Adobe Inc.

Good afternoon. I would like to welcome you to the Adobe Second Quarter Fiscal Year 2019 Earnings Conference Call. Today's conference is being recorded. During today's presentation, all lines will be muted and we will take questions following the prepared remarks. At this time, I would like to turn the call over to Mike Savage, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon and thank you for joining us today. Joining me on the call are Adobe's President and CEO, Shantanu Narayan, and John Murphy, Executive Vice President and CFO. In our call today, we will discuss Adobe's second quarter fiscal year 2019 financial results. By now, you should have a copy of our earnings press release, which crossed the wire approximately one hour ago. We've also posted PDFs of our earnings call prepared remarks and slides, and an updated investor data sheet on adobe.com. If you'd like a copy of these documents, you can go to Adobe's Investor Relations page and find them listed under Quick Links. Before we get started, we want to emphasize that some of the information discussed in this call, particularly our revenue and operating model targets and our forward-looking product plans, is based on information as of today, June 18, 2019, and contains forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forelooking statements disclosure in the earnings press release we issued today, as well as Adobe's SEC filings. On this call, we will discuss GAAP and non-GAAP financial measures. Reconciliation between the two is available in our earnings release and on Adobe's Investor Relations website. Call participants are advised that the audio of this conference call is being webcast live. It's also being recorded for playback purposes. The archive of the webcast will be made available on Adobe's Investor Relations website for approximately 45 days and is the property of Adobe. The call audio and the webcast archive may not be re-recorded or otherwise reproduced or distributed without prior written permission from Adobe. I'll now turn the call over to Shatnu.

Thanks, Mike, and good afternoon. Q2 is another strong quarter for Adobe. with record revenue and continued growth across Adobe Creative Cloud, Adobe Document Cloud, and Adobe Experience Cloud. We delivered $2.74 billion in revenue in Q2, representing 25% year-over-year growth. Gap earnings per share for the quarter was $1.29, and non-gap earnings per share was $1.83. Adobe solutions have become the standard for creating and managing the world's digital experiences. Millions of consumers depend on brands like Photoshop and PDF for their personal and professional pursuits. Thousands of enterprises the world over are turning to Adobe every day to help them transform their businesses. The power of our brand, the continuous innovation in our products and services, The deep investment we're making in our technology platforms and a robust ecosystem of partners are enabling us to serve millions of customers around the globe. We are creating large addressable markets in the creativity, document and customer experience management categories. Our opportunity has never been greater. In our digital media business, we drove strong revenue growth in both Creative Cloud and Document Cloud in Q2. Net new digital media annualized recurring revenue, or ARR, was $406 million, and total digital media ARR exiting Q2 grew to $7.47 billion. Q2 creative revenue was $1.59 billion, which represents 22% year-over-year growth. Mobile is a tailwind in our digital media business, and we're driving significant increases in mobile traffic and member signups for our offerings. This is the golden age of creativity, and our vision for Creative Cloud is to be the creativity platform for all. Whether you're a student, an experienced designer, a YouTuber, or a marketer, storytelling is central to the way you communicate and connect. A key part of our Creative Cloud growth strategy is appealing to new segments of users. Adobe Spark, our offering for easily turning ideas into compelling stories, graphics, and web pages, is rapidly gaining popularity among creators from the classroom to the boardroom. Spark traffic on web and mobile has more than doubled year over year. In Q2, we expanded Spark's global footprint with support for five new languages, Brazilian, Portuguese, French, German, Italian, and Spanish. We've expanded our vision of platforms to include social media channels like Facebook, Instagram, and YouTube. Premiere Rush is rapidly becoming the solution of choice for YouTubers and social video creators. Premiere Rush is now available on Android in addition to iOS, Mac, and Windows. Experience Design is one of the most explosive creative categories And we continue to innovate in this space with Adobe XD, our design system for UX and UI. We released a major update to Adobe XD in May, enabling teams to create and share designs to enhance both productivity and collaboration. In Q2, we drove strong subscription growth across our flagship photography and digital video offerings. At NAB in Las Vegas, we unveil new innovations across Premiere Pro, Audition, Character Animator, and After Effects. One exciting announcement was the availability of the Content Aware Fill feature in After Effects, powered by Adobe Sensei, which magically enables editors to seamlessly remove unwanted objects from video, saving hours of tedious manual work. It won five awards at the show, including the NAB Show Product of the Year Award. We continue to expand Creative Cloud with value-added services. Adobe Stock, our fast-growing service for stock images, videos, and millions of additional creative assets, grew greater than 25% year over year. We're proud of the role our solutions play in inspiring the global creative community and shaping popular culture. This quarter, we launched a creative campaign with 17-year-old music sensation Billie Eilish. which inspired significant participation among our important student segment. With Adobe Document Cloud, we're reinventing how people scan, edit, collaborate, sign, and share documents in the cloud and mobile era. Document Cloud revenue in Q2 was a record $296 million, and we grew Document Cloud ARR to $921 million, driven by continued strength in Acrobat subscription adoption. Mobile is the next frontier for digital documents and our flagship apps. Adobe Reader for mobile and Adobe Scan continue to gain traction. Adobe Scan, which allows you to capture everything from documents to forms, whiteboard sketches or business cards, and turn them into picture-perfect, high-quality PDFs, is now the leading scanning app on iOS and Android. We're driving adoption for Adobe Sign our cloud-based electronic signature solution with customers including Merck, Hitachi, and Iowa State University. They're using Adobe Sign to provide a better customer experience, close contracts, and win business. In our digital experience business, we achieved record experience cloud revenue of $784 million for the quarter, which represents 34% year-over-year growth. To win in today's competitive landscape, businesses must become more customer-centric and data-driven. Our vision for Adobe Experience Cloud is to enable businesses to reimagine the entire customer journey using data to understand and drive their business from discovery through trial, purchase, use, and renewal. At the core of Adobe's own transformation has been our use of Adobe Experience Cloud. B2B and B2C companies across every country and industry are choosing Adobe Experience Cloud, the only end-to-end solution for marketing, advertising, analytics, and commerce, to master the art and science of customer experience management. Key Experience Cloud customer wins in Q2 include Amazon, Rite Aid, Vodafone, and Wyndham Hotels. The acquisitions of Magento and Marketo have significantly increased our value to existing customers, helped us attract new logos, and expanded Adobe's addressable opportunity. Magento adds to our experience cloud vision by allowing us to make every moment personal and every experience shoppable, in addition to attracting a large and vibrant developer community to Adobe. This quarter, we announced the availability of Adobe Commerce Cloud, built on the Magento Commerce platform, with deep integrations across Adobe Analytics Cloud, Marketing Cloud, and Advertising Cloud. We announced a new partnership with Amazon, creating Magento Commerce branded stores for Amazon sellers, which will give merchants a more seamless way to manage their business across both Amazon.com and their own storefront. With the addition of Marketo, Adobe provides the leading marketing engagement platform for both B2B and B2C customers. We've deepened the integration between Adobe Marketing Cloud and Marketo Engage. We're leveraging Adobe Sensei so companies can deliver the right experiences to the right people at the right time. This quarter, we announced our partnership with LinkedIn, empowering B2B marketers and sellers to easily identify, understand, and engage B2B customer buying teams. At Summit, we announced the global availability of Adobe Experience Platform, the industry's first real-time platform for customer experience management. Adobe Experience Platform provides real-time CDP and DMP capabilities and stitches together data from across the enterprise, creating real-time customer profiles and enabling the activation and delivery of hyper-personalized experiences. Some of the world's leading brands are already using Adobe Experience Platform in beta, including Best Buy, Sony Interactive Entertainment, The Home Depot, and Verizon Wireless. We built a strong ecosystem of global partners. Recently, we announced new partnerships with ServiceNow and Software AG. We will deliver integration between Adobe Experience Platform and the ServiceNow platform, as well as with Software AG's Web Methods platform. Adobe and Marketo were both positioned as leaders by Gartner and the Magic Quadrant for multi-channel marketing hubs. Among the 21 companies evaluated, Adobe achieved the strongest position for completeness of vision. Adobe Experience Cloud was recently named a leader in the Gartner Magic Quadrant for digital experience platforms. Adobe Marketing Cloud, Advertising Cloud, and Analytics Cloud were reviewed and successfully validated by TrustArk. making Adobe the first company in the digital experience space to receive trustee GDPR privacy practices compliance validation. Our mission to change the world through digital experiences gives purpose to the work we do. We're proud Adobe was honored with a Hope Award from the National Center for Missing and Exploited Children. For more than a decade, Adobe has been partnering with NECMEC through software contributions and technical expertise in service of its important mission to find missing children and prevent child exploitation and victimization. At Adobe, our employees are our greatest asset, and we continue to invest in our future talent. This summer, we're pleased to welcome more than 1,000 interns and new grads to Adobe from more than 150 schools around the world. A strategy of empowering people to create and transforming how businesses compete offers a unique value proposition in the market and large addressable opportunities to grow our business. FI19 is expected to be another record year. We expect the first half momentum to continue in the second half. Our revenue growth, cash flow, and operating profits differentiates us among SaaS companies at scale. John?