Adobe Inc.

Good afternoon. I would like to welcome you to the Adobe first quarter fiscal year 2020 earnings conference call. Today's call is being recorded. There will be a question and answer session following the prepared remarks. 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 first quarter fiscal year 2020 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, March 12, 2020, and contains forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For discussion of these risks and uncertainties, you should review the four looking 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 and is 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 will now turn the call over to Shantanu.

Thanks, Mike, and good afternoon. We delivered another record quarter in Q1, achieving $3.09 billion in revenue and representing 19% year-over-year growth. Gap earnings per share for the quarter was $1.96, and non-gap earnings per share was $2.27. Our strategy of unleashing creativity for all, accelerating document productivity, empowering digital businesses continues to drive strong top- and bottom-line performance. Adobe's unique advantage of enabling everyone from students to creative professionals to small businesses and large enterprises to create and deliver exceptional digital experiences is enabling our customers' success and fueling our business momentum. With Creative Cloud, Document Cloud, and Experience Cloud, we're growing across all geographies and industries and appealing to a broader set of customers than ever before. In our digital media business, we achieved record revenue in both Creative Cloud and Document Cloud in Q1. Net new digital media annualized recurring revenue, or ARR, was $400 million, and total digital media ARR exiting Q1 grew to $8.73 billion. Q1 creative revenue was $1.82 billion, which represents 22% year-over-year growth. The desire to create rich and expressive experiences is universal. Adobe is giving everyone, including newer customer segments like business communicators and social media creators, the inspiration and tools to tell their story. We're proud of the impact our flagship digital imaging solutions have had in shaping culture and creative expression. This year, Photoshop turns 30 years old. Photoshop has helped push the limits of creativity across a broad range of creative disciplines, from photography to graphic design. It is truly the heart of the creative world, and we continue to develop a steady stream of innovative new Photoshop capabilities and applications across surfaces. Demand for our mobile applications like Photoshop on iPad, Lightroom, and Photoshop Express continues to grow. With more than 35 million new Adobe IDs in Q1, mobile is proving to be a strong pipeline for paid mobile-only as well as desktop subscriptions. Film has always had the incredible power to connect us through compelling stories and Adobe continues to be the leader in video production software. At the recent Sundance Film Festival, more than 80% of the films created use Creative Cloud. Now, more than ever, we believe every voice needs to be heard. As part of our efforts to empower diverse voices and support the next generation of filmmakers, Adobe launched the inaugural Women at Sundance Adobe Fellowship and renewed our commitment to the Sundance Ignite program, which supports young filmmakers. This quarter, Adobe Character Animator took home an Emmy for breaking new ground in television animation. This recognition reflects our continued ability to create innovative applications and establish new categories. Adobe Spark, our easy-to-use application for creating social graphics, videos, and web pages, is now a top destination for hundreds of basic creative tasks. We are seeing great momentum with Spark, with organic search alone contributing more than one million new registered users per quarter. Business communicators and social marketers are increasingly turning to Spark to help them engage with their audiences in compelling ways. Creativity is a fundamental skill in the digital age, and we remain committed to building STEAM skills for the next generation. We recently announced a one-of-a-kind partnership with Teach for America to provide educator training, workshops, and tools to put creativity front and center in the classroom. In this first phase, our goal is to reach 15,000 teachers and 500,000 students in the U.S. who otherwise wouldn't have access to creative tools or programs. Our efforts to improve digital literacy extend across the globe. While visiting India recently, I had the opportunity to meet with students who were finalists in an Adobe creativity competition. In conjunction with the 150th anniversary of Mahatma Gandhi's birth, Students from 20,000 schools were encouraged to depict how Gandhi's values can help our modern world prosper. I was inspired and moved by students' messages of humanity and the brilliant ways they chose to tell their stories using Creative Cloud. With Adobe Document Cloud, we're accelerating document productivity, modernizing how people work with documents across all devices. Document cloud revenue in Q1 was $351 million, and we grew document cloud ARR to $1.15 billion. This momentum is being driven by strong customer acquisition and the expanding portfolio of PDF mobile and web applications. Key wins in the quarter included Equifax, Gannett, Shell, and Cummins. Acrobat continues to be the gold standard for creating, editing, scanning, signing, and sharing digital documents. As more people are working on the go, our mobile app usage continues to rise. More than 600 million people have installed Acrobat on their mobile devices. As digital transformation continues at organizations across the globe, Adobe Sign continues to power paper-to-digital workflows across all industries, including the majority of Fortune 100 companies. This quarter, we extended the reach of Adobe Sign with an enhanced integration with SharePoint that enables people to easily create and sign digital forms. We recently launched the ability to convert to and from PDF via one-click access on the web, providing a seamless on-ramp to PDF services and an Acrobat subscription. We're providing PDF functionality through APIs and expanding integrations with partners. Our recent integration with Google Drive gives its more than one billion users instant access to Acrobat's best-in-class tools to create, view, annotate, modify, and share PDFs without leaving Google Drive. In our digital experience business, we achieve revenue of $858 million in Q1, which represents 15% year-over-year growth. Now, more than ever, every business across B2C and B2B and mid-market to enterprise must be a digital business, driving opportunities The industry's most comprehensive offering, Adobe Experience Cloud features innovative applications and services built on the Adobe Experience platform and leveraging Adobe Sensei's AI and machine learning framework. Key wins this quarter included Intuit, PayPal, Bank of America, Common Spirit Health, Travel Zoo, State of Oklahoma, Kohl's, National Instruments, Toyota Motor, and Accenture. Only Adobe has data from trillions of transactions tens of millions of products, and thousands of retailers, which gives us the unique ability to assess the global digital economy in real time. Building on the success of our annual holiday shopping report, we're developing an economic index to help companies get a better understanding of local and global trends so they can anticipate changes and manage their businesses effectively in this dynamic market. A great experience starts with compelling content and is informed by data and insights Harnessing the power of Adobe Experience Platform to stitch together siloed data across the enterprise, our recently released Customer Journey Analytics service gives our customers a set of analytics tools that provides a complete picture of the customer journey, online and offline. We're continuing to drive strong performance with Adobe Experience Manager for omnichannel content delivery. This quarter, we launched Adobe Experience Manager, is a cloud service enabling brands to go live with personalized campaigns and experiences across any channel, device, or mobile app in days instead of months. It provides agility and flexibility for enterprises and mid-sized companies with brands like Under Armour, Coca-Cola, and Morningstar becoming early customers. Adobe Commerce Cloud enables our customers to make every moment personal and every experience shoppable. With new functionality that enables merchants to natively add high-quality media assets to their websites and create personalized recommendations, we drove more than 50% year-over-year bookings growth. For the third consecutive year, our industry leadership was validated in the Gartner Magic Quadrant for digital experience platforms and achieved the strongest position in completeness of vision. The digital experience opportunity is immense. Our roadmap is robust, and we're excited to have Anil Chakravarti lead this business. Anil brings a powerful combination of business and product leadership, and his impact is already being felt. We're proud to have created a unique employee culture that embraces diversity and inclusion and supports the communities in which we live and work. This commitment has made Adobe one of Fortune's 100 best companies for the past 20 years. This quarter, we were honored for our sustainability efforts on the CDPA list for climate change for the fourth consecutive year, and we were included in the Bloomberg Gender Equality Index, recognizing our transparency in gender reporting and advancing women's equality in the workplace. While Q1 was a typically strong quarter, I know what's top of mind for all of us is navigating the impact of COVID-19. The well-being of our employees and customers is our number one priority. In addition to encouraging employees in impacted regions to work from home for the next two weeks, we are restricting travel and canceling in-person events. In keeping with that strategy, we made the tough decision to cancel the in-person Adobe Summit in Las Vegas and replace it with a digital event at the end of the month. We are proactively engaging digitally with our current customers to support their businesses in continuing to drive enterprise pipeline globally. We're fortunate that the company's revenue and earnings are relatively predictable as a result of our move to a subscription-based business model. We have seen little to no impact on Adobe.com for Creative Cloud and Document Cloud demand thus far, and will continue to acquire and engage customers digitally. In my conversations with business leaders across the globe, it is evident that investments in digital will continue to be critical, but dealing with the implications of COVID-19 is the immediate priority. As a result, we expect some enterprises will delay bookings, postpone services implementation, and reduce expenses. We will be using Adobe Digital Solutions to mitigate impact and to engage with our customers. While the situation is concerning and there's tremendous uncertainty, the long-term fundamentals of our business remain undiminished. Adobe is at the center of three massive market opportunities across creativity, digital documents, and customer experience management, which will fuel growth in the near and long term. Businesses must transform to deliver a personalized digital relationship with every customer. The paper to digital revolution continues. Creativity and design have never been more relevant. We will continue to lead in these categories and manage the company for the long run while we navigate through this environment. At times like this, the best companies like Adobe continue to innovate, drive increased focus, and emerge stronger than ever before. John?