live. And there have been puts and takes for Adobe. It's -- what we're seeing right now in the markets were tough. But when I just look at the context, we just did $15.8 billion of revenue and nearly $6 billion of operating income. And it's just -- I think when I think about the way Adobe has been so resilient with these durable diverse sources of revenue and a profitability that I think is the envy of most companies in the world, I'm really grateful. Even in these continued tough times, I'm grateful to be where we are and to have phenomenal growth and profitability through that. When I look at 2021, it was a year where you compare to our initial targets. And we knocked it out of the park from the top line targets to profitability. It was a really, really strong year for Adobe. The year when you zoom in quarter-to-quarter, it was much more dramatic in terms of where we were seeing really strong recovery. The first half of the year felt like it was a recovery from a pandemic year. And then the back half of the year felt like kind of going back down. And we -- the first half of the year for Adobe was obviously very strong. I think we were resilient throughout the year. And ultimately, when I look at our targets for next year and the growth opportunity for Adobe, it's just -- it remains immense. All of that said, there's been ups and downs and Q4 had some challenges for Adobe right in those last couple of weeks and wasn't as strong of a finish as we wanted to see. We've been having a lot of conversations with our investors around kind of what we're seeing and why we're so optimistic for the future. But all in all, definitely, it was a strong year, and I feel like the investment opportunity for Adobe is as good as it's ever been.

Great. That's great, Jonathan. Good summary. And why don't we just go back to one of the points from the Q4 earnings call. You kind of alluded to this a little bit, but Digital Media, net new ARR of $571 million is what you reported that exceeded your guidance of $550 million, but the Frame.io acquisition contributed to some, if not all, of that upside. So a little bit of discussion around where did the upside come from? Was it acquisition? Or was it organic? Maybe you could just elaborate on the finer point there, please. I think that would be helpful.

Sure. Yes. Yes, the $571 million is -- that's the highest net new ARR Adobe has ever had in a quarter. So when we look at overall the growth we're seeing and the quarter we just completed, that shows that there's -- all of that is growth. But when -- we talked about this on the earnings call that we had given a target of $550 million, and that did not explicitly include Frame.io. Now Adobe over the years has always grown organically, and we've always grown through finding acquisitions that are really synergistic and Frame is 1 of those. We brought that in, and it had a tremendous momentum right out of the gate in Q4. And we shared in the earnings release that we added -- of that $571 million, $29 million was the addition of Frame.io's enterprise ARR. Both deals we closed in the quarter, but also that entire book of business was added to and recognized as a new ARR in the quarter. Ultimately, we also shared that we definitely had higher aspirations for how we would finish that Q4. And in the last 2 weeks of the quarter, that's the week of Black Friday and the week of Cyber Monday. These are tremendous e-commerce shopping weeks traditionally where we generate ARR in -- the word we used was spikes. But these are our 2 traditionally biggest ARR weeks of the year, where a lot of that upside tends to come in. And from the consumer segment point of view, we saw kind of a defensiveness and a retrenching in spending those couple of weeks. And it wasn't that upside that we expected. And so we didn't have the strong finish that we hoped for. Still a record Q4. When you look at our targets for 2022, we feel like the opportunity to continue the growth is really strong, but definitely some challenges in those last couple of weeks. We think that correlates with a lot of the macro anxieties and Omicron anxieties that we were seeing swell up right at the end of the year.

Understood. That's great. Okay. Good. And why don't we just shift gears to Creative Cloud. You also had, in conjunction with the earnings call, your Analyst Day where you outlined TAM and kind of the growth initiatives in each of the businesses. And Creative Cloud you're estimating a $63 billion TAM across professionals, communicators, consumers. That's up significantly from $41 billion, $31 billion in the prior year. So over 2 years, it's more than doubled. What's driving that expansion? Is it just you've launched some new products here that address a wider swath of that market of those different segments of the market. You've also used the term, the golden age of design and creativity. What are some of the dynamics there where perhaps those are expanding the TAM?

Sure. The symbolist answer is that there's forces that are expanding the TAM at the top of the market for experts, who need high fidelity creative tools like Adobe and only Adobe can offer. And then there's the TAM expanding forces at the bottom of the market in sort of creativity for all, democratizing content creation. At the top of the market, something I would reference is the metaverse, augmented reality, virtual reality. There's these new media types, and there's an explosion of content consumption that's happening where all kinds of enterprises, media companies, traditional and nontraditional are creating content. So at the top of the market with things like Adobe substance, our entire Creative Cloud suite of apps, enterprises and small businesses. There's all kinds -- there's millions of new creative professionals entering the world every year, who are going to consume those sorts of products. That's a big TAM expander in the professional segment. We said in 2024, there will be 68 million creative professionals in the world. That's up significantly from the 45 million figure we gave a couple of years ago. Now if you look at the bottom of the market, in kind of what I call democratizing creativity, we just launched a new product, Creative Cloud Express, which we really believe brings creativity for all. This week, my 8-year-old son has been using it for a science fair project on this. It's that easy to use. And, of course, kids today are pretty tech savvy. But it really is meant to be for anyone, including office workers like you and me, Brad. And we believe one of the reasons that TAM expanded as we believe that all kinds of knowledge workers, who might have historically used to do like PowerPoint, will be using a tool like Creative Cloud Express to create presentations for work to create pitch decks, to create board presentations, all sorts of things like that. It's going to be used by students, social media, creators and influencers. So there's just this massive monetization opportunity that we're really entering now with purpose at the bottom of the market, addressing the Creative Cloud Express. So those are kind of 2 big TAM expanders in opposite directions.

Got it. Makes a ton of sense. I mean, the one that stands out most where I think most -- majority of the expansion is the communicator segment. That's more than doubling the $31 billion from $15 billion last year. So that one in particular, I wanted to 0 in on anything unique to that segment. I think what you're describing for Express would be more consumers, but I'm sure communicators as well. Maybe if you could just 0 in on that.

Yes. Express really is targeting those. Communicators are kind of the people, who are using it not for just the joy of it, like that's what we mean with consumer, but for a business purpose. And in the prior year, we had said there were 600 million global communicators included in the TAM. This year, we said 900 million. And what we did is we really included people, who would be using office productivity software. People who are using tools like Acrobat as well. But ultimately, like I said, we believe there's more people in that category and that are going to be using tools like Express for work-related content creation. And that was a big driver of TAM expansion.

Got it. Okay. Makes a ton of sense. When you think about the overall growth rate for the Creative Cloud, it's been consistently in the low 20s. And some of the puts and takes you saw in 2021, you talked about those earlier. How are you thinking about growth trajectory for the Creative Cloud going forward, not just this year, but over the longer term?

Yes. I think when you back out some of the noise, our targets for that business in the year ahead in 2022 actually show really consistent momentum. We had strong growth in that business in 2021. That was a year that had an extra week, and there was also a year where foreign exchange was about maybe a 2-point top line growth tailwind for Adobe. And so when you look at 2021 and kind of back out the noise of those tailwinds that are just kind of math and then you look at our target for 2022, when we also kind of look at it on a constant currency basis and factoring out that extra week, I think ultimately, that shows a lot of continued momentum in the business. In terms of the drivers of growth in 2021, it was a really strong year for small businesses and enterprises in that recovery environment that I referenced earlier, especially in the first half of the year. We really saw small businesses getting back to economic health, buying our products, adopting our products. Enterprise is expanding their seat usage of our products. And I think as we get back to continued recovery from the pandemic, those things will continue to be drivers. And then we also have seen individual retention rates at higher levels than pre-COVID, which is something that we -- it's something that we're driving with product innovation and that trend we want to see continue.

Great. That's great to hear. Awesome. Maybe just if we could shift gears to price increase in the kind of company's philosophy there. Inflation, CPI is at record levels. You've not raised prices as far as I know. And now that you're pretty conservative when it comes to price increases, what would the philosophy be here? What has it been historically? And now as we're getting into the wage inflationary environment, could that change?

Sure. Our philosophy is we want to be really focused on the value we deliver to customers and not sort of just have automatic price escalations built into the way we do things, but really, we're constantly giving more value to our customers. And then at a time where it's sort of a no-brainer that, that value is there, we might consider looking at prices. We've -- since the dawn of Creative Cloud, we've only done one broad-based global price increase, that was in the 2018-time frame. And Shantanu addressed this a little bit on the Q&A of our earnings call. In the context of Creative Cloud Express, now we have the culmination of many, many years of research, the right easy-to-use offering for people entering content creation. And so we're not going to be sending beginners to a product like Photoshop or Illustrator. We're going to send beginners to Creative Cloud Express. And I think that gives us a little bit more freedom to really think about the value we're delivering with more complex high-fidelity tools, like the ones I just referenced, our video tools, our 3D tools, and make sure we're appropriately charging for the value we're delivering in those. So it's something I think CCX, Creative Cloud Express, gives us freedom to consider how we kind of bundle and price optimize within the portfolio of products. That's one reason it's great to have so many different products and build bridges and journeys between them, because we can bring people in on a lower point product and move them up over time as they're ready. But pricing is something, I think that Shantanu's comment on the call, implies it's something we'll look at.

Yes. Makes sense. Okay. And you've talked about extending the Creative Cloud to new services like mobile and web. Could you elaborate on that initiative? Where does that manifest in the product? Are these separate offerings? Or are these features within existing offerings?

Yes. I think about Creative Cloud and -- I describe it sometimes in 3 generations. Generation 1 was a hybrid cloud delivery mechanism for desktop software. The second generation was turning that into a multi-surface system of connected apps on mobile devices, tablets and desktop. But those are all hardware devices where you install and run locally that software. The third generation is going to be using Adobe's creative apps truly in the cloud, accessed through a web browser. So there's not a -- you're not downloading an executable file that you install in a local device, you're logging into a website. And this is how much cloud software traditionally works. That's where -- now for our subscribers, who subscribe to Creative Cloud all apps, they're going to get all of those. They're going to get every single one of those ways of working. And we know that increasingly, people want that flexibility. You want to go deep on a desktop device. You want to be able to work in the subway as you're on your way from point A to point B. You might be on vacation somewhere and need to quickly log in through a hotel lobby computer, access your files, edit them in the cloud, and that's the new part with cloud. At MAX last year, we launched in beta, Photoshop, Web, and Illustrator Web truly in the cloud. We've been partnering with Google to make sure Google Chrome and Adobe work together. And there's all kinds of image processing that has to happen now in AWS or Azure servers. So it's a complex engineering problem that we've been solving and we're really excited about our ability to extend our global reach. Once truly you can use Adobe software in the cloud, there's all kinds of global reach where we can consider new SKUs and price points in different geographies to really reach people we're not reaching today. It also adds a new way of using Adobe and a stickiness for our current subscriber base. So it's something we're really excited about. But I just think it's sort of that evolution of broadening the offering. And then you asked sort of is it included as a stand-alone, it can be -- we're still in beta today, but it gives you the ability to consider creating a separate SKU for that cloud-only product or think about just the overall value you're delivering as part of the bundle. And then down at the -- again, at the entry point, Creative Cloud Express is a cloud-native web browser-based application also usable on mobile. So we really feel like that's the way consumers today, millennials, beginners, that's the way they want to interact with software versus the traditional way of downloading an executable file on a desktop.

Makes sense. That's great. And you alluded earlier to the metaverse as an opportunity for Adobe. Could you elaborate on that? What are some of the initiatives there? 3D and immersive come to mind as natural plays here? Where are you focusing your efforts and are there any deliverables that we should see here? How do you view that opportunity?

3D is -- Adobe's 3D product suite is called the Substance. And this is the best product in the world for photo realistically painting a 3-dimensional object. And if you think about what you have to do to create a 3-dimensional VR experience or a metaverse, you need to have sort of the wire frames, the objects themselves, which we have a robust marketplace for those sorts of assets in Adobe Stock. But then you have to be able to paint them in a photorealistic way and then put them in an environment where you render out that experience. Our Substance is best in the world at what it does. It's broadly used by the big gaming companies, special effects and marketing industries. Almost any automobile ad you see on TV is not filmed today, it's actually rendered in 3D using Adobe Substance. So that's a big one. But when I think about metaverse, what gets me even more excited is it's going to require, again, millions of new creative professionals that use all kinds of high fidelity tools entering the world. And they're not just going to be modeling out and rendering 3D experiences. They have to do character design. They have to do environment design. They're going to be doing storyboarding. End-to-end, they're going to be using tools in the Adobe ecosystem and collaborating with a broad range of other creators and stakeholders. So I really -- at the sort of professional end of the products that we offer, I almost can't think of one that won't have increased usage as people are building the metaverse. And so that's just -- that's another huge explosive vector of content creation we're going to see of a new media type. And then just to foreshadow maybe talking a little bit about our Enterprise business. Think about the data opportunity in an existing metaverse. The way that millions of individuals have this new sort of digital realm where they are interacting, they're purchasing, they're seeing advertisements and what the responsibilities and opportunities around that experience and the data are going to be. I think that's something that also will play into Adobe's strengths.

Yes. Makes a ton of sense. Okay. Why don't we shift just before we move on to Experience Cloud, just on the Creative Cloud. There's some high-profile private companies facing capital at high valuations, Canva and Figma. Have you seen these 2 offerings in the marketplace? When you think about the competitive landscape here, what are Adobe's strengths general? And maybe specific to those 2, how do you see those 2?

Sure. Yes. When you look at a $63 billion TAM, I think more than any other company, that's Adobe's opportunity. There are definitely other point solution players, who have, I think, had a role in expanding that TAM as we see millions of new people really interested in content creation. Certainly, some other companies validating the secular tailwinds that are driving expansion in that market. I would say almost to the company that I could think about, everyone else we see as a point solution provider. They're a single product company that's found a niche with a growing universe of users. And there's some companies that have good momentum in that space. You mentioned Canva, and I think that's one that has done a good job of getting all kinds of new content creators interested and even willing to pay for those simple kinds of tools. There's -- since the beginning of Adobe's creative business, there's always been free and simple tools in the world where people get started and then when they're ready to do more, they come to Adobe. Microsoft Paint, the simple photo editors in your -- the phone we all carry around in our pocket, for example, simple -- there was Flickr, there's Facebook and Instagram. And Canva has been part of that sort of that world of where beginners get started before they come to Adobe. With Creative Cloud Express, you can see that we now have democratized our own tools to the level that we want people to get started and begin their journey with Adobe. And the big differentiation from us, this applies, you mentioned Figma, any other company, there are some competitors in video editing, for example. But they're all point solutions. Whereas we have this cloud connected collaborative system of applications that all work together and we say creativity is a multiplayer sport. And from the file types they use, to color templates and fonts, we have it all connected together in a way where there's bridges we build between creators and journeys for people to break out of simple templates and do more and do more. And so I don't see a competitor that sort of has anything approaching that end-to-end strategic position that Adobe does, but there's definitely other companies that are seeing the global enthusiasm around content creation. And I think overall, that's a good thing for Adobe and it's a good thing for the expanding market.

Makes sense. Why don't we shift to Experience Cloud. Another area where you raised your TAM. The TAM is expanding, which is great to see $110 billion here versus $85 billion. And here, you're addressing varying market -- end markets like customer data insights, the $33 billion; content and commerce, $49 billion; customer management, which we would think of as traditional marketing automation $18 billion; and Workfront addressing workflows did $10 billion. Maybe just more broadly, when you think about the TAM that you outlined for the Experience Cloud, what gives you the confidence in these different categories that it is expanding? And where is some of that coming from? I think with the marketing workflows, that's just a function of Workfront now being integrated, so you feel like you're more aggressively addressing that. And so that accounts for the majority of -- or some of the expansion there. But just in the other segments, perhaps where do you see that expansion? And how are you addressing that?

Sure, sure. Yes, other than the addition of the $10 billion Workfront TAM, what -- the rest of the TAM would show growth from $85 billion in 2023 to $100 billion, 2024. And I would say we're seeing an environment much like our segment itself that where the spend in the front office, where enterprises are really leaning into digital engagement, customer experience management, is in reacceleration mode. In 2020, we saw enterprises, although the road map was strong for digital transformation, enterprises slowed down as they weathered that initial storm of the pandemic in 2020. And it's now reaccelerating as enterprises start to catch up on their digital transformation initiatives. We saw that in our business, a tremendous reacceleration of revenues and bookings. And I think every business, it's just a no-brainer. I don't have to oversell this one. Every business knows they have to be digital mindset first. That's simply the way to compete and win with consumers in this day and age. And -- the biggest growth is actually happening in data. So if you look at the different TAMs that we break out, the fastest-growing portion of that is in the data and insights category. And I think there's now so much -- we've been -- we're a decade into the Big Data generation, where there's such massive data sets. And they're only as good as the insights you can derive from them and making them actionable at the speed that consumers click through an app or a website. And so that's one where we see people talk about CDP. It's still very, very early days, frankly, for CDP adoption, but at hyper growth. But that market is really growing tremendously. And obviously, with that $100 billion number, $110 billion with Workfront. There's a lot of -- we're looking at global spend in these categories today, but it's a significant CAGR on top of that, because enterprise is really increasing spend in these categories.

Okay. Great. Makes a ton of sense. Okay, good. And you provided fiscal '22 initial guidance here in Experience Cloud for 17% adjusted. What are some of -- I guess when we look back a year from now on how you did in that business, where could you see upside? Where is there momentum in the business that perhaps reported growth coming in higher than where you guided to?

Sure. And I'm going to pick the number I like better, which is the subscription revenue target. We've said the health of that business is really around subscription revenue growth. As the segment is subscription revenue plus professional services, and maybe a very de minimis amount of nonrecurring revenues. But our strategy is to partner with the big system integrators, whose strategy is to grow consulting services for customer success rather than trying to grow our own pro services, we want to be a software company, a high-technology company. And so we've targeted on an as-adjusted basis, 19% growth on the subscription revenue line. And we've said our aspiration is to be growing subscription revenues 20% year-over-year in that business. Ultimately, we're getting closer and closer to the rule of 40. We're expanding profitability in that segment. Revenue growth is -- for a SaaS business is extremely predictable. For the most part, it just flows right from deferred revenue, which flows right from RPO. We grew RPO last year 23% year-over-year. So I think that was a really strong number. And ultimately, the upside is going to come from our ability to partner with our big enterprise customers and to get them to move up the maturity curve from using point solutions by Adobe to adopting an integrated set of solutions built on a common data platform. We call those transformational accounts. And we gave new data in our FA materials this year, financial analyst materials, that kind of size some of those customer cohorts, and you can see how massive these accounts are when we look at our top 25 transformational accounts. And so that's the journey we've been on, and we're going to keep -- we want to be a technology partner to our customers, not just an IT vendor and really help them digitally transform and see the additional value they can get from using a real-time platform like we built. So I think the data platform is really crucial to driving that upside.

Okay. Great. And you called out strength in the commerce business. We all know e-commerce volumes have been stronger in the pandemic. How much of that growth is sustainable post pandemic? Obviously, there are -- there's evidence that we've seen tougher comps in e-commerce and other areas of software. How do you think about kind of the sustainable growth there in terms of volumes?

Yes. In times like these, I'm even more grateful for the way we think about the opportunity and the way we contract and price with our customers. Because Adobe's commerce business, we license commerce software. We don't charge a percentage of sales or GMV like some of the other competitors in the commerce space. So for those that charge in that way, if there's a massive swing of spend online, their revenues are going to spike. And then if there's a movement of spend off-line, their revenues are going to have a tough compare, right? And for our commerce business, we don't have that dynamic, because we license the technology to build the shopping cart function on their websites. We're not sort of the paid mercenary that's charging a percentage of sales. It's a more customer favorable way of doing business, because we're not a single point solution. We're looking to sell them an end-to-end suite of solutions. So we don't have that tough compare coming out of a pandemic. We think more and more, there's still a huge opportunity for people to need to modernize their online commerce systems and Adobe has one of the best in the world. And one of the things that we call it as the big differentiator is our commerce system is optimized for both B2C and B2B selling. Increasingly in the world, companies are hybrids. They're selling to businesses and consumers, and they need that more and more. But I think we have a tremendous opportunity to keep growing the commerce business for Adobe.

Great. That makes a ton of sense. Okay, a few questions have come in via e-mail. So why don't we shift here if we could, please. One question on Creative Express. What are the right metrics we should be watching and that you might perhaps disclose to evaluate traction in the Creative Cloud Express in the SMB?

Yes, that's a good question. So first of all, I should explain Creative Cloud Express is a freemium model where over time, we believe there will be significant product-led growth as we grow that business. I think here in the first half of 2022, we're really going to be doing a lot of generating knowledge and awareness of the tool and getting millions of new users signing up. In the back half of the year, we expect to start seeing more and more people going past that paywall to unlock additional features and usage. And over time, we're extremely bullish about Creative Cloud Express being a significant generator of net new ARR for the Digital Media business. So I think, all of that is really ahead of us. And I'm sure and I appreciate the feedback on kind of what's helpful. But over time, as we grow the business, we'll find ways of telling that story. If you go back and look at Creative Cloud when we first launched that, I remember when we did our first press release that we had crossed x number of paying users or subscribers and talking about ARR when it hit certain milestones. And so I'm sure we will find a way of telling that story and sharing probably a year from now on how that business is growing. And over time, we think that when you look at that $30 billion TAM, there's a tremendous opportunity for us to monetize that application. So there's a lot ahead of us on that one.

Got it. And I get this question while we're on this topic around Creative Express. Is there some concern or risk that you might see customers downgrading from, say, the fully featured Creative Cloud suite -- Creative Cloud Express. How are you managing that such that these are distinct use cases, not overlapping use cases, perhaps where you could see some downgrade?

Sure. And folks are -- for customers who use a sophisticated tool like Photoshop or Adobe Premiere, Creative Cloud Express will not be a substitute that would -- for our -- the users of our sophisticated products, we don't think there's going to be a significant number of them, who could find what they need going down to Creative Cloud Express, because they've really -- they're using tools that are much more sophisticated, high fidelity in their ability to output. Now on the margins, will you see people that might have bought Photoshop that moved down and used Creative Cloud Express, for sure. I think any time a company has differently priced products, you'll see on the margins that are happening. And I think really, our view is if there's a customer that does that, that's probably someone who bought a more sophisticated tool than they needed. And without Creative Cloud Express, might have bought, not gotten the value and left Adobe. And now we actually have the right product for them to land and find value, build affinity with Adobe, understand our products and over time potentially graduate back up. So I think we believe that customers, who might have attrited in the past, now have a landing place where they can find permanent long-term value. We also believe our ability to convert and gain users at the bottom of the market is going to be much, much higher with a product like Creative Cloud Express that's built for them rather than kind of the halo effect of something like Photoshop, attracting new users, who want to try it out, and it's too sophisticated for their entry-level needs. So overall, I think the benefits of increased conversion look -- customer lifetime value going up over time with better retention and giving us the ability, again, to think about how do we optimize pricing for the more sophisticated applications. All in all, strategically, it's really a no-brainer.

Great. Another one came in on Creative Cloud Express. This one is around Photoshop Express and Spark. Does this mean that you're effectively discontinuing those 2?

So Photoshop Express is a mobile app that comes as part of Creative Cloud Express. There's a number of mobile apps that are part of the offering. I mentioned, it's both a mobile and a web-based offering. And Spark was a fundamental part of the research and the product development that led us to Photoshop Express. And effectively, our Spark users are going to graduate up to Photoshop Express, which includes a lot of the features that they're used to, but many, many more templates and asset types and vector images that they can use. And also all different new types of projects that they can work in an export. So it's kind of the -- it's the natural evolution and expansion of Spark. And so ultimately, that all comes together in a much more robust app.

Got it. Another question on Creative Cloud Express surprise. And it's related to Spark. The question is what features were kept, what was cut from Spark and how much of that format has changed? The question is really just around conversion of Spark into CCX and how you're managing that?

So Spark was -- again, it was a more limited app with a few discrete types of projects and file types you could use. Nothing was cut from Spark, it was a massive expansion. And I think Spark was a critical part of our better understanding how to use AI and more simplified UIs to delight the beginner content creator. So CCX goes much farther than Spark. Any assets and templates that you would find in Spark, you're going to find in Creative Cloud Express, but you're going to find millions more. And we're better leveraging now our creative professional user base to create templates that really stand out and create new asset types that can be used in creative product press. So I would say in every way, Creative Cloud Express goes beyond what Spark did, but certainly is inclusive of the sort of functionality that our Spark users were used to.

Great. Okay. Just a reminder, if you do have questions, feel free to send me an e-mail at [email protected]. We've got 10 more minutes here. I'm going to move on with some of questions that I've got as well. Back to Experience Cloud, Jonathan. When you talked about this year a more balanced approach between mid-market and large enterprise, I think traditionally, this has been large enterprise, can you elaborate on any of the new initiatives going after the mid-market here in Experience Cloud, please?

Yes. I think for -- to grow into the mid-market and then grow with those enterprises as they scale up, you've got to do 2 things right. You've got to have the right product fit and you've got to have the right go-to-market motion. And those have been both focuses for Anil, who now is at the beginning of his third year with Adobe running that business. I think with the products, one of the big initiatives was bringing our leading content management application, AEM, Adobe Experience Manager, truly to the cloud. Historically, it had been more of a managed service offering. And now that we have AEM as a cloud service, we feel like we have the right content offering for the mid-market. Magento and Marketo both brought a robust heritage of both enterprise and mid-market. Marketo is the best marketing automation tool in the world for mid-market B2B companies. And there's a lot we can do with commerce. And so if you think about marrying the content with the commerce system and then the way they do marketing automation for mid-market companies that we now have strong capabilities in a suite that we can go offer to the mid-market. We also then have looked at the way we organize our field operations, under Anil, to make sure we have folks that are specifically going out and looking at those smaller companies that we have the right capabilities for and then can grow with them. So that's going to be continuingly an important growth vector for us. One thing I would clarify is, when we talk about the mid-market, we're not talking about small companies, we're not talking about local 10-employee shops. We're talking about companies that probably have hundreds of employees and maybe tens of millions of revenue rather than tens of billions of revenue. So we're still -- there's -- in the front office software ecosystem, there's going to be a lot of vendors that have very simple out-of-the-box functionality for smaller companies. And then in the way they might describe enterprise might be the way we describe the mid-market. But it's definitely going down market and then growing with them and bringing them up into transformation in the front office is an important part of our long-term growth strategy.

Great. And maybe just to shift gears to Workfront, specifically. How well integrated is the offering? It's been now about 1.5 years since you made the acquisition. And what types of use cases are you seeing? Just any color on traction with Workfront? Is this a new entry point, more of an upsell opportunity versus that? Just any color on how Workfront has been...

Sure. Yes. I think we're 13 months in with Workfront now. And one of the things that made it such a compelling investment opportunity for Adobe was there were already a number of deep integrations with Workfront's work management platform and our creative ecosystem from the creative apps that can bring content into Workfront for different sorts of content reviews along -- that are a critical part of the marketing operations. And then it was integrated in with our campaign execution, digital experience applications on the back end. And these were through APIs. In the 13 months intervening, we've gone much deeper in bringing integrations to the platform. And it's just so synergistic. It was a deal that was obviously connective tissue between how marketers use our content creation apps and then our digital experience apps with campaigns. And so we've seen tremendous growth. We really reignited growth right out of the gate with that acquisition. It had a tremendous 2021 both in terms of reaccelerating subscription revenues and the bookings. And I think it's both in terms of -- is it an upsell to existing customers? Absolutely. There's a lot of interest there. It's the only -- we believe it's the only work management platform that really optimized around marketers. And we wanted to be the tool that every marketer at every big company uses. But it's also a tip of the spear for us. There's -- it's something -- it's -- it's a, I would say, a shorter sales cycle and implementation cycle than things like a data platform or CDP. And so we're able to bring in new customers who are interested in adopting Workfront, and they might already be using some of our creative apps, for example. And it's a way to get them into our digital experience ecosystem and then start to explain to them how we can transform the way they do customer experience management and provide personalization at scale. So it's a very strategic asset for us, and we're really excited about the trajectory.

Great to hear. A couple more have come in here from the audience in e-mail. So why don't we end with 2 more that have come in here. So create -- one's on Creative Cloud Express. Are there any parallels we should think about in terms of how many free users ultimately convert to paid? And then there's a kind of follow-up on the 400 million mobile user IDs that you cited at the Analyst Day. How many of those were unique to Adobe? So 2 questions there.

Sure. Any time we talk about new mobile yes, any time we talk about mobile IDs, we give a number of hundreds of millions for -- that come in through our Document Cloud business, hundreds of millions from our Creative Cloud business. Those are unique IDs. And then we also gave a number at Analyst Meeting that we have 600 million MAU from nonprofessionals across our Digital Media business. And so the reach at the top of our funnel is just immense. There are very few technology companies in the world that have that kind of top of funnel. If you consider a tool like Creative Cloud Express as we're able to get tens of millions of users among that MAU to try the product and ultimately then convert x percentage into folks, who are going to pay us $9.99 a month, that business can become really important to Adobe's growth story. Again, we're very early days. I think it's been released in market maybe 5 weeks. So I'm not going to get out over my skis and start to call any predictions of percentage conversion, but obviously, the strategic positioning that we have and the reach we have is pretty unparalleled.

Got it. I guess just to clarify, I misspoke here, the 400 million mobile IDs. The question is how many of those were new unique users?

So we've given that number for several years in our analyst meeting. And if you go -- you can go to the materials from 2020 December. And I think look at that same number. I would be guessing from the top of my head if I tried to do a comparison, but you should be able to see that.

Okay. And then last one here. This is another one from the audience. When should we expect fully cloud-hosted version of Photoshop?

Well, it's available in beta today. And so you can look back and see kind of the period where Photoshop and Illustrator on the iPad were in beta versus generally available. And that might be a decent way to predict kind of the development cycle of Photoshop on the web. But it is available for use today and we're getting all kinds of usage and great feedback from the community, as we look to make that generally available. And I would hope that, that would happen sometime in 2022.

Well, Jonathan, we're out of time here. I want to thank you again for participating here, kicking off the bus tour for 2022 with us. It's been a pleasure. I've learned a lot. I always look forward to our conversation with Adobe on the bus tour. Thanks for all those dialing in and looking forward to an exciting couple of days here as we speak to more companies. Thanks again, Jonathan.

Thank you, Brad.