Adobe Inc (ADBE) — Q4 2021 Earnings Call Transcript

Good morning, and thanks everyone for joining us today. I'm Jonathan Vaas. Welcome to our financial analyst meeting. You should have a copy of the press release, which we filed this morning at approximately 5 A.M. Pacific Time, as well as a copy of our slides that we posted to the Investor Relations website. I'm hopeful to meet with many of you in person this year. For now, I'm really pleased to be able to be here with Adobe's leadership team and engage virtually, and we have a great program for you today. With a webcast format, the live presentation we'll be doing today will be a streamlined version of the long-form information that we posted to the Investor Relations website that has all of the information you're used to receiving from Adobe. We'll cover a portion of those slides today, and then we'll go ahead and do Q&A at the end. Let's take a quick look at the agenda. Shantanu will kick things off with a brief welcome, and then Ann will present Adobe's vision and strategy for the future. Anil will go over our digital experience strategy, and David will cover digital media strategy after that. Then, Dan Durn, who joined in October as Adobe's Chief Financial Officer, will provide a detailed financial summary, as well as discuss Adobe's long-term strategy. Then Shantanu will wrap things up sharing his vision of the long-term opportunity, and we'll go to live Q&A. Before we get started, as a reminder some of the information we'll be providing includes forward-looking statements that are subject to risk and uncertainty. Actual results may differ from those statements, and we encourage you to review the risk factors in our SEC filings for more information. Additionally, we'll be providing both GAAP and non-GAAP financial metrics. Reconciliations between the two are available on Adobe's Investor Relations website. I will now pass it over to Adobe's Chairman and CEO, Shantanu Narayen.

Good morning, and thanks, Jonathan. Welcome to this Virtual 2022 Financial Analysts Meeting. Adobe had another outstanding year in 2021. I'm incredibly proud of the dedication and resilience of Adobe's 25,000 employees all around the world in delivering breakthrough technologies for our customers. I'd like to start with a recap of the tremendous accomplishments we had across every dimension in 2021. As a product geek at heart, I take immense pride in our team driving hundreds of innovations across Adobe Creative Cloud, Document Cloud, and Experience Cloud. Earlier this week, we introduced Creative Cloud Express, to enable anyone to express their ideas simply and beautifully. Creative Cloud Express marks the start of a brand-new journey to introduce first-time creators to Adobe Creative tools, while adding significant value to all of our current Creative Cloud subscribers. It marks a new chapter of creation, collaboration, and sharing on the web, leveraging the unique technology and capabilities of Adobe's flagship products. It also builds on the collaboration capabilities we debuted at MAX, including Illustrator and Photoshop on the web, Creative Cloud Spaces, and Creative Cloud Canvas. With the addition of Frame.io, we're incorporating review and approval functionality to deliver a powerful collaboration platform for end-to-end video collaboration. We're continuing to add magic to our flagship applications, and we're enabling them to run natively on new hardware like Apple's M1 chip, as well as 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 in PDF. We've seen tremendous growth in Acrobat online, as people use our powerful, free, browser-based document tools to handle important tasks on the fly, without the need to download any software. Additionally, we made outstanding progress with PDF support within both the Chrome and Edge browsers. On the Experience Cloud platform, we extended our real-time customer data platform to B2B customers, bringing together individual and account profiles across systems to give B2B companies a single view of their customer for the very first time. We launched Adobe Journey Optimizer, harnessing over 20 years of industry-leading email, marketing, and cross-channel campaign management expertise to empower brands to design and deliver personalized experiences across the entire customer journey in a single application. With the new acquisition of Adobe Workfront, we're empowering companies to optimize business outcomes by connecting creative and marketing professionals to manage all creative workflows across the entire marketing lifecycle. We've advanced our industry leadership in key areas across our portfolio. Our three clouds are underpinned by the magic and power of Adobe Sensei, our artificial intelligence and machine learning framework, a significant differentiator for Adobe and an enabler for more rapid innovation. We continued our investment in the Adobe Experience platform as the foundational platform for strong governance capabilities across our Experience Cloud business, accelerating innovations like the real-time customer data platform and Adobe Journey Optimizer on a global scale. We take our responsibility in the creative community very seriously. As part of the content authenticity initiative, we've published a drop specification as an open standard to combat online disinformation. I'm amazed at the resiliency of our employees as we pioneered all new digital event experiences with Adobe Summit and Adobe MAX, extending our reach and engaging millions of people around the world. I'm also tremendously proud of the industry recognition we continue to receive for our brand, our workplace, our culture, and our practices. Just to name a few examples, we were again named a top riser on Interbrand's Best Global Brands list, named to Fortune's 100 Best Companies to Work For for the 21st year, acknowledged on People Magazine's Companies That Care list for the fifth year, and included in Fast Company's Brands That Matter list. Most significantly for investors moving forward, we were on the Dow Jones Sustainability Index for the fifth year, and I take pride in having received a 100% score for being the best place to work for disability inclusion. Our financial results position us uniquely in the industry. Not many companies can drive top-line and bottom-line growth with the impressive margin that we have. We powered through $15 billion in 2021, accomplishing significant milestones in Q4 with our first $1 billion digital experience revenue quarter, our first $3 billion digital media, and $2 billion in cash flow; incredible financial statistics. Dan Durn, our new CFO, will cover our Q4 and our FY'21 results in greater detail. Since he joined Adobe in October, I've appreciated his experience and partnership, and I look forward to having him share his perspective and significant impact on Adobe's growth in the coming decade. I'm delighted to announce that Anil Chakravarthy and David Wadhwani were promoted to the President of the Digital Experience and Digital Media Businesses respectively. I value their leadership and contributions, which they will elaborate on during the call. While 2021 was exceptional, I'm most excited about what lies ahead for 2022 and beyond. In the over 20 years I've been with Adobe, we have immense market potential, an incredible technology innovation roadmap, and the best leadership team in any company globally. We have provided 2022 targets that showcase the strength of our underlying business, with three large and growing opportunities across our clouds, focusing on execution based on the current economic climate. One change we're all experiencing is as the company scales beyond $15 billion, we must also focus on foreign exchange expectations, given the recent strength of the U.S. dollar. As excited as I am to discuss 2022, today is about sharing Adobe's tremendous growth story and driving the next decade of growth, supported by our growing $200 billion addressable market opportunity. As you'll hear from our leadership team, our growth anchors on five key pillars: our proven track record and focus on creating and leading categories, an expanding set of customers from consumers to creative pros to first-time creators, small and medium businesses, and the largest enterprises, our ability to deliver incredible technology platforms enabling new classes of applications and accelerating our innovative cadence, our continuous shift from building applications to enabling new business models, and an expansive global ecosystem of partners that spans the entire customer lifecycle from experience creation and marketing to delivery and ongoing support. The message for investors is that across all dimensions and businesses, our aspirations are higher, and we're thinking bigger. An incredible once-in-a-lifetime expansive opportunity is in front of us, and we are uniquely positioned to capture it. To provide insight into our strategy for expanding markets and categories, I'd now like to welcome Ann Lewnes, our incredible Chief Marketing Officer who recently celebrated her 15th year with Adobe.

Thank you, Shantanu, and good morning everyone. Over the past two years, we've witnessed a profound global shift to all things digital. Everyone, from students to small businesses to the largest global brands has had to make this dramatic pivot. Technology innovation, the proliferation of new devices and platforms, and the increased desire and ability for anyone to create and deliver great digital experiences have all accelerated the shift to a truly digital world. And there's no going back. Whether through a phone, tablet, or PC, it's easy for anyone, anywhere to create, work, learn, connect, shop, unwind, and launch and grow businesses. While there continue to be significant challenges in the world, digital has empowered us through the democratization of creativity, the development of rich digital experiences, and the ability to work and learn from home, to shop and sell products online, or to connect with those you love. We are moving society forward. Digital has fundamentally changed everything. According to Adobe Analytics, online spending during the 2021 holiday season is projected to reach $200 billion, while total e-commerce spending is projected to hit $1 trillion in 2022. It's clear that digital is essential to conducting business today. From your favorite local restaurant to Fortune 500 companies, across every country and industry, digital is empowering today's businesses. Companies are automating mission-critical document processes like HR and legal to drive increased efficiency and agility. At the same time, customers now expect rich, personalized digital experiences that are relevant, engaging, and consistent across any device. It's well documented that digital-first businesses drive greater long-term growth and customer loyalty. Adobe's technology has enabled us to transform into a digital-first business. Companies like Adobe are measuring every customer interaction to understand behavior, intent, and ultimately drive business impact. We accomplish this by providing personalized digital experiences at scale through adobe.com, across all of our digital channels, and increasingly through our products. Digital has transformed how we live, work, and connect. Anyone can create or participate in an online community, whether it's with family, friends, colleagues, or those with shared interests and passions. The emergence of the creator economy allows for enterprising content creators to build large followings and monetize their passions, products, and services. Today, there are countless social platforms and ways to engage with desired audiences. The ability to share, promote, and monetize content has fostered a new level of connection and commerce. We're discovering new ways to work together even when apart, harnessing collaboration solutions like Frame.io, which we acquired in Q4. Adobe's mission to change the world through digital experiences is more crucial than ever. The digital world relies on Adobe's tools and platforms; through our unparalleled innovation, creativity, scale, and advanced data-driven operating model, we are catalyzing the growth of digital. Hundreds of millions of people across the globe use our products daily and we are impacting every aspect of society. Adobe is uniquely positioned to lead in this next digital era. Our three industry-leading cloud offerings are mission-critical across every geography and customer demographic. With Creative Cloud, we're unleashing creativity for all, providing anyone, anywhere the tools to express themselves. With Document Cloud, we're accelerating document productivity by modernizing how people view, share, and engage with documents. Experience Cloud powers digital businesses of all sizes, giving them everything necessary to design and deliver exceptional customer experiences. At the foundation of our three clouds is Adobe Sensei, our advanced AI/ML framework that enables us to deliver a steady stream of unparalleled innovation. Over the last year, we've recognized the critical role creativity plays globally. Creative Cloud empowers everyone from high school students to social media influencers to demanding creative professionals to tell their stories. The Creative Cloud total addressable market (TAM) is projected to be approximately $63 billion in 2024, with $25 billion coming from our core base of creative professionals who purchase Creative Cloud applications and services like Adobe Stock. New growth drivers in this segment include 3D and immersive experiences and web-first collaboration tools like Frame.io. $13 billion of the TAM comes from communicators and non-professional creators, including small businesses, students, and marketers. Many communicators currently use Creative Cloud, and we anticipate serving even more with offerings like Creative Cloud Express, which just launched on Monday. The remaining $7 billion of the TAM comes from consumers, including hobbyists and social media users. The biggest growth drivers here are mobile applications in video and imaging categories, such as Adobe's Photoshop Express. Digital documents are fundamental to the future of work; PDFs and document workflows empower everyone from individuals to large enterprises to be productive anytime, anywhere. We're excited about the Document Cloud strategy and the large addressable market, projected to grow to $32 billion by 2024. $10 billion of that TAM will come from knowledge workers and business professionals who typically use our core Acrobat desktop subscription offerings. Growth is expected from expanding digital document use cases, e-signatures, and increased collaboration capabilities. $8 billion of the TAM is anticipated to come from communicators using Acrobat web and mobile applications to create, scan, and edit PDF files for business and personal use. Growth in this segment is expected to stem from expanding the premium PDF base and capturing demand from new funnels. Finally, $14 billion of the TAM will come from enterprises leveraging document services, including Acrobat, e-signature solutions, and APIs that developers use to integrate seamlessly with key line of business applications. Growth drivers in this segment include APIs for building powerful document workflows and expanded use cases. Whether B2B or B2C, businesses of all sizes are investing in customer experience management. Adobe Experience Cloud enables companies to deliver predictive, personalized, real-time digital experiences across every phase of the customer lifecycle. Our total addressable market for Adobe Experience Cloud is estimated to be $110 billion in 2024, with $33 billion coming from data insights and audiences, which includes Adobe Experience platform, real-time customer data platform, and Adobe Analytics, including our new customer journey analytics offering. Future growth drivers include increasing demand for unified customer profiles and personalization at scale. $49 billion of the TAM comes from content and commerce, which includes our Adobe Experience Manager and Adobe Commerce offerings. The growing volume of content needed by businesses to engage customers across every touchpoint is exploding, and the pace at which it must be deployed is accelerating alongside the need for a seamlessly integrated commerce capability. $18 billion of the TAM is derived from customer journeys, which includes Adobe Campaign, Marketo Engage, and our new Adobe Journey Optimizer. Growth in this segment is expected to come from the continuous need for businesses to engage with customers over an increasing array of channels. This year, we introduced a new $10 billion marketing workflow category that includes Adobe Workfront. Expected growth here will stem from the rising demand for teams to efficiently plan, track, and execute marketing campaigns. Adobe has always been relentlessly focused on identifying new growth opportunities and successfully driving growth within our existing businesses. We pioneered and lead three massive categories: creativity, digital documents, and customer experience management. This week, we announced Creative Cloud Express, an exciting new unified web and mobile offering that's perfect for anyone looking to quickly and easily make and share standout content. Creative Cloud Express is great for first time creators and communicators, but also delivers value to our current Creative Cloud subscribers. It exemplifies how we continue to expand our customer base and enlarge our TAM. We achieve success by establishing enduring technology platforms, from Adobe Sensei to Adobe Experience platform, which serve as foundations for product innovation and our industry-leading applications and services. Since transitioning Creative Cloud to a subscription model 10 years ago, we have consistently innovated our business models by building applications, services, and platforms to deliver value to market faster, better serve new customers, and utilize new monetization models. This would not be possible alone. We have built a vast ecosystem of partners including agencies, solution integrators, and ISPs, who customize and extend our solutions to meet the needs of our joint customers. We see massive opportunities within Creative Cloud, Document Cloud, and Experience Cloud, and with favorable market conditions, our world-class innovation, and the best employees, we are well positioned for the next decade of growth. Now, I'd like to introduce Anil Chakravarthy, President of our Digital Experience business.

Thank you, Ann. Hello everyone. It's great to be here with you, and I look forward to sharing more on our momentum, opportunity, and strategy for the Digital Experience business. It's truly an exciting time for all of us, as Ann shared. I'll begin by discussing some highlights from Q4. We had strong performance across the board, with our segment revenue crossing over $1 billion for the first time, demonstrating 23% year-over-year growth. Our subscription revenue grew to $886 million, reflecting a 27% year-over-year increase, while our subscription bookings in Q4 surged 50% year-over-year. Consequently, we were up over 40% year-over-year for the full fiscal year FY'21. Much of this growth was powered by the success of our Adobe Experience platform and the native apps that run on it. We invested early in the platform and have a significant head start, having launched it in 2019. Our growth accelerated, with earlier disclosures indicating we had surpassed $100 million in revenue, and by the end of Q4, we exceeded $250 million in booked business. We witnessed 300% year-over-year growth in customer count, and our production's scale is massive, totaling over 21 trillion segment evaluations per day, supported by an extensive ecosystem with over 300 partner integrations. As Shantanu and Ann both mentioned, we accelerated our innovation over the past 18 months, introducing new native applications and services powered by Adobe Sensei. A prime example is Major League Baseball; they are utilizing digital to enhance customer experiences focused on engaging the next generation of fans across all their channels—at home, on-the-go, and in the ballpark—by delivering personalized experiences at scale, reaching customers with the right experience at the right time, via the right channel. It's clear that every business is now a digital business, and customer experience management is vital to achieving success. The changes and trends we've observed during the pandemic are here to stay, contributing to strong momentum in our Digital Experience business. We've seen significant growth in average annual recurring revenue across our Top 1125 accounts, with all accounts over a million dollars in ARR demonstrating strong growth, underlining the development of long-term partnerships. The combined total contract value of our Top 10 accounts stands at $760 million, tripling from FY'19 levels. Customer experience management is now essential for any company; it's crucial to provide personalized experiences tailored to individuals, delivered in real-time, seamlessly spanning online and offline channels based on first-party data while respecting customer preferences and privacy. That's our focus. Our battle-tested strategy aids global companies in achieving personalization at scale, offering them integrated, AI-enabled applications delivered on a real-time cloud scale platform. We're witnessing strong momentum with Workfront, allowing us to unify marketing workflows and enhance marketing agility for all customers. As we expand the Adobe Experience Cloud ecosystem, our approach is extensive, including over 4,000 partners within various categories, integrating system integrators, agencies, and ISVs. This collaboration helps our customers succeed across all phases while leveraging the comprehensive applications we offer on the Adobe Experience platform. We focus on four key categories: content and commerce, data insights and audiences, customer journeys, and marketing workflow, all delivered on a common platform—Adobe Experience platform. Our innovation engine has been robust over the last 18 months, and that pace continues both on the application layer and the platform, fueled by Adobe Sensei's AI and machine learning capabilities. This forms a significant moat for us, with an integrated platform and a comprehensive set of applications. In closing, I am incredibly excited about the opportunity ahead for the Digital Experience business. We have strong momentum and we're leading the market in the Customer Experience Management sector. Our technology is excellent, and the capabilities evolve rapidly, which supports our ability to grow swiftly, as demonstrated over the last couple of years. Next, I am pleased to introduce David to cover the Digital Media business.

Great. Thanks, Anil, and hello everyone. I've been back at Adobe now for about six months and I am genuinely excited about what I see. Some of you may remember that I led the Digital Media business during the transition to Creative Cloud. While the business has certainly matured since those early days, many things remain unchanged. Our product teams continue to deliver incredible innovation, and our business demonstrates strong momentum. Before we delve into what excites me about FY'22 and beyond, I want to highlight some Q4 accomplishments. In the quarter, our Digital Media business generated $571 million in net new ARR. Notably, Creative Cloud surpassed $10 billion in ARR, reflecting ongoing strength in our Creative Cloud offerings and significant growth for Substance, which increased 100% year-over-year, driven by surging demand for 3D and emerging Metaverse platforms. We also observed exceptional growth in our mobile applications, which grew over 55% year-over-year. Currently, our mobile applications have generated over 400 million mobile IDs to date, serving as a vital source of user acquisition. On the Document Cloud side, we achieved 31% growth in ARR for the year, culminating in $1.9 billion. To provide further context on these numbers, we now have 2.5 billion mobile and desktop devices with Reader or Acrobat installed. We’re witnessing explosive growth in Acrobat Web, where we've seen monthly active users grow over 100% since last year. The integration of Adobe Sign into Acrobat is certainly paying dividends: Adobe Sign transactions in Acrobat have soared 85% year-over-year. In total, we concluded the year with approximately $12.2 billion in ARR, and while we had a successful FY'21, even more exciting opportunities lie ahead. Let's start by discussing Creative Cloud. The big picture is that we are living in a time when content, creativity, and design have never held greater value. Digital consumption is exploding, leading virtually every business to require a digital presence. Creative expression is now regarded as a 21st-century skill in education. We are also witnessing the rise of the creator economy, where a growing number of individuals, solopreneurs, and small businesses are transforming their passions into monetizable ventures. The creator economy is substantial, with nearly 100 million small businesses active on social media, the majority of which claim their online presence is more critical to their success than their physical presence. The continued growth in this space has significant contributions to our success and a major factor in the over 600 million free and paid monthly users across our Digital Media products, many of whom are not classified as creative professionals. This extensive opportunity necessitates an expanded strategy driving our mission for creativity for all. In the minutes ahead, I will outline how Adobe can facilitate self-expression for anyone—be it a small business owner or a high-end production house. Our investment focuses on five key areas. Since we just launched Creative Cloud Express, I want to highlight how we empower the world with content-first, task-based creativity. Let's start by looking at a video of Creative Cloud Express and its capabilities. Creative Cloud Express is the culmination of years of in-market learning from our web and mobile products, constructed around four essential pillars. First, we eliminate barriers to adoption. Getting started is free, no desktop download is required, and there's no steep learning curve; users can create an account and publish content in minutes. Second, an unparalleled content library allows novice users to create stunning images, social media posts, digital flyers, and more in no time, featuring 175 stock images from Adobe Stock, 20,000 fonts, and 1,000 templates. Third, it leverages decades of Adobe's product innovation. As expected, there are great workflows with Creative Cloud applications, including numerous Sensei-driven quick actions that simplify image, video, and PDF creation and editing. Fourth, we recognize that users create content intending to distribute it. Therefore, Creative Cloud Express integrates single-click publishing features for easy access to social media channels. Expect to see our recent acquisition of ContentCal enhance CCX users' social planning and publishing capabilities in the near future. Creative Cloud Express is simple to use and easy to start with, enabling users to experience success with the free tier while also presenting premium features and content for an affordable monthly price. CCX is included in most existing Creative Cloud plans, which we anticipate will drive higher engagement and retention among our core Creative Cloud customer base. The go-to-market strategy is familiar; we will combine our digital acquisition funnels and product-led growth approach tailored for web and mobile, allowing us to iteratively and optimize user journeys over time. We also plan to leverage our existing reach across education, reseller, and enterprise sectors to scale the business. We are thrilled that Creative Cloud Express is now available; it has been inspiring to see how people utilize it, and we are genuinely excited for this moment, marking the beginning of a new journey for Adobe. Beyond Creative Cloud Express, we are innovating tremendously across the entire Creative Cloud, advancing state-of-the-art imaging, video, design, and more via new capabilities across desktop, web, and mobile. For instance, we introduced Photoshop and Illustrator for web at Adobe MAX, along with a series of new Sensei-driven AI/ML capabilities, such as neural filters and auto masking in Photoshop, and auto captioning in Premiere. Our dedication to democratizing 3D and immersive experiences is evident through the Substance 3D suite, which now supports comprehensive 3D workflows, enabling users to design parametric 3D assets, compose virtual scenes, apply textures and colors, and create materials. This innovation allows for fully virtual photo shoots, saving time and costs while expediting asset and scene creation for use in games, videos, and the emerging Metaverse platforms. Collaboration is another critical focus area; we're integrating collaboration directly within our applications and existing creative procedures. We are enthusiastic about the Frame.io acquisition and see tremendous potential for individual, corporate, and media workflows utilizing this product. We launched a public beta of sharing workflows for review at MAX, also demoed Spaces on Canvas, which we believe will enable teams to organize creative assets and host live working sessions. Last, but certainly not least, we strive to create content that inspires and educates users via services like Adobe Live, assist users in monetizing their work through services like Adobe Stock, and help users connect and inspire each other with platforms like Behance, which is closing in on almost 29 million members. These five strategic pillars work synergistically to ensure individuals with creative needs can find solutions at Adobe, whether they are creative professionals, communicators in the creator economy, or consumers interested in photography or students developing 21st-century skills. Our data-driven operating model allows us to engage users as they express their interests online by searching for topics such as compositing in Photoshop or designing a Twitter post. Based on their intent, we route them to one of our Creative Cloud apps, mobile apps, or frictionless web quick actions. We ensure early success for users before introducing them to other capabilities in Creative Cloud or Creative Cloud Express prior to converting them into engaged paid users. With our reseller partners and direct sales teams, our digital activities yield an amazing global footprint and reach. In summary, everything is going digital, and content is fueling the digital economy. This results in a massive and growing total addressable market for Creative Cloud, as Ann previously discussed, while our offerings, including Creative Cloud Express, continue to evolve to meet market demand for both professionals and non-professionals. We could not be more enthusiastic about the opportunities ahead for the creative business. Another critical part of the Digital Media business is Document Cloud, which also experiences notable momentum. The demand for PDFs has never been greater, with web searches for PDF doubling in the last decade. PDF has become the de facto format for unstructured data and for B2B collaboration. This establishes PDF as an essential element in modernizing any business workflow, and Adobe is uniquely positioned to capitalize on this trend. Our applications are installed on over 2.5 billion devices, and we generated approximately 320 billion PDFs within our applications in the last 12 months. Adobe remains a leading destination for PDF viewing; we're proud to have achieved 100 million free and gross signups in the past year. We see Acrobat as a launching point for related services. The number of Adobe Sign transactions initiated in Acrobat has increased 85% year-over-year as we deepen their integration. Our approach has clearly been effective, and we are investing across five foundational motions to ensure this trajectory continues. First, our document verb strategy has proven effective; we now have 21 verbs in the market—from edit PDF to convert PDF to rotate PDF—and we continue optimizing our digital acquisition, elevating our visibility across 80 million PDF-related searches monthly. Second, we are proliferating e-signatures by integrating them into Acrobat across all services—desktop, web, and mobile. With the success we've experienced in the past year, you can expect to see us continue bringing the products closer together in the coming years. Third, we’re committed to making PDFs more intelligent for both reading and interaction. Adobe is reinventing mobile PDF viewing with Liquid Mode, accelerating document productivity through automated form field detection, and enabling the transformation of unstructured data into structured actionable data through our AI/ML-based extract function. Fourth, we’re unlocking business workflows through our PDF and Sign APIs, empowering developers to create document automation solutions that reshape how their businesses operate. Lastly, we leverage diverse go-to-market strategies to engage anyone with document needs. Our global resellers and inside sales teams provide outstanding access to broad business demand. The enterprise sales team allows us to sell top-down to CIOs seeking to transform their operations, while our digital funnel drives end-users into conversion pathways. Knowledge workers, communicators, IT decision-makers, and developers all have frictionless onboarding options. Our data-driven operating model helps customers discover Adobe technology while they search for PDF-related verbs; we engage them in ways that yield quick success on the web, mobile, and desktop prior to upselling premium features, products, services, or APIs, which encourages deeper engagement over time. In summary, Document Cloud is exceptionally well-positioned for the years ahead. I hope this provides insight into why we’re excited about both the creative and document businesses. Both are benefitting from compelling tailwinds, who are leveraging our remarkable brand awareness, our extensive go-to-market strategy, and our significant pipeline of innovation. Both businesses have the opportunity to supercharge their data-driven operating model by pairing it with a product-led growth motion, as capabilities are increasingly available to users through web and mobile. We are exceedingly enthusiastic about the year ahead. With that, I’m pleased to introduce Dan.

Thanks, David. Before I jump in, I want to thank you for letting me borrow your sweater today. I am thrilled to be here and to be part of this incredible team at Adobe. After just a few months here, it’s evident what a unique company this is, and I couldn't be more excited about our future. Now, let’s dive into Adobe’s Q4 results. Adobe achieved revenue of $4.11 billion—an impressive milestone—representing 20% year-over-year growth. GAAP diluted EPS was $2.57, and non-GAAP diluted EPS was $3.20. Digital Media segment revenue was $3.01 billion, marking the business's first $3 billion quarter, with a year-on-year growth of 21% and net new digital media ARR of $571 million. Digital Experience hit its first billion-dollar quarter, representing 23% year-over-year growth. Digital Experience subscription revenue reached $886 million, representing a 27% year-over-year growth. In the quarter, we had record cash flows from operations of $2.05 billion, and we repurchased approximately 1.6 million shares of stock. Looking at our three strategic clouds—Q4 was a tremendous finish to the year! In Q4, Adobe achieved $2.48 billion in Creative revenue and added $430 million of net new Creative ARR while exiting the year with more than $10 billion of Creative ARR. Growth drivers included acquiring new users on adobe.com, strength in our teams offering, seasonal Q4 demand in enterprise, and success co-selling Frame.io with our Creative Cloud Enterprise offerings. Although we observed increased demand during the Black Friday and Cyber Monday weeks, we did not see traditional jumps compared to previous years. This aligns with overall industry trends, as indicated by the Adobe Digital Economy Index holiday shopping data. Adobe Document Cloud achieved $532 million in Q4, continuing to be our fastest-growing business. We added a record $141 million of net new Document Cloud ARR in the quarter, with ending ARR of $1.93 billion growing 31% year-over-year. Our integrated document platform has resonated with customers globally; we're witnessing growth in enterprises, small businesses, and individuals leveraging our web- and mobile-first tools. In Digital Experience, we hit our first billion-dollar revenue quarter, thanks to strong demand for our real-time experience platform and app services. Large enterprises are turning to Adobe to enhance customer experience management and personalization at scale. We achieved record Q4 net subscription bookings, while for the full fiscal year, net ASP grew over 40% year-over-year. Let’s look quickly at the annual numbers. Adobe's fiscal performance was outstanding, with both top-line acceleration and margin expansion resulting in over $7 billion of operating cash flow, and remaining performance obligations grew 23% year-over-year to nearly $14 billion—truly world-class performance. Now, let's discuss what makes Adobe a unique investment opportunity. Some outstanding qualities energize me about the possibilities ahead for the company, ultimately bringing me here today. A fundamental shift toward digitization accelerates globally, placing Adobe in an unparalleled position to capitalize. Coupling this with Adobe's financial trajectory and industry-defining products and platforms leads to immense growth potential. Let me elaborate a bit on this opportunity. In the years ahead, we expect digital enablement to define various aspects of our lives, impacting how we create, communicate, and collaborate, how companies serve customers, compete, and how economies function. These changes are powerful and pervasive—it reflects the digitization of everything, and this acceleration is set to shape the rest of the century, similar to the Industrial Revolution. Digital content and data will fuel the digital economy, and I believe Adobe is exceptionally placed to become a vital enabler. How many companies have this profile? Few, if any, can match Adobe in leveraging the digitization of the global economy. From creativity and communication to productivity and digital collaboration, to customer engagement driven by data insights and personalized experiences at scale—Adobe's unique strengths intersect with global trends toward digitization. Looking at our near-term strengths alongside long-term opportunities, I find Adobe's positioning incredibly thrilling. Specifically focusing on revenue growth, we demonstrate consistent, sustained growth over the past four years, with subscription revenues expanding at a 24% CAGR. This strategy enables ongoing growth, while generating a revenue stream that is even more ratable and predictable. I am impressed by the team's acumen and achievements, as well as by the contributions to revenue growth across newer initiatives such as Adobe Stock, Substance 3D, Acrobat Web, Sign, Creative Cloud mobile apps, and the Adobe Experience Platform. Our diverse business model—from our broad customer base to comprehensive product offerings and platforms—positions us strongly. With growing and varied revenue streams, we have expanded profitability while accelerating top-line growth. Adobe's disciplined execution and investment strategies ensure we balance long-term investments with a focus on profitability. This period has also included integrating several strategic acquisitions such as Magento, Marketo, Algorithmic, Workfront, and Frame.io—it's impressive that Adobe has achieved sustained top-line growth alongside strong profitability while successfully managing M&A integration. Let's turn to RPO, which constitutes future revenues that Adobe has contractually committed. This aspect adds predictability and reliability to our future performance; exiting fiscal 2021, RPO grew 23% due to strong enterprise bookings. RPO consists of deferred revenue and unbilled backlog, with the current portion expected to flow into revenue over the next year. Furthermore, most subscriptions via adobe.com are billed monthly and do not appear as deferred revenue—remaining contractual commitments average about six months in time are included in unbilled backlog. The cash flow performance is noteworthy, showcasing accelerated operating cash flows over the last two fiscal years. Sustained growth and profitability at scale pose challenges, yet Adobe is gaining robust momentum, as evidenced by our first $2 billion quarter in operating cash flow. A strong capital structure and investment-grade credit rating position us well for continued growth while making capital affordable. Let's review our capital allocation strategy. First, we prioritize investing in business to drive growth. Given the tremendous opportunities ahead, our recent innovative R&D initiatives cover our next-generation data platform and Creative Cloud Express announced earlier this week. We will continue investing in sales and marketing to globally scale these businesses. Second, our cash, investment balances, and debt capacity enable inorganic growth opportunities. Recent fiscal year accelerations have come through strategic acquisitions like Workfront and Frame.io. Lastly, we focus on returning capital to stakeholders; our stock repurchase program is funded through our growing operating cash flows, having successfully driven down the average shares outstanding over the last four years. Since 2018, we've returned approximately $12 billion to shareholders through repurchases, with $13.1 billion remaining in authorized repurchases through fiscal 2024. The hallmark of a great technology company is consistent innovation regarding category-defining products—Adobe has done this across all its operations. Let’s dive into performance drivers. First, the creative segment has driven sustained ARR and continued revenue growth, accelerated from fiscal 2020 to fiscal 2021. I’d like to share the underlying data-driven model that drives this success. Innovation and the most comprehensive industry-leading portfolio of products drive our growth. Our brilliant marketing campaigns generate awareness regarding Adobe's offerings, directing traffic to adobe.com and encouraging customers to try, buy, use, and renew. We're assisting creators on this journey, starting with simpler applications, including our mobile, tablet, and web applications. We connect them with vibrant creative communities and provide journey options that empower them to do more as they advance, including services like Adobe Stock and cloud libraries. With the addition of Frame.io and Creative Cloud Express, we’re broadening our reach and appealing to various creators and stakeholders that will power the world's content. As for Document Cloud, we observe sustained revenue growth, with ARR increasing faster as the business evolves toward being primarily subscription-based, with nearly 90% of Document Cloud revenues attributed to subscriptions in FY2021. Our primary growth driver remains new user acquisition. Strong performance from Acrobat on adobe.com differs across geographies, with web growth and mobile growth for enterprise expanding. PDF and document workflows are essential to how people work and collaborate in a digital-first environment. As mentioned earlier, there is substantial growth potential within our large customer cohort, as we emphasize cross-selling and maturing them along the journey toward adopting our entire platform of customer experience management solutions. The average ARR and total contract value of our largest clients demonstrates how significant this growth opportunity is. We are winning by adding new logos to our customer base and expanding within those accounts—a multiyear approach. While Adobe's track record is impressive, I believe we can achieve even more growth. I genuinely perceive a trillion-dollar opportunity on the horizon; having surpassed the $15 billion revenue benchmark, what does our path to $30 billion look like? How do we progress to $45 billion? It begins with an estimated $205 billion TAM and an extensive ecosystem built around our market-leading products. The path ahead comprises broadening our outreach to a larger range of customers, facilitating engagement and retention for our current customer base across all regions, and pursuing growth by innovating and investing in new categories that expand our growth trajectory and enhance customer enablement in the digital era. By executing this strategy over the next decade, Adobe will secure a position comparable to only a few software companies in the world. As we surpassed the $15 billion revenue threshold, we will report revenues in constant currency due to potential foreign exchange impacts, following a year where FX positively influenced reported revenues. Due to the U.S. dollar's recent strength, we anticipate a headwind on reported revenue and growth rates for FY2022. Consistent with our usual practice, we've revalued our digital media ARR balance to account for foreign exchange rate changes. Regarding operating expenses, we saved significantly on travel and facilities during FY2021. Since many employees still work from home, we expect these expenses to escalate throughout FY2022. We aim to invest in increasing headcount as we integrate Frame.io, considering these critical investments. FY2021 was a 53-week fiscal year, adding approximately $267 million in revenue and $25 million in net new digital media ARR. The reversion to a 52-week fiscal year is poised to create a two-point headwind on full-year FY2022 growth rates and a seven-point headwind in Q1. Here are Adobe's fiscal year 2022 annual targets. We present our segment growth targets based on actual and adjusted figures in constant currency, accounting for last year's additional week: Total Adobe revenue of approximately $17.9 billion, net new digital media ARR of approximately $1.9 billion, digital media segment revenue growth approximating 14% year-over-year (or 17% on an adjusted basis), digital experience segment revenue growth around 14% year-over-year (or 17% on an adjusted basis), digital experience subscription revenue growth of roughly 16% year-over-year (or 19% on an adjusted basis), a tax rate of about 17.5% on a GAAP basis and 17% on a non-GAAP basis, GAAP earnings per share (EPS) of approximately $10.25, and non-GAAP EPS near $13.70. For Q1 of fiscal 2022, we're targeting revenue around $4.23 billion, net new digital media ARR of about $400 million, digital media segment revenue growth approximately 8% year-over-year (or 17% on an adjusted basis), digital experience segment revenue growth forecasting around 11% year-over-year (or 18% on an adjusted basis), digital experience subscription revenue growth approximately 13% year-over-year (or 20% on an adjusted basis), a tax rate near 16% on a GAAP basis and 17% on a non-GAAP basis, GAAP EPS around $2.63, and non-GAAP EPS approximately $3.35. I would like to conclude by acknowledging what Adobe has achieved over the past four years. Whether it’s revenue growth and profitability, exceptional cash flow generation, or shareholder returns, Adobe's track record exemplifies why the company is in a class of its own. I firmly believe our best days are ahead. Thank you for your time today. I will now pass it to Shantanu.

Thank you, Dan, and welcome Ann, Anil, and David for outlining the opportunities across our three industry-leading clouds. As I mentioned earlier, I am incredibly excited about Adobe's future and our ability to not only lead but also create new categories. If we zoom out a bit to view this from a macro lens, it's clear that worldwide, digital is empowering individuals, transforming businesses, and connecting communities. Digital is set to play a much larger role in work, life, and entertainment moving forward. We are seeing the rise of the creator economy and the democratization of creativity. Work and education have become hybrid and are likely to stay that way. Advances in cloud and web technologies are fueling unprecedented levels of real-time collaboration. Document workflows will increasingly be automated. The critical mandate for a digital business is more urgent than ever, as customers now expect digital-first experiences that are both contextual and personalized. E-commerce growth is building on the historic highs achieved during the pandemic. From a technology perspective, artificial intelligence and machine learning have become essential facilitators of our daily lives. In short, digital technologies are empowering more people to create, collaborate, learn, work, be productive, and make a living than ever before. I relish our mission and the opportunity to change the world through digital experiences places us at the forefront of all these trends. We are very well positioned to make a positive impact across every aspect of society, benefiting billions of people globally for years to come. At Adobe, we believe what we do is just as important as how we do it. From the very beginning, our founders, John Warnock and Charles Geschke, committed to building a company that prioritizes ethics. This sense of purpose has guided our growth over the last 40 years. We're witnessing a shift in the role companies must take in social issues and the expectations stakeholders and investors have for corporations. The response of companies to the COVID-19 pandemic has been remarkable. Stakeholders worldwide are increasingly looking to the private sector to take a proactive stance on social issues. Consumers are making decisions about the products they purchase and the companies they work for, influenced by where those organizations stand on critical issues. Our product ubiquity has enabled many companies to harness the transformative capabilities of our digital technologies, and we've recognized that our responsibility and commitment to corporate citizenship has expanded significantly. Issues Adobe is uniquely positioned to address include ensuring diversity and inclusion within our workforce, for our customers, and our partners. We believe technology will transform all areas, and along with providing technology, we have an obligation to understand its implications. Above all else, we seek to empower every individual with a story to tell. Our commitment in these areas has been a significant focus for many years, yielding real impact within the company and the communities we serve. This emphasis on purpose motivates our employees to impact the world positively and imagine the future. I firmly believe our strategy, which has remained consistent for the past decade, to unleash creativity for all, accelerate document productivity, and power digital businesses, is more essential than ever. Most companies would be thrilled to have one of these growth opportunities, and Adobe is fortunate to have three businesses positioned at the intersection of technology needs today. We have the right strategy, complemented by significant opportunities, meaning we are not constrained by prospects. To emphasize, I believe Adobe is uniquely poised to drive growth for the next decade. We have a proven ability to create and lead market categories, and we actively seek and identify whitespace that opens new chances for Adobe. We think dynamically regarding every aspect of our business, how we scale, and how we expand our customer base. Our continuous focus on innovation fosters the development of leading products, services, and platforms while simultaneously leveraging AI and machine learning technologies. We consistently explore ways to innovate our business models to deliver added value to a larger customer base, capitalize on global growth trends, and enable newly emerging monetization models. Ultimately, our technology supports a vibrant ecosystem of partners who develop, customize, and extend our solutions to meet the unique needs of our joint customers. However, our greatest asset lies in being an intellectual property company, and the central drivers of our growth come from our highly engaged global workforce, which consists of over 25,000 individuals to whom I am eternally grateful. Thanks again for joining us today. I believe 2021 was fantastic, and we surely expect that momentum to continue into 2022 and beyond. As we approach our 40th anniversary next year, Adobe stands in a strong position, marked by an exceptional track record of innovation and brand leadership, excellent financial performance, and numerous growth opportunities. Together with an expanding market, deep technological foundations, and motivated staff, I genuinely believe Adobe's most rewarding days lie ahead. With that, we’ll roll a video while we assemble our management team for the Q&A.

Thanks, Shantanu. We've shared a wealth of information today, showcasing the team's enthusiasm regarding growth opportunities ahead. Let's begin taking your questions. To those on the phone, if you haven’t already, please queue up your questions. As a reminder, we'd appreciate it if each of you could limit yourselves to one question to allow as many people as possible the chance to ask. With that, I'd like to turn it over to the operator for the first question.

Okay, great. Hey, folks, thanks for taking my question here and congrats, Anil and David, on the promotion and welcome, Dan.

Thank you.

Maybe the question is—it’s to start us off, I’d love if we could address the digital media net new ARR in the quarter, particularly within Creative. I think, Dan, you had mentioned that we hadn’t seen spikes that maybe as high as we’ve historically seen around Cyber Monday and Black Friday. I was wondering if the team could just go in a little bit deeper into the result versus the guide, and then maybe comment on the competitive backdrop within Creative specifically?

Why don't I start with that, Saket, and then I'll certainly have others add. As we evaluate the Digital Media ARR accomplishment over the quarter, I want to note that it was indeed a record quarter and a record year. When we assess what our Digital Media guide was, we certainly expected Frame to close in the quarter, and it closed relatively early in the quarter. Consequently, we view this with various outcomes in mind. The Team business performed exceptionally throughout the quarter; strength was apparent in small and medium businesses as well. Enterprise also showed traditional Q4 strength that we typically expect and individual demand remained strong throughout the year. As Dan mentioned, one slight change we observed was that the growth during online shopping may not have peaked during traditional spikes we may have seen in previous years. However, demand remains robust, and again, we factored that into our guidance for fiscal 2022, which marks the strongest ARR guidance we've ever issued. Regarding product differentiation, I will let Scott provide more insight, and David can discuss business-specific issues.

In terms of product differentiation for Creative Cloud, we had an outstanding year. We delivered exciting innovations, such as Neural Filters in Photoshop, along with a strong emphasis on collaboration. We proclaimed that going forward, Creative Cloud will prioritize collaboration as much as creativity, which invites more stakeholders into the creation process. We're thrilled about the launch of Creative Cloud Express, marking a significant new chapter for us. We've learned a lot from our earlier products, refining our offerings to better fulfill our mission of creativity for all. We've captured insights and signals to guide our development.

I’m also happy to elaborate from a business perspective. The innovation Scott mentioned contributes to our growth in TAM that Ann referred to earlier. We're broadening our access to a larger audience with offerings like Creative Cloud Express while simultaneously enhancing the value delivered to the Creative Pro base. Looking ahead at our business, we plan to build upon the momentum we gained, with nearly $2 billion in net new ARR added in FY'21. This guide signals our optimism moving forward. A key aspect of Creative Cloud Express is bringing in new users; not only do we enhance our existing customer base, but we also enable opportunities for our users to grow and mature within our platform.

Got it. Thanks very much, guys. Very helpful.

Hey guys, thanks for taking the question. Maybe I'll go a little bit more directional as we're getting a lot of inquiries from investors. Looking at the guide and your performance of Digital Media ARR, at this time you’ve not outperformed guidance in Q4, which I believe hasn't happened previously. Perhaps you could comment on the mix—what it was, and how you assess the impacts of COVID in the first and second half of the year, especially concerning the holiday season? What is your confidence level in the guidance for next year in relation to historical patterns and seasonality?

Yes, Alex, I’ll take that. You know, people who have covered us for a long time are aware that we take our guidance seriously. Let's revisit what we accomplished in 2020 and how we guided for 2021. We guided below our 2020 figures at the start of 2021 and ultimately outperformed in terms of digital media ARR. For 2022, we've set guidance closer to our 2021 starting point, and we maintain our optimism regarding the underlying strength of the business and demand for creativity. We do not believe that there were any pull-ins, as are reported by other firms; we see continuing steadfast demand. Recent initiatives have directed our team toward video and enterprise, while Creative Cloud Express is also gaining traction. Traditional quarter-end spikes in enterprise demand remained solid, matched by a strong individual demand market. While we experienced growth during Q4, we did not witness spikes traditionally recorded during Black Friday or Cyber Monday weeks but remained confident overall. The business trajectory stays on course, and our fiscal 2022 guidance reflects our strongest ARR guidance to date. I think this is a sign of the value we’re providing and the product differentiation we’ve built out.

Perfect. Thank you, guys.

Excellent, thank you guys for taking the questions. I want to dive deeper into the positioning of Creative Cloud Express and how it compares to what you were trying to achieve with Spark. Is it a midpoint between the two? Should we view this defensively against emerging competitors? Is there a risk of clients downgrading to a cheaper option as a result, or could this instead lead you to push pricing upwards on the core Creative Cloud offering?

Yes, Keith, I’ll begin, and then David can provide additional context. Step back and consider the tremendous opportunities available for creators. Today, we already have remarkable diversity in our offerings. We have Photoshop Express on mobile performing well regarding ARR. Creative Cloud is well established, offering Substance 3D and more premium applications. CCX aims to enrich that experience for a broader user base and attract new customers while ensuring we maximize opportunities for our existing subscribers. The combination of online and our DDOM enables us to personalize our offerings for a wider audience seamlessly; the message remains positive for customer satisfaction while enhancing ARR. Regarding the Communicator segment, I feel we are already leading in that domain, with Creative Cloud boasting the largest audience globally. Through user growth and satisfaction from CCX, we expect to see retention increase among existing subscribers while attracting new clientele.

Adding to that, we view this as a pivotal moment to meet the needs of our customers. We already have hundreds of millions of mobile IDs and 600 million monthly active users across our Digital Media products who aren't necessarily creative professionals. Creative Cloud Express is the answer; it allows us to onboard these users successfully. Our Creative Cloud base seeks options that bring them value, whether they want robust features or quick solutions. By offering CCX for our existing Creative Cloud customers, we anticipate boosting engagement and retention, essentially presenting alternatives that appeal based on users' varying needs. We expect to make further optimizations in our pricing structures across categories.

Outstanding. Super helpful, guys. Thank you.

Yes. Thanks very much. I was wondering if you could elaborate more on the strengths you're experiencing on the enterprise side of Experience Cloud. Obviously, RPO was exceptionally strong; I presume much of that strength stemmed from the Experience Cloud. What are your expectations for this robust demand going into next year, particularly noting that some strength may be attributable to Workfront's anniversary? Can you indicate the aspects of your business that continue to experience momentum and what the landscape looks like for further upside?

We're noticing robust momentum across every industry. From B2C to B2B companies, and those exploring new business models, direct-to-client commerce for example, are investing extensively in digital experiences. We observe this demand across all categories, focusing on male experience via Adobe Experience Platform that maintains a unified profile. This is essential for customer engagement, as effective marketing strategies can’t thrive without an understanding of unified customer data. This is why I believe the recent emergence of unified customer profiles greatly reshapes customer experience across categories.

To add more context, look at what we’ve achieved altogether. We established the digital marketing category and recognized a more expansive customer experience management opportunity. The innovations around the experience platform and data integration we’ve developed are particularly groundbreaking. We're well equipped to deliver quick provisioning and activation. Our capabilities span content, insights, and marketing flows. Essentially, we can consolidate our infrastructure leading to market activity, reaching the point where one company doesn’t need to bounce from various systems to activate data; I think we'll see more results from our ecosystem as we build up our entire category.

Thank you.

Thank you very much for taking my question. I’d like to dive deeper into the sustained 24% subscription growth, considering your robust guidance. What observations can you share regarding Digital Media and Experience Cloud? Can you comment on foreign exchange impacts on ARR and revenue?

Sure. To start, let’s recognize the underlying strength of the business. With a foundation of excellent potential, it’s crucial to strip away any noise to focus on the one-year outlook. We can point to two factors to differentiate our performance: FX and the 53-week versus 52-week effects. To elaborate on the week difference, the extra week in fiscal 2021 added approximately 2% to the overall company; returning to the standard 52-week guidance will represent a roughly two-point revenue headwind in fiscal 2022 as the extra week occurred in Q1. Additionally, FX has positively affected results in 2021, contributing about a two-point tailwind across the business, whereas it will present about a one-point headwind in FY2022, considering how the dollar has strengthened against other currencies recently.

One last data point I'd like to highlight is that as Dan mentioned, it also explains why we focus more strongly on foreign exchange during this period, particularly in relation to Digital Media ARR. Explaining our contextual relationships with ARR, we obtain rates as values evolve—important to understand as we manage our forecasts moving forward.

That is extremely helpful—thank you for the analysis.

Okay, thank you for taking my question. One of your competitors in the Document Cloud space recently cited softening demand and execution issues. Naturally, your business is much broader than theirs. However, have you experienced any changes connected to customer engagement within Document Cloud?

Gregg, we had a phenomenal quarter in Document Cloud. We recorded a record $141 million net new ARR in Document Cloud. We integrate all products well—let me allow David to elaborate on how the integration of Adobe Sign within Acrobat enhances our offerings.

Enthusiasm regarding Document Cloud remains high, especially considering the reach we now possess. Building strong integration allows seamless transactions across platforms to promote use. We're witnessing continued strength with an 85% year-over-year increase in Adobe Sign transactions in Acrobat. By providing users with familiar tools, we're able to simplify using our products to achieve their goals.

Additionally, our extension within Chrome and the strategic partnership with Microsoft fortifies Adobe's distribution potential. The automation of document workflows will increase exponentially, and that nurturing of advanced functionalities will continue to grow our reach.

That's terrific. Can you also provide a bit of guidance on how you expect increases in normalized T&E to impact operating margins in FY'22? How should we regard that?

Yes, looking ahead to 2022, we expect our engagement will increase sharply as the world opens back up. We're going to ramp up travel to meet customers and resolve their complex challenges. While some costs will return, the rationale behind investing in growth and positioning ourselves in the market will reflect strategies toward sustained industry leadership—allowing us to remain highly competitive and market-defining.

Dan, welcome to the team. I want to clarify a bit about margins. Your margins have increased by 590 basis points over the last three years. I understand a bit of a moderation makes sense. But when you forecast margins long-term, do you perceive them capped at mid-40s? Or do you envision a potential upward trend—is it still possible to lean towards 50%?

Yes, Brent. I would say 60s follow 50s as you contemplate those figures. We’re focused on expansive growth opportunities, as Dan highlighted, and we’re aware of Adobe’s powerful leverage model. If you review our targets for 2022, you’ll find ample reasons for optimism. Frame.io might slightly dilute margins, and Dan could speak on how our Experience Cloud and Adobe’s overall digital presence increase our margins for growth continuity. We ensure strong investments while managing them correctly, reflecting the innovation cycle we're enjoying. We are undertaking significant expansion and leveraging our brand as well.

Excellent, Shantanu. With regard to Q4, many analysts aren’t accustomed to seeing a quarter like you’ve presented. What occurred from your view? Was it digital digestion following large adoption from last year?

Brent, if I narrow down specifics, based on our Adobe Digital Index, we've seen overwhelming online activity, staggering traffic, and business transformation occurring digitally. This suggests that these trends will continue. Conclusively, assessing our Digital Media business and analyzing the strength in the Team sector, we’re proud of the performance we’ve seen in individuals and enterprises. The expansion around the holidays and specific peak times was robust, but slightly more moderated than traditional spikes noted in pervious years. The demand trajectory continues and is robust—and restarting Q1, we should remain attentive to execute against our anticipated opportunities.

Thank you very much.

The benefit of going last means I may have three additional minutes. I’ll condense my queries quickly! Shantanu and Dan, I was fascinated by your comments regarding doubling the size of the company to $30 billion and beyond, then growing to $45 billion. Considering your observation of prioritizing growth over margins offers encouragement. It appears your guidance implies a degree of conservatism; can you discuss potential upside or downside levers for fiscal 22? Furthermore, I'd appreciate insight on your position regarding the Metaverse, as outlined by Satya Nadella? Do you envision opportunities in both consumer and enterprise virtual work settings?

Thank you for the thoughtful question, Kash. Let's touch on a few key trends dominating the market. Notably, we're not heavily involved in EVs or batteries, but everything else appears positively trending. Now shifting to web 3D and the Metaverse, these developments create pathways for individuals in the physical world to increasingly engage across the virtual realm. This trend encapsulates everything from shopping to gaming to co-creation, and Adobe is uniquely positioned to usher this transformation. The technologies produced by Adobe—content creation opportunities within virtual spaces—all come together to position us for success amidst growing trends in NFTs and blockchain. Our robust foundational strengths and opportunities in the creator economy showcase our readiness for these shifts. The focus is encouraging while maintaining a conservative approach toward quantifying uncertainties in our forecasts as we engage with product differentiation deeply. I genuinely feel we are on the threshold of significant growth ahead. Thank you all for joining us today! Stay safe and healthy, and have a great day ahead!