Adobe Inc.

Good afternoon. I would like to welcome you to Adobe's fourth quarter fiscal year 2019 earnings conference call. All participants are in a listen-only mode. Later, we will conduct a question-answer session, and instructions will be provided at that time. As a reminder, today's call is being recorded. I would like to now turn the call over to Mr. 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 fourth quarter and fiscal year 2019 financial results. And 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 in 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, December 12, 2019, and contains forward-looking statements that involve risks and uncertainty. Actual results can differ materially from those set forth in such statements. where discussion of these risks and uncertainties usually 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. A 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. An 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 Shantanu.

Thanks, Mike, and good afternoon. Fiscal 2019 was a phenomenal year for Adobe as we exceeded $11 billion in revenues. a significant milestone for the company. Our record revenue and EPS performance in 2019 makes us one of the largest, most diversified, and profitable software companies in the world. Total Adobe revenue was 11.17 billion in FY19, which represents 24% annual growth. Gap earnings per share in FY19 was $6, and non-GAAP earnings per share was 787. We closed the year with another record quarter, delivering Q4 revenue of 2.99 billion, representing 21% year-over-year growth. GAAP earnings per share for the quarter was $1.74, and non-GAAP earnings per share was 229. A strategy to unleash creativity for all, accelerate document productivity, Empower Digital Businesses is significantly expanding our customer universe, from students to business communicators to creative professionals to the world's largest multinational corporations. Groundbreaking innovation in Creative Cloud, Document Cloud, and Experience Cloud is accelerating our opportunity and momentum. Creative Cloud empowers all voices from the most demanding professional to next-gen creators. enables the cutting edge of creativity across all media types, makes the creative process more productive and collaborative, and delivers Adobe magic with Sensei. We continue to invest in multiple new growth drivers, which has expanded the total addressable market for Creative Cloud to approximately $31 billion by 2022. Innovation is at the heart of Creative Cloud's growth. This year at Max, we announced the next generation of Creative Cloud with goals of deepening customer engagement, continuing to attract new customers, and investing in adjacent opportunities to fuel future growth. Key announcements at Max included delivering additional value to existing subscribers through feature enhancements to our flagship creative tools, including Photoshop, Lightroom, Premiere Pro, Illustrator, and InDesign, as well as a complete redesign of our Creative Cloud desktop app. Enabling collaboration via multi-surface systems with the launch of Photoshop on iPad, Fresco on Windows, and a preview of Illustrator on iPad. Extending category leadership with new innovations in Adobe XD, including live co-editing and fully integrated Creative Cloud libraries. Launching new products such as Adobe Aero, the industry's first tool that allows designers to build and share AR experiences. Expanding our mobile offering with the introduction of Photoshop Camera, a consumer app that will bring Photoshop technology directly to the moment of capture, and delivering Adobe Magic to enable creatives to work faster and smarter than ever before with new Adobe Sensei-powered features. Adobe Heritage, is built on providing trusted, creative solutions, and we have a responsibility to play a role in addressing content authenticity. At Max, we announced an initiative in partnership with the New York Times Company and Twitter to develop an industry standard for digital content attribution, and we're inviting other companies to join to create a long-term shared solution. With Document Cloud, Adobe is enabling the paper-to-digital transformation that is underway at organizations and enterprises around the world. With trillions of PDFs created every year and billions of people viewing PDF documents, we've expanded our ambitions in this space and estimate the total addressable market for Document Cloud will grow to approximately 13 billion by 2022. A Document Cloud strategy is to enable all common document actions, what we call acrobat verbs, including editing, sharing, scanning, and signing, to be frictionless across mobile and web by leveraging the ubiquitous PDF format. We make this possible through desktop and mobile applications, single-click web functionality in browsers, and with a rich set of APIs that can be embedded in third-party applications. A document cloud ecosystem continues to grow. At Boxworks, we introduced a new Acrobat web experience, which includes capabilities to modify, organize, sign, and collaborate on PDFs directly within Box. At Microsoft Ignite, we announced new advancements in Adobe Sign to simplify the e-signature process, and we deepened integrations between Adobe Sign and Microsoft Office 365, Dynamics 365, and Azure. In Q4, we drove strong revenue growth across both Creative Cloud and Document Cloud. Digital media revenue was $2.08 billion. Net new digital media ARR was a record $539 million, and total digital media ARR exiting Q4 grew to $8.4 billion. Global interest and subscription adoption was strong throughout the quarter and accelerated after Adobe MAXX. Demand for mobile offerings and overall web traffic continue to grow. We're attracting new customers with over 50% of our cumulative subscribers being new to our creative cloud franchise. With 23 million students having access to Adobe Spark, we're spearheading the development of critical creative skills for the next generation. Document cloud growth is being driven by new customer acquisition migration from Acrobat perpetual licenses to subscriptions, and the monetization of an ever-increasing universe of Document Cloud mobile app users. Digital media enterprise adoption continues to expand with outstanding seasonal Q4 performance. Finally, we drove record demand for subscriptions during the last week of the quarter, culminating in our biggest ever Black Friday on Adobe.com. In the experience economy, every business must be a digital business, and Adobe Experience Cloud is the industry leader for powering digital businesses. The ever-increasing demand for data and insights, content and personalization, customer journey management, commerce and advertising is expanding our total addressable market for Experience Cloud to $84 billion by 2022. We're leveraging our relationships with chief marketing officers and chief digital officers to drive customer experience management across the enterprise. With Adobe Experience Platform, we are becoming mission critical to the chief information officer. We've extended our offerings and go-to-market across both B2B and B2C and are expanding our footprint in the mid-market segment. rapidly evolving our cxm product strategy to deliver generational technology platforms launch innovative new services and introduce enhancements to our market leading applications adobe experience platform is the industry's first purpose-built cxm platform with real-time customer profiles continuous intelligence and an open and extensible architecture Adobe Experience Platform makes delivering personalized customer experiences at scale a reality. At Adobe, we've leveraged our highly successful data-driven operating model, or DDOM, into a transformation playbook for our customers. We're helping enterprises re-architect their technology, people, and processes to drive business growth. We have a unique and valuable perspective as a company that has used its own technology to transform its business. Our leadership in customer experience management is reflected in the industry recognition we've received in Q4, including being named the top leader in Forrester's Digital Intelligence Platform's WAVE report, achieving the best scores across both ability to execute and completeness of vision. Adobe was named a leader by Gartner and Forrester in the categories of enterprise marketing software suites, Digital Asset Management, and CRM Lead Management. If you watch TV, listen to the radio, or read the news this past week, you could not have avoided references to Adobe's Holiday Shopping Predictions Report, which leverages Adobe Sensei to identify retail trends and insights from trillions of data points flowing through Adobe Analytics and Adobe Commerce Cloud. Adobe's data showed that Cyber Monday reached a record $9.4 billion in online sales, and we predict online holiday spending will surpass $140 billion this year. Key digital experience transactions in the quarter included Goldman Sachs, Marriott, McDonald's, and Qualcomm. Interest in the Adobe experience platform and our new real-time customer data platform is strong, and we successfully closed business. across key verticals including financial services, manufacturing, media and entertainment, retail, telecommunications, and travel and hospitality. Key wins included 3M, Coca-Cola, Synopsys, Tommy Bahama, and Verizon. As a result of the strong Q4, we exceeded 20% subscription bookings growth during FY19. Our performance in FY19 was driven by the significant contributions of our global employees. They are Adobe's greatest asset, and we pride ourselves on our progressive and inclusive employee policies. This year, we reaffirmed global pay parity across our workforce, and in September, we became the first company to announce our commitment to opportunity parity, which looks at fairness in internal promotions and horizontal movement. We are proud to once again be included on Fortune's list of the 100 best companies to work for and one of the best employers for new grads by Forbes. We're pleased to have been recognized by Newsweek as one of America's most responsible companies and were named to the Dow Jones Sustainability Index for the fourth consecutive year. We were honored to receive the Hope Award from the National Center for Missing and Exploited Children for our ongoing work to further their mission of keeping every child safe. Adobe's vision, our compelling strategy, our large and loyal customer base, and our relentless focus on these opportunities position us well for the next decade of growth. Adobe is the clear front runner in the categories we serve, creativity, digital documents, and customer experience management. Our best days remain ahead of us, and we look forward to a phenomenal 2020. John? Thanks, Shantanu.